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ThePlumLIneGS whorunsgov plumline
Posted at 11:27 AM ET, 11/27/2012

Obama must push for another extension of unemployment insurance

Discussion over the fiscal cliff is focused on taxes and spending cuts, but there are other policy measures — unrelated to either — that are also due to expire at the beginning of next year. For example, the unemployment insurance extension — secured by President Obama in the 2010 lame duck session — is slated to end in January. If it does, more than 2 million Americans will lose their federal jobless benefits, a key lifeline in an economy that’s still trudging towards recovery. Unfortunately, no one in the administration is talking about extending this policy — and the recovery itself is at stake.

What would happen if unemployment benefits were to expire in January? Earlier this month, the Economic Policy Institute found that the economy would save 400,000 jobs if unemployment benefits were extended through 2013. It’s not hard to see why — as with food stamps and other forms of federal assistance, unemployment benefits are spent on necessities like rent, groceries and fuel. They provide a direct boost to the economy, and provide significant bang for the buck; you get more than a dollar’s worth of stimulus (a multiplier of 150 percent) for every dollar spent on unemployment insurance.

Just as the payroll tax cuts should be preserved in any deal over the fiscal cliff, the administration should work to include an unemployment insurance extension in any deal over the fiscal cliff. Both are key components of the recovery, and allowing either to lapse will deal far more damage to the economy than an increase in tax rates.

Indeed, preserving both policies is so important that it provides an argument for allowing the United States to go over the cliff. If we do go over the cliff, Republicans will end up with even less leverage than they have now. Right now, any leverage Republicans have is contingent on the fact that there’s a time limit — if the administration wants a deal before the end of the year, that gives Republicans a bit of a boost in the negotiations. If Obama is willing to over the cliff, and tax rates go up, Republicans lose their leverage. Republicans will suddenly be in need of something — a new compromise tax rate for the rich that is slightly lower than the Clinton-era rates that will have automatically kicked in — that only Obama can agree to.

Going over the cliff would strengthen the administration’s hand. Obama could then negotiate a far better deal for the economy — one that includes an extension of unemployment benefits. All we need now is for the administration or Senate Democrats to start talking about them.

Jamelle Bouie is a staff writer at The American Prospect, where he writes a blog.

 

By  |  11:27 AM ET, 11/27/2012

 
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