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Despite GOP rhetoric, unemployment extension would increase jobs by 200k in 2014

Nearly 3 million "long term unemployed" Americans are coming closer to having their benefits restored, but it won't happen unless House Republicans budge.

Rep. John Boehner refuses to put unemployment benefits up for a vote in the House.
Photo by Mark Wilson/Getty Images

On Monday, the Senate voted 59 to 38 in favor of extending unemployment benefits for 2.8 million Americans. Nearly all Democrats voted to push the bill forward and also reached across the aisle to grab "yes" votes from Sens Rob Portman (Ohio), Sen. Kelly Ayotte (N.H.) and Sen. Mark Kirk (Ill.).

Prior to the Senate vote, Sen. Chuck Schumer (D-N.Y.) sent out a statement with the hopes it would help grab additional Republican votes.

"Contrary to right-wing talking points, many of the people who would benefit this bill are out of work through no fault of their own, and have been knocking on doors and going online looking for a job for months or even years. The House needs to extend unemployment benefits to millions of Americans right now, without attaching extraneous issues that are merely an attempt to score political points.”

The bill needs to be put up for a vote in the House of Representatives, but Republican House Speaker, John Boehner, refuses to do so. Boehner has stated he would consider putting up the bill for a vote if it included "provisions to help create more private-sector jobs." Democrats have refused to add any job measures to the bill, asking for a straight up or down vote on unemployment extension.

Though Republicans and conservative economics have noted that extending unemployment benefits would further reduce unemployment, the Department of Labor reports different findings.

"According to the U.S. Department of Labor, extending federal benefits through 2014 would cost about $25 billion. The actual economic impact of cutting them off would be larger. That's because the unemployed reliably spend that money, creating a multiplier effect in the economy."

A report in Bloomberg Businessweek highlights a report from chief economist at Moody's Analytics, Mark Zandi, where it has been estimated that for each dollar invested in unemployment benefits would in turn generate $1.55 in economic activity. The study also concludes that ending the unemployment extension will result in a loss of nearly $39 billion by the end of 2014.

The Congressional Budget Office (CBO) also reports that inflation-adjusted GDP would increase by 0.2 percent if unemployment benefits were increased and would create more than 200,000 jobs by the end of 2014.

"Combining the positive effects on the economy from higher aggregate demand with the negative effects from job searches that would be (on average) less intense, CBO estimates that extending the current EUC program and other related expiring provisions until the end of 2014 would increase inflation-adjusted GDP by 0.2 percent and increase full-time-equivalent employment by 0.2 million in the fourth quarter of 2014. Those figures represent CBO's central estimates, which correspond to the assumption that key parameters of economic behavior (in particular, the extent to which higher federal spending boosts aggregate demand in the short term) equal the midpoints of the ranges that CBO uses. The full ranges that CBO uses for those parameters suggest that, in the fourth quarter of calendar year 2014, GDP could be increased very slightly or by as much as 0.3 percent, and employment could be increased very slightly or by as much as 0.3 million."

Though a few moderates have sided with Democrats, the majority of Republicans have demanded a jobs measure to be passed side by side with an unemployment extension. While coming up with a clear plan for jobs should be a top priority, in the short term Republicans are hurting the economy by sticking to their stubborn ways.

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