Just three days after Christmas, 1.3 million people will lose their federal emergency unemployment insurance. The extension of the benefits for the long-time jobless didn't make its way into the budget deal.
On Jan. 6, Majority Leader Harry Reid will reconvene the Senate and attempt to pass a retroactive extension of the benefits as emergency spending. That means the bill won't have an offset and would raise the deficit—sheer blasphemy to most Republicans. It's not clear that it will pass.
Reid's move is basically an election-year dare to Republicans to cut off benefits for long-term unemployed people. But it may be a harder sell when the overall unemployment rate is sinking to its lowest levels in five years. Still, the expiration is a bucket of cold water on a shaky recovery that might make some lawmakers squeamish.
"This is the first time since the downturn that they haven't extended unemployment on a bipartisan basis," said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget. Republicans have always groused at the unemployment extension, he added, but "at the end of the day they have backed down. This time, I'm not so sure."
Democrats have shown their willingness to play politics with the issue. By allowing unemployment assistance to stay out of the budget deal crafted by the leaders of the budget conference committee—Sen. Patty Murray and Rep. Paul Ryan—Democrats have shifted the unemployment extension from a must-pass issue that could keep Congress in session until the new year to a campaign issue designed to scold Republicans for allowing long-term unemployed people to lose benefits.
Basically, Democrats really wanted the extension, but they didn't want it badly enough to blow up the entire budget deal.
They are already honing their talking points for next year. Here's Reid before cameras on Thursday: "The people that are unemployed for a long period of time are Democrats and they are Republicans. This is an issue that Republicans, I think, need more than we need it. This is something I think will be extremely difficult for them to turn away from."
And here's House Minority Leader Nancy Pelosi: "In fact, it gives us a bigger spotlight to put on it—'look, they would do this, they wouldn't close one corporate loophole even to extend it for three months to continue the debate.' No, these are fighting words for us."
In truth, there are economic arguments both pro and con for extending long-term unemployment benefits. On the pro side, there is the basic human element. More than a million people who have been out of work for a long time are counting on those unemployment checks, and they won't get them.
On a broader scale, unemployment benefits are an automatic short-term stimulus. People spend those checks immediately. What better way to give the still-recovering economy a little boost? The GDP will grow by 0.2 percent and 200,000 jobs would be added to the economy if the benefits continue, according to the Congressional Budget Office.
On the con side, the benefits still cost money—somewhere in the $8 billion range for a three-month extension or $25 billion over 10 years for a one-year extension. CBO says the short-term stimulus of the benefits outweighs the economic effect of the cost.
But Goldwein says it's still a mistake not to offset the cost. If it's worth doing, it's worth paying for. "The best economic bang for your buck for unemployment is to spend money on it now and pay for it over time," he said.
House Democrats, led by Reps. Chris Van Hollen of Maryland and Sander Levin of Michigan, unsuccessfully tried to attach an amendment to the budget deal to extend unemployment insurance for three months, using savings from the farm bill as the pay-for. When that didn't work, Democrats took to the House floor to loudly denounce the move, but the battle was already lost. Van Hollen has since suggested in The Washington Post that Democrats should withhold support for the farm bill unless it addresses unemployment insurance.
Reid has committed to putting an extension of the emergency unemployment insurance on the Senate floor after Christmas recess. The stand-alone bill would be retroactive, meaning those who lost benefits on Dec. 28 and after would get back-benefits.
"This is something we're focused on like a laser and we're going to be working on it, and I'm confident we'll be able to extend unemployment benefits," he said. But he declined to specify how he will lure Republicans to vote for it.
This article appears in the December 16, 2013 edition of NJ Daily.