Unemployment Benefits: Big Battle Ahead

Unemployment Benefits: Big Battle Ahead

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When Congress returns next week it will have quite a lot on its plate—including whether to extend the emergency unemployment insurance benefits for nearly two million people who will otherwise see their benefits evaporate at the end of November.

House Speaker Nancy Pelosi recently told the Huffington Post that her top priority during the lame duck session will be to reauthorize unemployment benefits. With Democrats still in control of both chambers until the newly elected Congress is ushered in, the extension of benefits nevertheless remains a legislative challenge, especially among Republicans wary about adding to the $1.3 trillion budget deficit.

Republicans agree that extending the benefits is a priority, but a big concern is how those benefits will be paid for. “It’s irresponsible to put more IOUs on an already bad fiscal situation,” said a source close to Rep. Paul Ryan (R-WI), a ranking member of the House Budget Committee.

Republicans say they want to help the unemployed but need to prioritize spending. In the past, unemployment extensions that came with offsets like spending cuts in other areas garnered bipartisan support, point out some Republicans. But “whether Speaker Pelosi and her team pursue that or simply do what they want in the waning days of their majority is unknown,” said a source connected to the Republican Study Committee, the caucus of House conservatives.

Regular state-funded unemployment insurance programs provide benefits for up to 26 weeks. In sluggish economies, the federal government adds an additional period of benefits. About five million people currently receive unemployment benefits each week.

According to a recent report by the Center on Budget and Policy Priorities (CBPP), the failure to pass the benefits program for another year would be  counterproductive in a weak economy. “Renewing federal emergency unemployment insurance benefits for another year is good for unemployed workers, good for the economy, and doesn’t endanger efforts to get the long term budget deficit under control,” said Chad Stone, co-author of the report. The report says that in every major recession since the 1950s, Congress extended federally funded benefits until the economy was back on track and job prospects were improving. In all previous cases, the unemployment rate was 7.2 percent or lower when the program expired.

The current unemployment rate has hovered at 9.6 percent for months. The latest jobless claims report indicated that 435,000 Americans filed for benefits for the first time. For every job opening, there are still five unemployed workers, according to the Labor Department.

The CBPP claims that extending the temporary benefits would have a minimal effect on the long term fiscal problem.  There’s no official cost estimate yet, but the CBPP says it’s in the range of $50-$80 billion a year. Robert Greenstein, director of the CBPP, calls it a “blip” in the long term fiscal gap and says it is dwarfed by the impact of ongoing costs (such as those for health care). 

“The question is whether members of Congress who claim to be concerned about jobs and deficits will follow a path where they allow the most potent job creator to die and pursue the biggest long term deficit increaser [the Bush tax cuts],” Greenstein said.

Congress extended unemployment benefits back in July. The measure was nearly gridlocked in the Senate because of disputes over how to pay for the benefits. If the July decision serves as any judge of how Congress will act this time around—in an already acrimonious political environment—we’re  likely to see quite a catfight on Capitol Hill.