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INSIDE TRACK: Attack on the unemployed that could happen here

It is hard to imagine the UK mimicking what happened to job- seekers in America last week.

Three days after Christmas, every American who had been claiming federal unemployment benefits for more than six months had them stopped. Officially, the Emergency Unemployment Compensation programme is a benefit that pays an average of $300 a week to those who have exhausted the limited unemployment insurance offered by most states. In many cases, it is a family or an individual's only source of income.

The scheme is the subject of a political battle as President Obama and Democratic members of Congress aim to extend protection for the long-term jobless, against Republican opposition. It is hard to imagine all this happening here but is it so hard? George Osborne's announcement that there are big cuts still to come and that £12 billion's worth are to come from the UK benefits system surely raises the question. Already, as in America, the idea of social security has been replaced by "welfare", with a corresponding sense that it is something that can and should sometimes be withheld from people for their own good.

The shift here towards US-style reliance on food banks or the generosity of family members for those without other means of support has also been remarkable.

But America's rationale for cutting the payments is hard to fathom. The obvious question for the 1.3 million people who have had payments stopped is: how to survive?

Some will be motivated to seek work with greater urgency, for instance by being less picky about the type of job or their pay expectations. But in America, as in Britain, employers are generally much more reluctant to take on those who have been out of work for lengthy periods.Though the jobless rate is falling, it is still stubbornly high. Indeed, it is often highest in some of the Red states, Republican strongholds such as Mississippi that have long been more dependent on federal aid than those traditionally held by Democrats.

Homelessness and other costly social outcomes such as rising crime seem likely effects. But the biggest concern voiced in the American media has been economic. Harvard Professor of Economics Lawrence Katz argues that the decision to stop payments was simply fiscally irresponsible.

His argument is that $400m a week has been taken from the pockets of America's jobless but, far from being a saving, this is undermines the economy: Those on the breadline tend to spend their income right away, on food, goods and services. Remove that money and you damage local businesses and undermine commerce. Depending on the arithmetic, this translates to a cost to the economy of $600m to $1bn a week.

It isn't clear what further cuts the UK Chancellor has in mind for the UK benefits system, but food banks supplied a Christmas meal to 60,000 people this year. Perhaps that benefits the economy too: the food surely has to be bought at some point.

But it will be worth watching the American situation and whether this latest cut proves fiscally prudent; or a lesson in unintended consequences.

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