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Getting America Back to Work and Hastening the Recovery

By Brian Blase, Casey Mulligan and Doug Badger

Galen Institute | July 7, 2020
Three former White House economic advisers warn in a new Galen paper that Congress would delay the recovery if it extends the $600 weekly increase in unemployment insurance (UI) benefits scheduled to expire July 31.  In “Getting America Back to Work and Hastening the Recovery,” they estimate that almost two-thirds of those on UI would be out of work because of the bonus if the add-on payment were extended.
 
Their findings are bolstered by CBO estimates that showed extending the bonus will continue to encourage people to collect UI instead of returning to work because “roughly five of every six recipients would receive benefits that exceeded the weekly amounts they could expect to earn from work.”
 
Brian Blase, Casey Mulligan, and Doug Badger explain why the enhanced UI benefit should be allowed to expire to hasten the recovery, but they add that if political imperatives prevail and Congress determines it must vote for an extension, “the benefit should be scaled down and phased out as quickly as possible. We also recommend that workers be allowed to keep the add-on benefit for a period of time after they return to work. In addition, the current enhanced benefits should apply only to people unemployed as of June 30, 2020.” 
 
They also recommend against creating a health insurance subsidy for UI recipients. “We found no evidence of widespread workplace coverage loss, and the addition of such a benefit would likely discourage a return to work and increase layoffs,” they write.
 
Nearly 98 percent of people who had employer coverage before the pandemic have maintained employer coverage, indicating that health insurance subsidies are unwarranted. Fewer than two percent of households that had employer-sponsored health insurance before the pandemic have become uninsured, they write.  
 
“If Congress does choose to add health benefits, it should do so through government contributions to health savings accounts, which would maximize the value of the benefit to UI recipients by affording them the broadest possible range of options to get or retain coverage,” they advise.
 
They maintain that extending the UI bonus and providing COBRA subsidies would “significantly impede the economic recovery and may harm recipients themselves over the long-term. Those who are unemployed for long periods of time have lower earnings because skills atrophy, and they therefore have a lower likelihood of subsequent employment.”
 

Read the paper at our website Galen.org



Brian Blase, Ph.D., is a senior research fellow at the Galen Institute and the Foundation for Government Accountability. He previously served as a special assistant to the president for economic policy at the White House's National Economic Council.

Casey B. Mulligan, Ph.D., is a professor of economics at the University of Chicago and previously served as chief economist of the White House Council of Economic Advisers.

Doug Badger is a senior fellow with the Galen Institute and visiting fellow at the Heritage Foundation. He earlier served as special assistant to the president for economic policy as a member of the National Economic Council.
 

 

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