This New Year’s Eve, unlike last year, Congress doesn’t face a “fiscal cliff” deadline to approve a must-pass tax or spending bill.
But one group does stand to suffer if Congress doesn’t take action before the end of the year: Americans who get benefits under an emergency unemployment compensation program President George W. Bush signed into law in 2008.
Unless Congress intervenes to keep that program alive, it will expire on Dec. 28, leaving about 1.3 million unemployed people without benefits.
An extension of the program could conceivably be wrapped into a Fiscal Year 2014 budget deal which Senate Budget Committee chairman Sen. Patty Murray, D-Wash., and her House counterpart, Rep. Paul Ryan, R-Wis., are working on.
Rep. Sander Levin, D-Mich., and other Democrats want to extend the program for another year. They point to the extraordinary nature of the recession and its lingering aftermath. The long-term unemployed – those jobless for 27 weeks or more – comprise a far higher share (nearly 40 percent) of the unemployed than ever seen in previous post-World War II recessions.
“We’re reached out to the Republicans. What they have said is how the program has cost. But the main point is it has cost so much because the recession was much deeper than any since the Great Depression and it has continued longer,” Levin said Tuesday.
Discussing when the Fed may taper, and the state of the economy and jobs, with Chris Rupkey, Bank of Tokyo-Mitsubishi UFJ, and Ed Keon, Quantitative Management Associates.
In Fiscal Year 2013, which ended Sept. 30, the federal government spent nearly $26 billion on the Emergency Unemployment Compensation program.
As for the job seekers in his Michigan district, Levin said, “Many of them are in their 40s and in their 50s. They don’t put any dates on the resumes they send out because they think if the prospective employer knows their age, they won’t get hired. So for individuals, this is really a crisis.”
He added, “If my (House) colleagues would talk to the unemployed when they’re home,” the extension of the benefits program “is sure to happen,” Levin said.
A remarkable fact to which Americans have become accustomed is that the number of people working today is less than the number of people working back in January of 2008, when non-farm employment peaked at just over 138 million.
When Congress created the Emergency Unemployment Compensation program in the summer of 2008 – out of fear that the recession was worsening—there were 137.3 million Americans working, according to the Bureau of Labor Statistics. That was 768,000 more than the number of Americans working last month. The unemployment rate then was 5.6 percent; now it’s 7.3 percent.
The Emergency Unemployment Compensation program covers those who’ve exhausted their benefits under their state’s regular unemployment benefits program. Benefits are available for 26 weeks in most states, but some states offer fewer weeks. Michigan, for example provides 20 weeks of regular unemployment benefits.
The Emergency Unemployment Compensation program – funded entirely by the federal government – provides between 20 weeks and 47 weeks of additional benefits, depending on the unemployment rate in the state where the jobless person lives.
The future of Emergency Unemployment Compensation benefits hasn’t been debated on the floor of House or Senate. But members of both parties in Congress express an uneasiness that even now, four years after the official end of the 2007-09 recession, the U.S. job market remains sluggish.
“Our economy is recovering, but far too slowly and our highest priority has to be making sure that we meet our short- and medium-term needs to create jobs and boost the economy,” Murray said last week as she and Ryan convened a meeting of the House-Senate budget conference committee.
As long as Republicans control the House, another fiscal stimulus – such as the $50 billion in spending on transportation infrastructure which President Barack Obama proposed two years ago and called for again during a visit to the port of New Orleans two weeks ago – seems out of the question.
In the meantime, monetary stimulus in the form of “quantitative easing,” or asset purchases, by the Federal Reserve hasn’t sparked the kind of sustained growth to create jobs for the 11.3 million unemployed.
At the confirmation hearing last week for Janet Yellen, Obama’s nominee to head the Federal Reserve, Sen. Mike Johanns, R-Neb., complained that the Fed’s ultra-low interest rate policy has created asset bubbles in real estate and the stock market: “the economy has gotten used to the sugar you've put out there, and I just worry that we're on a sugar high.”
Johanns contrasted what he sees as asset bubbles with an economy that “most everybody would recognize has too much unemployment, an economy where people continue to struggle, an economy where it's kind of hard to see where the growth is going to be.”
A day earlier, Congressional Budget Office Director Doug Elmendorf had testified to the Murray-Ryan conference committee that “the persistently high level of long-term unemployment is a very worrisome factor for the economy” because it means permanent loss of productive capacity (and future tax revenues) as unemployed workers find their skills “depreciating over time” and becoming less relevant every passing week.
Elmendorf said the high level of long-term unemployment “poses a very large risk of there being some set of people who will not find their way back to work at all or will not find their way to the productive sort of work that they were in before they lost their jobs.”
This story was originally published on Tue Nov 19, 2013 2:33 PM EST