Fox News hosted economics professor Casey Mulligan to falsely claim that extending unemployment insurance would further damage a struggling economy. However, many economists find that extending unemployment insurance stimulates the economy in times of slow economic growth and could add up to 300,000 jobs in 2013.
Fox & Friends co-host Gretchen Carlson interviewed Mulligan, a University of Chicago economist who claims that unemployment insurance and food stamps should be reduced to 2006 levels because their extension could be harmful to the economy. Carlson began the segment asking "what if those measures meant to help people during the recession are actually prolonging it?" From the show:
In fact, The Washington Post reported on a study from the non-partisan Congressional Budget Office (CBO) that found extending unemployment insurance now would stimulate the economy and add 300,000 jobs. From the article:
The report notes that extending unemployment insurance is a particularly effective form of stimulus when the economy is still struggling. That's because jobless workers who receive benefits are extremely likely to spend the money right away. So, the CBO estimates, if Congress extends all the programs, GDP will likely be 0.2 points higher and employment will be 300,000 in 2013 than if Congress does nothing at all.
Many economists have echoed the CBO's findings. Moody's Sophia Koropeckyj explained that unemployment insurance "reverberates through the economy" and former Federal Reserve chair Alan Blinder stated that it is "one of the best forms of stimulus we know." Ralph Martire of the bipartisan Center for Tax and Budget Accountability also highlighted why unemployment insurance is important in a weak economy:
The best consumers are low- and middle-income folks, who don't earn enough to save, so they spend their paychecks. That is, when they have paychecks. See, if they've lost their jobs and the private sector isn't creating jobs and the feds cut off unemployment benefits, their ability to spend drops to, well, nil. Which is why the amount of private sector economic activity stimulated by unemployment benefits is greater than any other fiscal action government can take. In fact, dollar-for-dollar, it's five times more stimulative than the Bush tax cuts.
Sure, the long-term deficit has to be dealt with -- but honestly and responsibly. Short-term, deficit spending -- particularly on things like unemployment insurance, food stamps, housing assistance and the like -- is creating jobs and saving the U.S. economy from disaster.
Not only does unemployment insurance help create and maintain jobs, but it also "has a significant impact on GDP." Moody's Mark Zandi illustrated the economic benefits of various stimulus provisions in this graphic published at the Economic Policy Institute, which shows that the greatest economic benefits come from food stamps and unemployment insurance extension: