Bush Will Back Unemployment Benefits Extension

President Bush is in favor of extending unemployment benefits in this market, White House press secretary Dana Perino said this morning. The Senate could vote today on a bill, already passed by the House, that would extend unemployment insurance by seven weeks--or 13 weeks in states with unemployment rates higher than 6 percent.

An extension is relief for those who have exhausted their benefits, and it's also considered by some economists to be an efficient economic stimulus, as the money goes to people who will spend it rather than save it.

From a Moody's Economy.com report by Mark Zandi:

A $1 increase in UI benefits generates an estimated $1.64 in near-term GDP; increasing food stamp payments by $1boosts GDP by $1.73 (see table). People who receive these benefits are very hardpressed and will spend any financial aid they receive within a few weeks. These programs are also already operating, and a benefit increase can be quickly delivered to recipients.

The benefit of extending unemployment insurance goes beyond simply providing financial aid for the jobless, to more broadly shoring up household confidence. Nothing is more psychologically debilitating, even to those still employed, than watching unemployed friends and relatives lose benefits. The slump in consumer confidence in late 1991, after the 1990-1991 recession, may very well have been due in part to the first Bush administration’s initial opposition to extending UI benefits for hundreds of thousands of workers.