Right-wing media have spent the week attacking Obama adviser Valerie Jarrett for her accurate claim that unemployment insurance stimulates the economy. The claim that unemployment benefits don't provide an economic boost is a conservative myth that right-wing media have regularly pushed.
Jarrett: “People Who Receive” Unemployment Benefits “Go Out And Spend It And Help Stimulate The Economy”
Jarrett: “People Who Receive That Unemployment Check Go Out And Spend It And Help Stimulate The Economy.” During a February 21 event at North Carolina Central University, White House senior adviser Valerie Jarrett said:
JARRETT: [T]hroughout our country many people were suffering long before the last three years, particularly in the black community. And so we need to make sure that we continue to support that important safety net. It not only is good for the family, but it's good for the economy. People who receive that unemployment check go out and spend it and help stimulate the economy, so that's healthy as well. [Fox News, Fox & Friends, 2/23/12, via Media Matters]
Right-Wing Media Attack Jarrett's Accurate Claim
Michelle Malkin: Jarrett Is The Obama Administration's “Magical Thinking Czar.” During the February 23 edition of Fox News' Fox & Friends, Fox News contributor Michelle Malkin called Jarrett the “Magical Thinking Czar” for her statement about unemployment insurance. [Fox News, Fox & Friends, 2/23/12, via Media Matters]
Hoft: “Good Grief... Valerie Jarrett Says Unemployment Stimulates The Economy.” In a February 22 Gateway Pundit post titled, “Good Grief ... Valerie Jarrett Says Unemployment Stimulates the Economy,” Jim Hoft wrote:
These people are shameless...
Speaking this week at North Carolina Central University in Durham, North Carolina, White House senior adviser Valerie Jarrett said that folks getting and spending unemployment checks is a healthy thing . . . because it stimulates the economy. [Gateway Pundit, 2/22/12]
NRO: “Good News! According To WH Economic Expert, Unemployment Causes Employment.” From a February 22 National Review Online (NRO) post:
Last night, White House senior adviser Valerie Jarrett stated, “And so we need to make sure that we continue to support that important safety net. It not only is good for the family, but it's good for the economy. People who receive that unemployment check go out and spend it and help stimulate the economy.”
Or as David Burge said on Twitter, “Good news! According to WH economic expert, unemployment causes employment.” [NRO, 2/22/12]
But Economists Have Long Said That Unemployment Insurance Stimulates The Economy
Dean Baker: Unemployment Insurance “Stimulates The Economy” By “Put[ting] Money In ... [The] Pockets” Of People Who Are “Very Likely To Spend” It. In an August 30, 2011, email to Media Matters, Dean Baker, co-director of the Center for Economic and Policy Research, stated:
UI stimulates the economy for the same reason that tax cuts provide stimulus to the economy, they put money in people's pockets. However, UI benefits will provide more stimulus per dollar because they are going to people who we know are very likely to spend the money. A large portion of money paid out in tax cuts are likely to be saved, especially if they go to the wealthy. [E-mail to Media Matters, 8/30/11]
Moody's Economist Sophia Koropeckyj: “Unemployment Insurance Benefits ... Reverberate Through The Economy.” During the July 11, 2010, edition of NPR's All Things Considered, Moody's economist Sophia Koropeckyj stated:
LYNN NEARY (host): That's because people who benefit from tax cuts tend to be wealthier. So they might save the extra money. On the other hand, Koropeckyj says, those getting extended unemployment benefits have no choice but to spend.
KOROPECKYJ: They've likely depleted their savings, and this is really all the income that they have. And they have kids to feed, they have rent to pay, and there's a very, very high probability they're going to spend that entire amount that they get.
NEARY: And where do they spend it? In stores.
KOROPECKYJ: That initial infusion into the economy of the unemployment insurance benefits then reverberates through the economy, flows through the economy in a variety of ways, and so that, you know, $1 of benefits is magnified. [NPR, All Things Considered, 7/11/10]
CBO Scored “Increasing Aid To The Unemployed” As The Highest-Scoring Policy Proposal To Stimulate Economy. In a January 2010 report on “Policies for Increasing Economic Growth and Employment in 2010 and 2011,” the Congressional Budget Office (CBO) estimated that extending aid to the unemployed would have one of the strongest stimulative effects on the economy:
Policies that could be implemented relatively quickly or targeted toward people whose consumption tends to be restricted by their income, such as reducing payroll taxes for firms that increase payroll or increasing aid to the unemployed, would have the largest effects on output and employment per dollar of budgetary cost in 2010 and 2011.
According to a table in the report, CBO estimated that increasing aid to the unemployed would have the greatest effects on GDP per dollar of budgetary cost and the second highest cumulative effect on employment of the policy options considered.
