Reports from the Economic Front

a blog by Marty Hart-Landsberg

The Unemployment Tragedy

Congress continues to debate, well perhaps discuss, whether to renew emergency unemployment benefit programs.  These programs expired as of December 1.  So, far, it appears that their renewal is being held hostage to an extension of Bush-era tax cuts for the super rich. 

What will it mean if Congress refuses to renew existing extended unemployment programs?  Most directly, disaster for the millions who will be effected.  But beyond that, as a report issued by the President’s Council of Economic Advisers makes clear, the loss of benefits will further depress consumer spending and significantly lower growth, raising chances of a new recession. 

To appreciate the disaster in the making, here is some background on the programs up for renewal.   

Workers in all states are eligible to receive up to 26 weeks of Unemployed Insurance (UI) benefits from the regular state-funded unemployment compensation program.  Workers in any state who exhausted their regular UI benefits were eligible (before the program expired) to receive up to 34 additional weeks of benefits through the temporary federal Emergency Unemployment Compensation (EUC) program (which was enacted in 2008). That number went up to 53 weeks in states that had especially high unemployment rates.

Workers who exhausted their regular UI and EUC benefits were eligible (before the program expired) for a maximum 20 additional weeks of coverage through the federal-state Extended Benefits (EB) program if their state’s unemployment insurance laws allow it.  (See states and their benefit packages here.)

 policybasics_ui_weeks_table1-rev8-30-10.jpg

So, depending on what state you live in and how bad the unemployment rate is, an unemployed person would receive the base 26 weeks, possibly an additional 53 weeks under the EUC program, and possibly a further 20 weeks under the EB program, for a maximum total of 99 weeks. 

A record high 1.4 million workers have already exhausted their 99 weeks of coverage–approximately 9 percent of all unemployed workers; those workers are no longer eligible for any unemployment support.  These are the 99ers.  Many of them and their supporters are pushing for a new program, one that would extend coverage beyond the 99 weeks. 

However, what is up for debate now in Congress is not an extension of benefits beyond 99 weeks, but rather the renewal of the EUC and EB programs.  Because Congress let these programs expire December 1, the unemployment benefit system has returned to its maximum 26 weeks of coverage.

This means that millions of people who would have maintained coverage beyond the 26 week limit are going to lose coverage once they run though the weeks corresponding to the program that now provides them benefits.  So, for example, workers receiving EUC benefits will not be eligible for EB benefits.  And workers receiving UI benefits will not be eligible for EUC benefits.  And of course all new unemployed will be limited to 26 weeks. 

More than 6.3 million workers were out of a job for at least 27 weeks in November 2010 (nearly 42 percent of all unemployed Americans).  Moreover, according to recent Federal Reserve forecasts, the unemployment rate is likely to be as high as 9 percent in December 2011 and 8 percent in December 2010. 

 unemployedover26weeksnov.jpg

Even if Congress eventually votes to renew the extended unemployment benefit programs, the Bureau of Labor Statistics estimates that some 4 million unemployed who are currently covered will run through their 99 weeks by the end of 2011.  If the programs are not renewed, some 8-10 million workers will likely be without benefits by the end of 2011.   

According to the Council of Economic Advisers’ report noted above, the income of the typical household with a member receiving emergency unemployment benefits would fall by one-third if those benefits are lost.  We are looking at a real social disaster.

Year by year we face ever worsening trade-offs.  Now it appears that in order to maintain a minimal system of social support for the unemployed we must provide the super rich with years of additional tax cuts.  And, as of now, there is no guarantee that even this exchange will be enough to close the deal.  

Go here for some powerful visuals on employment/unemployment trends.   

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: