When Congress returns after the August recess, it plans to consider an extension of unemployment benefits for the 1.5 million Americans whose benefits will run out by the end of the year (a half million of those will run out by the end of September). Last night, CNBC’s Larry Kudlow hosted University of Chicago Professor Casey Mulligan and former Secretary of Labor Robert Reich to discuss, among other things, the effectiveness of benefits as stimulus and a social safety net. Prompted by Kudlow asking Reich if “the thrust of the stimulus plan” constitues “paying people not to work,” Mulligan said:
This is the same fraud coming from the other party. When Republicans did it they called it trickle-down. You do this, you benefit one guy, he goes and spends it and it benefits another guy. The Democrats got their own version now, it’s called Keynesian or whatever, but they’re saying if I give an unemployment check to somebody who’s not working, he’s going to go spend it and create more jobs. It’s just another version of the trickle-down fraud and it’s a fraud.
Reich correctly characterized the dispute as a “ridiculous argument.” But the same ridiculousness was also put forth by conservative columnist Michelle Malkin, who claimed on ABC’s This Week that the unemployed have stopped looking for jobs because “if you put enough government cheese in front of people, they are just going to keep eating it.”
The truth is that unemployment benefits provide a vital lifeline to 9 million Americans who have lost their jobs, and keep those families going in an environment where jobs are scare. As Lawrence Katz, a labor economist at Harvard, explained, “for every job that becomes available, about six people are looking.” “Unemployment insurance gives income to families who are really suffering and can’t find work even if they are hustling to look,” he said.
And unlike trickle-down tax cuts, unemployment benefits are one of the best ways to provide fiscal stimulus, as they are almost certain to be spent quickly. One dollar put towards unemployment benefits contributes about $2.15 to economic growth.
As Maurice Emsellem, a policy director at the National Employment Law Project, said, “if more help is not on the way, by September a huge wave of workers will start running out of their critical extended benefits, and many will have nothing left to get by on even as work keeps getting harder to find.” Indeed, even if job losses have slowed, it’s likely to be some time before employment picks up again, and thus extending benefits is a prudent move.