“NO” on Unemployment Insurance Extension

This week, the Senate will vote on the Emergency Unemployment Compensation Extension Act (S.1845).  The bill, introduced by Sen. Jack Reed (D-RI)Heritage ActionScorecardSen. Jack Reed2%Senate Democrat AverageSee Full Scorecard2% and Sen. Dean Heller (R-NV)Heritage ActionScorecardSen. Dean Heller64%Senate Republican AverageSee Full Scorecard64%, extends the Emergency Unemployment Compensation (EUC) program for three months.  The EUC program provides for an additional 47 weeks of federally funded unemployment compensation, bringing the total length to 73 weeks.

As The Heritage Foundation has explained, expanded unemployment benefits are not “an economic free lunch.”  In fact, the continuation of so-called emergency unemployment benefits has an adverse economic impact:

  • Higher unemployment. Studies show that extending unemployment insurance (UI) benefits to 99 weeks (as was done during the stimulus) increased the national unemployment rate by roughly 0.5 percentage points.

  • Longer unemployment. Economic research shows that each 13-week extension of UI benefits increases the average length of time workers receiving benefits stay unemployed by approximately one week.

  • Ineffective stimulus.  The studies that conclude that UI benefits boost the economy ignore their effect in raising unemployment and incorrectly assume that unemployed households spend every dollar of UI benefits they receive.

Finally, according to the Congressional Budget Office (CBO), the 3-month proposal would cost taxpayers $6.555 billion.  Taxpayers not cannot afford tens of billions in new spending (a full one-year extension would cost upwards of $25 billion), and even if lawmakers attempt to offset this new spending with real cuts elsewhere, they would still be throwing taxpayer money at an ineffective and wasteful program.

Heritage Action opposes the S.1845 and will include it on our legislative scorecard.

Related:
Heritage Action Scorecard
Emergency Unemployment Benefits Brief
Heritage Testimony: Additional Problems in the UI System
Heritage Testimony: The Economics of Extending Unemployment Benefits