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.