Ellie Shermer Cry Wolf – DRAFT Sample Policy Brief: Unemployment Insurance

Transcription

Cry Wolf – DRAFT Sample Policy Brief: Unemployment Insurance
TITLE: Insuring the Unemployed for Stimulus, Stability, and Recovery
Ellie Shermer
INTRODUCTION:
The issue of unemployment benefits – including their length, eligibility, and expense – has
become a controversial political issue in recent years. It has dominated headlines, newsfeeds, and
blogs especially during the Great Recession when Congress continually debated whether to
extend Unemployment Insurance to employees who had exhausted their UI benefits.
Beginning in 2008 persistent, long-term unemployment drove Congress to extend jobless
benefits far past the normal twenty-six week guarantee. This legislation provoked bitter fights
between legislators. Republican Senators, joined by Joe Lieberman (I-CT), Ben Nelson (D-NB),
and a handful of conservative Democrats (but without Maine Republicans Susan Collins and
Olympia Snow) temporarily scuttled an extension on June 30, 2010. The bill was passed less
than a month later, by a vote of 60-40 in the US Senate. Two independents, Lieberman and
Vermont’s Bernie Sanders, and two Republicans, Collins and Snow, joined fifty-six Democrats
in voting “Yes.” Nelson was the only Democrat to vote with the Republicans. President Obama
signed the bill into law on July 22, 2010.
During the debate, opponents proclaimed themselves dedicated to keeping deficits down,
concerned that spending would delay economic recovery, and positive that extending benefits
would keep the unemployed from seeking work. “…it could jeopardize the recovery and would
add to our already enormous deficit, likely to be around $1.4 trillion for the second year in a
row,” Nelson explained in a statement, “Congress should provide additional unemployment
benefits but not as a bailout to the states that worsens the deficit and passes the bills onto our
children.” Jon Kyl (R-AZ) asserted that unemployment insurance “doesn’t create new jobs. In
fact, if anything, continuing to pay people unemployment compensation is a disincentive for
them to seek new work.”1
These arguments were hardly new. In the earliest debates over state and federal programs, and
even after unemployment insurance was included in the broad 1935 Social Security Act,
economists, manufacturers, bankers, and other business owners and managers have decried the
1
T. Cahill, “Tier V 99er’s Unemployment Petition Readies for Washington,” World News Vine,
July 18, 2010, http://worldnewsvine.com/2010/05/tier-v-99ers-unemployment-petition-readiesfor-washington/; Ryan Grim, “GOP Sen. Kyl: Unemployment Benefits Make People Not Want
To Get a Job,” Huffington Post, March 1, 2010, http://www.huffingtonpost.com/2010/03/01/gopsen-kyl-unemployment_n_481526.html; Brian Beutler, “With Millions Losing Benefits, Ben
Nelson Blocks Extension of Unemployment Insurance,” Talking Points Memo, July 1, 2010,
http://tpmdc.talkingpointsmemo.com/2010/07/with-millions-losing-benefits-ben-nelson-blocksextension-of-unemployment-insurance.php; Alan Harten, “Republican Senators Filibuster 2010
Unemployment Benefits Extension,” APEX News Network, July 1, 2010,
http://apexnewsnetwork.com/23912/republican-senators-filibuster-2010-unemployment-benefitsextension/.
1
jobless benefits, no matter how modest, as a job killer, a detriment to recovery, an unmanageable
burden, a government overreach, and an entitlement that encourages Americans to stay home and
not look for a job.
These opponents are, quite simply, crying wolf. Since enactment, unemployment benefits have
proven critical to economic stability, individual livelihood, and long-term prosperity. Hence,
keeping and extending this insurance is vital to Americans living through any downturn and to
the nation’s lasting economic stability.
LEGISLATIVE HISTORY:
Unemployment insurance was a critical part of President Franklin Delano Roosevelt’s New Deal,
a lifesaver during a period defined by economic volatility, depressed wages, and record
unemployment. The President and his advisors backed short-term relief for the unemployed to
keep them off welfare (at the time maligned as the “dole”), provide for their basic subsistence
and increase the purchasing power of the American people so as to mitigate the overall effects of
mass unemployment. As governor of New York, Roosevelt had backed unemployment
insurance, asserting this relief: “must be extended by Government, not as a matter of charity, but
as a matter of social duty.” Roosevelt’s Secretary of Labor, Frances Perkins, stated before the
House Committee on Ways and Means that private charity and state/local relief could not
shoulder the burden. Instead they proposed nationalizing these local experiments and existing
programs in private industry to create a federal guarantee for short-term unemployment benefits.
She described a 1934 unemployment insurance proposal as “fundamentally a tax bill” because
New Dealers argued that business, not wage earners, should contribute to the reserves that would
be dispersed. The proposal, a critical piece of economic relief, recovery, and social security,
found backing not only from New Deal Democrats, Keynesian economists, and trade union
leaders, but from progressive jurists such as Supreme Court Justice Louis Brandeis, and key
business leaders, including retailer William Filene. Indeed, Secretary of Labor Perkins often
cited efforts by businesses to offer their own set of privately-financed jobless benefits as proof
that this type of relief was welcomed, fiscally sound, and workable. Differences between this
coalition centered mostly on who, taxpayers, employees, or employers, would bear the tax
burden and how best to ensure, either through time limits or compensation levels, that this relief
was an emergency hand up, not a permanent hand out.2
Despite broad agreement from many on the need for such a program, unemployment insurance
had a tortuous path through state governments and Congress. Federal legislation stalled in the
early years of the Roosevelt Administration and only a few state legislatures, most notably
Wisconsin and New York, passed provisions over numerous objections from manufacturing
interests and warnings from conservative economists adverse to higher taxes, more regulations,
and increased state guarantees. In Congress, Southern politicians opposed the bill because they
feared that any state or federal program that would make the African American domestic and
agricultural workforce less desperate would upset the Jim Crow racial order. Likewise, those
2
“Unemployment Insurance,” Hearings, Subcommittee of the House Committee on Ways and
Means, 73rd Congress, 2nd Session, March 21 to 30, 1934, esp. 5-27, quoted on 10; David
Kennedy, Freedom from Fear: The American People in Depression and War, 1929-1945
(Oxford: Oxford University Press, 1999), 249-287, esp. 90.