[CBO, 1/14/10, via Media Matters]
Blinder: “Extending Unemployment Benefits Is One Of The Best Forms Of Stimulus We Know.” On July 2, 2010, NPR reported that Alan Blinder, former vice chairman of the Federal Reserve and Clinton economic adviser, “supports the effort to extend expiring unemployment benefits.” NPR quoted Blinder as saying: “Extending unemployment benefits is one of the best forms of stimulus we know.” [NPR, 7/2/10, via Media Matters]
Martire: Stimulus From Unemployment Benefits “Greater Than Any Other Fiscal Action Government Can Take.” In a June 30, 2010, piece in the State Journal-Register of Springfield, Illinois, Center for Tax and Budget Accountability Executive Director Ralph Martire wrote:
As for the contention that extending UI encourages people to avoid finding jobs so they can stay on the public dole -- well, it's just plain goofy. In May 2010, the private sector created only 41,000 jobs. That's 72,000 less than what's needed to keep up with the demand generated by natural work-force growth, much less creating the positions needed for the unemployed to find work. No one's thumbing a nose at getting hired to live in luxury eating government cheese -- there simply are no private sector jobs available.
Perhaps the hawks have forgotten that consumer spending accounts for more than two-thirds of the nation's 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. [Slate Journal-Register, 6/30/10, via Media Matters]
EPI's Mishel Explains Why Unemployment Insurance Is “Such Good Stimulus.” In a June 10, 2010, hearing before the House Ways and Means Income Security and Family Support Subcommittee, the Economic Policy Institute's Lawrence Mishel testified:
As I have explained, the only real option for increasing economic activity and consumer demand for goods and services is federal government intervention in the economy, specifically through more deficit spending. The safety net programs are a vital part of this picture.
The reason extending unemployment insurance is such good stimulus is that it gets money to people who are the most likely to have depleted their savings and thus tend to have no choice but to quickly spend essentially every dollar they receive on necessities found in their local economy. In other words, virtually every dollar spent on extending unemployment insurance benefits goes directly, and immediately, toward the purchase of local goods and services, providing an extremely efficient demand boost. Not only is extending and expanding UI benefits the right thing to do for the people hurt most by this economic downturn, it is also excellent economic policy. [EPI, 6/10/11, via Media Matters]
CEPR's Schmitt: Unemployment Insurance Helps “Sustain A Community.” In an April 28, 2010, article, McClatchy Newspapers reported:
And allowing workers to fall off the unemployment insurance rolls can have negative ripple effects, said John Schmitt, senior economist with the Center for Economic and Policy Research.
“It hits individuals hard, but it also hits their communities, and more broadly the country,” Schmitt said. “Having unemployment insurance benefits can help sustain a community through a very difficult time.” [McClatchy, 4/28/10, via Media Matters]
Center On Budget And Policy Priorities: “The Money Gets Spent Fast And Its Effects Spread Through The Economy.” From an April 16, 2010, Center on Budget and Policy Priorities document:
Temporary increases in unemployment insurance benefits score high in “bang-for-the-buck” calculations of their economic impact as stimulus. The money gets spent fast and its effects spread through the economy. As a result of such policies, local businesses are less apt to lay off workers and cut back on orders from their suppliers during a downturn; and in the early stages of a recovery, they are more apt to hire additional workers and step up their orders. Policymakers have always ended these emergency UI benefits once a strong and sustainable economic recovery is underway. [CBPP, 4/16/10, via Media Matters]
CBO's Elmendorf: Policies Such As Unemployment Insurance “Have A Significant Impact On GDP.” In January 2009, CBO director Douglas Elmendorf testified:
Transfers to persons (for example, unemployment insurance and nutrition assistance) would also have a significant impact on GDP. Because a large amount of such spending can occur quickly, transfers would have a significant impact on GDP by early 2010. Transfers also include refundable tax credits, which have an impact similar to that of a temporary tax cut.
A dollar's worth of a temporary tax cut would have a smaller effect on GDP than a dollar's worth of direct purchases or transfers, because a significant share of the tax cut would probably be saved. The nonbusiness tax cuts in H.R. 1 would reduce revenues much more in calendar year 2010 than in calendar year 2009 because much of the reduction in taxes would be realized by households when they filed their returns in 2010. [CBO, January 2009, via Media Matters]
Mark Zandi Estimated That Extending Unemployment Benefits Provides Significant Stimulus. In a 2008 congressional testimony, Mark Zandi, Moody's Economy.com chief economist and a former adviser to John McCain, ranked extended unemployment benefits behind only food stamps in terms of economic “bang for the buck.” The Economic Policy Institute created the following graphic based on Zandi's figures:
Right Wing Media Previously Attacked Nancy Pelosi For Similar Remarks ...
Pelosi: Unemployment Insurance “Injects Demand Into The Economy,” “Is A Job Creator.” From a July 1, 2010, press conference:
PELOSI: When the economy turns down, there is a compact that we have that there is unemployment insurance for those who, through no fault of their own, lose their job, and we owe them that. It is a safety net, not just for those individuals but for our whole system, our whole system. It goes in cycles.
I think we further have to address the fact that we need to create many, many more jobs so that people's economic existence is not so dependent on cycles.
