A potpourri of temporary spending increases were also included in the fiscal stimulus. Additional unemployment insurance beyond the regular 26-week benefit period has been far and away the most costly type of stimulus spending, with a total price tag now approaching $300 billion. The high rate and surprisingly long duration of unemployment—well over half the jobless have been out of work more than 26 weeks—have added to the bill.
Yet UI benefits are among the most potent forms of economic stimulus available. Additional unemployment insurance produces very high economic activity per federal dollar spent (see Table 11).23 Most unemployed workers spend their benefits immediately; and without such extra help, laid-off workers and their families have little choice but to slash their spending.
The loss of benefits is debilitating not only for unemployed workers, but also for friends, family, and neighbors who may have been providing financial help themselves.
The fiscal stimulus also provided almost $50 billion in other income transfers, including Social Security, food stamps, and COBRA payments to allow unemployed workers to retain access to healthcare. Food stamps are another particularly powerful form of stimulus, as such money flows quickly into the economy. COBRA and Social Security
Funds for infrastructure projects generally do not generate spending quickly, as it takes time to get projects going. That is not a bad thing: rushing raises the risks of financing unproductive projects. But infrastructure spending does pack a significant economic punch, particularly to the nation’s depressed construction and manufacturing industries. Almost $150 billion in ARRA infrastructure spending is now flowing into the economy, and is particularly welcome, as the other stimulus fades while the economy struggles.