An Update on Unemployment Insurance
Lost in the ongoing debate over an extension of the payroll tax cut has been the fate of unemployment insurance. Tuesday, the House majority rejected a Senate proposal that would have extended the payroll tax cut and unemployment benefits for two months, through February, buying time for a longer-term deal to be struck.
While the exact merits of a payroll tax cut as a form of economic stimulus vary from economist to economist, unemployment insurance represents a potent form of investment. The nonpartisan Congressional Budget Office estimated recently that every dollar spent on unemployment insurance can add up to $1.90 to the economy—more than either infrastructure spending or tax cuts. The Economic Policy Institute wrote in November that unemployment insurance has substantial benefits:
Long-term unemployed workers are almost by definition cash-strapped and have very little choice but to immediately spend their unemployment benefits. Unemployment benefits spent on rent, groceries, and other necessities increase economic activity, and that increased economic activity saves and creates jobs throughout the economy. For this reason, economists, including those at the Congressional Budget Office, widely recognize government spending on unemployment insurance benefits as one of the most effective things that can be done in a recession to generate jobs. Spending $45 billion on unemployment insurance extensions in 2012 would increase GDP by an estimated $72 billion, raising our $15.2 trillion GDP by roughly 0.5 percent. This increase in economic activity translates into roughly 560,000 payroll jobs. In other words, extending the federally funded unemployment insurance extensions through 2012 would not only extend a lifeline to the families of millions of long-term unemployed workers, it would also generate spending that supports well over half a million jobs. If this program is discontinued, the economy will lose these jobs.
You read that right—extending unemployment insurance could create up to half a million jobs. Not only do unemployment benefits serve as a critical source of aid to families, helping to keep food on the table, and roofs over heads, but they can as well be a powerful form of economic stimulus. Tell your members of Congress to extend unemployment insurance today—and help keep our families well and our economy growing.
Photo via Whitehouse.gov