Limbaugh Pushes Myth That Unemployment Benefits Have “No Stimulative Effect”

Rush Limbaugh claimed that “there is no stimulative effect of unemployment benefits.” But economists agree that unemployment benefits do have a strong effect on job creation and growth.

Limbaugh Claims Unemployment Benefits Have “No Stimulative Effect”

Limbaugh: “There Is No Stimulative Effect Of Unemployment Benefits -- None Whatsoever.” From the August 30 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 ganna 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]

But Economists Agree That Unemployment Benefits Have A Strong Effect On Job Creation And Growth

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 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. [Email to Media Matters, 8/30/11]

Mark Zandi Estimated That Extending Unemployment Benefits Provides Significant Stimulus. In 2008 congressional testimony, Mark Zandi, Moody's 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:

[Mark Zandi testimony via, 11/19/08; Economic Policy Institute, 10/22/08]

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 nonpartisan 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. [CBO, 1/14/10]

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]