Power Centers

Jobless Benefits Save Jobs, Economy: White House Economists

Unemployed Illinois workers

Unemployed people in line at a Rockford, Ill. jobs fair, October 2010. Jim Prisching/AP Photographer hide caption

itoggle caption Jim Prisching/AP Photographer

Not extending federal unemployment insurance benefits will cost the economy about 600,000 jobs as well as significantly slow economic growth, according to the Obama Administration's top economists.

The White House Council of Economic Advisers issued a report Thursday to provide statistical ammunition to congressional Democrats and their allies who are pushing for the extension.

Congresional Republicans, meanwhile, have said they want to offset the cost of extending benefits, estimated at about $56 billion, with spending cuts elsewhere in the federal budget.

Senate Republicans are also insisting that their top agenda items are extending the Bush tax cuts and passing legislation to "fund the government" before taking up any other legislation, including, presumably, unemployment insurance.

A key point in the report is that jobless benefits actually help keep others employed by creating spending that otherwise wouldn't exist.

For instance, the report says that without the benefits, the unemployed would spend 22 percent less on food than the seven percent.

The report also notes that 40 million people have been helped during the Great Recession by the federal unemployment benefits which kicked in after many of the income earners exhausted their 26-weeks of state unemployment benefits. About 10.5 million of those people were children.

An excerpt from the report:

Allowing these extensions to expire now will reduce the income of the typical affected household by approximately one-third during a time when the job market is still not recovered. With less income, spending will fall, and this will translate into about 600,000 fewer jobs and 0.6 percent lower GDP in December 2011, relative to an extension.

The U.S. economy has made important strides in the last year. Since the employment trough in December 2009, there have been 10 consecutive months of private sector job growth and private sector employment has risen by more than one million jobs. However, the unemployment rate remains unacceptably high and there are still 5 job seekers for every job opening. For the last half-century, Congress has consistently extended UI benefits when economic circumstances were serious enough to make finding a job difficult. Given the current labor market conditions, failing to continue UI extensions now would be unprecedented.

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