Building an Economy that Works for Everyone

Party foul: Will these three Congress members from WA keep voting against family economic security and recovery?

If one’s company and two’s a crowd, what does that make Washington Reps. Brian Baird (D-3), Doc Hastings (R-4), and Cathy McMorris Rodgers (R-5), all three of whom have so far voted against extending unemployment insurance (UI) for thousands of their constituents?

A party, of course! Well, maybe not just any party. Most people on unemployment are living right on the brink. So I think we can rule out the possibility of a constituent potluck — after all, the ‘no’ votes from these three have helped delay (and possibly prevent) a federal UI benefit extension to 18,600 Washingtonians.

Never before has Congress failed to pass an unemployment benefit extension when the economy was in such bad shape. So much for buying gas and groceries for the party.

Economists generally agree on the fact that unemployment benefits help to stimulate the economy and prevent catastrophic recessions and depressions. After all, the 1.2 million American who have lost their federal UI benefits weren’t the only beneficiaries of the funds: local grocery stores enjoyed a multiplier effect from their stimulus spending, credit union and banks received mortgage payments on time, and gas stations, dry cleaners, and other businesses all benefit from expenditures job seekers make when looking for jobs.

It is economics at its most basic: supply = demand. And when demand can’t afford to buy gas, groceries, and pay the mortgage, supply (the economy) drops. But for a more cogent analysis, here’s nationally-recognized economist Lawrence Mishel, on deficit-spending for UI benefits as one of the most stimulative things the government can do for the economy:

Note that the net cost on the long-term debt is minimal since the expenditures only last a few years and are not permanent. Plus, there’s a return that such spending provides in higher revenues and lower outlays (for food stamps, Medicaid and other spending related to periods of high unemployment) since UI expands the economy and creates more jobs. For instance, for every $100 billion of unemployment compensation paid out the economy expands by $161 billion (Source: This in turns contributes  to lowering the impact, since CBO identifies that 35-40% is returned in higher revenues or lower spending.

Therefore, a $161 billion larger economy (from the hypothetical $100 billion spent on UI) provides roughly a  $60 billion return, meaning the original $100 billion of UI spending actually only cost about $40 billion. Moreover, even that much borrowed is a good deal because we’re borrowing at very low interest rates. Although this adds a tiny bit to the long-term debt, it also prevents much long-term damage by ameliorating the impact of the recession and creating jobs. We calculate that the expansion of unemployment compensation since 2007, including COBRA, has generated over 1.5 million full-time equivalent jobs in the economy.

Valuing long term deficit reduction over short term recovery misses the whole point of economic stimulus — long-term deficit reductions will never occur if unemployed Americans aren’t able to work when recovery begins. But this lapse in UI benefits is doing just that. By the end of July, Washington will have lost $208 million in economic stimulus, and a total of 24,800 people will be dropped from federal UI benefits.

The UI benefits that Reps. Baird, Hastings and McMorris Rodgers voted against have since been stuck in the Senate. A vote to end debate on the measure in the Senate is likely today, but then it will be deja vu all over again: once when the House votes on the measure this summer, and once again in November when another extension of UI benefits will likely be up for a vote by a then lame-duck Congress.

With a strong majority of Americans backing them up, let’s hope Baird, Hastings and McMorris do better by Washington State and vote yes.

UPDATE (07.20.2010, 2:15 p.m.) | The Senate has voted to end debate over the unemployment insurance extension, so the House will take up the bill Wednesday after a final vote by the Senate. President Barack Obama is likely to sign it into law by week’s end, ensuring out-of-work Americans will continue to receive unemployment benefits through November of this year.

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