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A Fox host and Wall Street Journal assistant editor disputed the existence of a multiplier effect with unemployment benefits -- which generates more dollars worth of economic activity than the dollars invested in the program by boosting consumption -- though the effect is well supported by economic research.
Unemployment benefits for the long-term unemployed expired at the end of 2013, abruptly cutting off benefits for 1.3 million Americans. Department of Labor estimates show it would cost approximately $25 billion to extend the unemployment insurance for another year, a step President Obama urged Congress to take during a January 7 speech in which he argued that such an extension would not only help people but help the economy and create jobs.
Wall Street Journal assistant editor James Freeman and Fox host Steve Doocy took issue with the idea that unemployment insurance benefits have a net-positive effect on the economy during the January 9 edition of Fox and Friends:
DOOCY: We heard this from the president the other day. Unemployment creates jobs. And?
FREEMAN: Yeah. It's hard to explain that one. The administration argument is that there's something called a multiplier, where when you put $1 of unemployment benefits into the economy it creates $1.80 in economic activity. So if this is true, this would suggest we should all stay home and the country will become wealthier by giving us unemployment benefits.
During the segment, Fox aired an on-screen graphic mocked the notion as "fuzzy math":
But economists agree that the economic benefits of unemployment benefits outweigh the cost. In what's known as the multiplier-effect -- which Freeman dismissed -- recipients of unemployment benefits reliably spend that money. In fact, Moody's chief economist Mark Zandi estimated that each dollar spent on unemployment benefits generates about $1.55 in economic activity. To put it another way, spending $25 billion on unemployment benefits would increase consumer spending and raise by $37.8 billion, according to the Economic Policy Institute (EPI).
What's more, the Center on Budget and Policy Priorities explained that benefits for "unemployed workers in hard-pressed communities helps prevent the spread of layoffs and job losses in those communities." EPI emphasized (emphasis original):
We find that continuing the extensions through 2014 would generate spending that would support 310,000 jobs. If this program is discontinued, the economy will lose these jobs.