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 A Covid-19 Unemployment Assistance Updates logo is displayed on a smartphone on top of an application for unemployment benefits on May 8, 2020, in Arlington, Virginia. (Photo: Olivier Douliery/AFP/Getty Images)

'Cruel and Bad Economics': Analysis Warns Devastation Will Follow If GOP Cuts Off $600 Unemployment Boost

"It would be a catastrophe to let these turn off and replace them with nothing."

Jake Johnson

A leading progressive economist warned Friday that devastating job losses and income cuts will result if Congress bows to President Donald Trump and Republicans in the Senate and lets the $600 weekly boost in unemployment benefits expire at the end of July.

"Letting this extra $600 in UI benefit expire at the end of July would by itself cause more job loss than was seen in either of the recessions of the early 1990s or early 2000s."
—Josh Bivens, Economic Policy Institute

Economic Policy Institute (EPI) research director Josh Bivens, in an analysis of new personal income data released Friday by the Commerce Department, said not extending the enhanced unemployment insurance (UI) past July 31 "would be both cruel and bad economics."

"The economy's growth will continue to be tightly constrained by insufficient demand for goods and services, and cutting off a policy support that helps households maintain spending is a terrible idea," Bivens wrote, "both for these households' welfare and for macroeconomic stabilization."

Bivens estimated that "letting this extra $600 in UI benefit expire at the end of July would by itself cause more job loss than was seen in either of the recessions of the early 1990s or early 2000s," which each led to more than a million lost jobs.

According to the new Commerce Department data, the enhanced UI payments boosted incomes by $842 billion at an annualized rate in May. Bivens said that figure shows the "fiscal cliff resulting from cutting off the extra $600 in UI weekly benefits is really steep."

"It would be a catastrophe to let these turn off and replace them with nothing," Bivens tweeted.

Bivens pointed out that during the several months of deep economic recession brought on by the coronavirus pandemic, "UI benefits have kept the cutback in spending in closed sectors from leading more catastrophically to cutbacks in spending in other sectors."

"For example, as restaurant and airline employees lost their jobs early in the coronavirus crisis due to social distancing measures, UI benefits provided income to spend in still-going sectors like grocery stores, and contained some of the economic collapse," Bivens wrote.

"Super-unemployment thus carries a grave moral risk for Republicans—that the working class might stop simply accepting the political domination of the business class."
—Ryan Cooper, The Week

"Policymakers can and should extend the extra $600 in UI benefits," said Bivens, "and allow the amount of the benefit top-up to phase down modestly over time as the unemployment rate falls and the economy begins growing faster."

Trump and Senate Majority Leader Mitch McConnell (R-Ky.) have both said they oppose extending the $600 weekly boost in unemployment insurance in any future coronavirus stimulus package.

Last month, House Democrats passed legislation that would extend the enhanced UI benefits through January of next year. McConnell dismissed the bill as a "laundry list of pet priorities" and refused to let it reach the Senate floor for a vote.

In a column for The Week on Tuesday, Ryan Cooper described the boosted UI payments as among the most progressive policies "America has seen in over half a century" and said congressional Republicans oppose extending the benefits for that reason.

"Conservative ideologues think the main activity of the state should be forcing people to work making profits for capitalists," Cooper wrote. "By this view, unemployment should be miserable so that people will be desperate for work, and rich business owners can make the largest possible profit by keeping wages low."

"Super-unemployment thus carries a grave moral risk for Republicans—that the working class might stop simply accepting the political domination of the business class," Cooper continued. "People living comfortably on state benefits might start demanding higher wages or better working conditions before they will go back to work, or horror of horrors, start making other political demands."


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