What is Next for Federal Unemployment Benefits?

Monday, November 15, 2010 at 10:40 PM by

Congress is in a state of flux right now, and some lawmakers are advocating holding off making any important decisions until after the newly-elected senators and representatives are seated. But there are several important issues that Congress is going to have to address before the end of the year, either by omission or commission.

One issue is whether to extend the Bush tax cuts, which expire at the end of the year. Before that though, Congress will have to consider whether to extended federal unemployment benefits for the long-term unemployed. If Congress takes no action, these benefits will run out at the end of November.

Some lawmakers in Congress are reluctant to continue unemployment benefits, but the need is unmistakable, both here in Wisconsin and nationally. The recession may officially be over, but the state unemployment rate has been inching downward at a frustratingly slow rate, as has the nation’s. In September 2010, the state unemployment rate (preliminary and seasonally adjusted) was 7.8 percent. That’s down from the high of 8.9 percent in July 2009, but it took more than a year to drop just over a single percentage point. If Wisconsin’s unemployment rate continues to drop at this snail-like pace, we won’t see a typical pre-recession rate of 5.0 percent for another three years. Since the recession began in December 2007, 160,000 jobs have been lost.

The cost of temporarily extending federal unemployment benefits is significant but affordable and appropriate. According to the Center for Budget and Policy Priorities, the unemployment benefits currently cost the federal government in the neighborhood of $6 to $7 billion a month, with the price tag coming down as the economy improves and the unemployment rate drops. So the cost of extending the program for another year would most likely be less than $80 billion and possibly substantially less, depending on how much the economy improves. To put the $80 billion amount in context, that is about the same cost as extending the Bush tax cuts for the wealthy for two years, according to the Center for American Progress.

The cost of extending unemployment benefits is a smart investment in light of the boost they provide to the economy. Unemployed workers can’t spend what they don’t earn, and the lack of consumer spending can hamper the recovery. Unemployment benefits have been shown to be one of the most effective means of stimulating the economy; for every $1 in unemployment benefits, the GDP one year later is increased by an estimated $1.61, according to Moody’s Economy.com.

Unemployment is still high, the cost of extending unemployment benefits is reasonable considering the upside, and the impact on the state and national economy would be positive: extending unemployment benefits might seem like a no-brainer. But things are different after the recent election. Exactly how different remains to be seen, but extending the federal unemployment benefits when they run out at the end of this month is far from a sure thing.

Several swing senators have yet to commit voting to extend benefits, including both Wisconsin senators. Please share your thoughts on this important issue with Senator Kohl at (202) 224-5653 or Senator Feingold at (202) 224-5323.

A number of groups hve organized a national call-in day on this issue on Tuesday.  To read more about the issue, click here.

Tamarine Cornelius

Categories: Blog, federal issues, jobs, Recovery Act, unemployment benefits | Comments Off on What is Next for Federal Unemployment Benefits?

Comments are closed.