Recovery Act’s big impact

Picture a large tanker headed to the shoals. It’s about to hit ground with deadly force, but just before the disastrous end, just barely in the nick of time, it starts to turn. It’s slow — it’s a big doggone boat after all — but it turns and begins to slowly head back to the ocean.

It’s easy to forget but the U.S. economy was headed to the shoals in late 2008. People talked about pulling their funds from their bank accounts. It was money-under-the mattress and cash-buried-in-the-yard-in-a-tin-can times and the specter of runs on the banks felt real.  My book club read The Grapes of Wrath and it no longer seemed like a long-ago story.

The American Recovery and Reinvestment Act, signed by President Obama a year ago today, was the muscle that began to turn that tanker.

It’s slow and frustrating. But there’s plenty of evidence that the economy has tortuously turned and the ARRA gets credit. The nonpartisan Congressional Budget Office estimates that the economy would have shed an additional 2.4 million jobs if not for ARRA.

For those of us in hard-hit Michigan, ARRA has been a lifeline. The Washington D.C.-based Center on Budget and Policy Priorities estimates these direct benefits to individuals in Michigan:

  • A boost in the Food Assistance Program, adding $317 million to the state’s economy;
  • A $25 per week increase in unemployment benefits, injecting $514 million;
  • Additional weeks of unemployment benefits through the Extended Unemployment, a $1.7 billion addition;
  • A one-time $250 payment for Social Security and SSI recipients (and some others) for $471 million in benefits; and
  • The Making Work Pay tax credit, a $1.4 billion increase to families in Michigan.

In addition to dollars flowing to individuals, the Michigan Department of Transportation reported that more than 750 road projects are completed or under way with ARRA money. The federal Recovery Act website reports that $6.5 billion has been paid out in various grants and contracts in Michigan so far. In all, ARRA is expected to send more than $15 billion to Michigan.

It’s frightening to imagine where Michigan would be today without it.

Unemployment extension critical

Michigan has much to lose if Congress does not act quickly to renew the unemployment insurance (UI) extensions in last year’s economic stimulus bill.

It is not just because Michigan has led the country in the unemployment rate for 33 out of the past 36 months.

In December, Michigan and the nation entered the 24th month since the beginning of the 2007 recession. As this chart shows,  this marks the first time Michigan had a higher unemployment rate during the current recession (14.6 percent) than it did during the same month relative to the 1981 recession (14.2 percent in July 1983).

The early 1980s are well known as Michigan’s toughest times, as unemployment topped 16 percent several months in a row.  However, during the 24th month of the 1981 recession, the unemployment rate was on a slow but consistent downward slope, while the unemployment rate in recent months has barely dropped at all.

Because many workers have been unemployed for a very long time despite faithfully looking for work, unemployment insurance has been a crucial safety net. Many long-term unemployed workers have exhausted their regular benefits, and are only continuing to receive unemployment insurance because of the extensions in the American Recovery and Reinvestment Act.

Those extensions, however, will expire at the end of February. Without congressional reauthorization, unemployed workers who have not used up all their weeks of unemployment insurance will lose those unused weeks and will be left without any UI at all.

New numbers released last week from the National Employment Law Project  show that without Congressional action, nearly 62,000 jobless Michigan workers will become ineligible for federal unemployment benefits in March. By June, this number will swell to more than 225,700 unemployed Michigan workers. Congress must renew the extensions before Friday to continue the benefits without interruption.

Remember that the UI safety net not only helps unemployed workers and their families avert crisis, but is good for the state and local economies as well. When workers spend their unemployment checks on necessities such as food, clothing and household needs, it helps to keep local businesses thriving.

The Congressional Budget Office estimates that UI benefits generate up to $1.90 in GDP per every dollar spent, making the UI provisions a very effective economic stimulus.

Michigan cannot afford for Congress to let this lapse. Fortunately, the Senate leadership is hoping to get the bill to the floor this week, have an expedited debate, and pass it in enough time to get it over the House of Representative so that both Chambers of Congress can pass it before they recess on February 12.

Both of Michigan’s U.S. Senators are helping push this effort. This will ensure that the state unemployment offices keep the programs up and running without any interruption in benefits to workers.

— Peter Ruark

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