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Amy Traub

Amy Traub

Posted: February 25, 2010 11:28 AM

Forget the Bipartisan Photo-op, Extend Unemployment Benefits Now

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Members of Congress got to pose for a moment of bipartisan victory on the jobs crisis yesterday with the passage of a package of tax cuts and transportation investments that may put a few hundred thousand people to work. It would be great news, if only there weren't 14.8 million Americans looking for a job and more than a million of them weren't about to lose their unemployment benefits and health care coverage this coming Monday according to the National Employment Law Project. The bipartisan photo-op is helpful only insofar as it actually helps build momentum for policies that will meaningfully lower the unemployment rate and keep faith with Americans who have been fruitlessly searching for work for months.

Economic analysts project that unemployment will remain above 8 percent through 2012 and will stay high through 2014. Those numbers only look worse when you consider discouraged workers and involuntary part-timers. So why aren't we extending benefits to the millions of Americans we already know will find it impossible to get work for the duration, whatever they do? Congress should be implementing a permanent fix to the system that automatically extends benefits at times of persistent high unemployment, not a two week extension that leaves families, communities, and the states that administer unemployment programs scrambling and uncertain.

Unemployment benefits are both a critical lifeline for families struggling with the loss of income and an overall boost to the economy, creating as much as $1.70 in economic growth for every dollar spent. Families hit by unemployment tend to spend their benefits quickly, getting money into circulation in their local economies immediately. That means a sudden loss of benefits would hit not only the families affected but the supermarkets, landlords, drug stores, and other local retailers they continue to keep in business only because of the trickle of income unemployment benefits provide. As the National Federation of Independent Businesses found in their recent survey of small business owners, [pdf] small firms' top concern wasn't tax cuts or even a difficulty getting financing: it was a lack of customers and sales. From a sector that must play a key role in creating the new jobs the nation needs, "there is no need to hire with no new customers." How much worse would the impact be if these small companies (and their larger counterparts, also suffering from a lack of consumer demand) not only failed to gain new customers, but began losing them at an even greater pace as unemployment benefits disappeared? Hint: it looks like still greater unemployment.

The effect of unemployment benefits - and the potential for their catastrophic loss - is greatest in communities with the highest rates of joblessness: cities like Detroit, with an official unemployment rate of nearly 15 percent; Riverside, California where 14 percent of residents are out of work, and Miami, which has lost more than 100,000 jobs since the end of 2008. Indeed, the same cities hit hard by declining tax revenue and rising public need - the very places we depend on for an economic revival that will lift the nation - would fall further into a tailspin if benefits are not quickly extended.

Extending unemployment benefits - and the health coverage subsidy that should accompany them - should be a no-brainer for Senators with tens and even hundreds of thousands of constituents set to lose their economic lifeline and at the same time deprive local employers of their already shrunken customer base. Extending benefits is the least we can do to prevent the economy from plunging once again. Congress should act without delay, and then move to enact the more ambitious measures that will really spark job creation and get the economy moving again.

 

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