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Former Fed chair: It's 'crazy' and 'cruel' not to extend the $600-a-week enhanced unemployment benefits

Alan Blinder, former Federal Reserve vice chairman.
Brendan Smialowski | Getty Images

At the end of July, the extra $600 a week in enhanced unemployment benefits that jobless workers currently receive from the federal government will expire. 

Under the $2.2 trillion coronavirus relief bill, known as the CARES Act, which was signed into law by President Trump on March 27, the federal government increased unemployment benefits by an additional $600 per week for four months. However, if Congress does not pass another stimulus bill, that additional relief will end on July 31.

Failure to extend this extra unemployment aid is "not only crazy economically, it's cruel on a humanitarian basis," Alan Blinder, former vice chair of the Federal Reserve and a professor of economics at Princeton University, tells Grow. 

Since mid-March, approximately 42 million Americans have filed for unemployment benefits, according to the U.S. Labor Department. And the U.S. has officially been in a recession since February.

"This is not a time to cut unemployment benefits. The unemployed should get extra benefits and the government should be even more generous than normal," Blinder says. 

'These benefits are an automatic stabilizer' 

When the federal government increased those benefits for out-of-work Americans, "it was a rescue mission," says Blinder. And it made sense, he says, especially at a time when the government wanted to incentivize workers to stay home to stop the spread of the coronavirus. 

"We've never seen a flood into the unemployment system like the one we've seen recently," Blinder says. "And these benefits are an automatic stabilizer that helps not only the unemployed but the whole economy."

That's because, Blinder explains, getting money into the hands of those who need it most, aids Americans in buying goods and services. That's important to the overall health of the economy, since consumer spending accounts for more than two-thirds of all U.S. economic activity. 

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The argument against extending enhanced unemployment benefits

Some politicians who are opposed to extending the increased unemployment benefits argue that some Americans earn more money unemployed than they do at their normal jobs and increased aid could deter people from returning to work. 

Blinder acknowledges this concern: "We would never, in normal times, structure an unemployment benefits system so that an unemployed worker would get more money by not going back to work."

This is not a time to cut unemployment benefits.
Alan Blinder
former vice chair of the Federal Reserve and professor of Economics at Princeton University

Still, whatever the government does to support unemployed Americans, it "should be even more generous than normal," given these unprecedented circumstances, Blinder argues. Especially since only about 21 million people are currently receiving the extra $600 weekly unemployment benefit.

In addition to unemployment benefits, the government has sent 159 million stimulus checks totaling $267 billion to support Americans during the pandemic. 

Possible fixes: Streamline the process, try 'back-to-work' bonuses

Blinder has two solutions in mind, which he outlined in an op-ed for The Wall Street Journal on June 8. The first is a Congressional move to increase unemployment benefits on a state level. The U.S. doesn't have a single national system for unemployment benefits. 

Instead, each state's system is overseen, but not run by, the federal government. And states have the power to decide who receives unemployment, how much they'll get, and for how long they can collect state aid. This means that, depending where you live, your benefits can vary widely, Blinder explains. 

In March, at the onset of the pandemic, roughly 66% of unemployed Massachusetts residents received benefit payments, but only 7.6% of jobless Floridians did, according to Pew Research. Blinder believes one way to support Americans who are struggling would be for the federal government to intervene and finance an increase in state benefits, especially in states that aren't "generous" with unemployment aid. 

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In addition, he believes workers should receive back-to-work bonuses. "As states reopen they want workers to return to their jobs," Blinder says. So to incentivize workers, he is a proponent of various government proposals to pay temporary back-to-work bonuses. A new bill under consideration in the House of Representatives would give unemployed Americans a bonus worth $1,200 for getting back into the workforce.

Swift action by the government is especially vital for supporting low-income Americans, Blinder says. "I think one of the saddest parts of the job losses we've seen in this recession is that it has been highly concentrated to low-skill and modest-skills jobs that don't require a college education. Many jobs that require a college education have continued with telework."

"That's sad because the people who can least afford lost income and are in danger by working because they're in industries like food services," he says. "It's ironic that we call them essential workers now, but we don't pay them that way."

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