What Drives the Economy?

In today’s relatively volatile market climate, what is really driving our economy forward? There is obviously more than one factor, but I found a surprising one when reading an article by Paul Wiseman this week for the Associate Press. According to Wiseman, unemployment benefits are actually a huge driving force behind the economy, which makes a good case for the saying, ‘You’ve got to spend money to make money.’ Congress, however, is considering letting these unemployment benefits expire this week and economists are worried.

Mr. Wiseman says that, “Unemployment benefits help drive the economy because the jobless tend to spend every dollar they get, pumping cash into business.” So what is the alternative? If unemployment benefits expire this week we can expect to see the annual economic growth drop up to 1 percent, 1 million people could lose their jobs and hundreds of thousands of U.S. citizens could fall below the poverty line.

The basic question when it comes to a decision such as this is – do the costs outweigh the benefits or not? In the case of unemployment benefits I think the answer is yes. The Congressional Budget Office says that every $1 spent on unemployment benefits guarantees up to $1.90 put back into the economy. So why is Congress considering cutting these benefits?

In a marketplace like ours shouldn’t we want to help out in any way possible – even if it does cost money to do so? Stimulus packages are rarely considered a waste of money, so why is something like benefits, which have been proven to put money into the economy, being categorized as harmful? What do you think?

About Maureen Lowe

President and Founder of Financial Technologies Forum, LLC. Editor-In-Chief of FTF News. Entrepreneur, Jersey Girl that recently returned to Jersey, Loves to Bake, Married to a Kiwi, First Time Mom
This entry was posted in Regulation, Wall Street and tagged , . Bookmark the permalink.

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