Will Congress extend jobless benefits again?

posted at 1:10 pm on July 11, 2011 by Ed Morrissey

That question will undoubtedly wait until after the debt-ceiling negotiations have finished, but probably not long afterward.  The deal signed that kept tax rates in place also extended jobless benefit funding for those who had not yet hit the 99-week maximum, a controversial decision that essentially set up yet another controversial decision.  Those funds run out at the end of 2011, and Yahoo’s Zachary Roth previews what the argument will be for yet another funding extension:

The recovery is weak now–but it could be headed for a major hit that will leave it even weaker.

At the start of 2012, the extended unemployment benefits approved by Congress in December 2010, which cover a maximum of 99 weeks per person, will expire. Though the benefits are hardly lavish–a little more than $300 a week for most recipients–their total impact on the economy is huge, because so many Americans are currently taking advantage of them. Moody’s Analytics estimates that when the benefits expire, $37 billion will be taken out of the economy, the New York Times reports. That’s enough to exert a significant slowing effect–at a time when the recovery is already a long way from robust.

Government benefits that go to poorer Americans, like unemployment insurance, tend to boost consumer spending more than other kinds of stimulus, because people living paycheck to paycheck have little choice but to spend the money, rather than saving it. So the disappearance of jobless benefits will take money out of circulation when economic growth is seeking to gain some traction.

Indeed, economists say that the withdrawal of jobless benefits will create a major ripple effect on growth as a whole. Consumer spending accounts for around 60-70 percent of U.S. economic activity, economists say. But with so many Americans having lost wealth in the housing bust, spending has been tepid for a while, preventing the recovery from gaining any momentum. Now, the end of the extended benefits will likely soon put a further crimp in spending.

A “big hit”?  Not exactly.  The US economy amounts to somewhere around $14.3 trillion a year.  Taking “$37 billion out of the economy” (more on that in a minute) would create an impact of … 0.26% to the annual GDP.  Even if one supposed that Nancy Pelosi’s estimate of a multiplier effect of 1.5:1 on unemployment payments is correct, that would still amount to 0.39% of GDP over the year.  In most quarters of the Obama administration, that’s less than the quarterly adjustments to GDP estimates.

Calling that a “big hit” to the American economy is absurd, but so is the argument that we’re taking it out of the economy by not spending it.  Frankly, it doesn’t exist in our economy in the first place.  We’re funding that program with money from other economies that we’re borrowing — with interest.  That produces a cost to the taxpayer that goes well beyond the 0.39% it represents in the overall economy.  To the extent that the money does exist in our economy, government only has it because it already took it out of the economy.  I’m not sure where Roth thinks the money originates, but taxes collected by government means less money in the private economy; money doesn’t grow on trees.

Losing benefits will constitute a big hit to the individuals unemployed, which is a perfectly legitimate argument, but casting a loss of $37 billion in aid as a dark cloud on the economy is just silly, especially in an economy with so many dark clouds that this begins to look like a ray of sunshine.  And, in fact, Roth even admits that it might just be that:

On the bright side, some studies have shown that when people face the loss of their benefits, they’re more likely to look for a job, and to look more aggressively. So the loss of benefits could motivate some job-seekers. But most economists appear to agree that jobless benefits have a larger stimulative impact–meaning, in other words, that the benefits likely lead to more jobs, rather than fewer.

That’s because “most economists” aren’t figuring on the lost opportunity costs of leaving that capital in the private sector.  If we’re paying those funds from collected revenues, then that is $37 billion not going into job-creating expansion that would produce long-term jobs rather than month-to-month benefits.  If we’re paying them out of borrowed money, then we’re spending future capital (at a higher price) that would have gone to long-term growth in exchange for non-growth benefit payments in the present.

Americans have largely agreed that short-term support for the unemployed has social benefits that outweigh short-term costs to economic growth, not because unemployment checks create economic growth.  (If that were true, why not just pay everyone a government salary?)  Stealing growth from the future on a long-term, seemingly interminable trajectory for those social benefits has never had a consensus, because it’s a sure way to kill the economic engine of growth in the US.

