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Extending Unemployment Benefits Helps Jobless Workers & Stimulates the Economy

Earlier this year, the New Direction Congress passed a bipartisan economic stimulus package to help American families and businesses make ends meet and to jumpstart the economy. Of the 130 million Americans expected to get Recovery Rebate checks as part of this package, more than 76 million people have already received their checks.

Recent economic reports from the Commerce Department indicate these rebates are working:

“Sales at U.S. retailers rose an unexpectedly sharp 1% last month, suggesting consumers spent a chunk of their government economic-stimulus checks.” [Wall Street Journal, 6/13/08]

The impact of the Recovery Rebates on our economy will likely be limited with prices rising for everything from gas to food, families losing their homes and unemployment increasing.  

“But rising prices and a weakening labor market could mean the boost to the economy will be short-lived.” [Wall Street Journal, 6/13/08]

Last week, Congress took action to strengthen our economy and give assistance to millions of jobless American workers by extending unemployment benefits to those who have exhausted their regular benefits. Not only will the Emergency Extended Unemployment Compensation Act directly benefit an estimated 3.5 million Americans, it would provide needed stimulus to our struggling economy.

•    Every $1 spent on unemployment benefits generates $1.64 in new economic demand. Jobless workers and our nation's businesses could use the relief. [Mark Zandi, chief economist of Moody's, 1/22/08]   

•    The Congressional Budget Office has determined that extending these benefits is one of the most cost-effective and fast-acting ways to stimulate the economy because the money is spent quickly.

Economists across the country agree extending benefits like unemployment insurance will have a direct, positive and immediate impact on our economy.


Chad Stone, chief economist at Center on Budget and Policy Priorities
“People are losing income…[Extending unemployment benefits] puts money into the pockets of people who are going to spend it.” [6/11/08]

Jeffrey Kling, senior fellow at Brookings Institution
“[Extending unemployment benefits] essentially puts money into the pockets of people who will spend it, and it's targeted to people who need it.” [6/9/08]

Lawrence Summers, Former Treasury Secretary
“On the spending side the measures most likely to be effective are temporary increases in benefits perhaps for the long term unemployed and food stamp recipients.  Such increases can be implemented quickly and go to people who will spend them fast.” [1/16/08]

Mark Zandi, chief economist at Moody's
“I would extend UI benefits… no one is more panicked than a person that loses their job, and no one cuts back on their spending more than someone who's lost their job and has been out of work for 26 weeks, I mean that's pure panic, and it's key to helping those folks…  I think we need to help them. They'll spend that money as soon as they get it, and I think that's vital to supporting confidence…it's very efficacious in terms of stimulating economic activity.” [1/10/08 (.pdf)]