Helping the 99ers Helps Everyone

The CPBB has just published a new report, "Emergency Unemployment Insurance Benefits Remain Critical for the Economy" (link, PDF)

One section in particular is worth close attention:

UI Is a Highly Effective Tool for Reviving a Weak Economy

Among 11 measures analyzed by the Congressional Budget Office (CBO) for increasing economic growth and employment in the next year or two, aid to the unemployed stands at the top of the list. According to CBO, "Households receiving unemployment benefits tend to spend the additional benefits quickly, making this option both timely and cost-effective in spurring economic activity and employment." CBO estimates that providing additional unemployment insurance benefits would boost economic output by as much as $1.90 per dollar of budgetary cost and increase employment by as many as 19,000 jobs per billion dollars of budgetary cost.

CBO's estimate of the relative importance and bang-for-the-buck of UI is similar to that of most other forecasters. Mark Zandi of Moody's estimates, for example, that UI generates $1.64 of GDP per dollar spent in the first year, a bang-for-the-buck that is exceeded in his calculations only by the $1.73 generated by an increase in food stamp benefits.

Federal emergency UI benefits provide a significant boost to the economy and job creation. To illustrate, in September roughly 5 million people were receiving additional weeks of federally funded emergency UI benefits with an average weekly benefit of roughly $300. That translates into about $6.5 billion a month pumped into the economy, or $75 to $80 billion over the course of a year. That’s likely to mean one million or more additional jobs, based on CBO's estimates.

Put the other way around, failure to provide federal emergency UI benefits for another year could drain as much as $75 to $80 billion of purchasing power from the economy and hold down job creation over the coming year, costing one million or more jobs. With forecasters becoming more pessimistic about economic growth and job creation over the coming year, that’s a loss we cannot afford. And, as the Federal Reserve concluded this week, the case for further policy to boost the economy is strong.

More soon.


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