2
Senators and Representatives beholden to major manufacturing interests also deemed the entire
project an overreach. Federally funded unemployment insurance was also opposed by the Wall
Street Journal and Los Angeles Times, the du Ponts and other wealthy conservatives associated
with the Liberty League, and both the Merchants Association of New York and the Merchants’
and Manufacturers’ Association of Los Angeles. Key figures at the helm of the Philadelphia,
Illinois, and U.S. Chambers of Commerce, attacked proposals for federalized unemployment
insurance on the same terms that latter-day counterparts would criticize the extension of
unemployment benefits in the Great Recession that began in 2008.3
Ultimately, unemployment insurance was passed as a part of the 1935 Social Security Act.
Roosevelt introduced his 1935 proposals as “security against the hazards and vicissitudes of
life.” “No one can guarantee this country against the dangers of future depressions,” he asserted.
“We can eliminate many of the factors that cause economic depressions, and we can provide the
means of mitigating their results. This plan for economic security is at once a measure of
prevention and a method of alleviation.” The unemployment provisions included a federal tax on
employers of 8 or more workers (legislators assigned a gradually increasing tax, it started at 1%
and increased, and stayed, at 3% after 1937).
States ran the agencies that dispersed payments and thus could recapture 90% of funds paid to
the federal government through a tax offset to fund the local/state programs (the last 10% was
dedicated to administrative costs). Still, the program was a far-cry from the original proposal put
forward by Roosevelt and Perkins. Liberals made serious compromises with the Southern
Democrats whose votes were critical for passage. The policy exempted agricultural, domestic,
and public employees from jobless protections, which, in effect, left African Americans in the
South, who could find little work outside fields, farms, and family homes, uncovered. Moreover,
the entire structure left much power at the local and state levels, which structured compensation
levels and time limits, often in accordance with employer wishes.4
Nonetheless, unemployment insurance was a key element of post-Depression assurances of
economic security, general stability, and social protection. In the Depression decade itself,
twenty-six million workers found themselves with new protections, guarantees, and income
supports. By the end of the 1930s, every state had individual unemployment compensation
programs. There was a real range in scope and scale. Generally, the newly jobless could expect
sixteen weeks of support at half pay (no more than $15 per week).5
3
Kennedy, Freedom from Fear, 249-287.
Nelson Lichtenstein, State of the Union: A Century of American Labor (Princeton: Princeton
University Press, 2002), esp. 92-97; David Kennedy, Freedom from Fear: The American People
in Depression and War, 1929-1945 (Oxford: Oxford University Press, 1999), 249-287, esp. 270.
5
David Kennedy, Freedom from Fear: The American People in Depression and War, 1929-1945
(Oxford: Oxford University Press, 1999), 249-287, esp. 270-272; James T. Patterson, Grand
Expectations: The United States, 1945-1974 (Oxford: Oxford University Press, 1997); Jefferson
R. Cowie, Stayin’ Alive: The 1970s and the Last Days of the Working Class (New York: New
Press, 2010).
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3
Since 1935, there have been substantive changes to the policy, particularly general reductions in
contributions and tax rates during the 1980s and 1990s. During prosperous times most states
provide twenty-six weeks worth of benefits at roughly one-third of wages for middle and lowincome wage earners. If a state’s unemployment rate is well above the national average, it
“triggers” an additional thirteen weeks of coverage for the jobless. Federal law (under the
Federal Unemployment Tax Act, which was first passed in 1939 and has been amended
frequently in the ensuring decades) now requires a .8% tax on employers for each employee’s
first $7,000 of pay (roughly $56 per worker). At the state level, a wide variety of measures exist,
including higher taxes on companies that lay more workers off, restrictive benefit eligibility
standards, strict disqualification provisions, and high thresholds to qualify for jobless benefits.6
CRYING WOLF:
In the Great Depression and the recent recession, critics of unemployment insurance have
attacked the program as a job killer, an unmanageable burden, a detriment to recovery, an
example of government overreach, and an entitlement that discourages Americans from looking
for and taking jobs.
The standard argument against unemployment insurance, in the 1930s and the 2000s, is that:
1) the payroll tax is an unmanageable burden
2) that will cause employers to hire fewer workers
3) discourage the unemployed from seeking work (claims made during periods where
there was an overall decline in the number of job openings)
4) which subsequently slows or even stops economic recovery.
These claims are ubiquitous. For example, Florida legislator Dave Murzin asserted: “You tell
businesses to pony up and write a big check and that puts more people out of business.” “This is
a welfare program. And it's needed because the Democrat Party has destroyed the job sector,”
conservative commentator Rush Limbaugh declared in July 2010, “We wouldn't even need this if
there were jobs being created out there. There's one reason the jobs aren't being created. His
name is Barack Obama and his party, the Democrat Party. They’re killing jobs. They are killing
the private sector, and it is not an accident.” “The longer you pay people not to work, the longer
they're not gonna try to work,” Limbaugh continued, “At what point does unemployment
compensation become welfare?”7
6
“Understanding the Unemployment Trust Fund Crisis of 2010,” Unemployment Insurance
Briefing Paper, April 2010, National Employment Law Project, http://nelp.org/page//UI/solvencyupdate2010.pdf?nocdn=1.
