Unemployment Benefits Extension an Economic Booster
Business tax cuts, meanwhile, provide little short-term stimulus
New estimates from the nonpartisan Congressional Budget Office suggest that increasing aid to the unemployed could be the best policy for near-term job creation in
According to estimates released today by the CBO, increased unemployment aid could, over the course of 2012 and 2013, add
The new estimates come as the country simultaneously faces an economic crisis and a deficit crisis. GDP growth was at a sluggish 2.5 percent in the third quarter, and the unemployment rate has been stuck at or above 9 percent for seven months. Meanwhile, the so-called congressional super committee is scrambling to determine a way to cut
The difficulty of this situation was highlighted at a
"Under current policies, U.S. fiscal policy is on an unsustainable path," said Elmendorf.
When Budget Committee Chairman
"It's not really a paradox," Elmendorf told the committee, later explaining, "In the short term, most economists agree the constraint on our output and incomes today...is principally weak demand for goods and services."
Increasing that demand, therefore, is the key to growth, says Elmendorf: "In the short term, what can strengthen the economy is cuts in taxes or increases in spending."
That boost to demand may have to come soon; unemployment benefits are set to expire at the end of the year. As The Hillreports, lawmakers are currently fighting over the process of passing an unemployment benefits extension.
Elmendorf acknowledged that some policies are more effective over the long term than the short term, with infrastructure as one key example. Conrad emphasized the importance of infrastructure in his home state, where he says a booming oil industry requires better transportation routes.
"We need to build roads. That could employ thousands of people," said Conrad.
Elmendorf agreed that infrastructure does not create significant jobs in the short term simply because of the sometimes lengthy processes involved in identifying and approving projects, but said that in the longer term the effects can be larger.
When Delaware Democratic Sen.
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