Dems Want to Extend $600 Unemployment Boost. GOP Has Other Ideas.

  • In Business
  • 2020-07-01 22:38:35Z
  • By The Fiscal Times

The $600-a-week federal boost to unemployment insurance introduced by Congress in March is set to expire this month, and the debate about whether or how to extend jobless benefits will be central to negotiations on a next coronavirus relief bill - negotiations that are likely to be difficult, with Democrats and Republicans deeply divided. Here's the latest:

Senate Democrats propose "automatic stabilizers": Senate Democrats on Wednesday introduced legislation called the American Workforce Rescue Act to extend the weekly benefit increase and tie it to state unemployment levels.

The $600 increase would stay in place until a state's three-month average unemployment rate falls below 11%. The benefit boost would then phase out after 13 weeks, falling by $100 for each percentage point decrease in the unemployment rate until the rate drops below 6 percent.

The bill would also continue a 13-week extension of unemployment benefits through March and then tie the extension to state unemployment rates, with additional 13-week extensions for each percentage point the unemployment rate rises above 5.5%. It would similarly extend the unemployment coverage Congress created for self-employed, gig workers and others who aren't eligible for traditional unemployment through March 27, 2021, after which the benefits are tied to state unemployment levels.

"If we fail to renew the $600 per week increase in UI, millions of American families will have their legs cut out from underneath them at the worst possible time-in the middle of a pandemic when unemployment is higher than it's been since the Great Depression," Schumer said in a statement. "The American Workforce Rescue Act would tie the extension of enhanced UI benefits to economic data-not politics. As the need goes down, so will the benefits. As the need goes up, so will the benefits."

Republicans say no to extending the $600 payments: The Democratic-led House in May passed legislation that would extend the $600 weekly payments through January, but the Senate Democrats' proposal represents a new marker for negotiations with Republicans, who remain staunchly opposed to extending the payments as currently structured, insisting that they create an incentive for workers to stay away from their jobs - particularly low-income employees who are making more on unemployment than they did at work.

"You'd make more money if you don't go to work," President Trump told Fox Business Network in an interview Wednesday, apparently referring to the enhanced unemployment benefits even though he was asked about additional stimulus payments. "We don't want to have that. We want to have people get out, and we want to create a tremendous incentive for people to want to go back to work."

Senate Majority Leader Mitch McConnell (R-KY) also said this week that the $600 payments won't be in the next phase of coronavirus relief, according to NBC News. "Unemployment is extremely important. And we need to make sure, for those who are not able to recover their jobs, unemployment is adequate," McConnell told reporters on Tuesday. "That is a different issue from whether we ought to pay people a bonus not to go back to work. And so I think that was a mistake."

The Congressional Budget Office projected last month that if the increase in unemployment payments was extended for six months, about five in six recipients would get benefits that exceeded what they could expect to earn at work - and that economic output over the second half of the year would be higher and spending by those workers would be closer to normal than if the benefits weren't extended.

Some Senate Republicans and Trump administration officials have supported the idea of return-to-work bonuses. But NBC News reports that in interviews with nearly a dozen GOP senators on Tuesday "one consistent theme emerged: They are certain they don't want to extend the $600 per week in emergency jobless compensation because they widely agree that it is motivating people to stay out of work. But they have little clarity on what ought to replace it."

Schumer on Tuesday pushed back on the GOP bonus idea. "The back-to-work bonus pays people who are working. What about the people who are unemployed and can't get back to work?" he said. "I don't get it, it's illogical. If unemployment insurance is supposed people who are unemployed, back-to-work bonus doesn't solve that problem."

Why it matters, part 1: The automatic stabilizers in the new Schumer-Wyden proposal "would address a pernicious problem Democrats have faced as they've tried to extend the unemployment boost: The need to continually renegotiate benefits in the face of the pandemic's ever-changing economic outlook," writes Kara Voght at Mother Jones. Given GOP opposition, the bill likely won't pass Congress, but Voght says "it's significant that Democratic leadership is embracing automatic stabilizers, which have been championed mostly by progressive economists and lawmakers."

Why it matters, part 2: The unemployment benefit boost has provided a crucial safety net, offsetting lost income for millions of workers laid off of furloughed during the pandemic. The national unemployment rate remains above 13% and some 30 million Americans are collecting unemployment benefits of some sort. Nebraska (5.2%) was the only state with a May unemployment rate below 8.5%, while 33 states had rates of 10% or higher, including three states - Michigan, Hawaii and Nevada - were above 20%. Economists worry that without some extension of emergency unemployment benefits, incomes would plunge - and spending vital to the economy would follow.

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