7
Tami Luhby, “Unemployment Taxes Slam Businesses,” CNNMoney.com, February 9, 2010,
http://money.cnn.com/2010/02/09/news/economy/unemployment_taxes/index.htm; Brian Faler,
“Democrats Trim Jobs Bill to Address Deficit Concerns,” Bloomberg Businessweek, June 17,
2010, http://www.businessweek.com/news/2010-06-17/democrats-trim-jobs-bill-to-addressdeficit-concerns-update4-.html; Rush Limbaugh, “Democrats Turn Unemployment Insurance
Into Welfare Payments,” The Rush Limbaugh Show, transcript, July 20, 2010,
http://www.rushlimbaugh.com/home/daily/site_072010/content/01125108.guest.html.
4
These claims were hardly new. Unemployment insurance opponents used these same arguments
to try to halt its passage in the 1930s. “Such a law would inevitably operate to hold down the
number of employees on the pay roll as well as to prevent and minimize increases in the rate of
pay, so that the burden of the tax could be reduced to the minimum,” a Los Angeles Times
editorial forewarned in 1934, “These bills, in our opinion, are contrary to the spirit of the
Constitution of the United States…” The next day, editors asserted that their “objection to the
whole plan is that it is based on the false assumption, not merely that the world owes every man
a living, but that employees in industry owe a living to every person who chances to be
employed in that or any other industry.” James L. Donnelly, executive vice president of the
Illinois Manufacturers Association, asserted that benefits would stall recovery: “The imposition
on industry at this time of the tax burden contemplated by this measure would render business
recovery absolutely hopeless.” Almost eighty years ago, opponents also wrung their hands over
deficit spending: The Merchants Association of New York publicly stated, “unemployment
insurance legislation at this time would be a costly experiment which is certain to add
extravagantly to public expenditures.” Executives predicted that the bill would kill jobs because
the benefit “tends to retard the increase of pay rolls, because of the absorption of this amount of
money for taxation purposes; it retards the increase of employment also. It is a permanent tax,
with no limit, regardless of economic conditions in general or of the individual company. In
other words, it may be the last straw…that puts this company over the line into bankruptcy.”
Conservative economists predicted that the policy would snowball into an unaffordable
entitlement because unemployment insurance “tends to make many people feel a greater reliance
on the Government. What is needed to bring us out of this depression is for the greatest possible
number of people to know fully that their best reliance is still on themselves.”8
Critics also issued the same dire predictions during the prosperous postwar decades. In the mid1950s, for example, when the American manufacturing economy was strong and many
Americans saw their incomes rise each year, the House Ways and Means Committee considered
bills that increased overall benefits, expanded coverage to those working in small firms with less
than eight employees, extended the coverage period, and enacted fiscal programs that increased
the general solvency of state unemployment insurance programs so as to equalize coverage
across the nation. Business groups attacked these proposals. In response to the establishment of a
federal loan program to bolster insolvent state programs, a representative from the National
Association of Manufacturers declared: “Such arrangements do violence to the basic purpose of
unemployment compensation, perpetuate underemployment, and avert or postpone needed
individual or industrial adjustments to changed economic conditions.”
8
“Job Insurance Idea Scored,” Los Angeles Times, April 2, 1934, pg. 4; Associated Press,
“Insurance Plan Called Ruinous,” Washington Post, March 31, 1934, pg. 3; Statement by the
Merchants Association of New York on New York & national unemployment insurance, quoted
in “Merchants Oppose Job Insurance Bills,” New York Times, April 17, 1934, pg. 2; Merwin K.
Hary, New York, NY, President, New York State Economic Council, pgs. 288-294, esp. 289290, “Unemployment Insurance,” Hearings before the House Committee on Ways and Means,
Mar. 21-24, 26-30, 1934; Frank H. Willard, Worcester, MA, President, Graton & Knight
Manufacturing Co., 294-302, esp. 295, “Unemployment Insurance,” Hearings before the House
Committee on Ways and Means, Mar. 21-24, 26-30, 1934.
5
Critics also cited federal overreach in proposals to levy all employers, even if they had a
workforce of one, with the unemployment tax. “It is part of a nibbling-away process,” director of
the National Small Businessmen’s Association charged, “federalizing State unemployment
compensation bit by bit so as to thus achieve ultimately the same end results as would be
achieved by directly scrapping State systems and establishing a Federal system.” He questioned,
“Is this proposed additional tax burden required by the public interest?” “Small employers,” he
explained, “would be required to make an annual return, involving the compilation and reporting
of payroll data on an annual basis and also reporting their State unemployment taxes, and credits,
etc. The work of assembling and reporting this data for many would be more of a burden than the
payment of the Federal tax itself.” The same themes appeared a decade later when Congress
considered another benefit expansion and a federal trigger to better safeguard workers in a
sudden downturn. A member of the Indiana State Chamber of Commerce asserted that there was
no “clearly demonstrated need, in Indiana, for a benefit duration in excess of the 26 weeks now
permitted by Indiana law.” He also complained, “the heaviest percentage of tax cost increase is
borne by those employers who, by providing steady employment, have earned more favorable
rates.”9
CONCLUSION:
Constant predictions, whether in times of prosperity or peril, of excessive deficits, fewer jobs,
firms taxed out of business, government control of private enterprises, a decline in individual
initiative, and overall economic stagnation clearly never came to pass. As historians, economists,
and sociologists have noted and documented, the United States emerged out of World War II as a
leading economic power, the engine of the postwar consumer-driven economy, and a paragon of
the kind of affluence that state guarantees of a general social safety net could produce. Moreover,
unemployment insurance proved vital to buoying the American middle class during the 1970s,
when economic stagflation, the first oil crisis, and high unemployment threatened this general
prosperity.
