Stopgap Unemployment Benefit Extension Should Be Offset

At the end of 2013, Congress allowed extended unemployment benefits to expire, and as a result the maximum number of weeks for collecting benefits has declined from 73 to 26. While the White House and Congressional democrats have pushed for a one-year extension costing $25 billion, Sens. Jack Reed (D-RI) and Dean Heller (R-NV) offered a three-month unemployment insurance extension, costing $6 billion, which presumably would buy time for Congress to pass a full-year extension that includes offsets to pay for it. The Senate is expected to take this legislation up next week when they reconvene.

The relatively small cost of the extension does not justify abandoning pay-as-you-go principles. As we’ve explained before, it is important that policymakers stick to the budget principle that if something is worth having it is worth paying for. This is true for the tax extenders, and it is true for unemployment benefits.

Nor should finding $6 billion be all that hard. A Ways & Means Committee proposal to stop beneficiaries from simultaneously collecting unemployment and disability benefits would just about do the trick. So too would reinstating the 0.2 percent unemployment surtax through 2018, which was in effect from 1976 and 2011, and the savings would double if it were made permanent. And any number of spending cuts not related to unemployment insurance could also be used.

The table below shows several other mandatory policies which could offset the $6 billion cost.

Ten-Year Savings from Mandatory Policies
Policy Savings
Prevent "double-dipping" for UI and DI $5 billion
Extend UI surtax through 2018 $7 billion
Extend Fannie and Freddie fees beyond 2021 $8 billion
Increase federal retirement contributions by 0.4 percentage points for current workers $6 billion
Increase PBGC premiums to levels proposed in the President's budget $6 billion
Calculate retirement benefits based on highest 5 earning years $6 billion
Freeze Medicare premium means-tested thresholds for an additional two years $9 billion
Reform Perkins loans as in the President's budget $9 billion
Prohibit pay-for-delay agreements for generic drugs $5 billion
Reform post-acute care payments $9 billion
Establish air traffic control surcharge $8 billion
Establish spectrum user fees $5 billion
Eliminate in-school interest subsidy for undergraduate loans during graduate school $8 billion
Eliminate S corp. reasonable compensation ("John Edwards/Newt Gingrich") loophole $15 billion
Reduce "heat and eat" loophole $4-11 billion
Enact Postal Service reform $0-20 billion

Source: CBO, OMB

Even if this legislation is just a three-month stopgap, the extension should be offset, and there are plenty of policies with the requisite savings to consider.

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