"Back in July, the federal government was still paying enhanced benefits to the unemployed—even though many in Washington, including prominent Democrats, were warning that the federal handouts on top of state unemployment payments were creating a big disincentive to go back to work. That extra federal payment, which had begun under President Trump and was extended by Biden last March, finally ended in early September, but other federal aid continues. The IRS, for instance, now pays families a child tax credit that has expanded to $3,600 per child under six and $3,000 per older child. A recent study estimated that this lucrative benefit, if it becomes permanent as some Democrats have proposed, could prompt up to 1.5 million more mostly low-income parents to leave the workforce over the next few years. Meantime, the Treasury Department has told states that they can use some of the $350 billion stimulus money Washington was sending them to support and expand their own unemployment benefits."
Even before the Covid-induced recession struck, public policy in America had been increasingly discouraging work through expanded and more generous disability payments, longer bouts of enhanced, less restrictive unemployment benefits, and more generous social-welfare payments. One consequence: the ranks of the permanently unemployed have grown in America. In the last 20 years alone, the country’s labor-participation rate shrank from nearly 68 percent of adults to just 63 percent right before the Covid lockdowns began. Then in March 2020, the rate slipped below 61 percent—an unprecedented drop. Since then, it’s climbed less than halfway back to pre-Covid level, despite widespread business re-openings and help-wanted signs everywhere. More people are getting used to not working, and the Biden administration’s proposals for expanding federal aid programs will do little to lure them back.
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