It is these provisions that have kept the short and long-term unemployed, both in the crises of the
1970s, 1980s, and 2000s, in their homes and above the poverty line. Quite simply,
unemployment insurance:
1) is critical to economic recovery
2) does not stop citizens from seeking work
3) but instead provides them the temporary security to enable them to find new
employment
9
Statement of Harold C. McClellan, Chairman of the Employee Benefits Committee, National
Association of Manufacturers, pgs 76-81, esp. 78, Hearings before the House Committee on
Ways and Means, Apr. 14, 15, 1953; Statement of Blyth Emmons, Director, Washington Office,
National Small Businessmen’s Association, pgs 211-215, esp. 213 and 214, “Unemployment
Insurance,” Hearings before the House Committee on Ways and Means, June 8-11, 1954;
Statement of Oscar Alvord, Director, Social Legislation Department, Indiana State Chamber of
Commerce, pgs 556-565, esp. 556-557, in “Unemployment Insurance Amendments of 1966,”
Hearings before the Senate Finance Committee, July 13, 15, 18-22, 25, 26, 1966.
6
Contemporary analysts, for example, have shown that unemployment helps to end, not to
prolong, downturns. “If you give money to someone who is unemployed,” the U.S. Department
of Labor’s chief economist recently explained, “they are going to spend it the next day.” Mark
Zandi, an economist who advised Sen. John McCain during his presidential campaign,
determined that just spending one dollar of an unemployment benefit results in a $1.61 increase
in economic activity. Others refute the wild assertions that unemployment checks stop recipients
from looking for other work. Rick McHugh and Mike Evangelist point out, “On average,
unemployment benefits are equivalent to just 36 percent of average weekly wages—enough to
maintain a modest standard of living but hardly enough for a princely lifestyle.” “What’s limiting
employment now is lack of demand for things workers produce,” economist Paul Krugman
noted, “Their incentives to seek work are, for now, irrelevant.” These points proved especially
salient in the early Great Recession. Benefit extensions, which included an extra $25 per week, a
health care subsidy, and a general extension past the initial 26 weeks of unemployment,
generated 1.2 million full-time equivalent positions. A report from the Economic Policy Institute
concluded: “These jobs were generated by the increase in spending on unemployment
compensation of $152.1 billion, which, in turn, raised gross domestic product (GDP) by $244.8
billion, a 1.7% boost.” 10
Unfortunately, and blindly, critics continue to assert that benefits will kill jobs, fetter enterprise,
enhance federal power, slow recovery, and destroy individual initiative. They are crying wolf.
Unemployment insurance is vital to a sound economic present and future.
10
Andrea Orr, “Extending Unemployment Insurance is the Fiscally Responsible Thing to Do,”
Economic Policy Institute, May 28, 2010,
http://www.epi.org/analysis_and_opinion/entry/extending_unemployment_insurance_is_the_fisc
ally_responsible_thing_to_/; Lawrence Mishel and Heidi Shierholz, “Two For the Price of One:
Providing Unemployment Insurance Both Assists the Unemployed and Generates Jobs,” Issue
Brief #281, July 15, 2010, Economic Policy Institute,
http://www.epi.org/publications/entry/two_for_the_price_of_one/; Rick McHugh and Mike
Evangelist, “Beyond Sound Bites—Understanding the Impact of Unemployment Insurance on
the Severity of Unemployment,” National Employment Law Project, May 2010, esp. 5 and 8,
http://nelp.3cdn.net/2e73fd99708056efc1_r8m6i6jx4.pdf.
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APPENDIX A: ADDITIONAL SOURCES
CONTEMPORARY ADVOCACY GROUPS:
• Center for American Progress, http://www.americanprogress.org/
• Center for Economic and Policy Research, http://www.cepr.net/
• Economic Policy Institute, http://www.epi.org/
• National Employment Law Project, www.nelp.org
STATISTICS/REPORTS ON THE LONG-TERM EFFECTS OF UNEMPLOYMENT
INSURANCE:
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•
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•
•
•
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Rick McHugh and Mike Evangelist, “Beyond Sound Bites—Understanding the Impact of
Unemployment Insurance on the Severity of Unemployment,” National Employment
Law Project, May 2010, http://nelp.3cdn.net/2e73fd99708056efc1_r8m6i6jx4.pdf.
Alan S. Blinder and Mark Zandi, “How the Great Recession Was Brought to an End,”
Moody’s Economy.com, July 27, 2010, www.economy.com/mark-zandi/documents/Endof-Great-Recession.pdf.
Mark Zandi, “Extend Unemployment Insurance: Testimony Before the Senate Finance
Committee,” Testimony before the Senate Finance Committee, available at:
http://www.economy.com/mark-zandi/documents/Senate-Finance-CommitteeUnemployment%20Insurance-041410.pdf.
Mark Zandi, “The Recovery Act and Economic Growth,” Testimony Before the Joint
Economic Committee of the U.S. Congress, available at:
http://www.economy.com/mark-zandi/documents/JEC-Fiscal-Stimulus-102909.pdf.
Heather Boushey, “Economic Analysis,” February 22, 2009, originally published in the
Denver Post, available at:
http://www.americanprogress.org/issues/2009/02/economic_analysis.html.
Heather Boushey, “Keep the Money Flowing,” June 24, 2010, originally published in the
New York Times, available at:
http://www.americanprogress.org/issues/2010/06/money_flowing.html.
Heather Boushey, “Congress Must Extend Unemployment Insurance,” July 7, 2010,
originally published on The Hill, available at:
http://www.americanprogress.org/issues/2010/07/boushey_thehill_ui.html.
“Unemployment Insurance Trigger 101,” Center for American Progress, February 22,
2010, http://www.americanprogress.org/issues/2010/02/ui_trigger_101.html.
Maurice Emsellem, Andrew Stettner, Lisa Donner, Alexandra Cawthorne, “Helping the
Jobless Helps Us All: The Central Role of Unemployment Insurance in America’s
Economic Recovery,” Center for American Progress Action Fund, November 14, 2008,
http://www.americanprogressaction.org/issues/2008/ui_report.html.
Alexandra Cawthorne and Melissa Boteach, “Extending Help to the Unemployed,”
Center for American Progress, October 28, 2009,
http://www.americanprogress.org/pressroom/releases/2009/10/ExtendingHelp.html.
