Unemployment benefits coming to a halt

An estimated 1.3 million people will be cut off when the federally funded unemployment payments end Saturday
Associated Press
Dec 27, 2013

 

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.

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 Saturday.

Some 214,000 Californians will lose their payments, a figure expected to rise to more than a half-million by June, the Labor Department said. In the last 12 months, Californians received $4.5 billion in federal jobless benefits, much if plowed back into the local economy.

More than 127,000 New Yorkers also will be cut off this weekend. In New Jersey, 11th among states in population, 90,000 people will immediately lose out.

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. Another 1.9 million people across the country are expected to exhaust their state benefits before the end of June.

Gene Sperling, the director of the White House's National Economic Council, said Friday that President Barack Obama wants an extension as soon as Congress return next month, warning the abrupt cut-off will deliver a blow to the U.S. economy.

"It defies economic sense, precedent and our values," Sperling said.

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. But as with much in Congress, an extension is no sure thing.

House Speaker John Boehner spoke with Obama about an extension earlier this month. Boehner and said his caucus 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 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 effect of jobless benefits on the unemployment rates has been fiercely debated for decades. To qualify, people have to be seeking work. Tea partiers such as Sen. Rand Paul of Kentucky argue that the payments aggravate rather than relieve unemployment.

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.

Michael Feroli, an analyst at JPMorgan Chase, said ending the extended benefits will lower the unemployment rate by half a percentage point as the long-term unemployed leave the labor force. While that statistical change may look good on the surface, Feroli cautioned the drop could be accompanied by a similar decrease in consumer spending. That would also hurt clothing retailers, car dealers and other Main Street businesses.

Extending the program, on the other hand, would boost GDP growth by some 0.2 percent and increase full-time employment by 200,000 next year, the Congressional Budget Office estimated, but at the price of increasing the government's debt.

Advocates of extended benefits say communities hardest hit by the recession will feel the sudden loss of cash in circulation the most.

They cite a set of their own troublesome figures: three jobseekers still competing for each opening; some 4 million people in the ranks of long-term unemployed; unemployment lasting on average 37 weeks, two months longer than most states provide insurance.

Comments

Dr. Information

And liberals will celebrate because the unemployment numbers will go down.

coasterfan

No, liberals will celebrate because every time Republican politicians kick people when they are down, more people are compelled to vote for Democrats.

Darwin's choice

More cheerleading.

Gardenman

Refusing to help those unemployed has never bid well for any party who has opposed it. People can talk all they want about cutting cost of government but kicking people in the teeth who have already lost jobs etc is not going to make you popular at the polls. Thats not cheerleading that is just plain fact.

Darwin's choice

So, what is anyone kicking?

Dr. Information

gardenman and coasterfan like to enable people to just get free checks as long as they want.

Contango

Re: "enable people to just get free checks as long as they want."

With tens of millions of Americans collecting hundreds of billions of dollars of income transfer payments, economically this country has been being artificially propped up financially for the past five plus yrs.

Through the Fed's QE & ZIRP policies, we 'merely' put off the day of reckoning from the '07-'08 credit crisis.

The 10 Yr. Tres'y hit 3.00% yesterday. Servicing our sovereign debt is becoming increasingly more expensive.

Contango

Re: "liberals"

The govt. can't spend a dollar that it doesn't get from somewhere else. So where's the money comin' from hum?

According to you, there's economic growth. Hence little need for extending unemployment benefits right?

Really are you ...

Sad but true, jobs that we shouldn't have lost years ago that we have to recover from now.

YoMamma

Make people do community service for their unemployment check! What is so wrong about that?

dorothy gale

Exactly!

grandmasgirl

I see both sides. I have lost my job do to a plant closing. We had 26 weeks of unemployment. If you could find a lower paying job, you could pull in benefits for a longer period. However, some people have made collecting unemployment a way of life, just as some have made welfare a way of life. Both of these should have a time limit. Otherwise, unless you have scruples, you will expect to be taken care of for life.

deertracker

Both of them do have time limits!

chongo

Who says they have refused to help the unemployed? they helped some for TWO YEARS!!! Time to go out there and GET A JOB! are things gonna be tight w/ a smaller check, possibly, but that's where responsibility comes in. Lets not mention having a bit of Pride in yourself for a job and not just milking the system. I for one love this. like ripping off a band-aid, it's gonna hurt at first, but it will heal and get better in the long run for it.

Stop It

More like putting a band aid on a gaping wound. Don't forget the neosporin....

Dr. Information

99 weeks, almost 2 YEARS of federal help. Plenty long enough to find another job. Quit enabling these people Obama.

Darwin's choice

http://money.msn.com/investing/5...

Just something to consider....

As much as you think there are jobs for everyone, sadly, your mistaken.

Thanks Obama.

SamAdams

There's no need for any extended unemployment benefits.

The economy is much improved. People are doing much better. Jobs numbers are way up. Obamacare is a great idea that's created even more jobs. Don't believe me? Just ask one of Obama's progressive voters!

Since those same progressive voters insist that everything is so much better now, I DO find it interesting that they're also at the forefront of demanding still more ongoing handouts which, if they're right about everything else, aren't needed...

grumpy

Sarcasm becomes you Sam.

I always love sarcasm, snark, and irony. They are mostly lost arts in conversation, and prose.

ohioengineer

This is a one-sided, opinionated article that belongs on the editorial page. Whatever happened to reporting both sides of an issue? The AP used to be a respected news agency; today it is just another NBC wearing different clothes. Anyone who hasn't recently returned from Mars knows that there are good arguements on both sides of this issue, yet the AP (and also the Register by unabashedly printing the article) have chosen to take sides; all while hiding behind the guise of the "free" press.

2sense

I think this was another program that was initiated to provide help for someone who became unemployed but as often happens is abused by some. "Wake up America"

Retiree

Get rid of half of the people in the Senate and the House. Employment will not go up because they are all attorneys and millionaires. Next we cut foreign aid to the countries that hate us. Third, our Congress is paid by the number of hours that they work. No salaries,vacation four weeks a year and term limits of ten years. No social security for any one that makes over $300,000 annually. That is a start.