While Washington obsesses over the so-called “fiscal cliff” — the set of tax increases and spending cuts scheduled to take place at the end of the year — America’s unemployed are facing a cliff of a different kind. In January, the expanded federal unemployment insurance program will expire, cutting off benefits for millions of Americans.
According to the Congressional Budget Office, extending unemployment insurance won’t just help those Americans struggling to find work in a still-sluggish economy. It will also help create 300,000 jobs:
For the three options involving extensions for an entire year—Options 1, 2, and 4—economic output would be $1.10 higher per dollar of budgetary cost, on average, in 2013, CBO estimates, and employment would be increased by six years of full-time-equivalent employment per million dollars of budgetary cost (see figure below).
Under Option 1 [a full, year-long extension], for example, which extends the benefits provided under the current EUC and EB programs at a total budgetary cost of $30 billion, CBO estimates that gross domestic product adjusted for inflation would be 0.2 percent higher in the fourth quarter of 2013 and that full-time-equivalent employment would be 0.3 million higher at that time than it would be under current law.
Unemployment insurance kept 2.3 million people out of poverty last year, despite America’s system being one of the stingiest in the developed world. Already, 500,000 Americans have lost benefits due to the program’s faulty design and Congress restricting eligibility. (HT: Matt O’Brien)