Heather Boushey and Jeffrey Wenger, “Finding the Better Fit: Receiving Unemployment
Insurance Increases Likelihood of Re-Employment with Health Insurance,” EPI/CEPR
Brief #205, April 14, 2005, http://www.epi.org/publications/entry/ib205/.
8
•
•
•
•
•
•
•
•
•
•
•
•
Joh Bivens and Kathryn Anne Edwards, “Cheaper Than You Think—Why Smart Efforts
to Spur Jobs Cost Less Than Advertised,” EPI Policy Memorandum #165, May 18, 2010,
http://www.epi.org/publications/entry/pm165/.
Christine Riordan, “The Crisis of Long Term Unemployment and the Need for Bold
Action to Sustain the Unemployed and Support Recovery,” National Employment Law
Project, June 2010, http://www.nelp.org/page//UI/2010/long.term.unemployment.fact.sheet.pdf?nocdn=1%20?nocdn=1.
James Parrott and Christine Riordan, “Casualty of Chaos: The Cost of Albany’s Inaction
on Jobless Benefit Increases,” Fiscal Policy Institute and National Employment Law
Project, July 2009, http://www.nelp.org/page//UI/NELPFPIMaxBenefitReport.pdf?nocdn=1.
Sylvia Allegretto and Andrew Stettner, “The Severe Crisis of Job Loss and the
Accompanying Surge in Long Term Unemployment,” National Employment Law Project
and Institute for Research on Labor and Employment,” May 6, 2009,
http://www.nelp.org/page/-/UI/LTU2009.pdf?nocdn=1.
“Rebuilding a Good Jobs Economy: A Blueprint for Recovery and Reform,” National
Employment Law Project, November 2008, http://www.nelp.org/page//Federal/NELP_federal_agenda.pdf?nocdn=1.
Maurice Emsellem and Omar Semidey, “Federal Jobless Benefits Will Stimulate the
Economy While Helping Over Three Million Jobless Families Who Will Run Out of
State Benefits This Year,” National Employment Law Project, February 12, 2008,
http://www.nelp.org/page/-/UI/UI_Extension.pdf.
“Why Should Latino Workers and Their Families Care About Unemployment
Insurance?” National Employment Law Project, August 24, 2005,
http://www.nelp.org/page/-/UI/LatinosandUI.pdf.
Andrew Stettner and Maurice Emsellem, “Unemployment Insurance is Vital to Workers,
Employers and the Struggling Economy,” National Employment Law Project, December
5, 2002, http://www.nelp.org/page//UI/UI%20Benefits%20Workers%2C%20Employers%20and%20the%20Struggling%20
Economy.pdf.
Rebecca Smith, Rick McHugh, Andrew Stettner, and Maurice Emsellem,
“Unemployment Insurance in Washington: A Positive Impact for Working Families and
the Economy,” National Employment Law Project, October 2002,
http://www.nelp.org/page/-/UI/Positive%20Impact%20for%20Working%20Families.pdf.
Dean Baker, “Spending Versus Tax Cuts: Who Pays the Cost of Political Compromise?”
Center for Economic Progress, January 2009,
http://www.cepr.net/index.php/publications/reports/spending-versus-tax-cuts/.
Matthew Sherman, “Will Workers Survive State Budget Belt-Tightening?” Center for
Economic and Policy Research, December 2008,
http://www.cepr.net/index.php/publications/reports/will-workers-survive-state-budgetbelt-tightening/.
Lawrence Mishel and Heidi Shierholz, “Two For the Price of One: Providing
Unemployment Insurance Both Assists the Unemployed and Generates Jobs,” Issue Brief
#281, July 15, 2010, Economic Policy Institute,
http://www.epi.org/publications/entry/two_for_the_price_of_one/
9
•
“Understanding the Unemployment Trust Fund Crisis of 2010,” Unemployment
Insurance Briefing Paper, April 2010, National Employment Law Project,
http://nelp.org/page/-/UI/solvencyupdate2010.pdf?nocdn=1
HISTORICAL:
Anthony Badger, The New Deal: The Depression Years, 1933-1940 (New York: Hill and Wang,
1989).
William Barber, Designs Within Disorder: Franklin D. Roosevelt, the Economists, and the
Shaping to American Economic Policy (Cambridge: Cambridge University Press, 2006).
David Beito, Taxpayers in Revolt: Tax Resistance During the Great Depression (Chapel Hill:
University of North Carolina Press, 1989).
Edward Berkowitz, America’s Welfare State (Baltimore, Johns Hopkins University Press, 1991).
Alan Brinkley, The End of Reform: New Deal Liberalism in Recession and War (New York:
Knopf, 1995).
William Brock, Welfare, Democracy, and the New Deal (Cambridge: Cambridge University
Press. 1987).
Steve Fraser and Gary Gerstle (eds.), The Rise and Fall of the New Deal Order (Princeton:
Princeton University Press, 1989).
Colin Gordon, New Deals: Business, Labor, and Politics in America, 1920-1935 (Cambridge:
Cambridge University Press, 1994).
Ellis Hawley, “The New Deal and Business,” in The New Deal: The National Lavel, ed. David
Brody, John Braeman, and Robert Bremmer (Akron: Ohio State University Press, 1975), 50-82.
Ira Katznelson, Kim Geiger, Daniel Kryder, “Limiting Liberalism: The Southern Veto in
Congress, 1933-1950,” Political Science Quarterly 109 (Summer 1993), 283-306.
David Kennedy, Freedom from Fear: The American People in Depression and War, 1929-1945
(Oxford: Oxford University Press, 1999), 249-287, esp. 90
Alice Kessler-Harris, In Pursuit of Equity: Women, Men, and the Quest for Economic Citizenship
in 20th-Century America (Oxford: Oxford University Press, 2003).
Mark Leff, The Limits of Symbolic Reform: The New Deal and Taxation, 1933-1939
(Cambridge: Cambridge University Press. 1984).
