With Congress back in session, an item near the top of both chambers’ legislative agendas involves the renewal of unemployment benefits which have now expired for approximately 1.3 million of our fellow citizens. Very recently, the Senate had a procedural vote the results of which have moved this matter forward for debate. In contrast to that small but positive step, House Speaker Boehner has signaled that nothing of the sort is going to happen on his watch.

While both Senate and House Democrats support the renewal, it’s Republicans who are balking, even as they are divided into two camps; i.e. the Tea Party caucus in the House that is unreservedly against the renewal, while their more mainstream cohorts would support it IF offsets in the form of spending cuts can be found to “zero out” the cost.

In the face of this all-too-typical partisan gridlock, we have poll findings which show that the public is very much behind the renewal. It’s that sentiment that the president is counting on to cause a “softening” of the GOP’s stance. The bet here is that it won’t work, mainly because the aforementioned Tea Party members of Congress are guided, not by the national mood, but more narrowly by the hard lines taken by the constituents in their states and districts.

If it becomes evident that the foregoing prediction is being born out, Obama and the Democrats do have this option:  Find offsets as more mainstream Republicans have requested. Those cuts can be found in the tax breaks and subsidies that the government routinely extends to corporations. This largesse is hardly needed since corporate profits are now at record levels. Republicans will complain, preferring to find cuts in one or another of the programs that make up the social safety net (e.g think Social Security, Medicare). However, to make such a proposal in an election year would be political suicide. That would leave the president with the upper hand as he tries to negotiate some sort of deal that would make the renewal possible. What is more, skimming off the top of corporate revenues for the offsets would dovetail neatly with Obama’s concern about growing income inequality, a topic that he is likely to feature in his coming State of the Union address.

Politics aside, there is a good deal positive to be said about putting the renewal in place. For example, for every $1.00 delivered with the renewal, the economy gets back $1.40 through the operation of a “multiplier effect”; i.e. as people have money to spend, their consumer behavior ramps up and businesses respond to that increased demand by hiring and boosting their inventories of goods. Those goods must be produced by another company that responds to this new need for more product by engaging in new hiring as well. All those increased sales and new hires eventually generate more taxes that will flow into the US Treasury which explains where the added .40 cents comes from.

The contents of the foregoing paragraph provide a sound economic rationale for putting unemployment benefits back in place. The president has, on a number of recent occasions, made the moral case for doing the same thing. One can hope that the two, in concert, move Congress to act affirmatively.

 

 

 

 

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