Extending unemployment benefits for America’s long-term jobless can only help the economy, say experts on Wall Street and in Washington. But Republicans in Congress are determined not to appropriate any more money for unemployment assistance, citing the need to reduce federal spending.

 

Jobless benefits for two million Americans are set to expire within two weeks—a development that could have negative ramifications for an already weak economy. Alec Phillips, an analyst with Goldman Sachs, told The Wall Street Journal that allowing unemployment insurance to expire would lower economic growth by half a percentage point.

 

In a report commissioned by the Bush administration U.S. Department of Labor, it is estimated that every dollar spent on jobless benefits has the effect of $2 spent in the economy. This is because unemployment checks allow the out-of-work to still be a part of the consumer economy and purchase goods and services.

 

But getting another extension of benefits during the waning days of the lame-duck Congress is proving difficult. On Thursday, the House voted 258 to 154 in favor of the extension, but fell short of the two-thirds needed for passage under fast-track procedures. Democrats voted 237-11 in favor of the bill, while Republicans voted 143-21 against it. The program has already been extended seven times, due to the slow recovery and persistent high unemployment.

 

Democrats may try to win Republican support for the unemployment program by offering to support an extension of the Bush-era tax cuts for the wealthy.

 

Although it may seem cynical for Congress to be pushing help for the rich rather than for the poor, it is worth noting that almost half the members of the new Congress are millionaires.

-Noel Brinkerhoff, David Wallechinsky

 

Spending Worries Put Jobless Benefits at Risk (by Janet Hook and Sara Murray, Wall Street Journal)

Majority of Senators are Millionaires (by Noel Brinkerhoff, AllGov)

Summary: The Role of Unemployment as an Automatic Stabilizer during a Recession (U.S. Department of Labor)

The Role of Unemployment as an Automatic Stabilizer during a Recession (by Wayne Vroman, Urban Institute) (pdf)