Stimulus that Works: Senate Correct to Focus on Unemployment Insurance

By Louis Soares | February 6, 2008

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The entire Senate this week begins debate on its version of the economic stimulus package already passed by the House of Representatives. There are many reasons to support specific provisions in the House bill, but one key component of the proposed Senate legislation merits particular attention—extended unemployment insurance.

The Senate is right to enhance the economic stimulus proposal with extended unemployment insurance. The immediate macroeconomic benefit of putting more money in the pockets of unemployed Americans looking for work is reason enough to extend benefits. This is stimulus money that will swiftly and assuredly flow back into the economy.

What’s more, the boost to their income would provide resources for covering necessary everyday expenses as the economic downturn keeps them out of work longer. Already, the current long-term unemployment rate is nearly double the rate just prior to the economic downturn in 2001, and the latest report on the health of the economy is not at all encouraging. And an estimated one million Americans will exhaust their unemployment insurance over the next six months.

Last week’s Bureau of Labor Statistics release highlights the need to act now. Overall job numbers have dropped by 17,000—the first net loss of jobs in five years. As the numbers of unemployed Americans grow and their unemployment spells lengthen, temporarily expanded unemployment benefits are what’s needed. These unemployment insurance recipients will quickly spend their benefits, ensuring that the economy is boosted in the short term.

Of equal importance, however, is the role of unemployment insurance for an economy in which workers will change jobs more, both willingly and unwillingly, and the national priority to help them with this transition. Helping Americans find productive work that benefits both them and the economy is more complex than ever before. Extended unemployment insurance amid an economic downturn is the least the government can do to help workers cope with these difficult and often complex transitions.

But much more needs to be done. The mix of employment, education, compensation, and benefits choices have multiplied a hundredfold from 30 years ago, when cyclical downturns were followed by recoveries in which a worker could rely on getting the same job back. Today, workers must balance decisions about pay differentials, needed skills, upgrades, and health insurance to ensure against family financial hardship.

As Congress looks past short-term stimulus toward analyses of ensuring a healthy and robust economy, transforming the unemployment insurance system into a 21st century resource that helps workers regain good jobs should be the next priority.

Louis Soares is the Director of the Economic Mobility Program at the Center for American Progress. To read more on the Center’s Progressive Growth Economic Policy Priorities, please see the following reports:

• Progressive Growth: Transforming America’s Economy through Clean Energy, Innovation and Opportunity
• From Poverty to Prosperity: A National Strategy to Cut Poverty in Half