Question

During the financial crisis of 2007-2009, and the following steep rise in unemployment a national debate erupted about the need to increase the duration of unemployment benefits from 26 weeks of eligibility to 73 weeks of eligibility. Imagine that you are in the middle of this debate. You have seen the unemployment rate double in about a year and a half, and you read that millions of Americans are out of work. present an argument in favor or against raising the duration of unemployment benefits. Begin the argument by stating, “I believe that unemployment benefits should/should not be extended because…”

Answer 1

I believe that unemployment benefits should be extended because the financial crisis of 2007-09 is one of the worst crisis since the great depression of 1929.

Extraordinary times required extraordinary monetary and fiscal policy. Further, the following key points support the argument to extend unemployment benefits -

1. The United States economy is nearly 70% consumption based, with million of Americans out of job, consumption spending will be significantly impacted and this will further depress investment spending. Extension of unemployment benefits is likely to ensure that consumption spending is boosted with spending coming from the unemployed and the lower-income segment.

2. When the government extends unemployment benefits, there is a significant increase in budget deficits. However, deficit spending in times of recession is not a concern and can be offset by lower spending and increasing taxes when the economy recovers.

3. The 2007-09 crisis is deep and the unemployment duration has been high. Besides rising unemployment, individuals have been out of job for a significant period and this calls for support from the government. It is important to note that banks and corporations were bailed out by the government in sync with the federal reserve. This bailout should also extend to the unemployment in the form of higher duration of unemployment benefits.