Congress should eliminate federal unemployment insurance.
The Social Security Act of 1935 that created the federal government's retirement insurance system also established a system to pay workers during periods of unemployment. But at any given time as many as half of the workers who lose jobs are barred from collecting benefits from the system into which they have been forced to pay, while a large portion of those who do collect benefits are repeat claimants. Further, the system unfairly helps some businesses and individuals at the expense of others and reduces incentives for the jobless to accept work. Now that Social Security privatization is a serious policy option, it is time for Congress to consider privatizing the other primary income-security program, unemployment insurance (UI). Doing so at this time is particularly important in view of the proposal to raid the UI trust funds to pay benefits to individuals taking advantage of the Family and Medical Leave Act.
In the early 20th century, proposed state legislation to create UI was regularly defeated. Most state legislators believed that providing such insurance was not a proper function of government and would put their state in a poor competitive position. And in the U.S. Congress many lawmakers understood that the federal government had no constitutional authority to enact UI policy.
Further, at the beginning of the 20th century, the private sector was developing ways to provide assistance for the unemployed. For example, in Britain before the adoption of a government UI system in 1911, 30 percent of all union expenditures were for unemployment benefits. Union and employer plans also began to develop in the United States at that time as well. Worker contributions took the form of a percentage of