Unemployment benefits extension clears hurdle

WASHINGTON (AP) — For jobless Americans struggling to pay their bills and keep their homes, the restoration of unemployment benefits could keep their crisis from getting worse.

Olympia Snowe, Susan Collins
AP Photo/Harry Hamburg

In this Oct. 22, 2009, file photo Maine's Republican Senators Olympia Snowe, left, and Susan Collins walk on Capitol Hill in Washington. Now that it's been shorn of unrelated tax and spending provisions that have held it up for more than four months, the bill to extend unemployment benefits finally seems poised to pass.

The same might be said of the broader economy.

The Senate is expected to vote Wednesday to keep providing unemployment benefits for up to 99 weeks to more than 5 million long-term unemployed. The injection of an estimated $33 billion into a $14.6 trillion economy over the next five months won't be enough to energize the recovery. But economists say it could at least help sustain it.

The vote comes as evidence mounts that growth is slowing. Consumers, facing lower home values and high unemployment, are saving more and spending cautiously. The housing market is slumping again after a tax credit expired in April. And the impact of last year's $787 billion stimulus package has begun to fade.

By extending the unemployment aid, Congress will remove one potential drag on the economy, analysts say.

"It reduces the likelihood of a double-dip recession," said Gus Faucher, an economist at Moody's Analytics.

During the recession, Congress provided up to 73 extra weeks of unemployment aid, paid for by the federal government. They came on top of the 26 weeks customarily provided by the states.

But the extra benefits expired in early June. They had been routinely extended during the worst parts of the recession. But Congress reached an impasse last month. Republicans demanded that the extension be paid for with leftover stimulus money. Democrats countered that unemployment benefits are normally considered an emergency need and paid for by adding to the deficit.

About 2.5 million people ran out of jobless aid during the political battle. They will now have the aid restored retroactively. That could create chaos if state unemployment offices are flooded with people seeking to reapply.

An additional 3 million people were still receiving aid under the extended benefits program. They will be able to keep doing so.

The legislation Congress is expected to approve will inject $33 billion into the economy by renewing the extra benefits through the end of November. That money will likely be spent quickly and generate extra economic activity, economists say. Jobless aid is widely seen as providing more "bang for the buck" than many other stimulus programs.

"It recycles very quickly into the economy," said David Wyss, chief economist at Standard & Poor's. "If that's your only source of money, you're going to spend it."

Moody's Analytics estimates that every dollar of unemployment aid generates $1.61 in economic activity. Still, that translates into a boost of only $54 billion — less than one-half of 1 percent of the overall economy.

"It's not going to make or break" the recovery, Faucher said.

Weekly unemployment checks average about $309, though they vary widely by state. Benefit levels also depend on how much a recipient earned while working. The checks are financed through a tax on employers.

Many of those out of work don't receive unemployment benefits. Only those who have lost jobs through no fault of their own are eligible. Applicants must also have earned certain minimum pay, set by the states.

Partly because of the extensions, about two-thirds of the nearly 15 million unemployed are receiving unemployment aid. That's a greater proportion than in previous downturns. The Obama administration's stimulus package encouraged many states to expand eligibility to part-time workers and other groups.

In recessions, Congress usually adds extra weeks as unemployment rises and hiring slows. The federal government also pays for the extensions to lessen the burden on states, which are required to balance their budgets. Many experts argue that the program, begun in the 1930s, is ill-equipped to handle extended downturns. One result is that the program has been extended in almost every recession and often gets tangled in political fights.

The current benefit extensions are the longest on record.

Of the 2.5 million people whose benefits will be restored, nearly 430,000 are in California, nearly 200,000 are in New York, 175,000 are in Florida and 174,000 are in Pennsylvania, the Labor Department estimates. Georgia, Illinois, Michigan, Ohio and Texas also have more than 100,000 recipients who were cut off.

Unlike with some previous extensions, Congress isn't adding extra weeks. It's just keeping the extended program going.

For those who have exhausted all their 99 weeks, the Senate's vote Tuesday provides little hope. They face the prospect of looking for work even as hiring remains slow, with the unemployment rate at 9.5 percent.

"There's a lot more people than jobs out there right now," Wyss said.

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Republicans are wrong all the time every time.

SonofTron asked the question is the economy better under Obama or Bush. The answer is an unequivocal - Obama. In 2008 the economy was headed for depression. Job losses were accelerating toward a million a month, credit was frozen, bankruptcies, and foreclosures were increasing, profits were down, deflation loomed as a real possibility. Had Bush continued in the Presidentcy into 2009 50,000,000 million Americans would have been unemployed, tent cities would have sprouted up across the country, my company would have gone into bankruptcy. Obama stopped the slide into the abyss and stablized the economy.
Now as you know employment is a trailing economic indictator. It took the economy at excellent growth rates under Clinton 8 years to reduce unemployment from the first Bush recession from 8+ to 4.3%. It will take 8 years or more to bring unemployment down from this Bush Great Recession.
Of course, Republicans don't want a solution. They want to extend the recession as long as they can to blame democrats for what they, the Republican Party, caused. They are willing to sacrifice America, its standing in the world, and our future to gain 10 seats in the house of representatives. Pathetic losers.

 's picture

Great posts Maine Ken. No

Great posts Maine Ken. No one in there right mind is hiring right now.


I am amazed no one picked up

I am amazed no one picked up on Ksandra's comments; we have so many running for office that the law of supply and demand tells me we should cut the pay and BENEFITS we citizens give to our elected officials. It is high time they learn to live as we do. As far as the unemployed, after so long of not working are they interested in working or are they just enjoying early retirement? Maybe it is not the dream job people are looking for, but they have to go with changes in life. If your trade is making buggy whips, realize this job is not in great demand and learn to do another job.

 's picture

build more capacity

Your idea is to build and invest in more capacity, even though there is excess capacity right now? Give businesses tax cuts to hire people to stand around? Brilliant! If the unemployed keep receiving benefits, they spend right away, creating demand. Increased demand means increased production. Increased production means more people hired.

 's picture

pay for it

What programs would you cut to pay for the tax cuts? Or extending the Bush tax cuts?

Sandra Coulombe's picture

I think the GOP has the right

I think the GOP has the right idea but I doubt they would like how I would pay for the extension of benefits for the unemployed. You see we start with an across the board 25% reduction of salary for all congressmen and the president. Then we link their retirement to the same vested retirement plans all other government employees are in, you are in office for 4 years sorry you didn't get vested, in for 8 you get the same small percentage any other government worked would get who only worked for 8 years. Then we increase their contribution to their health care insurance by 10%. That should pretty much cover the cost. If not we start reinstating the tax breaks they gave themselves. Lets do recall you pretty much have to be rich to get into federal office these days so it is a matter of giving themselves tax breaks.


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