As the November 30 cutoff of emergency unemployment insurance (UI) benefits approaches, the internet has been flooded with new data that bolster the case we have been making for extending federal UI benefits for the millions who can’t find work after months of searching—and letting tax cuts for the very rich expire.

  • Last Wednesday, the Congressional Budget Office released a report examining the effect of UI benefits on family income of the unemployed, concluding that the national 14.3 percent poverty rate in 2009 would have been 15.4 percent without UI benefits, a poverty level not seen since the 1960s. Looking just at families in which at least one person was unemployed last year, the effect is even more striking: their poverty rate was 19.6 percent, but without UI benefits, that rate would have been 24.3 percent. The CBO also concluded that “the extensions of unemployment insurance benefits in the past few years increased both employment and participation in the labor force over what they would otherwise have been in 2009.”
  • In a study released on Wednesday that was originally commissioned by the Department of Labor during the Bush Administration, independent researchers concluded that UI has been a critical economic stabilizer during the recent recession, “helping break the downward spiral between widespread layoffs, cutbacks in families’ budgets, and declining economic activity.” By cushioning the blow to family income that occurs when a member becomes unemployed, UI benefits allowed these families to spend money in their local economies, which prevented further production cuts and layoffs and stemmed the tide of job losses. The study determined that 1.8 million job losses were averted by UI benefits at the low point of the recession, lowering the national unemployment rate by 1.2 percentage points and preventing it from rising to over 11 percent. The researchers found that every dollar spent on UI results in an increase in economic activity of two dollars, which also significantly reduced the fall in gross domestic product (GDP) during the recession.
  • In a Wall Street Journal article published last Tuesday, Goldman Sachs analyst Alec Phillips estimated that allowing emergency UI benefits to expire at the end of this month would shave half a percentage point from GDP growth—growth that was at a painfully slow annual rate of only 2 percent during the third quarter of this year and insufficient to bring down the unemployment rate at all.
  • On Thursday, David Leonhardt examined the impact on GDP of another policy that’s a hot topic of debate right now: the tax cuts enacted in 2001 and 2003 that are set to expire this year. Some Members of Congress have argued persistently that the tax cuts that benefit only the wealthiest 2 percent must be extended—at a cost of $700 billion over 10 years—because they are necessary to spur job creation and economic growth. But little evidence seems to be available to support that proposition. Leonhardt’s analysis suggests that the tax cuts hardly have been a catalyst for growth: the decade beginning in 2001, the year the Bush tax cuts were enacted, had the slowest average annual GDP growth of any decade since World War II—even if you exclude the effects of the Great Recession and consider only 2001 to 2007.
  • The Economic Policy Institute recently took a look at better ways to spend the estimated $66.8 billion that it would cost to extend the tax cuts for the wealthiest for just two years. It concluded that “[c]ontinuing to provide emergency unemployment compensation would generate 531,000 jobs in 2011 and 172,000 in 2012, roughly 5.0 times as many as would be created by an extension of the upper-income tax cuts.” 

In an environment of growing alarm over the deficit, this research makes crystal clear that funding to continue federal emergency UI benefits for the long-term unemployed is money well spent. The same simply cannot be said for the high-income tax cuts, which should be allowed to expire on schedule at the end of this year.