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Long Term Unemployment as of Nov. 2, 2012
In the zillion words written about the tax-and-spending changes that make up what's being called the "fiscal cliff," one that has gotten little attention is the end of federally funded emergency extensions to unemployment insurance coverage. If nothing changes between now and Dec. 29, the Democrats on the House Ways and Means Committee estimate that some two million Americans will be up jobless creek without the paddle provided by these emergency extensions.

Instantly these jobless Americans would be added to the millions who have already exhausted their benefits or were never eligible for them in the first place. The effect on them and the economy would be exceedingly painful. Recession-level painful. What a lovely Christmas present.

Household income would plunge to zero in many cases and force into poverty hundreds of thousands of others where one or more family members are lucky enough to have a job. It's estimated by the Congressional Research Service that unemployment compensation reduced the poverty rate for families receiving them in 2011 by 40 percent. It kept 600,000 children out of poverty.

As for the economy as a whole:

Mark Zandi from Moody’s Economy.com projects that allowing [emergency] benefits to end this year will reduce economic growth next year by $58 billion. Zandi testified earlier this year that “Emergency UI provides an especially large economic boost, as financially stressed unemployed workers spend any benefits they receive quickly.” The Congressional Budget Office (CBO) similarly concluded in a report this year that assistance for the unemployed has one of the “largest effects on employment per dollar of budgetary cost.”
Lawrence Mishel, president of the Economic Policy Institute, says, “Spending on unemployment insurance is the most effective thing you can do to stimulate the economy.” The government, he adds, recovers at least half of the money provided by unemployment benefits through higher tax revenues. That's because it actually creates jobs and supports businesses who benefit from the spending by people are receiving those unemployment paychecks.

The Congressional Budget Office also states that unemployment compensation provides the best bang for the buck for increasing output when the economy is weak. And, despite 32 consecutive months of job growth, the economy is most assuredly still weak. In fact, as of the most recent job report from the Bureau of Labor Statistics, there were 4.2 million fewer payroll jobs overall and 3.9 million fewer private-sector jobs in October than was the case when the recession began in December 2007.

Keeping the emergency benefits in place throughout 2013 would cost the government $39 billion. But because each dollar invested in workers through the unemployment compensation generates $1.52 in economic activity, the impact on the economy is $59 billion, a boost to gross domestic product of 0.4 percent and the creation or rescuing of 448,000 jobs.

During the worst part of the recession, some 75 percent of the unemployed received benefits. Now it is less than 50 percent. Only about a fourth of the unemployed are receiving regular state benefits. The rest, those two million Americans, depend on the federal emergency extensions. That's because long-term unemployment remain at record levels for the post-1930 period.

Quite a few Republicans have said or implied that unemployment compensation contributes to laziness. That it's a subsidy to people who don't want to work. They conveniently ignore the fact that there is still only one job opening available for every 3.4 Americans out of work. Contrary to the GOP BS, these out-of-work people aren't eating bon-bons out of the government trough.

Congress has extended the emergency benefits several times since they were first enacted in June 2008. But as we have seen over the past two years, there is less and less support for additional extensions. As Chad Stone at the Center for Budget and Policy Priorities notes, this is the case even though emergency jobless benefits have never been cut off in previous economic downturns anytime the unemployment rate was more than 7.2 percent. It is currently 7.9 percent, and nobody expects it to fall below 7.2 percent before the middle of next year, if then.

Rep. Sandy Levin of Michigan, the ranking Democrat on Ways and Means, points out that emergency extensions have already been cut back this year. Dropping them altogether "would deal a devastating blow to already hard-hit families still looking for work as well as undercut the nation’s economic recovery. Congress must act promptly to continue this economic lifeline."

Indeed.

Originally posted to Daily Kos Labor on Mon Nov 12, 2012 at 12:46 PM PST.

Also republished by In Support of Labor and Unions and Daily Kos.

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