Reports from the Economic Front

a blog by Marty Hart-Landsberg

The Unemployed Dismissed

Congress left Washington D.C. without renewing an emergency program that extends the length of time the unemployed can receive unemployment insurance benefits.  As it now stands, on December 28, 2013 some 1.3 million unemployed Americans will lose their unemployment benefits.

As Brad Plummer explains in his blog post at wonkblog:

In normal times, the states and federal government work together to fund up to 26 weeks of unemployment benefits. (The precise number varies from state to state— North Carolina only provides up to 19 weeks, Michigan 20 weeks.) When unemployment is particularly high, states can usually get some federal funding to provide an extra 13 or 20 weeks of “extended benefits.”

But starting in 2008, Congress expanded this program significantly. First, the federal government promised to pick up the entire tab for those “extended benefits” and made it easier for states to receive this money. Second, Congress created the Emergency Unemployment Compensation program to provide additional aid to workers when their state benefits ran out.

This additional financing has shrunk somewhat from its peak — currently only about one-third of the 4.1 million long-term unemployed receive benefits, and budget cuts have pared back benefit levels. Even so, at the moment, many states still offer up to 63 or even 73 weeks of unemployment aid, and benefits average around $300 a week.

The following two charts highlight what will happen if Congress doesn’t act.  The first shows current state unemployment benefit periods and the second shows state benefit periods if Congress allows the emergency programs to expire.  In short, anyone who is currently receiving benefits beyond the standard 26 weeks (or fewer in some states) will be cut off.

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Some 1.3 million people will, as noted above, immediately lose their benefits.  But that is only the beginning.  According to Center on Budget and Policy Priorities estimates, millions more workers will find themselves dropped from unemployment coverage over 2014.  All together almost 5 million people will be affected as illustrated below.

12-12-13bud

This outcome is not only cruel to those already suffering from unemployment.  It will also have wider negative consequences.  For example, the loss of benefits by millions of workers can be expected to reduce spending and slow economic growth.  It is also likely to put additional downward pressure on wages as desperate people complete for jobs.

It is estimated that a one year renewal of emergency benefits will cost some $25 billion.  Significantly, the recent Congressional budget deal which reduced scheduled sequestration cuts gave the Pentagon a $20 billion boost.

It is all a matter of priorities.

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