- A bipartisan group of top economists rolled out a four-part plan to stimulate the economy on Tuesday.
- Among its provisions is keeping boosted federal payments to unemployment benefits up to $US400 for states with unemployment rates above 15%.
- Other parts of the plan introduced by the Economic Strategy Group include state aid, hiring bonuses, and lending to small and mid-sized businesses.
- The group estimates the cost of the plan to range between $US1 trillion and $US2 trillion, depending on the length of the recovery, and add 4% to GDP through 2021.
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A bipartisan group of top economists rolled out a four-part plan to shore up a battered economy on Tuesday. Among its planks: extending the federal boost to weekly unemployment payments past July for up to $US400, but tying it to the economic health of individual states.
The proposal was unveiled by the Economic Strategy Group, a nonprofit arm of the Aspen Institute.
Four policymakers behind the plan include Jason Furman, the former head of the Council of Economic Advisers during the Obama administration and now a professor at Harvard University; former Treasury Secretary Timothy Geithner; Glenn Hubbard, a Columbia University professor and former CEA chair under President George W. Bush; and Melissa Kearney, an economics professor at the University of Maryland and leader of the Economic Strategy Group.
The economists said that beefing up payments for jobless workers provides substantial bang for the buck, especially with the unemployment rate at 13.3% – the worst in nearly a century.
“With the highest unemployment rate since the Great Depression, maintaining unemployment insurance support is essential both to protect families and support demand,” the group wrote in a Washington Post op-ed. “This makes economic sense: Evidence shows that every $US1 paid in unemployment insurance adds $US1.50 to the economy.”
They went on: “But extending the $US600 weekly unemployment insurance benefit enacted at the start of the shutdown does not make sense now, when better protections against covid-19 are being put in place and the unemployment rate is coming down.”
Their proposal would provide income support for jobless workers by granting a weekly benefit of up to 40% of their wages, pegged to a state unemployment rate of 15% or higher. The federal boost would be phased out when the rate drops to 7%.
Seventeen states had unemployment rates above 15% in April,according to the Bureau of Labour Statistics, the latest data available.
The other three parts of the economists’ plan include:
- Implementing return-to-work incentives to subsidise lower-paying jobs that carry greater risks of contracting coronavirus. Among the incentives were hiring bonuses or a beefed-up version of the Earned Income Tax Credit.
- Increasing federally subsidized lending to small- and mid-sized businesses through the Federal Reserve, by reallocating some of the bailout money already under the Treasury Department.
- Aiding cash-strapped states with block grants for Medicaid tethered to unemployment rates and support for K-12 schools.
Depending on the length of the economic recovery, the economists estimate the plan’s costs would range between $US1 trillion and $US2 trillion. But they also argue it would add around 4% to gross domestic product through the end of 2021 and create up to 4.5 million jobs.
Congress is slated to debate another round of economic relief due to the pandemic next month. A web of assistance programs enacted in March under the Cares Act to keep struggling people and businesses afloat are set to expire this summer.
Experts say that federal aid helped significantly boost household incomes during a period of severe economic contraction and reduced consumer spending.
The $US600 federal boost in weekly unemployment payments will end on July 31 without further federal intervention. That provision attracted plenty of GOP criticism since it provided many jobless workers with more income on unemployment than their old jobs.
Larry Kudlow, the National Economic Council Director for the Trump administration, said on Sunday the plussed-up benefits would be allowed to expire next month. Instead, Republicans are weighing whether to push for a hiring bonus.
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