Main Street Needs Unemployment Insurance

By MICHAEL COLLISS

No matter where one stands in the political spectrum, the data is clear: As far as employment, the US economy is basically stalled. Not only are we seeing the highest levels of unemployment in generations, American workers who lost their job through no fault of their own are experiencing the longest period of unemployment since the 1929 Great Depression.

Of all the programs that have been initiated since the beginning of the Great Recession, the one program that can show actual results for repairing the damaged economy has been unemployment insurance benefits. Unemployment benefits have kept millions of Americans on the job, boosted Gross Domestic Product, and literally saved millions of people from utter poverty. The debate in the Congress regarding continuation and expansion of federal unemployment benefits is baffling because it is hard to find any program coming out of Washington in the last two years which has done more to help the economy as a whole – and not just those who lost their job through no fault of their own – then federal unemployment extensions. Unless Congress acts – and quickly – to extend and expand unemployment extensions, the harm may well wipe out what small gains toward recovery have happened in the past two years.

Based on US Department of Labor data, there are about 10 million individuals in the United States who are receiving unemployment insurance benefits. About 4 million are receiving benefits under state unemployment insurance benefits, with the remainder receiving continuation of unemployment insurance under Federal extensions, which expire on Nov. 30. Additionally, the Department of Labor estimates that about 5.8 million American workers who lost their job through no fault of their own remain unemployed but have exhausted all unemployment benefits available to them.

Since the 1960s Congress has routinely approved federal unemployment extensions when national unemployment was above 7%. The costs for these extensions were always considered emergency spending in the sense that they did not have to be offset with reductions elsewhere in the federal budget. Even though the national unemployment stands at 9.6%, the issue of unemployment insurance has ceased to become a question of what is best to revive the economic health — as well as security of the middle class — but now seems to be mired in political posturing and gamesmanship by both parties.

The stakes could not be higher. If Congress fails to act, the following will be the damage:

• We have already seen approximately 5.8 million workers who have exhausted their unemployment benefits. This number will rise to about 7.9 million by December 31 and reach a staggering 16 million people by the spring of next year.

• Even the most conservative economists have estimated that every dollar of unemployment insurance benefits generate about $1.75 in immediate benefits to the economy. It has been well documented that the expenditure of unemployment benefits has saved about 1.9 million jobs. These are not jobs that are sent offshore but in local neighborhood stores and businesses. Those jobs will simply disappear without unemployment extension and expansion. The job loss that will occur without extensions and expansion of unemployment benefits will, in effect, wipe out any private sector job gains that have occurred in 2010.

• Unemployment benefits have generated — either through state income tax or sales tax — about $6 billion in revenue for cash-strapped state treasuries across the nation. States are already facing the necessity to cut thousands of jobs in public safety, education and other vital services, and unless unemployment extensions are continued and expanded even more state and local jobs will be eliminated

• Unemployment insurance benefits have literally kept millions in their homes. Failure to extend unemployment benefits will cause levels of homelessness that will probably be greater then the Great Depression and will further damage the key economic sector of housing.

• A recent survey of over 500 economists and financial analysts conducted by the Economic Policy Institute discovered that the consensus among those that make a living studying the economy is that even with unemployment insurance benefits, unemployment will be at or near 9% for at least the next two years. The refusal of Congress to continue and expand unemployment insurance will most assuredly cause even greater unemployment.

And yet, despite the clear damage that will be done to the entire economy (not to mention the unemployed themselves) it is becoming clear that unemployment insurance extensions and expansion is becoming little more than a bargaining chip in a game of political chicken which seems to be the main feature of the lame duck session.

Republicans are insisting that the Bush-era tax cuts be permanently extended, an action which will increase the deficit by at least $700 billion while opposing any unemployment extensions and a much-needed additional expansion of benefits (usually called “Tier V”) because it would add, by some calculations, about $100 billion to the deficit for a full year extension and expansion. Democrats are insisting that only tax cuts to those households with less than $200,000 in income be extended and have refused, thus far, to even consider a plan to pay for the literally life saving unemployment insurance benefits with reductions in spending elsewhere in the federal budget.

The next election is two years away. There will be plenty of time between now and then for each party to attempt to score political points. It’s clear that both sides in this debate will have to compromise if federal unemployment extensions are going to continue to exist. If Congress continues to hold the unemployed hostage in this debate, not only the unemployed themselves but the entire economy will be significantly damaged. It’s hard to find a better job creation and stimulus program other than unemployment insurance. The data clearly supports the position that federal unemployment extensions should not only be extended but also expanded until such time as there is a significant and sustained drop in the massive unemployment rate. Economists recognize this. Financial analysts recognize this. Small business owners recognize this. And most Americans know this. It is long past time that the members of the US Congress recognize this and continue and expand unemployment insurance.

Michael Colliss has worked as a volunteer with a community action agency in Massachusetts as an advocate for the unemployed. Email bostonui@verizon.net.

From The Progressive Populist, December 15, 2010