WASHINGTON - Ways and Means Committee Chairman Charles B. Rangel (D-NY) issued the following statement on the importance of extending unemployment benefits to individuals to strengthen the economy during the current downturn:
"I want to reiterate my appreciation for the significant tax cut Speaker Pelosi negotiated into the stimulus package for lower- and middle-income families. This is a common sense means of delivering tax relief to working Americans at the time they need it most.
"I also want to thank my colleagues in the Senate -- Chairmen Baucus and Harkin and Senators Schumer and Clinton -- for keeping the crucial issue of extended unemployment benefits alive. We did not expect the Administration or Congressional Republicans to enter into negotiations on a stimulus package with compassion for those who are without work. However, it should also be clear that this recession is directly caused by the Bush Administration’s economic policies, which widened the gap between rich and poor and left many families without money to spend into our economy.
"If the concept of an economic stimulus package is to inject money into our economy immediately, we cannot ignore the pressing need to put money in the hands of those who are currently without work through no fault of their own. This is not a political argument, it is pure economics - the Congressional Budget Office has identified unemployment benefits as one of the most "cost-effective" means of providing relief to those who are struggling and most likely to spend it. I look forward to working with my colleagues in the Senate and House to continue this discussion and improve the relief we provide to stimulate the economy."
Unemployment Benefits Stimulate the Economy
Economists agree widely that unemployment insurance (UI) is one of the most effective forms of economic stimulus. For example:
Joseph E. Stiglitz, a professor of economics at Columbia University, and the 2001 recipient of the Nobel prize in Economics, recently wrote in an Op-Ed for The New York Times that in order to stop a downturn, "We should begin by strengthening the unemployment insurance system, because money received by the unemployed would be spent immediately."
Moodys Economy.com Chief Economist Mark Zandi estimates that the two most effective stimulus proposals are expanding unemployment insurance and food stamp benefits: "A $1 increase in UI benefits generates an estimated $1.64 in near-term GDP; increasing food stamp payments by $1 boosts GDP by $1.73."
According to the Congressional Budget Office, expanding UI benefits would be "cost-effective" economic stimulus because it "tends to boost income among families very likely to spend most of the additional money rapidly."
Unemployment is rising significantly. In December, the total number of unemployed was 900,000 workers higher than the same month in prior year. Continuing economic weakness is likely to continue and probably accelerate that trend. We should have a safety net in place for workers who are exhausting their regular unemployment benefits.
Long-term unemployment is now twice as high as it was prior to the last recession. There are now 1.4 million long-term unemployed Americans (unemployed for 6 months or more). Just last month, 225,000 Americans exhausted regular unemployment benefits.
Past extensions of UI have come too late, forcing many workers to exhaust benefits before any additional help is provided.
