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Blog: Workforce Washington
 

January 17th, 2008

Democrats Seek to Stimulate Economy Through Unemployment Benefits

It didn’t take long this week for the dominate issue to emerge in the new congressional session—avoiding a looming recession. The collapsing housing market and rising unemployment have concentrated the minds of members of Congress.

Washington is already obsessed with putting together an economic stimulus package of more than $100 billion—and the Senate doesn’t even come back until January 22.

It seems as if there is a press conference about stimulus every hour. I attended three of them on Wednesday, January 16.

Although Democrats and Republicans on Capitol Hill are already negotiating the size and scope of a stimulus package with each other and the White House, the process is likely to go on for a few weeks.

So far, it looks as if the workforce dimension of stimulus will be unemployment benefits. David Smith, chief economist for the House Financial Services Committee, said that increasing payments to the jobless will be part of a package that his boss, Rep. Barney Frank, D-Massachusetts and chairman of the committee, is assembling.

Smith told a Capitol Hill audience Wednesday that the unemployment piece of stimulus will include reforms to the insurance system that were part of a House bill passed last fall. Under that measure, states would be given $7 billion to expand unemployment insurance to more low-wage and part-time workers.

It also would allow states to provide benefits to workers who are in training programs, who have had short job tenures and who had to leave work for family reasons.

Vicky Lovell, director of employment and work/life programs at the Institute for Women’s Policy Research, says that many states have already put these reforms in place and just need federal approval to implement them. That would give more workers a chance to collect unemployment. And the stimulus package likely also will include higher payments.

People who are out of work “are going to spend whatever extra unemployment benefits they get,” Lovell says.

In a January 16 press conference, Sen. Edward Kennedy, D-Massachusetts, rolled out a chart that showed that for every $1 increase in unemployment benefits there is a $1.73 boost to the economy.

Kennedy said his goal in a stimulus package is to target Americans who have lost their jobs. “Help is on the way,” he said. “We hear their cries of anguish, their cries of pain and their cries of real fear.”

Republicans are promoting a different take on stimulus. Many in the GOP doubt the efficacy of raising unemployment benefits.

“That is not something we should look to to grow the economy,” said Rep. Eric Cantor, R-Virginia, at a press conference to introduce his bill that cuts the corporate tax rate and offers several other tax changes to spur business.

Republicans argue that helping employers will create the jobs that put people back to work in positions that provide additional benefits like health care.

“It’s more important to stimulate paychecks than welfare checks,” said Rep. Jeb Hensarling, R-Texas, a co-sponsor of Cantor’s bill.

Smith has a different view. “A stimulus package is designed to give people fishes,” he told a Capitol Hill meeting sponsored by the Congressional Progressive Caucus and the Campaign for America’s Future.

The argument over whether to reinvigorate the economy by strengthening the safety net or providing incentives directly to businesses will frame the debate in Washington for the next few weeks.


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