Paul Krugman+ Your Authors @paulkrugman Nobel laureate. Op-Ed columnist, @nytopinion. Author, “The Return of Depression Economics,” “The Great Unraveling,” "Arguing With Zombies," + more. Jul. 21, 2020 1 min read + Your Authors

McConnell totally misunderstands the problem; thinks this is about stimulus, not support as the virus rages. So no deal on unemployment benefits any time soon, with extra benefits going away for many THIS WEEKEND 1/ 

The scale of this unforced error is stunning. In May Pandemic Unemployment Compensation — the extra $600/week, which is what is disappearing — was more than 4% of GDP. Snatching that away will impose huge hardship 2/

And the unemployed, especially this time around, have little in the way of savings. They'll be forced to slash spending, delivering a huge dose of austerity to the economy as a whole. Sending checks to people who still have jobs won't have anything like the same impact 3/

For the nerds: the marginal propensity to consume out of income is much higher for UI beneficiaries than for the rest, hence a much bigger multiplier 4/

This policy failure could easily deliver a negative shock of several percent of GDP. And it's not just Trump's fault; Senate Rs share much of the blame 5/

You can follow @paulkrugman.


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