There has been much talk recently in Washington about the so-called fiscal cliff, which would involve automatic spending cuts and tax hikes in January if Congress does not act. But the country has another potential economic cliff that we must focus our attention on right away. It is the imminent expiration of unemployment benefits for almost 2 million this Christmas and 1 million additional people in early 2013. Extending unemployment benefits is not an unnecessary or useless expense, although Republicans claim that this benefit “creates dependency” and discourages work. There are, however, better arguments to extend them: In a tough labor market, this money prevents millions of families from ending up in poverty and the funds are spent immediately because they are needed to address basic needs. This expense helps the economy. According to a Congress Joint Economic Committee study, the economic effect of every dollar spent on unemployment benefits almost doubles ($1.90 in impact for every dollar). In addition, continuing these benefits could generate up to 400,000 jobs for the rest of the economy.
On top of that, the effect of taking these benefits away and leaving several million families out on the street is that they will end up turning to other public assistance programs like TANF or SSDI, which will probably provide more incentives not to look for work. Unemployment insurance requires looking for another job. This that this is the toughest economic situation we have faced since the Great Depression in the early part of the 20th century. During previous recessions, Congress extended benefits until national unemployment decreased substantially. These benefits must be extended without delay.