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POLICY INSIGHT
BEYOND THE NUMBERS

Why Paying for Renewing Emergency Unemployment Insurance Is Hypocritical or Counterproductive

Some lawmakers think it’s fine to extend the Bush-era tax cuts — including those for people making over $250,000 — without offsetting the cost.  But some of those same lawmakers oppose a one-year extension of the program that provides emergency unemployment benefits to jobless workers unless it is offset by cuts elsewhere in the budget.  This is crazy.

If their concern is our long-term fiscal problem, their position is hypocritical.  Permanently extending the high-end tax cuts would cost about $700 billion over the next 10 years.  Over the next 75 years, it would cost roughly the same amount as the Social Security shortfall over that period.  Federal emergency unemployment benefits, in contrast, have virtually no effect on the long-term fiscal problem because they are temporary.

If their concern is the huge current jobs deficit, their position is misguided.  The Congressional Budget Office rated unemployment benefits the most effective of all the options it examined for stimulating economic growth and creating jobs in a weak economy.  CBO rated extending the Bush-era tax cuts the least effective option.

For Congress to inject purchasing power into the economy by continuing federal jobless benefits, while draining purchasing power out of the economy at the same time to pay for that extension, would be like stepping on the accelerator and the brake at the same time.

The gold standard for policy would be to extend emergency unemployment benefits for a year to help workers and boost the economic recovery now, while paying for this extension with offsets that take effect down the road, when the economy is stronger.  But we shouldn’t forgo federal unemployment benefits — which would be good for workers and their families as well as the economy — if Congress can’t agree on such offsets.

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