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January 05, 2014 12:02 PM Slashing unemployment benefits carries huge costs to the economy. Here’s one economist’s shocking estimate.

By Kathleen Geier

Congress’s decision to cut off long-term unemployment benefits wasn’t just punitive and nasty, it was also fiscally irresponsible.

Harvard economist Lawrence Katz says that the decision, which slashed the benefits of some 1.3 million people, could cost the economy up to a billion dollars a week. According to Katz:

the calculation was based on the “multiplier effect” of cancelling the benefits program, which had been forecast by the Congressional Budget Office (CBO). Applying the CBO’s estimated multiplier effect to the $400m per week being lost in benefits, Katz said, translated into a cost to the economy of between $600m and $1bn.

But that’s just the short-run cost. Katz warns that “The long-run cost to the taxpayers will be much higher from disconnecting people from the labour market.”

I will never understand this madness, and what the Republican party thinks it is accomplishing by doing these things. Do they not understand what it’s like to be unemployed in this economy? Do they not have any friends or loved ones experiencing the hell of long-term unemployment in America in 2014? The personal consequences are brutal. And the economic impact of austerity policy on the nation is devastating as well.

Alas, the march of folly continues. And who knows where it will end.

UPDATE: Boehner claims he’s “open” to extending unemployment benefits. But Congressional conservatives continue to screech about it, so I remain pessimistic.

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee

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