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No whites need apply.

Eric Holder

Key West Reader on July 11, 2011 at 1:14 PM

Moody’s Analytics estimates that when the benefits expire, $37 billion will be taken out of the economy, the New York Times reports.

But, on the other hand, $37 billion will not be taken out of taxpayers’ pockets, or borrowed, so is it really ‘taken out of the economy’?

Vashta.Nerada on July 11, 2011 at 1:15 PM

Will Congress extend jobless benefits again?

Not if they want to seek re-election without a primary challenge.

trapeze on July 11, 2011 at 1:15 PM

Wonder if those benefits will be extended depending if the applicant is eating them thar peas?

pilamaye on July 11, 2011 at 1:16 PM

Sorry bad link above. From the other thread:

Look! Free homes for blacks and hispanics!

Courtesy of Eric Holder

Key West Reader on July 11, 2011 at 1:16 PM

Extend it one more time and this time implement a hard cutoff. Let’s inform the American people that if they’re on unemployment, there’s a finite number of weeks they can apply for it. After that, they’re on their own. Period. No exceptions.

Doughboy on July 11, 2011 at 1:17 PM

I was rather hoping that congress would cut back unemployment benefits instead – 99 weeks is ridiculous.

Vashta.Nerada on July 11, 2011 at 1:18 PM

I once gave a team that worked under me a lecture and used my kids as an analogy. A few of the team came up to me afterwards and basically told me that if I ever do that again they would quit. They did it in a respectful way, and they were right. When I heard Obama do that spiel and then continue to talk down to the country in that tone it simply amazes me. At least my team respected me and I was clearly qualified to be in charge with a long history of project successes. This, on the other hand, is a moron that clearly has no vision or clue figuring if he shames his critics that they will just go away.

Hening on July 11, 2011 at 1:20 PM

jesus, we are going to be in a depression soon.

upinak on July 11, 2011 at 1:21 PM

Key West Reader on July 11, 2011 at 1:16 PM

cripe

cmsinaz on July 11, 2011 at 1:22 PM

HOLD THE LINE!

Oil Can on July 11, 2011 at 1:24 PM

The numbers of all these unemployed, that have been getting 99 weeks or less of money, should be included weekly to the jobs number so we have the true facts of what bho, team, and dc are up to cratering jobs. Not just the weeks number of loss but the total loss since bho was elected.
L

letget on July 11, 2011 at 1:24 PM

I currently receive unemployment insurance benefits.

I hope that it won’t be for long, but if they were to be cut off now…I really don’t know what I would do….
scary all around.

bridgetown on July 11, 2011 at 1:25 PM

Here ya go Oil Can

cmsinaz on July 11, 2011 at 1:25 PM

Jesus, we are going to be in a depression soon.

upinak on July 11, 2011 at 1:21 PM

We’re already there. If the press weren’t trying to hide the decline to benefit their political party, they would admit it.

Vashta.Nerada on July 11, 2011 at 1:26 PM

Look! Free homes for blacks and hispanics!

Courtesy of Eric Holder

Key West Reader on July 11, 2011 at 1:16 PM

Do they get a free gun with that free house?

Knucklehead on July 11, 2011 at 1:26 PM

yahoo had a story last week of the folks who are past the 99 weeks and still can’t find a job

cmsinaz on July 11, 2011 at 1:26 PM

Those who did not take advantage of any of the extensions are probably having to hit their savings to get by. Even when the unemployed isn’t the main bread winner, most people use all of their income.

Cindy Munford on July 11, 2011 at 1:27 PM

yahoo had a story last week of the folks who are past the 99 weeks and still can’t find a job

cmsinaz on July 11, 2011 at 1:26 PM

That’s terrifying to me. I’ve been receiving benes for 3 months…I can’t imagine going that long..

bridgetown on July 11, 2011 at 1:27 PM

Lets start a rumor:

Obama to give cash to poor and homeless starting Thursday, July 14. Contact your local SEIU or ACORN office for details and distribution tickets.

BobMbx on July 11, 2011 at 1:28 PM

We’re already there. If the press weren’t trying to hide the decline to benefit their political party, they would admit it.

