If you’re collecting unemployment insurance for more than two years, (which you will be if Congress has their way), you will officially be a welfare recipient in my book.

Let me ask you, when does unemployment insurance end?  If the recession were to continue for 10 years — like it did under Hoover/FDR’s New Deal era — should unemployment insurance just last for a whole decade?  This is so far beyond ridiculous it’s not even funny.  The big paradox to be taken from all of this is that unemployment numbers would actually fall if unemployment insurance were to end.  Unemployment insurance encourages not working. Period, Unemployment insurance is probably keeping unemployment 1-3% higher than it otherwise would be.Feel free to read into this, the Cato institute has done a great job as always with factually disproving the arguments for Unemployment Insurance. You can also read the history and development of UI as well. Fascinating.

Harvard University’s Larry Summers—former Treasury Secretary under President Clinton and former economic advisor to President Obama—summarized the link between government benefits and higher unemployment in a 1999 article:

To fully understand unemployment, we must consider the causes of recorded long-term unemployment. Empirical evidence shows that two causes are welfare payments and unemployment insurance. These government assistance programs contribute to long-term unemployment in two ways. First, government assistance increases the measure of unemployment by prompting people who are not working to claim that they are looking for work even when they are not. … The second way government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work. Each unemployed person has a “reservation wage”—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase that reservation wage, causing an unemployed person to remain unemployed longer.

Quoted in Wall Street Journal, “Summers on Demand,” April 16, 2010. And see Wall Street Journal, “Incentives Not to Work,” April 13, 2010.

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