As Congress considers further coronavirus relief, most of the attention—and debate—has been focused on the stimulus payments sent to many American families. President Biden has proposed adding $1,400 to the $600 payments that were delivered in the relief bill signed by President Donald Trump in December. Some progressives want that additional check to be for $2,000.
That’s an important discussion, but it has tended to overshadow the true policy innovation of this recession: The bold federal intervention in the state-financed and state-administered unemployment insurance program. The CARES Act, in March, provided $600 in federal money per week on top of state benefits to people who lost their jobs. The sequel bill, passed in December, extended the benefits through March 14 and included a lower, but still substantial, federal payment of $300 weekly (which Biden wants to bump up to $400).
Unemployment insurance is the most important fiscal response the United States has during a recession, because it sends timely, targeted, and temporary financial assistance to those directly affected by the downturn. What the CARES Act created—remarkably high benefits for more workers—was a short-term experiment born of necessity, but it could have a lasting influence on public policy. It adds some options to Congress’s “recession toolbox.” What’s more, the behavior of the people who received the benefit could reshape how we think about public assistance.
In the United States, we have a deeply ingrained belief that cash benefits disincentivize work, but this understanding tends to be one-dimensional: that any benefit, of any amount, reduces the incentive to work. Last summer, we got proof that there are multiple dimensions to the benefit-work trade-off—and that, in general, people want to be employed.
Read the full article about unemployment insurance by Kathryn A. Edwards at RAND Corporation.
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