The Effect of Transfer Payments on the Labor Force Participation Rate

Economist Stephen Moore recently testified on this subject before Congress: One of the worst mistakes in the Recovery Act was the supplemental unemployment benefits … with the supplemental UI [unemployment insurance], plus expanded food stamps, plus rental assistance, plus expanded Medicaid, and the evisceration of the Clinton-era work-for-welfare reforms, families with two unemployed parents and two kids could receive a tax-free income of $100,000 or more. … [S]tates which canceled the early UI benefits early had much lower unemployment rates. … University of Chicago economist Casey Mulligan and I published a paper last year showing that if we had reduced the payroll tax rather than increased unemployment benefits, we would have had 3 million more Americans working throughout 2020, 2021, and through the first half of 2022.

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