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The Next Self Inflicted Economic Wound, Ending Emergency Unemployment Benefits

kea cut her face

kea cut her face by malloreigh

When I was a little kid, my dad told me, “Nothing is permanent in politics.” He meant it as a way to buck me up after we lost his election to Congress. But there is a larger meaning when we look at compromises with the Republicans on how to deal with the millions of Americans who are still suffering from the economic collapse of 2008 and the resulting recession.

While the stimulus was not big enough to really get the economy humming, there were other programs that did help (but again not enough). The subsidy of COBRA payments and the extension of emergency unemployment benefits were a cushion that meant the difference between destitution and mere impoverishment for many Americans, this one included.

Ed Schultz was a tireless advocate for those called 99ers over the last two years. Sadly he was unable to get anyone in Washington to pay any attention and 99 weeks is the very top of unemployment assistance for any worker anywhere in the United States.

Yet even that program will end in a mere five more months. Policy will snap back to where it was, with only 26 weeks of unemployment. And no subsidy for COBRA payments, even though health insurance prices are not going down.

This is a big bag of bad news and it is not just for the people who will no longer be able to count on a weekly check that maxes out between $200 and $450 dollars. As much as this means to the people receiving these checks it actually means something to all of us as well.

As anyone reading this already knows, spending on people with no money, whether it is unemployment benefits or food stamps or what have you, is incredibly stimulative. Unemployment and food stamps come back to the economy at significantly more than a 1 to 1 ratio, depending on who you trust on this issue. Unemployment benefits come back between $1.67 to $2 in the economy for every dollar spent.

It is pretty obvious why this is true. No one holds on to unemployment benefits or food stamps. They do not save them, they spend them on goods and services which in tern help to keep others employed and making a pay check.

Given the totally unfounded hysteria about debt and deficit there is very little doubt that there will be no apatite in this Congress for extending benefits when they run out at year end this year If you are unlucky enough to be in week 60 of your unemployment, well come January first you are going to be even further out of luck.

It is estimated by Moody’s Analytics that some $37 billion in spending will disappear from the economy next year because of the expiration of this program. That is about the same level of cuts that Congress enacted at to avoid a government shut down earlier this year.

It is true that the economy has been turning around. We are no longer shedding jobs at a rate of over ¾ a million a month like we were in the early days of the Obama Presidency. However that does not mean that we are in any way out of the woods. Take a look at these numbers from the New York Times:

In Arizona, where there are 10 job seekers for every opening, 45,000 people could lose benefits by the end of the year, according to estimates from the state Department of Economic Security. Yet employers in the state have added just 4,000 jobs over the last 12 months.

Some other states will also feel a disproportionate loss of income unless hiring revives. In Florida, where nearly 476,000 people are collecting unemployment benefits, employers have added only 11,200 jobs in the last year. In Michigan, employers have added about 40,000 jobs since May 2010, but about 267,000 people are claiming jobless benefits.

That is just two states, and those two are a couple of the hardest hit, but it is still the same basic story all over the nation. It takes 150,000 new jobs, every month, to keep up with population growth. Last month we netted just 18,000 jobs, nation wide. These kind of numbers are not going to reduce the amount of people who are looking for work but not finding it. Right now there are 4.5 people looking for a job for every job available. This only counts job seekers, not the ones who have become completely discouraged and are not collecting benefits or looking for work.

I am not an economist, but even without that formal training I can say with certitude that if you take 35 billion in consumer spending out of the economy there is going to be less demand and less jobs. It is a straight line correlation. Even if one is completely callus to the suffering of our fellow citizens (I am looking right in your box turtle face Sen. McConnell!) there should be concern for what this lost of buy will do the fragile economic recovery we have managed to patch together.

If we had a sane opposition party we might be able to do something about this. However we are stuck with a Republican Party that has shown time and again that it knows nothing about how the economy works (is there anything that the Republicans are right about? Ever?) and has a deep seated hate for people who have been unable to find working in an economy that has five times as many workers as jobs.

Let’s be clear, the Democrats have been cowardly and thought small bore and have been held up by the weakest willed members of their caucus in addressing these problems, but it is the Republican intransigence in helping the American people at every turn that has brought us to this state of affairs.

A 1.4 trillion dollar stimulus is what we needed. We could not get it. Any kind of direct jobs bill would have helped, but we could not get anything from the Republicans except no votes. A massive investment in infrastructure could have helped, but again, we could not have that, Republicans had to posture for the Teahadists and Democrats were wetting their undies in an election year.

It is tragic because this is going to be another self inflicted economic wound. We have the money to spend, the cost of borrowing is so ridiculously low (when is the last time you could barrow as much as you liked for 3%?) and the need and pain is excruciatingly high. But we won’t do anything about this because we have about half the Congress filled with people who believe that our debt is more important than fixing the economy that will be able to pay off that debt.

The floor is yours.

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Bill Egnor

Bill Egnor

I am a life long Democrat from a political family. Work wise I am a Six Sigma Black Belt (process improvement project manager) and Freelance reporter for