Senators Sasse, Tim Scott, Rick Scott, and Lindsey Graham are objecting to a provision in the congressional Covid-19 rescue package that would provide unemployment benefits that in some cases are larger than the wages workers were getting paid.
As Senator Tim Scott put it, "What this bill says without fixing it, is, it simply says, you can earn more money by being on unemployment than you can while working. That is an incentive that is perverse."
Of course the senators are correct; the longer-term and more generous the payout of the unemployment insurance, the lower the incentives to re-enter the workforce, and the more difficult it is for the private sector to create new jobs.
Here is how one prominent politician assessed the situation back in 2011:
We've got to rethink how we do unemployment insurance. There is a smart program in Georgia. What they do is they say, all right, instead of you just getting unemployment insurance, just a check, what we're going to do is we will give a subsidy to any company that hires you with your unemployment insurance so that you're essentially earning a salary and getting your foot in the door into that company. And if they hire you full-time, then the unemployment insurance is used to subsidize you getting trained and getting a job. (Applause.) And so those kinds of adjustments to programs -- we've got to be more creative in terms of not doing things the way we've always done them.
Some Republican free-market ideologue? No sir, that was President Obama.
If the senators can't improve the provisions in this package, it's worth circling back to the issue sooner rather than later. It won't be politically popular to cut either the size or the duration of unemployment benefits, because it appears cruel to those who are out of work. But as both President Obama and President Clinton (who ended welfare as we know it but expanded the earned income tax credit) before him understood, it's both far better politics and far better economics to pay people to work than it is to pay people not to work. If it comes time to address unemployment reform in freestanding legislation, perhaps Senator Scott can ask former President Obama to come testify.
The four Republican senators do a good job of explaining the issue in this press conference:
