Unemployment and Unemployment Insurance

Eli,

This is one of my posts that makes your head explode. So be prepared.

Here's a graphic from the Wall Street Journal on the maximum duration of unemployment-insurance benefits by state, in weeks.

And here's the unemployment rate by state, from the Bureau of Labor Statistics.

Your trusted economist, the CBO recognizes 

Federal budget policies affect potential output mainly by affecting the amount of public saving (the combined sur- pluses or deficits run by the federal government and state and local governments) and the incentives for people and businesses to work, save, and invest. Different methods of achieving any given increase in public saving could have different effects on those incentives. For example, increases in marginal tax rates on labor would tend to reduce the amount of labor supplied to the economy,

Economists recognize increasing unemployment benefits is similar in nature to an increase in the marginal tax rate. That is, if you go back to work, you lose unemployment benefits. If you lose a lot of benefits and only get a little bit more from working, you face a high marginal tax rate. Despite recognizing this concept, the CBO ignores it in all of its analyses, which is one of the reasons I accepted your wager with such alacrity.

Here are the states with the lowest unemployment rates and the states with the fewest number of weeks of unemployment insurance. It's a pretty strong match, as you can see.

And here are the states with the highest unemployment rates and the greatest number of weeks of unemployment insurance.

I can hear your sighs and see your head shaking back and forth. "Of course there is almost a perfect match, higher unemployment causes states to respond with more generous benefits, and lower unemployment causes states to lower unemployment benefits."

But then again, maybe your CBO is correct and workers respond to incentives. If that is the case then the polices of Obama are causing higher unemployment and rather than considering this possibility:

They'd rather stand on principle and damage the economy in the process. Then, in the aftermath, like bugs exposed to the light, they'll crawl around frantically in an effort to blame anyone but themselves.

Bill