Over the past several years, I’ve repeatedly argued that you get more unemployment when the government pays people to be unemployed. But I’m not just relying on theory. I’ve cited both anecdotes and empirical research to bolster my case.
You won’t be surprised to learn that many politicians have a different perspective. They say it is compassionate to provide unemployment insurance benefits. And they say it is cruel and heartless to put a time limit on those payments.
And if you believe Nancy Pelosi, unemployment handouts actually are good for the economy!
You might think this is one of these never-to-be-resolved Washington debates, but we actually have two natural experiments over the past year that show one side was right and the other side was wrong.
Writing for the Wall Street Journal, John Hood of the North Carolina-based John Locke Foundation describes what happened when his state decided to limit unemployment benefits.
Here are the changes that were made.
A year ago, North Carolina became the first state in the nation to exit the federal government’s extended-benefits program for the unemployed. …Gov. Pat McCrory and the state legislature…reduced the amount and duration of unemployment-insurance benefits, which had been higher in North Carolina than in most states. As a result the state lost its eligibility to participate in the extended-benefits program on July 1, 2013. …liberal activists pounced. …media outlets excoriated North Carolina for ending extended benefits. New York Times columnist Paul Krugman called it a “war on the unemployed.”
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