Vashta.Nerada on July 11, 2011 at 1:26 PM

I think we have been in it since March. Last time the stock market dipped.

upinak on July 11, 2011 at 1:30 PM

bridgetown on July 11, 2011 at 1:27 PM

good luck on the job hunt my friend….

cmsinaz on July 11, 2011 at 1:30 PM

Do they get a free gun with that free house?

Knucklehead on July 11, 2011 at 1:26 PM

No, but Obama will get their votes, fo sho! That’s gunna win the election says Plouffe. Daily Caller.

Key West Reader on July 11, 2011 at 1:31 PM

yahoo had a story last week of the folks who are past the 99 weeks and still can’t find a job

cmsinaz on July 11, 2011 at 1:26 PM

Can’t or won’t? I know a few people who simply refuse to look because as they put it, “why work when you on that government cheese?”

jawkneemusic on July 11, 2011 at 1:31 PM

BobMbx on July 11, 2011 at 1:28 PM

That would be a cool sting. Have camera men ready and make a Facebook page announcing the ‘Stash. Watch the mayhem ensue. Then make a campaign commercial out of it.

Key West Reader on July 11, 2011 at 1:32 PM

Extend it one more time and this time implement a hard cutoff. Let’s inform the American people that if they’re on unemployment, there’s a finite number of weeks they can apply for it. After that, they’re on their own. Period. No exceptions.

Doughboy on July 11, 2011 at 1:17 PM

Are you serious? It’s already 99 weeks, which is already 70 weeks too long. Cut it off now.

When the only choice is to is to settle for that $400/week job, they’ll take it. As long as the $350/week is flowing in, the motivation to take the job is diminished.

iurockhead on July 11, 2011 at 1:32 PM

I’d say it time for family and friends after < 99 weeks of government.

tomg51 on July 11, 2011 at 1:35 PM

37 Billion that goes right into the economy vs. 787 billion on “shovel ready” projects that weren’t ready.

They should have extended them further and the money would have gone to the “right” things…

Remember when Clinton said no to tax refunds because “we wouldn’t spend it right”…. look how Obama’s “spending right” worked out…

originalpechanga on July 11, 2011 at 1:36 PM

That’s because “most economists” aren’t figuring on the lost opportunity costs of leaving that capital in the private sector.

Ed, you’re not exactly correct here. Because the unemployment benefits would be funded through deficit spending, there’s no opportunity cost against current private sector growth. But you’re right in that future private sector growth would be affected insofar as the debut must be paid off in the future.

bayam on July 11, 2011 at 1:37 PM

jesus, we are going to be in a depression soon.

upinak on July 11, 2011 at 1:21 PM

LOL no sarc tag?

Can’t or won’t? I know a few people who simply refuse to look because as they put it, “why work when you on that government cheese?”

jawkneemusic on July 11, 2011 at 1:31 PM

Can’t. There’s no work out there. I know quite a few people who worked very hard to find something, anything and couldn’t find work. They still haven’t.

With this many folks out of work. employers are getting swamped with candidates for every position they advertise.

dogsoldier on July 11, 2011 at 1:38 PM

When the only choice is to is to settle for that $400/week job, they’ll take it. As long as the $350/week is flowing in, the motivation to take the job is diminished.

iurockhead on July 11, 2011 at 1:32 PM

I’d settle for anything right now. I hope those jobs start popping up. I watch it every single day. The jobs aren’t out there!

bridgetown on July 11, 2011 at 1:38 PM

Jawknee, they didn’t specify that of course…they only focused on 1 person who said she sends out over 1800 resumes daily….

cmsinaz on July 11, 2011 at 1:40 PM

I may be wrong but aren’t these benefits payed by employers to the states on a percentage of a company’s payroll?I know in Texas they do.I also know company’s pay into the federal unemployment fund.So who is paying?

docflash on July 11, 2011 at 1:40 PM

I may be wrong but aren’t these benefits payed by employers to the states on a percentage of a company’s payroll?I know in Texas they do.I also know company’s pay into the federal unemployment fund.So who is paying?

docflash on July 11, 2011 at 1:40 PM

The way it was explained to me was that my ex-employers paid into this fund while I was working….what could have been mine went into this fund. Well, it makes me feel less guilty about collecting it now…but, I don’t understand how people can ‘live’ on this and stay on it for many months or years…

bridgetown on July 11, 2011 at 1:43 PM

some studies have shown that when people face the loss of their benefits, they’re more likely to look for a job, and to look more aggressively. So the loss of benefits could motivate some job-seekers.

