Unemployment Benefits End Right After Christmas. Here’s What Happens Next.

EMERYVILLE, CA - OCTOBER 08: A job seeker meets with a recruiter during the East Bay's HIREvent on October 8, 2013 in Emeryville, California. Dozens of job seekers attended the East Bay's HIREvent where several employers were recruiting for 650 available jobs.
National Journal
Elahe Izad Fawn Johnson
Dec. 15, 2013, 7:11 a.m.

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.

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