If the latest brightening economic indicators are correct, this may prove to be a recession that was over before the Democrats could do much to help their traditional constituency. The unemployment compensation system is a prime example. Established in 1935 by the Roosevelt New Deal, its coverage expanded until the Reagan era, then went into a retrenchment that Democrats have been unable to modify right through the current slump.
The House Budget Committee hopes to generate some passion for wider and longer benefits for the jobless with an educational hearing Thursday. But a day later, new employment figures are due. And if they are upbeat, as they were a month ago, prospects for congressional action will be nil.
Why this predicament? Last October's bipartisan budget agreement put the Democrats in a fiscal straitjacket. If they actually succeeded in increasing jobless benefits over Bush administration opposition, they would have to cut other domestic programs to pay for it. Either that, or raise taxes and suffer the consequences.
The result is near paralysis, despite the party's belief that the jobless-benefits system is flawed. In the House, Rep. Thomas Downey, D-N.Y., is proposing payroll tax increases on employers to pay for reforms that would make benefits more liberal and standardized nationwide. His plan is consistent with the budget agreement, but would paste the tax label on the Democrats. In the Senate, Maryland's Paul Sarbanes is urging that the existing, very flush federal fund for extended benefits be tapped heavily. Mr. Sarbanes' proposal would avoid higher taxes but bust the budget agreement.
Despite administration arguments that the existing system is working satisfactorily, only 42 percent of Americans out of work are getting benefits, compared with 75 percent in the mid-1970s recession. Tighter eligibility requirements and difficulty in extending benefits beyond a 26-week period in all but a few states account for the drop-off.
To avoid either the tax trap or the budget straitjacket, Democrats ought to consider two modest steps. One would index the present $7,000 wage base on which employers pay taxes so that it increase in future years in step with inflation. Another would extend the waiting period for benefits from one week, at present, to three or four weeks and use this money to prolong benefits beyond the 26-week cutoff, when they are most needed.
If the recession persists despite present trends, Democrats would be in a stronger position to push solid unemployment compensation reform. But they dare not show any eagerness for bad news.