I’m not acutely distressed by the fact that Super Committee members couldn’t cut a deal.
The Democrats had moved so far to the right that whatever deal got enough Republicans on board would probably have been worse than the automatic spending cuts the no-deal will trigger — assuming Congress lets them happen.
In one respect, however, the stalemate disappoints me.
I’d hoped that Democrats could wedge an extension of federally-funded unemployment benefits into a deal that could pass — just as President Obama got them extended as part of last December’s deal on the expiring Bush tax cuts.
Hope is the operative word here because the UI benefits extension had reportedly gotten tangled up in party-line differences based on a more fundamental consensus, i.e., the cost of the extension must be fully offset by savings elsewhere in the budget.
This incidentally marks a change from past precedent — and from the Democrats’ position as recently as last December.
In any event, we need a Plan B fast because the programs are due to expire at the end of the year.
Republicans balked at extending the programs last year. The situation is worse now because Congress as a whole is so riveted on the deficit. And extending the programs is, of course, not free.
But also not nearly as costly as what the federal government will spend to fund the programs. Nor nearly so costly as letting them die.
Costs in human terms should go without saying. We read story after story about the plight of jobless workers who’ve exhausted their UI benefits.
But the debate, of course, revolves around economic costs. So a bit of perspective on these.
The Congressional Budget Office estimates the cost of extending the UI programs for year at somewhat over $44 billion.
The Economic Policy Institute, however, argues that we need to factor in the jobs that will be created or saved because workers and their families spend most, if not all their benefits on basic needs — food, rent, gas for the car, clothes for the kids, etc.
Their spending supports jobs throughout the economy — in retail businesses, the companies that supply them, the companies that supply the suppliers and so forth.
Using a more conservative multiplier, EPI finds that the UI extensions will increase GDP, i.e., the total value of domestic economic activity, by $72 billion.*
This, it calculates, translates into 560,000 jobs created or saved.
The workers who hold those jobs pay federal taxes. They don’t depend — at least, not solely — on publicly-funded benefits.
EPI figures that the federal government would thus recoup $26.9 billion of what it would spend for the extra weeks of UI benefits — partly in tax revenues and partly in savings on safety net programs like food stamps and Medicaid.
Bottom line then is that, in real terms, the extensions would cost only $18.1 billion — far less than what the price tag seems to be.
Turn the story around. If Congress doesn’t extend the federal UI benefits programs, the economy will shed well over half a million more jobs. Our already sluggish GDP would lose a half-percent boost.
Economist Mark Zandi — a guru on such matters — puts the negative GDP impact a tad lower. Even so, he estimates the loss at $58 billion.
Makes the UI benefits extensions look like a good dollars-and-cents choice as well as a simple act of compassion.
* EPI uses a somewhat higher cost estimate than CBO because it assumes that Congress would adopt a technical fix to the so-called “look-back” provision in the Emergency Benefits law. Without it, states couldn’t get EB funds unless their unemployment rates had risen in the last two or three years.