Republicans Should Take Credit For America’s Improving Job Market

Republicans Should Take Credit For America’s Improving Job Market

For all the caterwauling about our ‘do-nothing Congress,’ the Republican majority’s refusal to go along with economically flawed proposals may have saved the job market.
Lachlan Markay
By

Republicans should stop poo-pooing good jobs numbers and start taking credit for them. They are ceding rhetorical ground, foregoing political advantage, and refusing to take credit for policy victories that have produced tangible benefits for American workers.

Alas, the immediate reaction from GOP leaders to positive employment data on Friday was to downplay its significance.

“While it is welcome news that more Americans found work last month, middle-class families continue to be left behind by the president’s policies,” said Speaker John Boehner in a statement.

That may be true—Boehner and Republican National Committee Chair Reince Preibus both rightfully cited the president’s refusal to approve the Keystone XL pipeline—but Boehner’s point rings hollow in the face of nearly 300,000 new jobs and an unemployment rate as low as it’s been in almost seven years.

President Obama Can’t Show He’s Increased Jobs

Most of the major national economic indicators are positive—employment is improving, the Nasdaq just broke 5,000—and Republicans sound disjointed trying to say otherwise.

Their concern seems to be that acknowledging any improvement in the U.S. economy will naturally redound to the president’s benefit. It’s not an unfounded fear. Some national political reporters seem to think the president deserves credit for economic progress simply for occupying the Oval Office while it takes place.

But which Barack Obama policy can Democrats possibly invoke to credit him with recent jobs gains? Immigration reform? The Congressional Budget Office said Obama’s preferred legislation would increase the unemployment rate in the near-term. Carbon regulations? Even if environmentally necessary, the Environmental Protection Agency is trying to shutter the entire coal power industry.

Ending Unemployment Benefits Should Get the Credit

What federal policies have put Americans back to work? According to a study from the National Bureau of Economic Research, significant credit goes to the expiration of long-term unemployment benefits at the end of 2013. According to that study, “1.8 million additional jobs were created in 2014 due to the benefit cut. Almost 1 million of these jobs were filled by workers from out of the labor force who would not have participated in the labor market had benefit extensions been reauthorized.”

How dramatic was the expiration’s effect on the U.S. job market? NBER: “The implied magnitude of the negative effect of benefit duration on employment is so large that it can account for almost the entire remarkable employment growth experienced by the U.S. in 2014.”

You may remember that Republicans were viciously attacked and mocked for claiming that long-term unemployment benefits discourage people from seeking out jobs. The White House Council of Economic Advisors predicted that the benefit cut would lead to nearly a quarter of a million job losses due to Americans’ reduced purchasing power—and hence reduced aggregate demand.

The NBER study squarely rejected that analysis. “The findings in this paper imply that the negative effects of unemployment benefit extensions on employment far outweighs the potential stimulative effects often ascribed to this policy.” In other words: on unemployment benefits, Republicans were right, Democrats were wrong. The former should be pointing that out.

Be Proud of Doing Nothing

It’s not just a policy victory for the GOP. It’s a resounding vindication of their governing philosophy. Humans react to policy incentives. Reward joblessness, and you’ll get more of it.

In that sense, “doing nothing” is the best thing Congress could’ve done. By trying to help the unemployed, it was in fact prolonging joblessness. Until recently, this was not a controversial position. Even Paul Krugman has endorsed it, declaring in a 2010 economics textbook:

People respond to incentives. If unemployment becomes more attractive because of the unemployment benefit, some unemployed workers may no longer try to find a job, or may not try to find one as quickly as they would without the benefit. Ways to get around this problem are to provide unemployment benefits only for a limited time or to require recipients to prove they are actively looking for a new job.

But the president and his party fought the benefit expiration tooth-and-nail. “The [House] Republican majority says: Suffer some more, families. You deserve it,” declared Rep. Rose DeLauro of Republican efforts to let benefits expire.

“Maybe someday we can invent a way convert gauzy speculation about merit and dependency into paychecks, but until then, congressional Republicans need to drop the act,” sneered one liberal pundit. No need, according NBER: letting unemployment benefits expire helped put people back to work. Republicans should take credit for it.

Members of Congress probably don’t want to get caught lauding political gridlock. Americans expect their representatives to get something done, after all. But for all the caterwauling about our contemporary “do-nothing Congress,” the Republican majority’s refusal to go along with well-intentioned but economically flawed proposals—and to stick to their principles in the face of withering criticism from Democrats and media figures—might have saved the American job market.

Friday’s jobs numbers were very good. It’s time Republicans claim some credit.

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