By Jose Rodriguez
The non-partisan Congressional Budget Office, out of 11 potential options for Congress, rated unemployment extension as the most likely to stimulate the economy. The least likely: extending the Bush tax cuts, especially for the wealthy. Furthermore, the CBO estimates that every dollar spent on unemployment benefits will generate up to $1.90 in economic activity. Others, such as the Labor Department, argue that there is $2.00 worth of economic activity for every spent dollar. It is a basic fact that people who are unemployed spend every dollar in unemployment insurance that they receive, which fuels economic activity. Conversely, tax cuts for the rich tend to only generate somewhere between 10 and 40 cents of economic activity for every dollar, because the rich tend to save their money, not spend it.
Not extending unemployment benefits would have a deleterious impact on the already slow pace of economic recovery. With current low demand and excess supply, failure to extend unemployment benefits would further contract the economy and make it even more difficult for employers to hire new workers. The CBO estimates that the economy could see a 1% decline in GDP growth and up to one million additional people could lose their jobs. It goes without saying that we would have hundreds of thousands of people fall into poverty. A recent report by the Census Bureau found that over one out of three people cannot “make ends meet” at a basic level. Not extending unemployment insurance to Americans suffering from unemployment during the worst economic crisis since the Great Depression would be a moral outrage.
The suggestion, posited by many conservatives, that people are simply too lazy to get a job would be laughable were it not so incredibly offensive. The Bureau of Labor Statistics released a report last August that indicated that there were five job seekers for every job listing. More specifically, there were 14.6 million people who were unemployed, but only 2.9 million job openings. Those numbers have shifted somewhat in recent months, but the ratio is constant. The misconception that the unemployed are simply lazy reflects a world view that suggests Americans are spoiled and feel entitled. The reality, in this economic crisis, is that Americans are struggling to keep their heads above water. They are struggling to survive. So, the notion that cutting off aid to lazy, spoiled Americans will get them back to work is completely false. Americans want to work, but there are simply not enough jobs.
The American economy is a consumer driven economy. And right now, Americans do not have the money to consume as much as they used to, which has driven demand downward. Now, corporations are sitting on $1.8 trillion. They claim that they have not invested that money for two reasons: there are excess supplies of goods, so there is no need to invest; and their confidence in the economic outlook is keeping them from making any risks in future investments. Others, such as myself, believe that there is a political dynamic, as well. Corporate America has not been happy with the Obama administration’s attempts to regulate the economy, or his desire to end the Bush tax cuts for the rich. Under President Bush, regulations were ignored, regulators were in bed (in some cases literally) with the people they were supposed to be monitoring, and corporations could count on President Bush to side with them. Fareed Zakaria, in a Washington Post column, made this case, as well. In discussions with business leaders, he found that most of them complained more about President Obama than their economic or financial concerns. He found that most of them felt similarly: “… [President Obama] has almost no private-sector experience, that he’s made clear he thinks government and nonprofit work are superior to the private sector. It all added up to a profound sense of distrust.”
It is an agreed fact that during periods of economic booms generous unemployment benefits reduce the incentives for people to find employment. However, we are not currently in a period of economic success. We are crawling out of the bowels of an economic crash. In 2003, in testimony before the Joint Economic Committee, Alan Greenspan made comments about unemployment benefits which can be applied to today’s debate about the issue: “Unemployment insurance is essentially restrictive because it’s been our perception that we don’t want to create incentives for people not to take jobs. But when you’re in a period of job weakness, where it is not a choice on the part of people whether they’re employed or unemployed, then obviously you want to be temporarily generous. We ought to be temporarily generous. And I think that’s what we have done in the past and it has worked well. [...]I think that because it is stringent in normal periods, that one should recognize that people who lose jobs not because they did anything and can’t find new ones, you have a different form of problem, which means that you have to allow the unemployment system to be much broader and, indeed, that’s what we need to do.” People who now find themselves unemployed through no fault of their own should not be left out to dry. Not only is it morally indefensible, it is economically unsound.