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THREAD. The debate over unemployment benefits is premised on a false choice, as if it’s impossible to support consumer spending without excessively discouraging people to go back to work.
My latest column: https://www.bloomberg.com/opinion/articles/2020-07-20/coronavirus-economic-relief-trump-and-congress-have-to-agree?sref=QK42wmXj @bopinion
My latest column: https://www.bloomberg.com/opinion/articles/2020-07-20/coronavirus-economic-relief-trump-and-congress-have-to-agree?sref=QK42wmXj @bopinion
2/ The Cares Act added a $600 weekly payment from the federal government to supplement standard, state-provided unemployment benefits. This extra payment expires at the end of July.
3/ The payments are so generous that, if extended for another six months, the vast majority of laid-off workers would have higher incomes on unemployment benefits than they would from working.
4/ This is bad stewardship of taxpayer dollars, but the payments have helped the economy by boosting consumer spending, and they aren’t discouraging unemployed workers from getting new jobs because there aren’t jobs to get.
5/ As the labor market recovers and strengthens, however, benefits this generous will hinder the recovery by discouraging the unemployed from working. This will hurt those workers’ longer-term job outcomes, as well.
6/ The debate over unemployment benefits is premised on a false choice, as if it’s impossible to support consumer spending without excessively discouraging people to go back to work.
7/ Cutting the bonus payment in half and putting it on a glide path to zero over the rest of the year would help consumers keep spending while reducing the perverse employment disincentive. (Better yet, tie the bonus payments to state-level economic conditions.)
8/ And taking some of the funds that would have gone to larger unemployment payments and using them for one-time re-employment bonuses for unemployed workers who get jobs would also put spending money into people’s pockets while encouraging employment.
9/ An additional use for some of those funds would be to temporarily increase the tax credit for children, being sure to make the credit refundable so that families that don’t earn enough to owe taxes can receive it.
10/ This would recognize the special burden that’s now being placed on parents, many of whom have to deal with missing work and losing wages to help their kids deal with virtual learning, and may also be facing additional child-care expenses.
11/ In addition, an expansion of the earned-income tax credit would support spending by supplementing the earnings of low-income households, while also encouraging work.
Fin/ Continuing to pay unemployed workers an annualized income of ~$50,000 is bad policy. Congress should fix this in Phase 4. But Congress should keep the money that would have been used for unemployment benefits in the economy.
My column: https://www.bloomberg.com/opinion/articles/2020-07-20/coronavirus-economic-relief-trump-and-congress-have-to-agree?sref=QK42wmXj @bopinion
My column: https://www.bloomberg.com/opinion/articles/2020-07-20/coronavirus-economic-relief-trump-and-congress-have-to-agree?sref=QK42wmXj @bopinion
