Off the cliff, onto the rocks

Monday December 10, 2012

Though the economy added 146,000 jobs in November, more than economists had expected with the destructive impact of Hurricane Sandy, and the unemployment rate ticked down to a four-year low of 7.7 percent, long-term joblessness remains a problem. In fact, economists note that this decrease in the unemployment rate is due as much to a shrinking of the labor force as to an increase in available jobs.

Part of the multifaceted "fiscal cliff" facing President Obama and Congress that has gotten little notice is the fact that federal unemployment benefits will expire at the end of this year, if Congress does not extend them. This means that more than 2 million unemployed workers will lose their benefits before New Year's Day and another 1 million will have no federal program to assist them when their state benefits run out in the first three months of next year. More than 12 million Americans remain unemployed. "The long-term unemployment rate -- the share of unemployed workers who have been unemployed for 27 weeks or longer -- was over 40 percent throughout the entirety of 2010 and 2011, and persist(ed) at a rate of 40.6 percent in October 2012. This is an unprecedented level of long-term unemployment; the previous peak, in June 1983, was just 26 percent," states a Dec. 7 letter from members of the U.S. House urging fellow members of Congress to renew the Emergency Unemployment Compensation (EUC) program.

Many Republicans argue against continuing benefits, saying that those on unemployment will become dependent and not look for work, but research shows this is not so. An article over the weekend in the Washington Post, "Five myths about the unemployed," refutes this. First, the payments are not overly generous and are of limited duration; second, a 2011 report by Congress's Joint Economic Committee showed that people who receive unemployment benefits search harder for jobs than those who aren't covered. As it is, federal benefits to the unemployed were already reduced earlier this year, with the total cap on combined state and federal benefits reduced from 99 weeks at the beginning of 2012 to 73 weeks now. In addition, a number of states have cut the amount and duration of benefits for the unemployed.

"Losing this lifeline during the holiday season will be devastating to individuals and families for whom EUC provides a small measure of economic security and a bridge to reemployment," states the National Employment Law Project (NELP), which does research and advocates on issues affecting low-wage and unemployed workers. "In all likelihood, these families are already cutting back on spending, even as the holidays are approaching, knowing that unemployment insurance may not be there next year."

In addition to its effect on individuals and families, the loss of these benefits also endangers the fragile economic recovery. Unemployment insurance has a proven stimulus effect on the economy, one we can ill-afford to lose. According to NELP:

* "Industries that rely on consumer spending, such as retail trade and food services, can ill afford another hit to customer demand." Eliminating unemployment compensation could cost retailers more than $16 billion in 2013.

* "Reauthorizing EUC will boost family income of unemployed workers by an estimated $30 billion in 2013 (Congressional Budget Office)." This is money which will go right back into the economy, as financially distressed unemployed people will spend their benefits quickly.

* "Increased spending as a result of federal unemployment insurance will increase output by $48 billion, supporting 300,000 to 400,000 jobs in 2013 (Congressional Budget Office and Economic Policy Institute)."

When an adequate number of jobs do not exist for people to support themselves, plunging hundreds of thousands of people into poverty by eliminating unemployment benefits in the name of austerity or reducing dependency is both foolish and immoral.

We are reminded of a recent exchange on "The Daily Show" between comedian Jon Stewart and New Jersey Gov. Chris Christie, with Christie saying there was a difference between government providing disaster relief and setting up an insurance exchange, the governor having excelled at the first task and vetoing a bill to do the latter. Stewart replied, "If you have cancer and don't have health insurance, that's Hurricane Sandy."

Similarly, if you're unemployed and don't have unemployment insurance, that's a real fiscal cliff. Congress needs to do the right thing and extend federal unemployment benefits into 2013.


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