The credit crunch and unemployment benefits

Posted by: Michael Mandel on March 05

Alan Krueger of Princeton is testifying today before the Senate Health, Education, Labor and Pensions Committee. Here’s an interesting point he makes in his testimony:

….it seems to me that the credit crunch that the economy is currently experiencing presents a unique situation in which a temporary increase in the level of UI [unemployment insurance] benefits may be particularly timely…..Even with UI benefits, many of the unemployed are forced to borrow to pay their bills. Borrowing is difficult in the current credit crisis. In addition, many adjustable rate mortgages are resetting, requiring higher monthly payments. It seems to me that even the short-term unemployed will face pressure meeting mortgage payments. A temporary increase in UI benefits can help to forestall mortgage foreclosures for a vulnerable population.

I like it.

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Reader Comments

TDM

March 7, 2008 12:13 AM

How about government-guaranteed unemployment loans. The government can be far more generous in the present with loans that it will attempt to recover than with benefits. The long term cost of defaulted loans will be less than the cost of increased benefits.

Brandon W

March 7, 2008 10:37 PM

Band-aids on top of band-aids on top of band-aids... when the underlying problem is a broken leg. Until the underlying structure is fixed the band-aids will only temporarily keep the blood from spurting all over. At this point it's like sending Joe Theismann back out on to the field after his little "run in" with Lawrence Taylor. Yeah... like that.

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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