Unemployment Extension 2014: Can The Federal Budget Afford Extended Insurance Benefits?
The debate over the 2014 unemployment extension has mostly been discussed in terms of cost versus the benefit to the United States. But can the US federal budget even afford increasing unemployment insurance benefits?
In a related report by The Inquisitr, a new White House petition is asking that President Obama simply call John Boehner about unemployment insurance. Unfortunately, due to the upcoming 2014 mid-term elections, it’s claimed that Democrats have largely lost interest in pushing the issue in comparison to other hot topics like the minimum wage. Even when it comes to the new bill, it’s claimed that it’s politically impossible to provide retroactive benefits.
When it comes to passing the 2014 unemployment extension bill, I can see both sides of the issue. Republicans will typically defend their decision to reduce unemployment benefits back to the normal level of only offering around 26 weeks (depends on the state and other conditions) based upon cutting spending. Democrats believe that increasing the size of the federal government is necessary in order to ensure a safety net for all citizens, which is fiscally more responsible in the long term assuming a majority of those helped manage to find new jobs.
Estimates can vary in accuracy, but the CBO believed the original 2014 unemployment extension bill would have cost around $26 billion. At the same time, the CBO noted in the past that ending the unemployment extension does remove billions of dollars from the economy. The reason this is the case is because the majority of the money is spent in local economies on basic goods with the major exceptions being car and house payments. In that case, the money is being sent into banks coffers even though it’s possible both items will be shortly repossessed and foreclosed upon if a job is not found within the time frame of the benefits expansion.
The reason that “only” $26 billion has become such an issue is because cutting spending is where that Congress has largely failed. The US national debt is currently slightly over $17.5 trillion and we’re about to hit several budget crises in the coming years. The first one is this summer because the Highway Trust Fund is running out money and about 700,000 jobs are at risk if Congress sits idle. But so far the proposed solutions involve a combination of laying off hundreds of thousands combined with a new gas tax. The bigger crisis looming on the horizon is when the Social Security Disability fund runs completely out of money in 2015 or 2016. That portion of the Federal budget amounts to hundreds of billions and, besides raiding the Federal piggy bank for money intended for other purposes, the only real solutions are reducing disability benefits combined with increasing taxes.
Still, it’s possible to find that $26 billion if Congress decide which priorities are most important: our homeland or foreign countries. For example, even though President Obama recently touted the Afghanistan war ending, and how many US troops will be coming home, he’d still like to keep a military unit of about 10,000 soldiers stationed there for years to come. What’s more, even if you exclude the military expenses the cost of rebuilding Afghanistan will be $15 billion in 2014 alone and $6 to $10 billion is expected to be spent every year. To give you an idea how much money is being spent in total, the US foreign aid in 2012 was listed as $37.7 billion while Wikipedia claims it was $50.6 billion last year.
If that’s true, then the 2014 unemployment extension could be financed simply by re-appropriating about half of the budget allotted for US foreign aid. Instead of rebuilding other countries we should rebuild fellow Americans. Of course, neither Republicans nor Democrats want to appear weak on foreign policy and defense right before the 2014 mid-term elections. It’s also debatable what the long term indirect ramifications would be on America itself if the US foreign aid was reduced. Regardless, this example does show that it’s possible for Congress to fund the 2014 unemployment extension without borrowing money from Peter to pay Paul. Keep in mind that the CBO also said the “net increase in [Federal] deficits over the 2014–2023 period would amount to about $25 billion,” which means the annual increase to the deficit would be $2.5 billion per year if the budget is not reduced elsewhere.
If a future 2014 unemployment extension bill is passed, how do you think Congress should fund the increased unemployment benefits?
