Curing Deficit and Job Loss: Unemployment Insurance FAR Better than High Income Tax Cuts

NOTE: This message arrived today from the highly regarded Center on Budget and Policy Priorities.  We wanted you to see it asap.

We’ve received some eye-popping policy simulations from Mark Zandi, chief economist at Moody’s Analytics, that flesh out an important point that the Congressional Budget Office, Zandi, and many others have made before: unemployment insurance (UI) and tax cuts focused on low- and moderate-income households have a much larger economic impact than income tax cuts for high-income individuals. I’ll be writing a more detailed report later, but here they are in a nutshell:

  • Short-term scenarios: Zandi found that extending federal UI for one year and some of the Obama tax cuts (expansion of the child tax credit, improvements to the earned income tax credit, and the higher education tax credit) for two years would generate more economic activity — including creating 500,000 more jobs next year — than would a two-year extension of the Bush high-income tax cuts. It would also add $30 billion less to deficits over the 2010-2015 period than extending the high-income tax cuts would.
  • Longer-term scenarios: Zandi found that extending federal UI for a year, making the Obama tax cuts described above permanent, extending Obama’s Making Work Pay tax cut for another year, and creating a two-year tax credit to promote additional hiring would generate substantially more economic activity — including creating 1.2 million more jobs next year — than would a permanent extension of the high-income tax cuts. It would also add $441 billion less to deficits over the 2010-2020 period than extending the high-income tax cuts.

     

Friday’s jobs report reminds us that the economy still needs a job-creating boost. As Federal Reserve Chairman Ben Bernanke said in a recent speech, “a fiscal program that combines near-term measures to enhance growth with strong, confidence-inducing steps to reduce longer-term structural deficits would be an important complement to the policies of the Federal Reserve.” These results show that, compared with a policy of extending the high-income tax cuts, a policy emphasizing unemployment insurance and refundable tax credits is far better for enhancing growth in the near term without undermining deficit reduction efforts in the longer term.

by AFLCIO via Flickr/Creative Commons
by Chad Stone, Chief Economist of the Center on Budget and Policy Priorities

45 comments

Barbara Erdman
Barbara Erdman7 years ago

Noted, thanx

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Mary L.
Mary L7 years ago

Sending a Green Star is a simple way to say "Thank you"

You cannot currently send a star to Judith because you have done so within the last week.

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Pat W.
Pat W.7 years ago

I totally agree with the comments of the current work force; but the unemployed need to be heard as well! I am glad the UE benefits were extended!

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Judith S.
Judith S7 years ago

The unemployment insurance will run out in 13 months and then we will have to give in on something else extremely important to get them extended. However, if the tax cuts had not been extended, we could have begun on the road to recovery. Now it will not happen.

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rhonda t.
rhonda t7 years ago

I'd love to know how sliding in the estate tax deal was in any way beneficial to anyone other than those who need it least? WHY were the deficit hawks, who swear they are so concerned about bringing down the federal deficit, allowed to squelch potential tax revenue on future mega estates?? I mean, come on..how many of us have estates worth $1-$5 million to pass on to our loved ones to begin with? Not many you say? Aren't most of us lucky if we can pass along a house, maybe a small amount of savings to the next generation? And those over $5 million will be taxed at just 35%?...and they left the loopholes in place so that the truly large estates pay NOTHING after adjustments. Did you know that the largest of estates in the U.S. .can be held as trusts in perpetuity, and that in some instances have passed from generation to generation with not one dime paid on them since they crafted law to exempt them? Who said we have no royalty with a very very different set of rules.
Interesting. Wonder what other little goodies are in store for us now that the blackmailers have been successful on this ransom..

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Craig C.
Craig C7 years ago

Greg get the facts straight the employee does not pay for UI it is the employer, which is put into a fund, its purpose was to help people out for the short term. Now if you own a business that requires you to hire and then let people go your rate goes to the max, now other businesses that don't see a turnover stay at a certain tax level. Now they just ran a story on this here in Vegas and guess who pays the higher fee or tax the employer, tell me how many will what to hire more at this time, only to have to lay them off and then have their rates go up. As for the war how about we just go in and set all the poppy fields ablaze, what good does heroin do for any country? Is that not the main resource for them and just who makes the money from this? If you don't want to do this then I say get out of that country now. The only way to really solve what we have got ourselves into is the flat tax, you know pay as you go, that way this back an forth between parties will stop dead in its tracks. The feeding well would be cut off in simple terms.

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Robert & Carmen S.
Carmen S7 years ago

Craig C I have to answer you. We were in pretty good shape until Mr. Bush got us into the "War" Since that time we have gone down hlll very rapidly.
Millionaire Bush and Millionaire Cheney did everything they could to help themselves and their cronies to get more and more.
Don't kid yourself they also made money out of the War.

Bush cried crocodile tears when he said he felt for the american people while granting tax cuts for his buddies and gave a carot to the American people. I do not understand why some people still cannot see how those wealthy Republicans are just fighting for Corporations and the rich.

Disappointed as I am in Obama, we thought he was a fighter, he truthfully is trying to help the middle class but he is too kind a person and we actually need a fighter to battle those "we want more" Republicans.

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Olivia Schlosser
Past Member 7 years ago

Sad news....but expected.

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Greg B.
Greg B.7 years ago

13 months is a hand full of crumbs to appease the peasants. They only caved in, because they did not social unrest and civil uprising that would have made the sixties look like a beach picnic. They are still feeding their Rich friends, so if your money was cut off... no civilisation on earth would sit back and take that. Only thing is ...YOU DESERVE it as a BASIC CIVIL RIGHT your enormous taxes pay for it, not to be wasted on stupid paranoid NASA programmes and tax breaks for the Rich and Famous, Keep Yelling Loudly America!!!
From your friends down under............ Glad you guys will have a better Christmas and ease your anxieties.
P.S. emigrate to O.Z. our mining sector is begging for staff and at last check we only have just over 4% unemployed. U.S. workers are snapped up quickly here. At least you will get real Medicare that way.

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Steve R.
Steve R7 years ago

Oh well - there goes the 2012 election!

The Republicans will get credit from the rich for the tax cuts they don't deserve.

The Republicans will also get credit from the unemployed for making the extension of unemployment benefits happen - not the Democrats who seemed too lame and spineless to use their majority to make it happen.

The Republicans will be rewarded with zillions of dollars in campaign funding from the rich and they'll get the votes of the unemployed too.

So the Republicans will win a landslide victory and then they'll FIX things right?

Well???? They will, won't they?

GULP!

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