In the expected “compromise” on the Bush tax cuts, there’s talk that Democrats would get a one-year extension of unemployment benefits, without offsets. That would be a $65 billion dollar “stimulus package” that is actually decent stimulus. From a macroeconomic standpoint, you wouldn’t want to pay for unemployment benefits, as they bring substantial benefits to the economy and will increase aggregate demand as deficit spending.
And deficit spending is the way to do it, economists say, because expanded government outlays make up for slackened demand in the private sector. “Current deficits impose no burden on the economy because there are massive amounts of idle capacity,” said progressive economist Dean Baker in an email to HuffPost. “The Federal Reserve can simply buy and hold the bonds to finance the deficit so it doesn’t create any interest burden. This should be a real no-brainer.”
Considering that the Fed has pushed for fiscal stimulus and has the mechanism through QEII to buy the bonds, this is clearly a realizable scenario.
Failure by Congress to act on extending unemployment benefits will have stark consequences for Americans this holiday season, according to a new report from the White House Council of Economic Advisers. Two million Americans in December alone – and nearly seven million over the course of the next year – will lose the temporary support that helps them keep food on the table and make ends meet while they search for a job if Congress fails to act.
“Extending this support to those hardest hit by this crisis is not only the right thing to do, it’s the right economic policy,” said CEA Chairman Austan Goolsbee. “Letting millions more Americans fall into hardship will hurt our economy at this critical point in our recovery and immediately undermine consumer spending.”
Without extended benefits, the country would have had 800,000 fewer jobs as of September 2010, and failure to act to extend benefits again could cost the nation 600,000 jobs by the end of next year.
Data actually shows slight improvement in the economy, but that’s compared to the awful stagnation of the summer, and it’s simply not enough growth to get 15 million Americans back to work. Extending unemployment benefits is both humane and practical economics. If we’re going to give giant tax cuts to millionaires, it’s the least we can do.