Greenspan Backs Extension of Unemployment Benefits

Federal Reserve Chairman Alan Greenspan said Thursday that improved education was the best long-term solution to the job losses caused by globalization and other economic gyrations, but he acknowledged that an extension of unemployment benefits might help in the meantime.

Testifying before the House Education and Workforce Committee, Greenspan warned that a retreat to protectionist policies would be the wrong response to trends that have contributed to the loss of 2.3 million jobs since President Bush took office and the accelerating shift of U.S. work to low-wage nations.

Taking a position that could put him at odds with the Bush administration and Republican lawmakers, Greenspan expressed support for proposals to provide a temporary extension of benefits for the nearly 2 million workers who have been unemployed for more than 26 weeks. The last such extension expired in December.

“When unemployment is created through no fault of the worker’s actions, then I think it is clearly to our advantage to find ways of creating support,” he said. “While I am fairly well convinced that employment is about to pick up ... I think that considering the possibility of extending unemployment insurance is not a bad idea.”

One House proposal would provide extended benefits at an estimated cost of $6 billion. In most states, it would provide the long-term unemployed with an additional 13 weeks of benefits. In states with unusually high unemployment rates, the extra benefits would last 26 weeks.

Rep. George Miller (D-Martinez) lauded Greenspan for his position and called on GOP congressional leaders to schedule action on pending legislation to extend jobless benefits for the long-term unemployed. “Chairman Greenspan’s remarks about unemployment benefits show that Republican efforts to block a benefits extension are misguided,” said Miller, the education panel’s senior Democrat.

Acknowledging that globalization has contributed to an increasingly volatile job market in recent years, Greenspan urged lawmakers not to erect trade barriers or restrict the ability of U.S. firms to open plants or hire workers overseas.

“These alleged cures would make matters worse rather than better,” he said. “They would do little to create jobs, and if foreigners were to retaliate, we would surely lose jobs.”

Although open trade and off-shoring displace some workers in the short term, Greenspan said, they are a necessary part of the cycle of “creative destruction” that, over time, creates higher living standards and new employment opportunities.

The Fed chairman expressed concern that the U.S. education system wasn’t keeping pace with the changing demands of the global economy, failing to provide enough Americans with the knowledge and skills to compete with workers in other countries.

“We have developed a shortage of highly skilled workers and a surplus of lesser skilled workers,” he said. “We cannot expect everyone to be equally skilled, but we need to pursue equal access to knowledge to ensure that our economic system works at maximum efficiency.”