Top economists plead case for unemployment insurance extension
Today Congress must decide on whether it will extend unemployment insurance benefits for millions of out-of-work Americans. Republican lawmakers have resisted extension, in part making the argument that unemployment insurance is becoming welfare and extending it will increase the federal budget deficit. Thirty-three of the nation’s top economists, including Nobel Prize winners in the field, have signed a statement asking lawmakers to put aside those ideological concerns and look at the bigger picture.
An extension of 12 months, they say, “is sensible economic policy that will not only assist the unemployed but help maintain spending, overall demand, and employment at this critical point in the recovery…. Eliminating these benefits, on the other hand, will cause hardship for the long-term unemployed, scale back spending, and weaken the economy since unemployment benefits are one of the most effective means available to support overall demand.”
The group of economists was assembled by Economic Policy Institute President Lawrence Mishel and Harvard University economist Lawrence Katz. Mishel sent a letter with the statement attached Monday to President Obama, Speaker Nancy Pelosi, Minority Leader John Boehner, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnel. Five recipients of the Nobel Prize in Economics and five past Chairs of the Council of Economic Advisors signed on, warning against letting the Emergency Unemployment Compensation program expire Tuesday.
Continuing the about-to-expire federal emergency unemployment insurance program, which provides extra weeks of benefits to the long-term unemployed, is sensible economic policy that will not only assist the unemployed but help maintain spending, overall demand, and employment at this critical point in the recovery. Given that there remains a historically high number of unemployed workers per job opening, there is no danger that continuing to provide extended unemployment insurance will materially raise overall unemployment.
Eliminating these benefits, on the other hand, will cause hardship for the long-term unemployed, scale back spending, and weaken the economy since unemployment benefits are one of the most effective means available to support overall demand. Unemployment has remained above 9.0% for 18 months already and will likely remain high for some time to come, making a strong case for continuing the current program for another 12 months. Moreover, the special provisions for extended unemployment insurance during recessions have traditionally been financed by short-term fiscal deficits and this remains a prudent approach. The program will not contribute significantly to long-term deficits because its costs will diminish automatically as the economy recovers and unemployment returns to more normal levels.
Mishel’s letter to the President and Congressional leaders is available as a pdf here.