Soon, the House Ways and Means Committee will vote on legislation that would allow states to divert the money they receive from the federal government for extended unemployment-insurance benefits toward other uses that would help them get their financial houses back in order. While states will eventually have to deal with their deficits, doing so at a time when the unemployment rate remains at 9 percent and 4.1 million workers are accessing extended benefits (the additional supports that kick in after 26 weeks of unemployment) defies logic.
According to the CBO, the ironically named JOBS Act would give states the option to use a total of $31 billion in federal payments elsewhere. If they use it to pay down their debt, that money will leave the economy, cutting 322,000 jobs nationwide and decreasing economic activity by $40 billion. The act gives states a few other options of where they could spend the money, such as on regular state unemployment-insurance benefits so businesses don’t have to pay them. Still, no other area of spending has the multiplier effect of employment benefits. Simply put, an unemployed person has to spend whatever money he or she takes in, throwing it back into the economy; the same can’t be guaranteed for businesses or other recipients.
Given unemployment-insurance benefits’ impressive multiplier effect, what states could use most is more extended benefit support, not less. That’s what Reps. Barbara Lee and Bobby Scott are suggesting in a different bill that would extend the benefits for anyone unemployed more than six months for an additional 14 weeks. On a less ambitious scale, Sen. Dick Durbin is sponsoring a bill in the Senate Finance Committee that would relieve states and employers’ interest costs so they can continue to pay out benefits.
With four or more unemployed workers for every job opening, lawmakers need to get their priorities straight. Legislation that cuts jobs and makes the lives of the unemployed even worse is just bad policy.