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Politics and the jobless

 

Let’s start with two facts:

No. 1: Republicans in the House of Representatives last week shot down fast-track legislation to extend federally funded unemployment insurance benefits, virtually guaranteeing that the program will expire Nov. 30.

No. 2: Lawmakers will reach a compromise sometime before Christmas, extending the benefits for the long-term unemployed.

OK, the second "fact" is a prediction. But bank on it.

The reasons the House rejected the bill last week and Congress almost certainly will re-fund extended UI benefits in December are one and the same: politics. And as usual, both parties are playing this game.

The Democrats chose the fast-track route because it requires a two-thirds majority for passage-ensuring that the GOP will be blamed for initially killing the extended benefits. For their part, Republicans want to talk tough about deficit spending, but there is little chance they won’t compromise in the end-as they did in July after allowing the benefits to expire for more than a month.

Lost in all of this is the fact that 9.6 percent of Americans still are unemployed amid a fragile recovery. And as noted here the last time Congress played this game, extending federal unemployment benefits is both economically smart and an act of compassion for fellow Americans who have fallen on hard times.

Research has shown that for every dollar spent on UI benefits, economic output is boosted by $1.50 or more. Why? Because the jobless need this assistance and spend the money promptly.

Further, studies-including recent research by the Federal Reserve Bank of San Francisco-have shown that under current conditions few recipients see extended benefits as a reason not to search for work. The overwhelming majority desperately want to find a job but face long odds with five job seekers for each opening.

If Congress fails to act now, 800,000 unemployed workers will lose their benefits by Nov. 30 and 2 million by Dec. 31. For an economy that needs strong consumption in order to grow, this would be a body blow.

Yes, extended unemployment insurance benefits are expensive. But in this economy, the cost of letting them expire-in both monetary and human terms-would be even higher.

11/26/10 (c) 2010 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail rbj@rbj.net.

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