Writing in the New York Times over the long weekend, Nobel laureate Paul Krugman continued to make the case for more government stimulus of the economy. He wasn’t advocating for the usual stimulus that funds road and bridge projects or shores up state budgets – though that is still needed. He was promoting unemployment insurance (UI), which is helping to hold the economy together by keeping the jobless in their homes and food on their tables as they slog through "the worst job market since the Great Depression."
Noting that Congress failed to extend benefits before going home for the Fourth of July due to "a coalition of the heartless, the clueless and the confused," Krugman competently demolishes the anti-UI arguments of deficit hawks and dim bulbs alike before tying it all together:
One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly – while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.
This is pretty basic stuff, but few lawmakers would even admit that we’re still in a period where emergency funding to help battle a bad economy is necessary. Of course, that’s exactly where we are. Moreover, for those "fiscally conservative" members of Congress that talk of offsetting the cost of extending UI benefits, most of them would vote to permanently kill the estate tax or provide huge tax expenditures to private businesses without offsetting the decreased revenue to Uncle Sam in a hot second.
It’s unfortunate that we’ve come to the point where even the most basic stimulus, UI, is a controversial addition to the country’s deficits. Congress must not entangle the issue of helping the unemployed continue their difficult search for work within the debate over the structural debt problem. And unless they want this country’s nascent recovery to grind to a halt – which the recent jobless numbers are suggesting – or possibly even reverse into a full-fledged depression, Congress must pass a UI benefit extension ASAP.