More than 1 million Americans are bracing for a harrowing, post-Christmas jolt as extended federal unemployment benefits come to a sudden halt this weekend, with potentially significant implications for the recovering U.S. economy. A tense political battle likely looms when Congress reconvenes in the new, midterm election year.
Nudging Congress along, a vacationing President Barack Obama called two senators proposing an extension to offer his support. From Hawaii, Obama pledged Friday to push Congress to move quickly next year to address the “urgent economic priority,” the White House said.
For families dependent on cash assistance, the end of the federal government’s “emergency unemployment compensation” will mean some difficult belt-tightening as enrollees lose their average monthly stipend of $1,166.
Jobless rates could drop, but analysts say the economy may suffer with less money for consumers to spend on everything from clothes to cars. Having let the “emergency” program expire as part of a budget deal, it’s unclear if Congress has the appetite to start it anew.
An estimated 1.3 million people will be cut off when the federally funded unemployment payments end today.
Started under President George W. Bush, the benefits were designed as a cushion for the millions of U.S. citizens who lost their jobs in a recession and failed to find new ones while receiving state jobless benefits, which in most states expire after six months. An additional 1.9 million people across the country are expected to exhaust their state benefits before the end of June.
But Obama has no quick fix. He hailed this month’s two-year budget agreement as a breakthrough of bipartisan cooperation while his administration works with Democratic allies in the House and Senate to revive an extension of jobless benefits for those unemployed more than six months.
The Obama administration says those payments have kept 11.4 million people out of poverty and benefited almost 17 million children. The cost of them since 2008 has totaled $225 billion.
At the depth of the recession, laid off workers could qualify for up to 99 weeks of benefits, including the initial 26 weeks provided by states. The most recent extension allowed a total of up to 73 weeks, depending on the state.
Restoring up to 47 extra weeks of benefits through 2014 would cost $19 billion, according to the Congressional Budget office.
House Democrats led by Reps. Sander Levin of Michigan and Chris Van Hollen of Maryland sought to include an extension through March by offsetting the costs with potential farm bill savings. They were rebuffed.
Senate Democrats and some Republicans plan another push in 2014. Sens. Jack Reed, D-R.I., and Dean Heller, R-Nev., have introduced a bill offering a similar three-month extension, and Senate Majority Leader Harry Reid, D-Nev., has promised to bring it up.
In phone calls Friday, Obama told Reed and Heller he was glad they were working together to address the problem. “It defies economic sense, precedent and our values,” Obama economic adviser Gene Sperling said in a statement.
House Speaker John Boehner, R-Ohio, spoke with Obama about an extension earlier this month. Boehner said he would consider the possibility “as long as it’s paid for and as long as there are other efforts that will help get our economy moving once again.” He said the White House has yet to introduce a plan that meets his standards.
For other Republicans, the bar is higher. Many of them look at signs of economic growth and an unemployment rate now down to 7 percent and expected to drop further as evidence the additional weeks of benefits are no longer necessary.
The benefits allow some jobseekers to hold out for higher wages. Without the benefits, they might accept lower-paying jobs, reducing the unemployment rate. Others may be looking for work only to keep the benefits flowing and will drop out of the job market entirely once the checks stop. In theory, that also would push the unemployment rate lower.
The flip side is that the benefits — in addition to alleviating suffering — get spent on consumer goods, stimulating the economy and creating jobs.
Extended unemployment insurance “is really a lifeline to help pay the bills, put food on the table, and put gas in the tank so people can look for work,” argued Maurice Emsellem, policy co-director at the left-leaning National Employment Law Project.
About the Author
