SADOW: The UI Swap Was A Lousy Deal For Republican Leges To Have Made

Louisiana conservatives must scratch their heads and wonder what is wrong with Republican legislators when mainly their votes send to the governor a bill like HB 183 by Democrat state Rep. Chad Brown.

The bill started out innocuously as giving claimants the ability to not have taxes withheld from emergency unemployment benefits, such as the extra $300 a week the federal government doles out through Sep. 6 on a state’s request. Half the states have signaled an intention not to participate in this through to that date.

Louisiana isn’t one of them, as surveys show the bonus payments discourage a portion of the unemployed from seeking work (despite that most states, including Louisiana, require that recipients seek jobs and take one if offered – this requirement easily is gamed by recipients, for example, by inquiring repeatedly about jobs which they know for various reasons they will not be offered).

Despite every southern state with a Republican governor having opted out, Louisiana’s Democrat Gov. John Bel Edwards has joined with the region’s other two Democrat chief executives in letting this form of universal basic income continue.

However, he will likely change his mind because of a gift from Republicans. Lawmakers amended HB 183 to add a provision increasing the maximum weekly benefit in all scenarios (a different maximum exists at different levels of the state’s unemployment trust fund with a higher balance allowing for higher payouts) by $28 beginning next year if before Jul. 31 the state withdraws from the federal largesse.

As the trust fund is considered off-budget, no fiscal note was prepared to outline the increased costs. These would be borne by employers and employees, and indirectly by the citizenry through price increases passed down by employers. Using first week of 2020 data and assuming that half of claimants were eligible to receive the maximum, that implies an extra $12 million extracted and paid out over a year. Additionally, in general wherever benefits rise, these translate into higher levels and longer durations of unemployment, creating yet another drag on a Louisiana economy that persistently underperforms.

Granted, Republicans sensibly wanted to remove an impediment holding back employment, and to its credit the state had just about the lowest maximum, reducing the disincentive to work (benefits which never should be relied upon as the sole source of resources available in case of unemployment) that the $300 extra badly distorted. Yet, using the Jul. 31 cutoff, it would have gone away in just over five weeks without doing anything.

Edwards is committed to government having an increased impact on people’s lives, and undoubtedly he inserted himself in the process to mutate the bill into a tradeoff. In essence, he negotiated this expansion of government into perpetuity for something that would have ended soon anyway – and was costing the state nothing except a little administratively. This was nothing more than an unforced error by legislative Republicans, although some sensibly opposed the bill.

Of course, Edwards will sign the bill then wait until the last moment to end the lagniappe. In essence, it will mean Republicans will have given employers and consumers – because they too suffer from business closures and cutbacks – 37 days quicker relief but make them pay more starting next year forever. There was no reason they had to make such a one-sided, bad deal, and Louisianans will pay for it for the foreseeable future.

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