Nelson Lichtenstein, State of the Union: A Century of American Labor (Princeton: Princeton
University Press, 2002).
10
James T. Patterson, Congressional Conservatism and the New Deal (Lexington: University of
Kentucky Press, 1967).
James T. Patterson, America’s Struggle Against Poverty in the Twentieth Century (Cambridge:
Harvard University Press, 2000).
Stanley Vittoz, New Deal Labor Policy and the American Industrial Economy (Chapel Hill:
University of North Carolina Press, 1987).
Clyde Weed, Nemesis of Reform: The Republican Party During the New Deal (New York:
Columbia University Press, 1994).
Edwin Witte, The Development of the Social Security Act (Madison: University of Wisconsin
Press, 1962).
George Wolfskill, The Revolt of the Conservatives: A History of the American Liberty League
(New York: Houghton Mifflin Company, 1962).
11
APPENDIX B:
NOTE: These quotations were easily obtained from just a quick reading of the hearings for the
Cry Wolf section of the policy brief and do not represent exhaustive research. These quotations
are needed for the Cry Wolf project’s database and thus a requirement for the brief.
QUOTATIONS FROM LEADING OPPONENTS TO STATE AND FEDERAL
UNEMPLOYMENT INSURANCE
• Divided by the following themesased on the primary reasoning within the theme:
o Job Killer
o Government Overreach
o Slows Economic Recovery
o Destroys Individual Initiative
* Note: Many of these passages could have fallen into several thematic categories. They were
placed under the heading that best fit the overall argument within the specific passage.
JOB KILLER
“Employers pay men, not machines. Can there be any question but that this and similar
legislation will drive industry faster and faster toward mechanization? Can there be any question
but that its normal tendency will be to depress wages, since the higher the total pay roll, the
greater the taxes? Can there be any question but that it will retard reemployment of men and
intensify the development of machinery and its substitution for men?”
* John C. Gall, Associate Counsel National Association of Manufacturers, Washington, DC,
313-357, esp. 338, “Unemployment Insurance,” Hearings before the House Committee on Ways
and Means, Mar. 21-24, 26-30, 1934.
“It will hasten mechanization of all processes and thus permanently reduce employment. It will
force employers to keep wage rates at the lowest possible minimum and thus reduce the amount
of the tax.”
* George C. Lucas of the Publishers Association in Associated Press, “Insurance Plan Called
Ruinous,” Washington Post, March 31, 1934, pg. 3.
“New York State’s past independent pioneering activities in social legislation, while
commendable in many respects…have already produced discriminatory differentials between the
cost of doing business in New York and such costs in neighboring States [sic]. We can see no
justification for deliberately increasing those differentials at this time by continuance of such
pioneering.”
*Statement by the Merchants Association of New York on New York & national unemployment
insurance, quoted in “Merchants Oppose Job Insurance Bills,” New York Times, April 17, 1934,
pg. 2.
“…we are going on the theory that it will create jobs. It will not. We shall create jobs only by
giving confidence to people who are in a position to hire other people.”
pg. 2.
12
“[The bill] tends to retard the increase of pay rolls, because of the absorption of this amount of
money for taxation purposes; it retards the increase of employment also. It is a permanent tax,
with no limit, regardless of economic conditions in general or of the individual company. In
other words, it may be the last straw, as I said before, that puts this company over the line into
bankruptcy.”
* Frank H. Willard, Worcester, MA, President, Graton & Knight Manufacturing Co., 294-302,
esp. 295, “Unemployment Insurance,” Hearings before the House Committee on Ways and
Means, Mar. 21-24, 26-30, 1934.
“There is probably no greater need at the present time than for opportunity of employment.
Through a long period in our country both law and public opinion reflected the universal
approval and the good will felt toward those capable of giving employment to men and women
who needed jobs. Yet, the imposition of this tax would be a complete reversal of that attitude. It
would indicate either that employment is held undesirable and should be discouraged, or else it
could properly be considered as an attempt to penalize unemployment.”
* Merwin K. Hary, New York, NY, President, New York State Economic Council, pgs. 288-294,
Means, Mar. 21-24, 26-30, 1934.
“…in regard to the ultimate consequence of this legislation, that is leaving aside the effect that
might be produced this year or next year, on pay rolls, we wish to point out the added incentive it
creates for the more rapid introduction of labor-saving machinery for the definite purpose of
reducing the total taxable pay roll and thus add to the unemployment.
Further there is always a maximum labor cost that any industry can meet and there will
be a definite increased tendency for employers to consider this tax as a part of the wages of their
employees and keep the direct wage paid as low as possible to reduce such wage by the size of
the tax itself; I am indicating that only as a natural business tendency.”
* George C. Lucas, Executive Secretary, National Publishers Association, pgs 395-398, esp. , in
“Unemployment Insurance,” Hearings before the House Committee on Ways and Means, Mar.
21-24, 26-30, 1934.
GOVERNMENT OVERREACH
“It would result in further and unnecessary intrusion of the Government into the domain of
private enterprise, thus aggravating the hardships which have already been caused industry by
extensive government regulations, restrictions, and competition.”
* James L. Donnelly on Behalf of the Illinois Manufacturers Association, pgs 402-408, esp. 407,
in “Unemployment Insurance,” Hearings before the House Committee on Ways and Means, Mar.
21-24, 26-30, 1934.
“These bills, in our opinion, are contrary to the spirit of the Constitution of the United States and
inconsistent with the many decisions of the Supreme Court on analogous questions of
taxation…”
* “Job Insurance Idea Scored,” Los Angeles Times, April 2, 1934, pg. 4.
13
“In all probability, however, compulsory unemployment insurance cannot be had without an
amendment to the Constitution, probably both state and federal, as such a measure might be
attacked on the grounds that it is confiscation of property without due process of law.”
