Unless Congress acts, 1.3 million Americans will lose their unemployment benefits on December 28th. Rand Paul claims this is for their own good:
Matthew O’Brien counters:
This long-term unemployment trap has nothing to do with long-term benefits. Indeed, [Rand] Ghayad [a PhD candidate at Northeastern University] looked at the labor markets for unemployed people who are and aren’t eligible for benefits, and found they’ve been equally dysfunctional. No, this long-term unemployment trap has to do with our great recession, and not-so-great recovery. With a labor market that doesn’t work for people who made the mistake of losing their job at the wrong time. If anything, unemployment benefits have kept people from giving up; remember, you have to be actively looking for a job to qualify for them. The San Francisco Fed, for one, estimates that unemployment would have been 0.4 percentage points lower without extended benefits, mostly because more people would have stopped trying to find work.
Josh Green runs the numbers:
How much does growth stand to suffer?
Well, according to the U.S. Labor Department, the cost of extending federal benefits through 2014 would be about $25 billion. But the economic impact of cutting them off would be larger. That’s because the unemployed reliably spend the benefits they get, creating a “multiplier effect” in the economy. Mark Zandi, chief economist at Moody’s Analytics (MCO), estimates that every dollar of unemployment benefits generates about $1.55 in economic activity, meaning that the federal benefits set to end later this month will cost the economy about $39 billion in spending next year (which would, in turn, have supported 310,000 jobs, according to a recent study by the Economic Policy Institute).
However, the effect on the economy will be worse than just the lost spending from those 1.3 million people. Throughout the year, state unemployment benefits will expire, with those who lose them having no emergency federal benefits to fall back on. Last week, a report from the White House Council of Economic Advisers and the Labor Department estimated that an additional 3.6 million people stand to lose access to benefits next year, so the drop in demand will be much larger than $39 billion.
Kilgore doubts unemployment benefits will get extended:
So it appears a budget “deal” that raises appropriations above sequester levels and avoids another government shutdown will involve sacrificing the Democratic priority of extending unemployment benefits for the long-term unemployed. It’s not clear why congressional Democrats are making it so clear so early that these folks are going to be the first to go over the side, but as Greg Sargent reports abundantly today, the signals are unmistakable.
Beutler looks at how the unemployment benefits fight intersects with the ongoing budget negotiations:
This is back-of-the-envelope. But if emergency unemployment benefits lapse, the $25 billion hit to the economy would largely, if not entirely, offset the fiscal easing Ryan and Murray are contemplating on the discretionary side of the budget. That’s not trivial
If a Ryan-Murray deal were the only viable budget vehicle, then digging in for extending emergency UI benefits as part of said deal would be such an obvious play politically, and on the economic merits, that it’s hard to see Democrats’ reluctance to pick the fight at this juncture as anything other than a testament to their belief that Republicans could act unilaterally and leave them on the hook for shutting down the government.
Given the weak-kneed performance House GOP moderates staged during the shutdown fight — the willingness they demonstrated to allow hard-liners to lead them by the nose — it’s hard to blame Democrats for assuming these guys might not be reliable allies of convenience. And if that assessment is correct, then the two in the bush are unattainable, and Democrats are making the right move.
The Dish 