This inability to connect economic policy to the larger problem of joblessness is a real problem with the debate over the payroll tax cut. This disconnect explains why the unemployment insurance extension bundled with the payroll tax cut have attracted so much less attention. After all, if all that matters is the first tranche of money, the payroll tax cut will affect many more households than the UI extension. But all serious economists agree that the extension of unemployment insurance is a far more efficient fiscal support – providing about 50 to 100 percent more jobs per dollar added to the deficit.
What makes unemployment insurance so much more efficient? It is laser-targeted at families in genuine distress, meaning that the recipients will spend every marginal dollar that comes in the door. This also makes the extension better targeted at alleviating actual economic misery.
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