Why the Lame Duck Congress Must Extend Jobless Benefits For Hard-hit Families But Not Tax Cuts For the Rich

http://robertreich.org/post/1601480347

Wednesday, November 17, 2010

America’s long-term unemployed — an estimated 4 million or more — constitute the single newest and biggest social problem facing America.

Now their unemployment benefits are about to run out, and the lame-duck Congress may not have the votes to extend them. (You can forget about the next Congress.)

The long-term unemployed can’t get work because there are still five people needing work for every job opening. And the long-term jobless are often at the end of the job line: Either they don’t have the right skills or enough eduction, or have been out of work so long prospective employers are nervous about hiring them.

They’re also a big problem for the economy. Without enough money in their pockets, they and their families can’t pay their mortgages, which keeps fueling the mortgage crisis. Nor can they replace worn-out cars and clothing, or buy muchof anything else, which is a drag on the economy.

Republicans and many blue-dog Dems say we can’t afford another extension.

But these are many of the same people who say we should extend the Bush tax cuts for the wealthy for at least another two years.

Extending the Bush tax cuts for the top 1 percent would cost an estimated $120 billion over the next two years. That’s more than another unemployment benefit extension would cost.

The unemployed need the money. The rich don’t.

Moreover, the top 1 percent spends a small fraction of their income. That’s what it means to be rich — you already have most of what you want. So extending the Bush tax cut to them won’t stimulate the economy.

Yet people without jobs, and their families, are likely to spend every penny of unemployment benefits they receive. That will go back into the economy and save or create jobs.

A Labor Department report shows that for every $1 spent on unemployment insurance, $2 are spent in the economy. If you don’t believe the Labor Department, maybe you’ll believe Goldman Sachs analyst Alec Phillips, who estimates that if unemployment benefits are allowed to expire, the American economy would slow by a half a percent.

Republicans are still spouting nutty Social Darwinism. Cutting taxes on the rich is better than helping the unemployed, they say, because the rich will create jobs with their extra money while giving money to the unemployed reduces their desire to look for work.

Rubbish. The Bush tax cuts on the top never trickled down. Between 2002 and 2007 the median wage dropped, adjusted for inflation. And job growth was pathetic.

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