Extension of unemployment benefits, home buyer tax credit may do more harm than good

By MITCHELL SCHNURMAN

mschnurman@star-telegram.com

Where’s the line between a helping hand and a crutch?

Last week, Congress approved a measure to extend unemployment benefits to 99 weeks and expand the home buyer’s tax credit first adopted in early 2008. The ministimulus plan includes two needy targets — the unemployed and the housing industry — but it’s hard to think of the help as temporary.

Ninety-nine weeks on the dole is about a month shy of two years, and that sounds like an eternity for workers in the United States. It’s almost four times longer than usual and 50 percent longer than any previous period.

Even in Texas, where drawing unemployment can be difficult, some residents are now eligible for 93 weeks of aid.

The extra six weeks’ aid goes to the 26 other states whose unemployment rate is at least 8.5 percent.

It’s understandable that lawmakers want to help.

Unemployment is the highest since 1983, and more than 1 in 3 jobless people have been looking for work for six months or longer, the most ever recorded in this country.

That helps explain why the Senate passed the bill by a vote of 98-0. The House approved it 403-12. And President Barack Obama signed the bill on Friday, the same day the government announced that national unemployment had reached 10.2 percent.

The question is whether the gestures will have unintended consequences. In softening today’s economic hit, will they extend the downturn, slow the recovery or lock politicians into an expensive precedent?

Research shows that job hunters work much harder when their benefits are about to expire. One study found that unemployed workers put in 70 minutes a day on job searches during their last week of benefits compared with 20 minutes a few months earlier.

It’s no surprise that the sense of urgency grows as the day of reckoning approaches.

Stakes are even higher today because so many jobs are gone for good. That means many people have to reinvent their careers, sometimes get training and reset their family finances.

In this economy, the old standard benefit — six months of unemployment insurance — isn’t enough. So the feds added 20 weeks of additional benefits in the summer, along with 13 extra weeks for states with "high unemployment."

In February, as part of the stimulus, 20 more weeks were added, raising the maximum to 79 weeks. And after Friday, states added 14 to 20 weeks.

With unemployment insurance, policymakers try to strike the right balance between helping people get through a rough patch and being fiscally responsible. They also don’t want to create a welfare mentality, which has hamstrung some countries in Europe, where aid can be unlimited.

There is plenty of incentive to get back to work in the United States, even beyond the emotional rewards of being productive. In general, unemployment insurance replaces only about half of previous income, up to a maximum of about $400 a week. Most people lose their health insurance with their job, and they have to pay for a COBRA plan to remain covered. That’s an expensive proposition that eats up much of the monthly benefit.

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