Now, let me say about unemployment insurance, we talk about it as a safety net and the rest. This is one of the biggest stimuluses to our economy. Economists will tell you this money is spent quickly. It injects demand into the economy, and is job creating. It creates jobs faster than almost any other initiative you can name because, again, it is money that is needed for families to survive, and it is spent. So it has a double benefit. It helps those who have lost their jobs, but it also is a job creator. And for that reason, for those two reasons, at least, it should be passed, and I am optimistic that it will.
It is impossible to think of a situation where we would have a country that would say we are not going to have unemployment benefits and that the only people who want them are people who don't want jobs. That is just so contrary to what our country is about, and I reject that misrepresentation of the motivation for people to be on unemployment insurance. [Media Matters, 7/1/10]
Hot Air: Nancy Pelosi's Statements Were “Laughable” And “Provably Incorrect.” In a July 2, 2010, post to Hot Air, blogger Ed Morrissey wrote that “the laughable notion from Nancy Pelosi that jobless benefits provide the biggest possible stimulus to the economy that Congress can create” is “both ridiculous and provably incorrect.” [Hot Air, 7/2/10, via Media Matters]
Powers: “Lunacy Of This Magnitude Is Known As A 'Cry For Help.' ” In a July 1, 2010, post on Michelle Malkin's blog, Doug Powers wrote that Pelosi “is around the bend even more than usual these days.” Powers posted some of Pelosi's comments, then wrote: “In the real world, demonstrating lunacy of this magnitude is known as a 'cry for help' and an intervention involving large nets, straight-jackets and electric shock therapy is in order. But not in Washington, DC, where free-range crazies are allowed to pick pockets, loot futures, and all too often get re-elected.” [MichelleMalkin.com, 7/1/10, via Media Matters]
Fox & Friends: It's “Hard To Parse The Logic” Behind Pelosi's Statement That Unemployment Benefits Are Stimulative. On the July 2, 2010, edition of Fox News' Fox & Friends, co-host Alisyn Camerota, before playing Pelosi's comments, called them “curious” and said it was “hard to parse the logic” of them." After playing the clip, co-host Clayton Morris said, “I would love to know what economists say that.” Camerota focused on Pelosi's statement that unemployment benefits are a “job creator” and asked, “How is it a job creator?” Co-host Dave Briggs said there were a “few holes in that logic to say the least.” [Fox News, Fox & Friends, 7/2/10, via Media Matters]
...And Have Previously Denied That Unemployment Benefits Provide A Boost To The Economy
Limbaugh: “There Is No Stimulative Effect Of Unemployment Benefits -- None Whatsoever.” From the August 30, 2011, edition of Premiere Radio Networks' The Rush Limbaugh Show:
[T]his regime, from Pelosi to any number of people, try to make the claim that unemployment benefits stimulate the economy. Jay Carney even said, “Oh yeah, I mean, it really works out there, you putting money in people's pockets that
they're gonna go spend, they're not gonna save it. And so, yeah, it'll stimulate the economy.”
Where does the money come from? You have to take it away from somebody before you give it to somebody else. It's a wash. There is no stimulative effect of unemployment benefits -- none whatsoever. Whether you borrow the money, or print it, or get it via taxes, you still have to take it from some place in the private sector to give it to somebody else in the private sector. It zeros out. And probably is a net negative because it also has the added benefit of promoting laziness, slothfulness. The longer you pay people not to do anything, the longer they'll not do anything. [Premiere Radio Networks, The Rush Limbaugh Show, 8/30/11, via Media Matters]
MichelleMalkin.com's Powers Mocked Obama's Claim That More Jobs Would Come From Extending Unemployment Insurance And Payroll Tax Cut Than Keystone Pipeline. In a December 8, 2011, MichelleMalkin.com post, Doug Powers quoted from a Washington Examiner write-up of Obama's remarks and stated:
Look for the White House to propose a compromise that would be acceptable to both labor unions and environmentalists while creating more jobs than anybody can possibly imagine: The construction of a 1,600 mile pipeline through which would flow economy-boosting unemployment checks. [MichelleMalkin.com, 12/8/11, via Media Matters]
Limbaugh: Unemployment Insurance Providing Economic Stimulus Is “An Out And Out Lie.” During the March 9, 2011, edition of his radio program, Limbaugh stated, “Pelosi and [former Council of Economic Advisers chairman Austan] Goolsbee say that unemployment compensation generates a buck-and-a-half return for every dollar or benefits. It's an out and out lie.” [Premiere Radio Networks, The Rush Limbaugh Show, 3/9/11, via Media Matters]
Bolling Responded To Fact That Unemployment Benefits Are Stimulus: “This Is An Administration That Just Doesn't Get It.” During the August 17, 2011, Fox & Friends, guest-host Eric Bolling said:
BOLLING Can I say something very quickly? Jay Carney earlier this week or last week came out and said unemployment benefits are stimulus as well. This is -- this is an administration that just doesn't get it. It's really -- it's socialism. They're pointing right to being socialist. The more you give, the more you stimulate? No. Sorry. It's got to come from the private sector. [Fox News, Fox & Friends, 8/17/11, via Media Matters]