Obama and Pelosi’s Long Term Unemployment Dilemma
Citing the Congressional Budget Office and a JP Morgan Chase economist, President Obama claims that if unemployment benefits expire, US GDP could fall next year by 0.2 to 0.4 of a percentage point.
“Christmastime is no time for Congress to tell more than one million of these Americans that they have to lose this unemployment insurance”, Obama stresses. Actual figures state that 1.3 million will lose their benefits on December 28, 2013, and an additional 850,000 in March 2014.
House Democrat Party leader Nancy Pelosi won’t support any year-end budget deal unless it includes plans to extend expiring benefits to the long-term victims of the recession. Remember, it was Pelosi who said, “Unemployment benefits creates a “safety net” for the US economy, because it “injects demand into the economy… creating jobs”. Quoting a “macroeconomic” adviser, Pelosi put the number of created jobs at 600,000.
Why are Obama and Pelosi so anxious about the long-term unemployment benefits running out? The Department of Labor currently has the current unemployment rate at 7.2%, which states that 11.1 million people are out of work. Divide 11.1 by .072 and you have 154 million in the workforce.
So if 1.3 million lose their benefits, they’ll be dropped out of the workforce, and the unemployment rate will drop to 6.4% with 9.8 million out of work. Then in March an additional 850,000 will also lose their benefits and the unemployment rate will fall to 5.8% with 8.95 million out of work. By these calculations, the unemployment rate is really 13% with 20 million are out of work.
Nothing is ever mentioned about the more than 10 million that have dropped out of the workforce. The end of the unemployment benefits would probably hasten the Federal Reserve to begin tapering, because of the 6.5% unemployment target has been reached, and the fragile economy would then fall apart.