The generous expansion to unemployment insurance that Congress passed to keep Americans afloat during the COVID-19 crisis will run out by the end of the month, potentially leaving millions of people in trouble.
Unemployment held steady at 11.1 percent in June, worse than at the height of the Great Recession in 2009, but Congress is far from agreeing on a way forward.
At the center of the discussion is a federal policy that adds $ 600 to each weekly unemployment check through the end of July.
Democrats who defend the policy say it has been a crucial lifeline for the millions of Americans who were suspended or lost their jobs as a result of the pandemic.
“It would be outrageous for Republicans to allow supercharged unemployment benefits to expire with an unemployment rate of more than 11 percent and 2.3 million new unemployment claims this week,” noted member of the Senate Finance Committee Ron Wyden
Ronald (Ron) Lee WydenHillicon Valley: Senate Panel Advances Bill Targeting Online Child Sexual Abuse | Trump administration awards tech group contract to build ‘virtual’ wall | Advocacy groups urge Congress to ban facial recognition technologies Senate panel previews bill targeting online child sexual abuse The Hill’s Report 12:30 PM: Democratic Proposal to Issue 0 Unemployment Checks MORE (D-Ore.) He said Thursday.
Republicans, however, argue that the $ 600 profit at best has outlived its usefulness, or at worst, has been hampering recovery all along.
“We have a real concern about creating an unwanted incentive for people to stay on the sidelines in this economy. And that $ 600 increase in unemployment that many believe has contributed to that, ”Vice President Pence told CNBC on Thursday.
The Democrat-controlled House passed the HEROES Act in May, which would extend the additional unemployment payment for another six months, along with other measures, such as aid to state and local governments.
However, the Republican-controlled Senate said the $ 3 billion legislation passed the mark and that it would wait and see economic conditions unfold before deciding on the scale of its version of the next aid package COVID-19. . The unexpected June employment report, which recorded a record increase of 4.3 million jobs in one month, may convince them that less help is needed.
Negotiations aren’t even expected to start until after the July 4 recess, leaving four weeks for the two chambers to work and approve a deal.
The debate over the $ 600 figure reaches the complexity of a mosaic system of unemployment benefits in all 50 states, but has been intensified by partisan and ideological rhetoric as the November elections approach. It also highlights the enormously uncertain path that the economy will take in the coming months, a path that is closely related to efforts to contain the coronavirus.
Congress resolved an additional $ 600 in unemployment benefits in the CARES Act passed in March because it filled the gap between the average weekly unemployment insurance payment across the country and the average salary, while allowing states to distribute more aid. quickly.
Most unemployment insurance is designed to cover only a fraction of a worker’s salary as an incentive for people to find a new job quickly.
But the variation from state to state benefits varies widely, from a low of $ 212 in Mississippi to a high of $ 557 in Massachusetts. The sum of $ 600 is not adjusted for inflation or the previous salary level, which means that some people earn more in unemployment than in work.
That creates an awkward dynamic, forcing workers to face a possible pay cut when they return to work.
“Despite mounting evidence of the problems these additional payments are causing, the House recently passed a bill to extend them, not just for a month or two, but for another six months, until January 2021,” said the chairman of the Senate Finance Committee Chuck grassley
Charles (Chuck) Ernest Grassley USA, Mexico, set for new post-NAFTA business era Senators pressurize IRS chief on stumbling block stumbling blocks. (R-Iowa) said at a contentious hearing on unemployment last month.
The nonpartisan Congressional Budget Office (CBO) estimated that if the policy were extended for six months, the overall economy would be better until the end of the year, as unemployed people would continue to use the money to buy food, pay rent, and spend at high levels. . But the employment situation would be worse, since more people would refrain from taking jobs that effectively reduced their income.
By 2021, CBO estimated that both the economy and unemployment would be worse, as people separated from the labor market took longer to find work.
Conservative groups have amplified the message.
“Although the unemployment rate remains high, the significant change shows that Congress should focus on fostering the recovery that is already underway and resisting the temptation to rush into another massive stimulus package,” said Rachel Greszler of the Heritage Foundation, asking for a salary replacement strategy instead of a flat sum of $ 600.
But at the same hearing, Wyden said Congress had few options for better policy because of how unemployment is managed through 50 different state unemployment offices. He said it would be impossible to quickly implement a more precise policy to prevent recipients from earning more than their previous wages.
Local unemployment offices contacted by The Hill said it could take six to nine months to establish a salary replacement program.
A Grassley spokesperson on Thursday did not offer specific alternatives, but noted the strong June jobs report.
“The jobs report underscores why Congress should take a thoughtful approach and not rush to pass expensive legislation paid for with more debt before better understanding the country’s economic situation,” the spokesperson said.
“Greater coronavirus relief legislation would need to effectively address any ongoing problems and encourage further job growth,” the spokesperson added.
But economists say the superlative jobs report also points to a protracted unemployment crisis.
The Congressional Budget Office projected Thursday that unemployment would remain above 10 percent by year-end and would not drop below 5 percent again until 2025.
Shai Akabas, director of economic policy at the Center for Bipartisan Policy, said the economy faces a long road to recovery.
“While we have overcome the initial labor shock by shutting down the economy, rising levels of permanent job loss and long-term unemployment are worrying and point to a long line of second-order effects,” he said.
“Many companies are gradually realizing that conditions will not be nearly normal again in the near future and are recalibrating their workforce accordingly,” he added.
Left-leaning economists are also warning that a sharp deficit in state and local budgets will trigger a tsunami of new layoffs in the new fiscal year, which for states started this week.
“Without massive additional federal aid, austerity is certainly on the horizon for state and local governments, because state and local tax revenues are plummeting,” wrote Elise Gould and Heidi Shierholz, economists at the Institute for Economic Policy.
“This means losses in public sector services, including cuts in school budgets at a time when schools are already struggling with the growing need for creative options for students,” they added.
One idea that Republicans can adopt is to leave a certain level of unemployment expanded, but allow people to keep some of the fringe benefits if they get a job.
“I think reemployment benefits are likely to help complete the bill, and those should also be directed at the right people who are having trouble getting a job or competing with the unemployment benefit,” said the White House economic adviser. Larry kudlow
Lawrence (Larry) Alan KudlowMORE he said on Bloomberg TV on Thursday.
But with negotiations on hold, the final package is far from secure.
“The shape of any type of package is still very much up in the air,” he said.
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