MSNBC reports that the total cost of the deal will be in the range of a trillion dollars. Bush tax cuts: $800 billion. Unemployment insurance extension: $60 billion.

The Bush tax cuts reportedly will be extended by two years; federal unemployment benefits will stretch to the end of 2011.

Ed Brayton at the Michigan Messenger reports that Democrats reacted with disappointment. Rep. Anthony Weiner criticized Obama for “punting on third down” and failing to use his office to lobby for a more progressive package that would have extended the unemployment benefits and all the tax cuts except those for the wealthiest taxpayers.

Democrats were rebuffed on two tries this weekend to pass a trimmed down version of the Bush tax cuts. The packages would have delivered breaks to the middle class that, Democrats argued, would act as direct economic stimulus, in effect paying for themselves because middle class people need the money in the recession just to pay for things immediately, like for rent and mortgages and car payments and medical bills and Christmas shopping, pouring the money back into the economy. Tax cuts for the wealthy, meantime, go into bank accounts. The rate wealthy Americans would have paid should the cuts have been stripped would be the same rate they paid in the Clinton years, still an historically low rate for the top 1 percent of the nation’s earners.

New York Times politics-economics columnist Paul Krugman captured the sentiment of much of the left blogosphere Sunday in a piece entitled “Let’s Not Make a Deal.” His premise was that the Republican position was in fact to make the low tax rates permanent.

If G.O.P. intransigence means that taxes rise at the end of this month, so be it… [W]hile raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils….

America cannot afford to make those cuts permanent. We’re talking about almost $4 trillion in lost revenue just over the next decade; over the next 75 years, the revenue loss would be more than three times the entire projected Social Security shortfall. So giving in to Republican demands would mean risking a major fiscal crisis — a crisis that could be resolved only by making savage cuts in federal spending.

And we’re not talking about government programs nobody cares about: the only way to cut spending enough to pay for the Bush tax cuts in the long run would be to dismantle large parts of Social Security and Medicare.

As Brayton puts it, the “internal incoherence of the Republicans’ positions” on the uemployment extension and the tax cuts has become clear:

Position 1: We support extending unemployment benefits but only if an extension is offset by budget cuts so it doesn’t increase the deficit.

Position 2: We’ll go along with extending unemployment benefits but only if you agree to extend tax cuts for the rich that will increase the deficit by an additional $700 billion.

There’s an old saying in D.C. and it goes like this: No one cares about the deficit and those who complain about it the most care about it the least. It seems to be coming true before our eyes.

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The benefits expired Tuesday at midnight. Deep into the U.S. jobless recovery, where job applicants far outpace job openings, roughly 800,000 Americans will lose benefits next week. Two million more will lose them by the end of the year and nearly four million will lose them by April.

The move will not just affect those eligible for unemployment benefits. The nation’s top economists have said the loss will also create more unemployment and lower economic growth because the benefits are one of the most effective ways of stimulating the economy by directly fueling regular nationwide spending on goods and services. The Associated Press reports:

Unemployment benefits help drive the economy because the jobless tend to spend every dollar they get, pumping cash into businesses. A cut-off of aid for millions of people jobless for more than six months could squeeze a fragile economy, analysts say. Among the consequences they envision over the next year:

— Annual economic growth could fall by one half to nearly 1 percentage point.

— Up to 1 million more people could lose their jobs.

— Hundreds of thousands would fall into poverty.

“Look for homelessness to rise and food lines to get longer as we approach Christmas if the situation can’t be resolved,” says Diane Swonk, chief economist at Mesirow Financial.

Economists say that for every dollar paid out in unemployment, nearly two dollars in economic stimulus is created as the money circulates through the economy. They also say that concerns about the deficit are misplaced or merely political because the benefits payouts are short term, especially compared to most government spending, and because nearly all of the cash paid out is spent and therefore comes back in part as tax revenue.

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An extension of 12 months, they say, “is sensible economic policy that will not only assist the unemployed but help maintain spending, overall demand, and employment at this critical point in the recovery…. Eliminating these benefits, on the other hand, will cause hardship for the long-term unemployed, scale back spending, and weaken the economy since unemployment benefits are one of the most effective means available to support overall demand.”

The group of economists was assembled by Economic Policy Institute President Lawrence Mishel and Harvard University economist Lawrence Katz. Mishel sent a letter with the statement attached Monday to President Obama, Speaker Nancy Pelosi, Minority Leader John Boehner, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnel. Five recipients of the Nobel Prize in Economics and five past Chairs of the Council of Economic Advisors signed on, warning against letting the Emergency Unemployment Compensation program expire Tuesday.
 

The statement:

Continuing the about-to-expire federal emergency unemployment insurance program, which provides extra weeks of benefits to the long-term unemployed, is sensible economic policy that will not only assist the unemployed but help maintain spending, overall demand, and employment at this critical point in the recovery. Given that there remains a historically high number of unemployed workers per job opening, there is no danger that continuing to provide extended unemployment insurance will materially raise overall unemployment.

Eliminating these benefits, on the other hand, will cause hardship for the long-term unemployed, scale back spending, and weaken the economy since unemployment benefits are one of the most effective means available to support overall demand. Unemployment has remained above 9.0% for 18 months already and will likely remain high for some time to come, making a strong case for continuing the current program for another 12 months. Moreover, the special provisions for extended unemployment insurance during recessions have traditionally been financed by short-term fiscal deficits and this remains a prudent approach. The program will not contribute significantly to long-term deficits because its costs will diminish automatically as the economy recovers and unemployment returns to more normal levels.

Mishel’s letter to the President and Congressional leaders is available as a pdf here.

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“To hear the Democrats tell the tale,” he writes, the extension of jobless benefits enacted over the weekend will provide those living in high-unemployment states with an additional 20 weeks of insurance…”

But it won’t, not quite.

And that’s because the bill was held up for so long in the Senate, that an end-of-the-year filing deadline will prevent anyone from accessing the final six weeks of benefits.

From Lillis:

Rep. Jim McDermott (D-Wash.) (WDCpix)

That’s according to state officials and sources on Capitol Hill. On Friday, President Obama signed into law legislation extending jobless benefits by 14 weeks nationwide, with an additional six weeks for those states where unemployment rates top 8.5 percent. Those benefits kicked in on Sunday. But there’s a glitch. The new law treats the 20-week extension as two separate extensions of 14 weeks and six weeks, with participants required to exhaust the first 14 weeks before applying for the next six. However, the current law keeps a Dec. 31 application deadline, roughly seven weeks from now, making collecting the full 20 weeks impossible.

That’s not all. The emergency unemployment benefits provided beginning in 2008 are also tiered. The filing deadline applies to all tiers. That is, the new extension would effectively grandfather the unemployed into the tier where they sit at the end of December, preventing them from jumping into the next, even if they were eligible.

As a result, some members of Congress are already eying another sweeping unemployment extension, which would both address the deadline glitch and provide additional help — well beyond the six weeks in question — to those unable to find work next year, when jobless rates are expected to hover near double digits.

Continue reading at the Washington Independent, the Colorado Independent’s sister site in D.C.

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