Friday, November 19, 2010

House Rejects Unemployment Extension

Yesterday the House of Representatives voted on a bill to extent the application deadline for the next tier of federal unemployment benefits to February 28, 2100, and the bill was defeated 258 in favor to 154 against. The legislation would have required 275 votes in favor to pass under pay as you go rules, since it included no revenue raising measure to pay the $12.5 billion cost of the benefit extension. As a result, up to 4 million out of work citizens, and their families, will lose their jobless benefits on the current filing deadline, which is November 30, 2010.

State governments pay the first 26 weeks of unemployment benefits, and after that additional federal payments can last up to an additional 73 weeks, for a total of 99 weeks of benefits: just 5 weeks short of 2 years before payments are cut off. The last extension passed by Congress was for 6 months at a cost of $34 billion. In the last 3 years the unemployed have collected $319 billion in jobless benefits, with 8.5 million citizens now collecting benefits. Of the 8.5 million, 4.8 million have already exhausted their state benefits, and are now collecting federal payments.

The federal government has never cut off benefit extensions when the unemployment rate has been above 7.4%. With today’s rate at 9.6%, Congress is likely to ultimately pass further extensions, but not before the November 30 cutoff. The debate rages on in the House about how to pay for the cost of an extension, which Democrats argue should last another year. Republicans want to use unspent stimulus money to pay for the extension, but Democrats oppose raiding any pot of money appropriated for job creation.

The House/Senate Joint Economic Committee reports that failure to continue extended unemployment benefits could take as much as $80 billion out of today’s already weakened economy, since families receiving benefits spend the money immediately because they are already living so close to the edge financially. Nevertheless, deficit hawks in the House will likely continue to oppose any bill not fully funded under pay as you go rules.
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