CBO: Extending higher jobless benefits would increase unemployment

Nonpartisan budget office says economic output would be higher if $600 benefit is extended as the unemployed have more to spend

Lita Griffin gets her hair cut by Raheem Austin on the first day of the phase one reopening of Washington at Mason's Barber Shop on H Street NE, on Friday, May 29, 2020. (Tom Williams/CQ Roll Call)
Lita Griffin gets her hair cut by Raheem Austin on the first day of the phase one reopening of Washington at Mason's Barber Shop on H Street NE, on Friday, May 29, 2020. (Tom Williams/CQ Roll Call)
Posted June 4, 2020 at 4:25pm

Five out of six workers would receive more in expanded unemployment benefits than they would earn on the job if Congress extends those benefits through January, the Congressional Budget Office said in a report Thursday.

That would translate into lower employment both in the second half of this year and next year, according to the CBO, than if lawmakers let the added $600 weekly benefit expire July 31 as scheduled.

The analysis said that in the second half of this year, economic output would probably be greater than it would be without an extension of extra unemployment benefits enacted in March. That's because jobless workers would have more money to spend on needed goods and services. But in 2021, the CBO said, economic output would be lower than it otherwise would be, since there would be fewer people working.

That conclusion, contained in a letter from the nonpartisan agency to Senate Finance Chairman Charles E. Grassley, R-Iowa, is likely to provide fresh ammunition to Republicans who oppose a benefits extension on the grounds that it provides a disincentive to work.

As unemployment rolls swelled in an economy cratering from the COVID-19 pandemic, Congress provided an extra $600 per week for jobless workers, on top of regular state unemployment benefits, as part of a major coronavirus relief package in March. Those benefits are set to expire at the end of July, but Democrats are seeking to extend them, including in a massive $3.5 trillion relief bill the House passed last month.

Even when the March package was approved, some Senate Republicans led an 11th-hour attempt to scuttle the $600 weekly benefit. “We’ve incentivized people not to go back to work,” Sen. Lindsey Graham, R-S.C., said in the days leading up to the vote.

While the objective was to avoid a loss of wages, Democrats said they settled on a $600 figure because state unemployment offices were often incapable of calculating each worker’s previous wages to determine a benefit level.