Totally Missing from the Debt Ceiling Deal: Jobs and the Unemployed

What is perhaps the most dismaying aspect of the GOP manufactured debt ceiling crisis is that years into the worse economy since the Great Depression of the 1930's, nothing of significance has been done to address the loss of jobs and the unemployed. And when the spending cuts kick in under the soon to be approved debt ceiling deal, the fall out will likely be more job losses and the addition of more individuals to the ranks of the unemployed or under employed. Shockingly, the GOP and the Tea Party who all to often wear their alleged religiosity o their sleeves care nothing for those falling into the ranks of the unemployed. In the minds of these "godly Christians" the unemployed and their families apparently mean nothing whatsoever. In my own law practice, the number one thing I am seeing in terms of the cause of why homeowners are falling behind in their mortgages is job loss or reduced work hours that devastates their family cash flow. And people wonder why housing isn't recovering? A piece in the Washington Post looks at this forgotten segment of the population - real, living, breathing people. Here are highlights:
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The debt-ceiling deal, as we know, contains no stimulus. Nothing on jobs. No relief for the out-of-work. And that’s a real worry because, at the end of this year, existing emergency unemployment benefits — the ones that were extended as part of the 2010 tax-cut deal — are set to expire. Yet there are still millions of Americans who can’t find work. So what happens to the unemployed at that point? . . . . anyone who loses their job after July 1 this year will get the 20 to 26 weeks, no more.
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The macroeconomic effects of failing to extend could be significant. Chad Stone, an economist at CBPP, walked me through a back-of-the envelope calculation. Currently, about 3.8 million people receive those additional, federally funded benefits scheduled to expire. The average benefit is about $1,300 a month. That comes to roughly $60 billion a year in spending. Now, UI benefits are one of the most effective forms of stimulus out there — people without jobs tend to spend most or all of the money, rather than pocket it. Moody’s chief economist Mark Zandi estimates that every dollar spent on unemployment benefits boosts GDP by about $1.60.
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Add it all up, and letting unemployment benefits dwindle could provide a hit to the economy of about 0.5 percent of GDP. That’s a sizeable dent, especially when we’re barely seeing any economic growth as it is.
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Conservatives might be inclined to say, fine, that will force people to look for work. They might even cite Harvard economist Robert Barro’s suggestion in the Wall Street Journal that the jobless rate would be 3 percent lower if unemployment hadn’t been extended to 99 weeks. But there’s reason to think Barro’s wrong. Conti points out that there are now at least five unemployed people for every one job opening — the main roadblock here hardly seems to be lazy, unmotivated laid-off workers living high on fat UI benefits. Second, two recent studies by the San Francisco Fed and Goldman Sachs suggest that extended unemployment benefits contribute just 0.4 percent to the jobless rate. Cutting off aid would produce a small gain in exchange for a lot of extra hardship.
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Meanwhile, apart from stimulus, unemployment benefits can also benefit the long-term health economy in another way, as Harvard’s Raj Chetty has argued. In a bleak job market, when unemployment benefits expire quickly, out-of-work folks tend to seize the first opportunity that comes along — even if it’s a job for which they’re not particularly suited. We end up with the specter of engineers, desperate to make ends meet, settling for low-wage food-service jobs. Giving people extra time to search can lead to more optimal outcomes.