Job SEEKING does not create a JOB. Boneheaded comment from “some studies.” Do you think that all of us reading this blog are FT employees? 21 years of unbroken employment does nothing for me now. Just saying…

leftnomore on July 11, 2011 at 1:43 PM

If we’re paying them out of borrowed money, then we’re spending future capital (at a higher price) that would have gone to long-term growth in exchange for non-growth benefit payments in the present.

Yep.
These benefits are taking money out of the economy. We should look forward to the relative boost it will receive when they expire.

Count to 10 on July 11, 2011 at 1:45 PM

they should examine it…..99 weeks is retarded….how about 20 weeks…if you can’t find a job in 20 weeks it might be time to throw the President and Congress out then instead…..

99 weeks is absolutely bankrupting us!!!

SDarchitect on July 11, 2011 at 1:45 PM

I’d settle for anything right now. I hope those jobs start popping up. I watch it every single day. The jobs aren’t out there!

bridgetown on July 11, 2011 at 1:38 PM

I don’t know where you are or what field you’re in, but there are LOTS of jobs in Texas. Come to where the jobs are.

PakviRoti on July 11, 2011 at 1:47 PM

I don’t know where you are or what field you’re in, but there are LOTS of jobs in Texas. Come to where the jobs are.

PakviRoti on July 11, 2011 at 1:47 PM

I’ve mentioned it! lol, no cash to get that far from here, but have checked the want ads in TX for anyone willing to pay relocation costs!

bridgetown on July 11, 2011 at 1:52 PM

Can’t. There’s no work out there. I know quite a few people who worked very hard to find something, anything and couldn’t find work. They still haven’t.
With this many folks out of work. employers are getting swamped with candidates for every position they advertise.
dogsoldier on July 11, 2011 at 1:38 PM

A surpluss of workers means that the cost of labor is too high. What is causing that?

Count to 10 on July 11, 2011 at 1:54 PM

they should examine it…..99 weeks is retarded….how about 20 weeks…if you can’t find a job in 20 weeks it might be time to throw the President and Congress out then instead…..

99 weeks is absolutely bankrupting us!!!

SDarchitect on July 11, 2011 at 1:45 PM

If only we had elections so frequently….that would be nice.

bridgetown on July 11, 2011 at 1:55 PM

Downside for little Bammie -this means that more of the unemployed will count in the numbers, and can’t be ignored.
Upside -more Cloward-Piven, more democratic voters.

slickwillie2001 on July 11, 2011 at 1:55 PM

These guys really need to learn some math. $37 billion taken out of a $14 trillion economy is nothing. Unemployment benefits are spread among so many people and communities that ending them won’t have any appreciable effect on retail or service sales or jobs.

Most unemployed people are not spending their UC checks on clothes or in restaurants, they are spending them on mortgage and utility payments.

Economic stimulus via unemployment checks is a liberal fallacy.

rockmom on July 11, 2011 at 1:55 PM

Can’t. There’s no work out there. I know quite a few people who worked very hard to find something, anything and couldn’t find work. They still haven’t.

With this many folks out of work. employers are getting swamped with candidates for every position they advertise.

dogsoldier on July 11, 2011 at 1:38 PM

Gas drilling companies are looking for people in PA. And I hear the job market is pretty good in North Dakota too.

forest on July 11, 2011 at 2:02 PM

I see help wanted signs all the time around Charleston. They may not be glamourous, but don’t tell me you can’t find a job.

