Economists are warning Congress that scrapping or substantially reducing unemployment benefits will pull the rug out from the economic recovery, The Hill reported. Republicans argue the $600 in additional weekly unemployment benefits has created warped incentives by paying many people more than they previously earned at work. Democrats counter that the benefits, set to expire on July 31, are crucial at a time of historic unemployment. Republicans say the additional $600 from the March 27 CARES Act means many workers would be taking a pay cut if they went back on the job. They’re now looking to make changes. Democrats note that it would likely take months for overstretched state unemployment offices using decades-old software to put in place more targeted programs. For 17 weeks in a row, more than 1.3 million new people have applied for jobless benefits, about twice the pre-pandemic high. Joseph Vavra, a professor of economics at the University of Chicago, says the $600 benefit has been an important factor in the economic recovery, helping millions of people pay their rent, buy food and spend money at businesses desperate for consumers. “There’s lots of evidence that unemployed workers spend those benefits when they get them, and that flows out to the general economy,” he said. “If you’re looking for how to stimulate the economy and you’ve got a fixed amount to spend, I think the evidence is pretty overwhelming that you’ll get bigger spending effects by sending it to unemployed households than you would by sending it out in an untargeted way.”
