A new effort to revive federal assistance to workers displaced by trade agreements has congressional conservatives ready to be up in arms.
Under the terms of an otherwise obscure provision of U.S. law known as the Trade Adjustment Assistance Program, or TAA, American workers who lose their jobs as the result of foreign trade are declared eligible for federally funded job retraining programs and given a relocation allowance and extended unemployment benefits that are intended to help them find new jobs.
It’s a good sound bite, but it has little basis in economic reality, making it government paternalism at its worst. According to the Heritage Foundation, a conservative think tank in Washington, “TAA job training largely fails to help workers. Studies show that workers who complete TAA job training earn no more afterward than workers who do not.” [Read more stories about unemployment.]
Whether the program is effective is up for debate, as is its reauthorization. Because it is largely a subsidy to unionized workers, it is very important to the Democrats—who depend on organized labor’s money and political support to win elections, which is why the program's coverage was expanded and funding for it was increased as part of the 2009 Obama stimulus legislation. With the program due to expire--and to the chagrin of many conservatives--the new chairman of the House Ways and Means Committee, Michigan Republican Dave Camp, is leading the charge to preserve it. [See who donates the most to Camp.]
Such efforts, which give generous subsidies to supposedly displaced workers, amount to little more than an expensive gift to the labor unions and the Democrats. Very few workers, in relative terms, lose their jobs as the result of new trade agreements, and the U.S. Department of Labor, as many people point out, already provides them with basic services in the event they are displaced. Moreover, the ebb and flow of the U.S. economy leads to a dynamic job market, meaning workers move around a lot— though they change jobs with much less frequency in bad economic times. As Heritage points out, “Competition and innovation constantly create and destroy jobs in America. Shrinking and bankrupt firms eliminate about 2 million existing jobs a month, while new and expanding companies create a similar number of new jobs.”
Even though international trade results in relatively few lost jobs here in the United States, the benefits package created by TAA is far more generous than what other workers who lose their jobs receive. Those benefits, critics say, provide an incentive to stay out of the job market rather than seek new employment—at a cost to taxpayers of $2.4 billion for the program alone. And that’s without considering the reduction in productive economic activity to which these generous subsides lead. [Check out a roundup of political cartoons on the economy.]
Camp’s support for the program's reauthorization does not sit well with other congressional Republicans, sources on Capitol Hill say, particularly not with the large class of freshmen who believe they were elected with a mandate to cut spending and enact policies that will lead to job creation rather than subsidize unemployment. Extending the program, critics say, is not just bad policy—it’s also bad politics. It amounts to a gift to the Democrats without receiving anything substantial in return. The best way to create jobs is to enact policies that lead to job creation—like cutting taxes, reducing government spending, keeping inflation down, and making the decision to hire more workers a rational one rather than one that is merely optimistic, or one that relies on government subsidies for new hiring to make economic sense. This retraining program does none of these things, making the GOP leadership’s support for it quite surprising indeed.