SouthernGent on July 11, 2011 at 2:06 PM

bridgetown on July 11, 2011 at 1:27 PM

Prayers out to you and yours! Now get out there and stimulate the economy like you are supposed to! /s

We just made it through a 2.5 month layoff, it was very tough. $30 at the grocery store and $10 for gas isn’t really very stimulative. Nor was playing eeenie meenie miney mo with creditors.

kringeesmom on July 11, 2011 at 2:14 PM

kringeesmom on July 11, 2011 at 2:14 PM

Thank You! I know the pain. I don’t drive at all unless it is to an interview (not many out there) or for food, and yes, the choosing utility bills and sending bits to everyone just to keep power and internet on. No TV…thus, HotAir. It’s embarrassing, really. Damn the Feds.

bridgetown on July 11, 2011 at 2:22 PM

I think we need to junk the entire unemployment insurance system and go with a new system set up like a 401K.

You get a job, you pay into it, your employer pays into it, (Or should) and it’s tax deferred until you draw on it.

If you never draw in it, then you can use it for retirement. Also I would not put any upper limit on how much you or your employer can contribute in a year.

For those who will say “But what about those who just start and only have 1 months worth?:

Easy. As they build up their funds, the government “benefit” decreases until it reaches zero.

You could end up with enough cash to hold you for several years.

evilned on July 11, 2011 at 2:26 PM

I see help wanted signs all the time around Charleston. They may not be glamourous, but don’t tell me you can’t find a job.

SouthernGent on July 11, 2011 at 2:06 PM

Maybe because we don’t LIVE in CHARLESTON? Sheesh.

leftnomore on July 11, 2011 at 2:26 PM

Thank You! I know the pain. I don’t drive at all unless it is to an interview (not many out there) or for food, and yes, the choosing utility bills and sending bits to everyone just to keep power and internet on. No TV…thus, HotAir. It’s embarrassing, really. Damn the Feds.

bridgetown on July 11, 2011 at 2:22 PM

I get you, you aren’t alone here. It sucks feeling like a hypocrite when the people we respect really don’t respect us, do to NO fault of our own.

leftnomore on July 11, 2011 at 2:28 PM

when people face the loss of their benefits, they’re more likely to look for a job, and to look more aggressively.

Whoa!!! is there any truth to that one?
And in response to their being no jobs out there? I dont buy it…. you might have to actually move to or travel to where there are jobs and Ill give you not all of them pay well or as much as you would like, but there are still jobs out there.

Koa on July 11, 2011 at 2:31 PM

bridgetown on July 11, 2011 at 2:22 PM

We were so very grateful for our well stocked pantry, our chickens, and our garden which was producing well when hubby lost his job. He’s back to work (on our 3rd paycheck) but it’s a job through a temp agency so we are working hard to restock and keep on saving just in case. Damn the Feds!

kringeesmom on July 11, 2011 at 2:38 PM

And in response to their being no jobs out there? I dont buy it…. you might have to actually move to or travel to where there are jobs and Ill give you not all of them pay well or as much as you would like, but there are still jobs out there.

Koa on July 11, 2011 at 2:31 PM

I wish I could sit there and think like you do.
When you cannot pay your bills, you tend to look in every corner for a job. I’ve walked dogs, I’ve cleaned homes…anything for cash here and there. There are no jobs out there, or I’d probably have one. I work in accounting. I always thought, Hey, I’m safe “everybody needs accounting” work done for them..always. Sure they do, but when they get 1,000 resumes for each position, the interviews dry up. The jobs are not there. I’ve tried to get a job waiting tables, something I’ve never done. You see what happened there? I’ve never done it, but there were 100 other people looking for the same job. Guess who gets it? I hope you don’t end up in the position to experience it first hand, but trust me. The jobs are not out there to meet the need of so many out of work.

bridgetown on July 11, 2011 at 2:55 PM

I’ve mentioned it! lol, no cash to get that far from here, but have checked the want ads in TX for anyone willing to pay relocation costs!

bridgetown on July 11, 2011 at 1:52 PM

I know of someone that job-shopped in Texas from where they were and had all their interviews over the phone. Once the deal was close to closure the hiring company sprang for a ticket for a face-to-face final.

