Extend additional unemployment benefits to boost economy and create jobs recommends CBO

This of course is if the government does not enact any more fiscal stimulus. However, the report requested by the Congress was just for this purpose of evaluating what policy options are available to improve the unemployment rate in the country.

Unemployment rate

The unemployment rate stood at 10% in December and is expected to hover around that for much of 2010 and see a modest decline to around 8% in 2012, according to the CBO.

Although GDP has grown in the last quarter of 2009, job losses are still present and new hiring has been slow. The CBO states that this pattern is typical of recent recessions, in which the unemployment rate continued to rise and employment continued to fall for 6 to 12 months after GDP began to grow.

One of the policy initiatives recommended by the CBO is increasing aid to the unemployed. The CBO estimates that for each dollar spent on aiding the unemployed, the economy benefits between $0.70 and $1.90.

Extending additional unemployment benefits

Extending additional unemployment benefits would directly help those who would otherwise exhaust their unemployment benefits between March and December of this year. Households receiving unemployment benefits tend to spend the additional benefits quickly, making this option both timely and cost-effective in spurring economic activity and employment, states the CBO report. This policy initiative would see results in 2010.

Policies that will impact employment in 2011 and beyond

Other policies if enacted in 2010 that will start showing results in 2011 and beyond include investing in infrastructure and providing aid to states for purposes other than infrastructure, according to the CBO.

CBO estimates that for every dollar spent on infrastructure the economy benefits by $0.50 to $1.20.