* “Unemployment Insurance,” Wall Street Journal, Jan. 13, 1933, pg. 13 [on a proposed
unemployment insurance bill for New York state].
“…if the Federal Government gets any revenue from this bill, it is worse than any sales tax. It is
a tax on pay rolls, on wage earners, and obstacle to increased employment and to rising wages. It
operates to encourage the substitution of other methods of production, using less labor. It
encourages, therefore, the introduction of wage saving machinery which may not be in the true
sense labor saving machinery.”
* Prof. R.S. Meriam, Harvard Business School, pgs 228-235, esp. 233-234, “Unemployment
Insurance,” Hearings before the House Committee on Ways and Means, Mar. 21-24, 26-30,
1934.
“…it is an attempt to foist action on the States in a matter with respect to which, apparently, the
Federal Government is unable under the Constitution to act directly itself.”
Means, Mar. 21-24, 26-30, 1934.
“Such a law would inevitably operate to hold down the number of employees on the pay roll as
well as to prevent and minimize increases in the rate of pay, so that the burden of the tax could
be reduced to the minimum.”
* “Job Insurance Idea Scored,” Los Angeles Times, April 2, 1934, pg. 4.
“The fact is that one of the reasons why our business leaders, large and small and in almost every
kind of business, are fearful of the future is because of the well-defined campaign of a very few
people to foist upon this country a complete scheme of compulsory social insurance. The little
group—and it is astonishingly small in numbers, though tremendously vocal—is largely of
foreign origin, a substantial part of the advocates of this system coming from Germany and from
countries lying further east.”
* M. K. Hart, president of the New York State Economic Council, quoted in “Social Insurance
Declared Menace,” New York Times, April 11, 1933, pg. 11.
“The fundamental objection to the whole plan is that it is based on the false assumption, not
merely that the world owes every man a living, but that employees in industry owe a living to
every person who chances to be employed in that or any other industry.”
* “The Federal Dole Bill,” Los Angeles Times, April 3, 1934, pg. A4.
“This bill will lead to an increase in bureaucracy in order to administer the act. There would have
to be a great host of field representatives to check up the laws of 48 States, and to insure
compliance with those laws.”
14
Means, Mar. 21-24, 26-30, 1934.
“It [unemployment insurance] will not alleviate current distress…because its provisions do not
become operative for two years. By that time they undoubtedly will not be necessary, as
mandatory obligations.
It would create a commission whose emissaries would have their official noses constantly
in the books of private business, contrary to all intent and constitutional principle. It would mean
another injection of government into individual initiative when the trend of the time is distinctly
away from interference.
Moreover, it would create a vast political machine with untold potentialities and, in its
ultimate purpose, is little short of a dole. An unemployed wage earner, for instance, would have
to be unemployed for a specified time before he could draw on the fund and then he would draw
only $10 to $12 a week. What would gain him against normal earning power?”
* Edgar R. Perry, General Manager of the Merchants’ and Manufacturers’ Association of Los
Angeles reacting to a proposed 1933 unemployment insurance bill for California in “Bill Would
Insure Job,” Los Angeles Times, Jan. 25, 1933, pg. 1-2.
“The proposed pay-roll tax is not only a sales tax, but, in addition, is a production tax, a
processing tax, and a distribution tax. It has all the vices and none of the virtues of a sales tax. It
is selective as to the classes of business against which it is to be assessed, and hence, is
discriminatory. It is cumulative; it applies over and over again on every operation from the
production of raw materials to and including the final sale of a product to the ultimate
consumer…The pay-roll tax is a hidden tax and each successive purchaser of a commodity pays
the tax if it can be passed on under the circumstances of the particular transaction.”
and Means, Mar. 21-24, 26-30, 1934.
“The following principal results of the experience of European countries, particularly England
and Germany, with compulsory unemployment insurance, may be noted:
First, that a tremendous and ever-increasing tax burden has been imposed on the citizens
of those countries which in the instance of several of the countries and particularly England, has
impaired the financial structure of the Government.
Second, that unemployment was not prevented—the number of unemployed in fact was
greatly increased.
Third, that increased liberalization of the act and extension of benefits, removed the
original insurance aspect and caused the plan to become dissipated into a system of doles.
Fourth, that the administrative expense increased out of all proportion to the benefits
extended.
Fifth, that demands for public charity in all other forms of poor relief have vastly
increased since the adoption of the public employment insurance program.
Sixth, that the socialistic tendencies involved in the system have influence other
objectionable forms of governmental regulation of private business.
15
Seventh, that this form of insurance invariably led to political abuses, the party in power
being influence more often by the effect of the dole policy upon voters than upon the real welfare
of the Nation.
Eight, that it ruined the public morale and initiative by establishing a vast army of
nonworkers [sic] who make no attempts to secure work and regard the dole as their inalienable
right. The ideal that dangled before the youth of Great Britain was not work but compensated
idleness.
Ninth, that it has reduced the opportunities for employment by stifling industrial
development and driving capital from the countries where it is in vogue.”
* James L. Donnelly on Behalf of the Illinois Manufacturers Association, pgs 402-408, esp. 403404, in “Unemployment Insurance,” Hearings before the House Committee on Ways and Means,
Mar. 21-24, 26-30, 1934.
SLOWS ECONOMIC RECOVERY
“It [this bill] would increase unemployment by aggravating the very conditions which it is
attempting to correct, by crippling the agencies which furnish opportunities for employment, by
discouraging efforts to relieve unemployment, and by placing a premium on idleness.”
21-24, 26-30, 1934.
“We have just come from another hearing, of the Wagner Labor Board. Now, if you keep piling
these things upon industry, where are the reserves going to come from to protect these things?
You are going to stop the very recovery necessary to produce this reserve.”
* P. H. Gadsden, President Chamber of Commerce, Philadelphia, pgs 248-251, esp. 249,
21-24, 26-30, 1934.
