CEPR - Center for Economic and Policy Research

Multimedia

En Español

Em Português

Other Languages

Home Publications Blogs CEPR Blog In the Interest of Decency and the Economy, Extend Unemployment Benefits

In the Interest of Decency and the Economy, Extend Unemployment Benefits

Print
Written by Eileen Appelbaum   
Monday, 06 December 2010 10:23

The extreme polarization of income and wealth in the U.S. has had a corrosive effect on the body politic. In this season that celebrates human generosity and compassion, our representatives in Washington could not muster the votes to reauthorize extended federal unemployment before the program expired on November 30.
 
This, despite the fact that for workers, the Great Recession is far from over. Yet, Congress and the administration appear ready to accede to Republican demands that tax benefits for the wealthiest 2 percent of households be extended.  The job situation is grave. Unemployment remains near 10 percent of the labor force, and
15.1 million workers are unemployed, nearly 42 percent for more than 26 weeks. 
Job creation is anemic, and there are still five unemployed workers for every job opening. And that’s just considering official unemployment. Counting everyone who wants a fulltime job and doesn’t have one brings the number of unemployed and underemployed to more than 25 million Americans.
 
Despite this job outlook, Congress failed for the first time in 60 years to provide extended unemployment benefits during a period of high unemployment. Some 800,000 workers began losing their benefits at the stroke of midnight on November 30. If no action is taken, the Department of Labor estimates this lifeline will be cut for 2 million unemployed workers by the end of December. 

 
About 6.3 million people have been unemployed for more than 26 weeks, of whom about 5 million collect federal extended unemployment benefits each week, according to the Joint Economic Committee of Congress. If Congress fails to enact a one-year extension, UI payments to the unemployed will be reduced by $70 billion to $80 billion next year; food stamps and programs for the destitute will offset some of this, but incomes of the long-term unemployed are expected to decline by $50 billion. 
 
These cuts make it difficult for the long-term unemployed to feed their families and hold onto their homes. According to the Census Bureau, extension of benefits last year kept 3.3 million people out of poverty. If this support disappears, it will be hard for these workers to keep their heads above water.  It’s not only unemployed workers and their families that are at risk, however. The Congressional Budget Office ranks aid to the unemployed as the No. 1 step government can take to get the economy growing again. By the same token, cutting UI benefits and reducing the incomes of the unemployed has a large negative impact on growth and increases job loss. Failure to enact extended UI benefits is expected to reduce GDP growth by more than one-half percent, which implies a loss of more than one-half a million jobs. 

In contrast, the Congressional Budget Office found that income tax cuts are the least effective step government can take to boost the economy. A tax cut for high-income households adds little to GDP. Conversely, letting the Bush tax cuts for these households expire has little negative effect on the economy. 

 
High-income households will continue to get a tax break on the first $250,000 of
household income ($200,000 for individuals), the same as everyone else. The failure to extend these tax breaks to the part of their income in excess of $250,000 will have little effect on GDP and employment.
  
A deal for a one-year extension of UI benefits for workers unemployed for more that 26 weeks in exchange for continuing the Bush tax cuts for high income households for another year is under discussion. The economic and social implications of failing to extend UI benefits are dire. 
 
Apart from the moral outrage provoked by a Congress that has shown itself unwilling to spend $70 billion to extend benefits and reduce the desperation of the long-term unemployed, there is the pressing question of the effects of such a failure to act on the nation's current weak and fragile economic recovery.

 

Comments (0)Add Comment

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.

busy
 

CEPR.net
Support this blog, donate
Combined Federal Campaign #79613
budget economy education employment Haiti health care housing inequality jobs labor labor market minimum wage OccupyWallSt poverty recession retirement Social Security taxes unemployment unions wages Wall Street women workers working class

+ All tags