House bill to extend unemployment benefits


The U.S. economy is indisputably in bad shape.  In May 2008, the number of unemployed persons increased by 861,000 to 8.5 million, after seasonal adjustment, and the unemployment rate rose by 0.5 percentage point to 5.5 percent. A year earlier, the number of unemployed persons was 6.9 million, and the jobless rate was 4.5 percent.  Approximately 20% of the unemployed have already received unemployment benefits for the current maximum of 26 weeks.


On Thursday, June 12, the U.S. House of Representatives passed a bill (HR5749: Emergency Extended Unemployment Compensation Act of 2008 ) to extend maximum unemployment benefits from 26 to 39 weeks.  The vote was 274 Aye (including 225 Democrats and 49 Republicans) to 137 Nay (all Republicans).  However, the bill faces an uncertain future in the Senate, which is considering a similar bill.  President Bush has threatened to veto the bill if it comes to him.


Democrats have been trying for six months to support the sagging U.S. economy by extending unemployment benefits.  When Treasury Secretary Paulson negotiated with Congressional leaders to write an economic stimulus package in December 2007 and January 2008, Speaker Nancy Pelosi tried to include an extension of unemployment benefits in the bill.  The Bush Administration preferred a broad-based tax refund.  The Speaker has been following the advice of many economists who predict that the broad tax refund will give $600 or $1200 to some people who do not need it and will either save it or use it to pay down credit card debt, whereas an extension of unemployment insurance benefits will give cash to people who need it and will spend it almost immediately, putting the money back into the economy. 


According to the non-partisan Congressional Budget Office, extending unemployment benefits would be one of the most cost-effective and fastest-acting forms of economic stimulus.  Compared to the cost of the enacted economic stimulus package of $150 billion, the Congressional Budget Office estimates that enacting the bill would:

  • Increase direct spending by $6.2 billion in 2008 and $11.7 billion over the 2008-2018 period; and
  • Increase revenues by a net amount of $3.2 billion over the 2008-2018 period.

In total, these changes would increase budget deficits (or reduce future surpluses) by

$6.2 billion in 2008 and by a net of $8.5 billion over the 2008-2018 period.


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