EDITORIAL: Unemployment reform

OPINION:

One of the things Democrats like most about high unemployment is the ability to dole out up to 99 weeks’ worth of “free” money to those without jobs. Instead of seeing an opportunity to deliver political favors, Republicans want to take a chance at reforming a system that desperately needs an overhaul. So the House is expected to vote this week on a proposal that would return a bit of flexibility to the states.

House Ways and Means Committee Chairman Dave Camp, Michigan Republican, introduced the JOBS Act to let states decide what to do with $31 billion in temporary federal unemployment funds. Current law requires that the money be expended to subsidize people not working for almost two full years. Mr. Camp recognizes that this one-size-fits-all strategy makes little sense in states like North Dakota, where the unemployment rate is 3.3 percent. On the other end of the scale, states like Nevada top the charts with a 12.5 percent jobless rate. Even there, perhaps trying something different could chip away at the serious problems the system faces.

Nevada happens to owe the federal government $773 million it borrowed under President Obama’s so-called “stimulus” bill to pay benefits during the Great Recession. Nationwide, this particular debt burden amounts to a whopping $43 billion, and the mounting interest expenses have caused 22 states to propose increases in their federal unemployment tax. This insidious fee is levied on businesses for each employee they hire. Firms struggling just to make payroll during tough times aren’t going to have the funds to hire new employees and expand operations when the government is driving up the cost of doing business.

Mr. Camp’s bill would allow states to decide, if they wish, to retire this debt so that businesses won’t be hit by the new tax. The proposal does add a few strings from Washington, such as a requirement that those getting checks show they’re actively looking for a job. This might seem obvious, but places like the District make it easy to get benefits without lifting a finger to look for new work. Similarly, to be eligible for benefits, anyone lacking a high school diploma would have to make an effort to obtain a GED certificate. This requirement is designed to increase the individual’s ability to land a job. States that want to experiment with new ideas could apply to set up demonstration projects to test the effectiveness of more creative solutions to the unemployment problem.

At a May 11 committee hearing, every Democrat voted against the measure. It’s obvious their vision of an unemployment system involves encouraging dependency rather than giving a temporary helping hand to someone falling on hard times. The economic collapse that began in December 2007 has shown that subsidizing unemployment for extended periods merely results in more people remaining on unemployment for extended periods. There are still 7,739,572 people on the rolls. More creative solutions are exactly what the country needs right now.

The Congressional Budget Office scored the committee’s legislation as offering $700 million in savings over the next decade. The measure would maintain existing funding allocations so that no state would receive special treatment. Were the proposed reforms to become law, states could opt to continue to offer 99 weeks of benefits. Lawmakers in Nevada and North Dakota ought to make that choice on their own.