Tag Archives: Unemployment Insurance

Paul Krugman Was (Probably) Right!

It pains me to admit this, but Paul Krugman was probably correct about something. (Though, modern-day Krugman might disagree.)

I’d point you to this excellent NRO item:

But what if 2014’s jobs boom is mostly thanks to the expiration of a program that the Obama administration and Democrats fervently pushed to renew?

That’s the finding of a new NBER working paper from three economists — Marcus Hagedorn, Kurt Mitman, and Iourii Manovskii — who contend that the ending of federally extended unemployment benefits across the country at the end of 2013 explains much of the labor-market boom in 2014.

About 60 percent of the job creation in 2014, 1.8 million jobs, they find, can be attributed to the end of the extended-benefits program. That’s a huge amount, and suggests that long-term unemployment benefits, while there’s a good charitable case for them, could have played a big role in the ongoing lassitude of our labor market. (Indeed, an earlier working paper from a few of the same authors argued that extended benefits raised the unemployment rate during the Great Recession by three percentage points; see a summary of that paper here.)

This brings me back down memory lane, nearly five years ago, to my days as a young and brash aide to Senator Jon Kyl (R-AZ) in 2010.

Here’s what Krugman sneered in his column back then about floor remarks made by my boss regarding the large expansion of unemployment insurance:

Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

To Krugman fanatics and haters, it’s not news that Krugman will write one thing, and then, years later with a newspaper column, write something completely different.

So, we went to the Library of Congress and pulled out the text book he had written with his wife, called “Macroeconomics” and look what we found:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.


So, a letter to the NY Times — something they are known for not publishing if critical — was drafted. And wouldn’t you know? It got published.

Though, we never did hear back from Paul Krugman. But I hope pre-NYT Krugman is feeling somewhat vindicated.

Here’s the letter:

jk nyt unemployment