Ending jobless benefits has toll

According to the U.S. Department of Labor, extending federal unemployment benefits (which go beyond state unemployment benefits when someone has been unemployed long-term) would cost about $25 billion through 2014. However, the unemployed reliably spend that money, creating a multiplier effect in the economy. Mark Zandi, chief economist at Moody’s Analytics, estimates that every dollar of unemployment benefits generates about $1.55 in economic activity. By that measure, ending the payments would cost about $39 billion in spending next year.

The Congressional Budget Office concluded that the economic effects of continuing emergency benefits through 2014 would “increase inflation-adjusted GDP by 0.2 percent and increase full-time equivalent employment by 0.2 million in the fourth quarter of 2014.”

Two hundred thousand jobs and a savings of about $15 billion-$20 billion a year for taxpayers because the demand created by those benefits dollars is not lost sounds good to me. Extend federal unemployment so the long-term unemployed do not suffer from Dec. 28th on into next year and the economy doesn’t suffer with them.

The material for this article was referenced from Bloomberg Businessweek.

Eric Engle