Then once the person had an offer letter, friends and family chipped in for gas and his local church contacted a local church in Texas that helped with temporary living arrangements. It wasn’t easy or pretty, but 6 months down the road the person is pretty much back on their feet.

There is help, but you will have to look and then ask for it. Not trying to be a smart a$$ (though I often am) but you will have to think out of the box and consider things you might not have previously considered.

Good Luck to you. I’ll say a prayer for your success.

PR

PakviRoti on July 11, 2011 at 3:06 PM

The down side of unemployment compensation is that it removes that sense of urgency required to really hit the market hard and bloody your fists pounding on those doors. It makes the job search much more casual at a time when a bit of desperation may be in order. And when that crutch gets pulled out from under you at 99 weeks, the fall is that much harder.

SKYFOX on July 11, 2011 at 3:09 PM

bridgetown on July 11, 2011 at 2:55 PM

I might have come off a little hard, and I actually have been there..working 3 jobs trying to pay bills. I do understand and respect anyone out there at least trying. My point was directed more at the person sitting on the couch complaining. However my statement does stand that sometimes you will have to pick up and move to find employment.

Koa on July 11, 2011 at 3:12 PM

Koa on July 11, 2011 at 3:12 PM

I understand. I think just as you do. My main goal is finding work, even if it looks like I am just commenting on a blog. ;)
I also know a few people in the same place. Looking frantically for work. When I had a job a few months ago, I thought and said just what you do. I blew their troubles off, thinking maybe they weren’t ‘really’ trying. Now I know better. Lesson learned.
I still hate the feds…and obama. lol

bridgetown on July 11, 2011 at 3:24 PM

One of my employee’s room mate has been collecting unemployment for over a year. When it was about to run out last time he began to look for a job. Then it his benefits were extended so he stopped looking. He said “well, I have a few more months before I actually have to find work so until then I can play video games and watch TV”. ARRRGGGHHHH!
Here we go again!

faol on July 11, 2011 at 4:00 PM

faol on July 11, 2011 at 4:00 PM

A guy my wife works with is getting laid off and he intends to milk UC for all its worth. He has no intention of looking for any job that’s not at least as good as the one he’s losing, and he especially won’t look out of town at all. It kind of pisses me off because all I do is work out of town – way out of town lately. It’s where the work is. And I don’t qualify for UC, but I have to pay into it. Flying without a net with less than zero sympathy for people who refuse to move or travel for work.

forest on July 11, 2011 at 4:19 PM

A guy my wife works with is getting laid off and he intends to milk UC for all its worth. He has no intention of looking for any job that’s not at least as good as the one he’s losing, and he especially won’t look out of town at all. It kind of pisses me off because all I do is work out of town – way out of town lately. It’s where the work is. And I don’t qualify for UC, but I have to pay into it. Flying without a net with less than zero sympathy for people who refuse to move or travel for work.

forest on July 11, 2011 at 4:19 PM

The problem that this guy will end up with is a significant black mark on his resume, a gap where it appears he is doing Obama-all. That black mark screams out to employers, it says “taking advantage of UI” and it will follow him for the rest of his life. He is a fool.

slickwillie2001 on July 11, 2011 at 5:41 PM

slickwillie2001 on July 11, 2011 at 5:41 PM

Got my black mark applying for approximately 750 jobs over the period of a year. All over the country, sans the super blue states. Seems a tad bit unfair. I picked up two new computer programs for skills in that time, but since I did not pay tuition, it is blank space.

astonerii on July 11, 2011 at 10:01 PM

Gee, cut them when we hit the debt ceiling. The benefits are contributing to unemployment. People are too comfortable with all that free time and “barely enough income to get by.” End it. Charlie and Charmaine it’s time to get a job, create a job, or hit the streets.

{^_^}

herself on July 12, 2011 at 6:35 AM

slickwillie2001 on July 11, 2011 at 5:41 PM

My “black mark” is not being able to get even a burger-flipping job for almost a YEAR. I swear employers all have Lake Woebegon syndrome or something…

Uncle Sams Nephew on July 12, 2011 at 9:50 AM