Extending Unemployment Benefits Helps the Economy

Armed with data provided by the Congressional Budget Office, the Financial Times argues for extension of jobless benefits:

“CBO estimates that extending the current EUC [emergency unemployment compensation] program and other related expiring provisions until the end of 2014 would increase inflation-adjusted GDP by 0.2 percent and increase full-time-equivalent employment by 0.2 million in the fourth quarter of 2014.”

“The economic case is just as strong … With prevailing rates low and short rates still at the zero lower bound, the stimulative impact of extending unemployment benefits would be higher than during periods of tighter labour markets.”

Henry Farber of Princeton and Robert Valletta of the San Francisco Fed concur: “The major effect of extended benefits is redistributive, providing income to job losers who would have exited the labor force otherwise.”

John Cassidy concludes: “As the White House Council of Economic Advisors noted in a recent study, the suggestion that extended benefits should be withdrawn now goes against more than half a century of history. ‘In no prior case has Congress allowed special extended benefits to expire when the unemployment rate was as high as it is today.'”

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