Give More Money to the Unemployed

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What's the single best idea to jumpstart job creation?

The best stimulus policy would be simpler and more generous help for the unemployed. On paper, direct government purchases of goods or services with high domestic content ought to give the economy a bigger push per dollar--infrastructure spending, or accelerated replenishment of run-down military inventories, for instance. But the discretionary element in initiatives like these has been a problem. Actually getting the money spent is hard. In the same way, aid for state and local governments ought to pack a lot of punch as well, but it hasn't. States have applied a lot of the aid they received not to maintaining jobs and services, as intended, but to improving their financial balances. Just as consumers can save a tax cut, states can save their federal aid--and they have.

The Great Jobs Debate: An Atlantic/McKinsey Report

The unemployed, especially those with limited savings, will spend all or most of their benefits. And they just happen to be the principal victims of the recession, so calculations of equity and stimulus power point the same way. Access to benefits is too complicated. The rules reduce take-up; the goal should be to increase it. Numerous ad hoc changes in eligibility and duration, like those seen of late, make matters worse. Unemployment insurance needs to be simplified and codified in a settled way, so that people understand the system and more of them can get the help they need when they need it. A well-designed system provides timely help and effective stimulus automatically [itals], with no need for political intervention--a big advantage so long as Congress remains a broken institution.

Aid for the unemployed needs to be extended in other ways. Generous support for retraining and relocation should be part of the package. A template exists in the Trade Adjustment and Assistance program, which the Obama administration wants to enlarge (as part of efforts to establish new free-trade agreements). Republicans resist the idea. The administration is right, but needs to be more ambitious. TAA confines its help to those who are unemployed because of imports, which narrows take-up and piles on the complications. From an equity point of view, this restriction is absurd. Unless it was your own fault, it should not matter why you became unemployed. TAA-like assistance needs to be scaled up that it is available for every victim of the recession.

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