“The imposition on industry at this time of the tax burden contemplated by this measure would
render business recovery absolutely hopeless. Manufacturing industry is now engaged in a
desperate struggle in an effort to continue operations and provide jobs. Most industries have been
operating at a loss for several years. Industry is not prepared at this time to accept the added
burden as contemplated by this bill.”
21-24, 26-30, 1934.
“The social legislation workers, whose views are represented in this bill, are more accustomed to
dealing with theories than facts…On paper, a 5 per cent tax on pay rolls may be ideal, but in
practice it would result in the definite retarding of business recovery.”
16
“…this is no time to put additional burdens on employers and employees and State
administrations. Recent legislation has created plenty of burdens without adding the one. It is an
extremely dangerous time to discuss raising labor costs in the sense of labor costs per unit.”
* Prof. R.S. Meriam, Harvard Business School, pgs 228-235, esp. 233, “Unemployment
Insurance,” Hearings before the House Committee on Ways and Means, Mar. 21-24, 26-30,
1934.
“…to impose this burden at this time, when industry is just struggling to get on its feet, is going
to still further retard the very recovery which is necessary to create these reserves. That is the
basis of our opposition to these provisions.”
* P. H. Gadsden, President Chamber of Commerce, Philadelphia, pgs 248-251, esp. 249,
21-24, 26-30, 1934.
“The imposition on industry at this time of the tax burden contemplated by this measure would
render business recovery absolutely hopeless.”
* James L. Donnelly, executive vice president of the Illinois Manufacturers Association in
Associated Press, “Insurance Plan Called Ruinous,” Washington Post, March 31, 1934, pg. 3.
“…unemployment insurance legislation at this time would be a costly experiment which is
certain to add extravagantly to public expenditures.”
pg. 2.
“State-supported unemployment insurance has everywhere broken down. It may be possible for
private industry to operate, successfully, unemployment plans on a voluntary basis, though the
matter is still experimental and there is not enough experience to go by. But the world does know
that the government plans do not work and why they do not work….it would be merely another
costly failure, providing soft berths for a number of politicians at the expense of industry and
labor, and degenerating into an outright dole.”
* “A Dole for California,” Los Angeles Times, Feb. 13, 1932, pg. A4 [on the California CroninHornblower unemployment insurance plan, introduced during state-level and national debate
over unemployment insurance]
“…we cannot consider this bill in a vacuum. Industry today is facing a number of bills here on
the Hill, all of which are of the same sort, and we have a right to look at them as a whole;
because none of them is going to be destructive of industry in itself, but, taken as a whole, they
are going to impose a very serious burden on the industries of the United States, which are now
trying to come out of the depression.”
and Means, Mar. 21-24, 26-30, 1934.
17
“Industrial corporations represent the principal source of livelihood of a very large percentage of
our total population. Accordingly, any legislative program which impose unreasonable hardships
on manufacturing industries will react to the detriment, directly or indirectly, of every taxpayer.”
* James L. Donnelly on Behalf of the Illinois Manufacturers Association, pgs 402-408, esp. , in
21-24, 26-30, 1934.
DESTROYS INDIVIDUAL INITIATIVE
“Unemployment insurance, which in many instances places a premium on indolence, would
unquestionably defeat this proposed plan of the Administration to place workers in the areas of
lower living costs and keep them gainfully employed.”
“…no matter who pays the unemployment insurance bill in the first instance, it comes out of
money available for wages and so is all paid by the workers in the long run. But like other
indirect taxes, those who bear the burden do not realize in under such a scheme as the WagnerLewis bill proposes. If they did, they would be careful how it was spent and would raise
objections if slackers and chiselers attempted to live off it. If they thought it was being paid by
employers and by the State, many would be tempted to join the slacker and chiseler class. Any
bill which purports to lay the whole burden on management (although it cannot be done) is
doubly vicious in tendency.”
* “The Federal Dole Bill,” Los Angeles Times, April 3, 1934, pg. A4.
“…this is one of a number of movements designed to give greater security to the working
people. Security is, of course, desirable as an abstract proposition.
But as a practical matter, not even the Government can guarantee security to all the
people; because the only way by which the Government can get the means wherewith security
can be guaranteed is from the people themselves, or from some of them.
Such a bill as this tends to make many people feel a greater reliance on the Government.
What is needed to bring us out of this depression is for the greatest possible number of people to
know fully that their best reliance is still on themselves.”
esp. 289-290, “Unemployment Insurance,” Hearings before the House Committee on Ways and
Means, Mar. 21-24, 26-30, 1934.
“Much is said in the headlines of the newspapers about the unemployed, and deservedly; but not
enough is said about the employers who have kept their men and women workers on, even
though they have been for a long time deep in the red themselves.”
Means, Mar. 21-24, 26-30, 1934.
“…it still is true that the young people of today in this country look to the people who have
succeeded in spite of every handicap such as that, as their inspiration for doing things. I think we
18
do not want to kill off that spirit of individualism. I use the term ‘individualism’; I know it is
sneered at a lot, but I know if is still a respectable term and I think we ought to cultivate it
instead of sneering at it.”
and Means, Mar. 21-24, 26-30, 1934.
“This bill will cause further migration from the farm areas to the industrial areas and will invite
the transfer of workers from the class of those not gainfully employed in order to share in the
unemployment benefits…Unemployment insurance, which in many instances places a premium
on indolence, would unquestionably defeat this proposed plan of the administration to place
workers in the areas of lower living costs and keep them gainfully employed.”
* Walter D. Allen, President of the National Editorial Association, pgs 399-402, esp. 400, in
21-24, 26-30, 1934.
“It would undermine the fabric of our economic and social life by destroying initiative,
discouraging thrift, and stifling individual responsibility.”
21-24, 26-30, 1934.
“…finally, it is paternalistic and incompatible with our fundamental conception of democracy.”
21-24, 26-30, 1934.
19

Ellie Shermer Cry Wolf – DRAFT Sample Policy Brief: Unemployment Insurance

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