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Why We Need to Continue Unemployment Insurance Benefits

It’s the Right Thing to Do and Good Medicine for the Economy

Unemployment insurance benefits to individuals who have been out of work for at least six months will expire on November 30. Congress should continue these benefits because they pump demand into the economy and help unemployed workers and their families. Congress should also commit to this policy until the unemployment rate comes back down. This is a far better way to help our economy and our workers recover from the Great Recession than to ask the American people to borrow $830 billion to give tax breaks to the richest 2 percent of Americans.

The need for these benefits continues even though the recession is officially over. Jobs are still hard to find, and nearly 15 million Americans remain unemployed. Four in 10 of those are long-term unemployed, meaning they’ve been out of work and searching for a job for at least six months.

These individuals exhaust regular unemployment insurance benefits, which they can receive for up to 26 weeks through their state unemployment insurance program. Due to prolonged joblessness in the recession, Congress implemented full federal funding for Extended Benefits in the American Recovery and Reinvestment Act that provide between 13 and 20 additional weeks of unemployment benefits to the long-term unemployed. It expires at the end of the month.

Congress also used the Recovery Act to provide up to 34 additional weeks of benefits for the long-term unemployed in high-unemployment states. This program is called Emergency Unemployment Compensation, and it’s federally funded as well. It too will expire at the end of the month unless Congress acts.

These benefits provide critical assistance to unemployed individuals and their families while they find a new job. They kept 3.3 million people out of poverty in 2009, and they enable those out of work to keep putting food on the table and pay their bills.

There’s a strong economic case for continuing these benefits, too. Unemployment benefits are one of the most effective and efficient ways to boost demand, which is exactly what our economy needs right now. Economists estimate that the economy grows by $1.61 for every dollar spent on unemployment benefits because recipients typically spend all of their benefit payments quickly.

UI benefits further stabilize the economy by keeping customers coming into small- and medium-sized businesses. Small businesses in particular are concerned about sales, and they would see fewer customers buying their goods without unemployment benefits because the jobless would have no money to spend. These businesses would in turn have less income they could invest and make purchases at other establishments. This cycle lowers overall demand.

Opponents of unemployment insurance like to argue that these benefits are just a giant welfare program that allows people to collect income without having to look for a job. But San Francisco Federal Reserve Bank researchers discovered that “extended unemployment insurance benefits have not been important factors in the increase in the duration of unemployment or in the elevated unemployment rates.”

Continuing these benefits would not be unusual by any means. Congress has provided emergency unemployment benefits to the long-term unemployed during every recession over the last four decades with bipartisan support. It has not once during the past 40 years allowed extended unemployment benefits to expire when the unemployment rate was above 7.2 percent—2.4 points lower than it is today.

In short, there’s no need for Congress to hesitate on this issue. They should continue these benefits before time runs out.

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