WASHINGTON
(AP) — More than 1 million Americans are bracing for a harrowing,
post-Christmas jolt as extended federal unemployment benefits come to a
sudden halt this weekend, with potentially significant implications for
the recovering U.S. economy. A tense political battle likely looms when…
FILE - This Aug. 14, 2013 file
photo shows job seekers checking out companies at a job fair in Miami
Lakes, Fla. More than 1 million Americans are bracing for a harrowing,
post-Christmas jolt as federal unemployment benefits come to a sudden
halt this weekend. The development entails potentially significant
implications for the recovering U.S. economy and sets up a tense battle
when Congress reconvenes in the new year. (AP Photo/Alan Diaz, File)
WASHINGTON (AP) — More than 1 million Americans are bracing
for a harrowing, post-Christmas jolt as extended federal unemployment
benefits come to a sudden halt this weekend, with potentially
significant implications for the recovering U.S. economy. A tense
political battle likely looms when Congress reconvenes in the new,
midterm election year.
Nudging Congress along, a vacationing President
Barack Obama called two senators proposing an extension to offer his
support. From Hawaii, Obama pledged Friday to push Congress to move
quickly next year to address the "urgent economic priority," the White
House said.
For families dependent on cash assistance, the end of
the federal government's "emergency unemployment compensation" will mean
some difficult belt-tightening as enrollees lose their average monthly
stipend of $1,166.
Jobless rates could drop, but analysts say the
economy may suffer with less money for consumers to spend on everything
from clothes to cars. Having let the "emergency" program expire as part
of a budget deal, it's unclear if Congress has the appetite to start it
anew.
An estimated 1.3 million people will be cut off when the federally funded unemployment payments end Saturday.
Some
214,000 Californians will lose their payments, a figure expected to
rise to more than a half-million by June, the Labor Department said. In
the last 12 months, Californians received $4.5 billion in federal
jobless benefits, much if plowed back into the local economy.
More
than 127,000 New Yorkers also will be cut off this weekend. In New
Jersey, 11th among states in population, 90,000 people will immediately
lose out.
Started under President George W. Bush, the benefits
were designed as a cushion for the millions of U.S. citizens who lost
their jobs in a recession and failed to find new ones while receiving
state jobless benefits, which in most states expire after six months.
Another 1.9 million people across the country are expected to exhaust
their state benefits before the end of June.
But Obama has no
quick fix. He hailed this month's two-year budget agreement as a
breakthrough of bipartisan cooperation while his administration works
with Democratic allies in the House and Senate to revive an extension of
jobless benefits for those unemployed more than six months.
The
Obama administration says those payments have kept 11.4 million people
out of poverty and benefited almost 17 million children. The cost of
them since 2008 has totaled $225 billion.
At the depth of the
recession, laid off workers could qualify for up to 99 weeks of
benefits, including the initial 26 weeks provided by states. The most
recent extension allowed a total of up to 73 weeks, depending on the
state.
Restoring up to 47 extra weeks of benefits through 2014 would cost $19 billion, according to the Congressional Budget office.
House
Democrats led by Reps. Sander Levin of Michigan and Chris Van Hollen of
Maryland sought to include an extension through March by offsetting the
costs with potential farm bill savings. They were rebuffed.
Senate
Democrats and some Republicans plan another push in 2014. Sens. Jack
Reed, D-R.I., and Dean Heller, R-Nev., have introduced a bill offering a
similar three-month extension, and Senate Majority Leader Harry Reid,
D-Nev., has promised to bring it up. But as with much in Congress, an
extension is no sure thing.
In phone calls on Friday, Obama told
Reed and Heller he was glad they were working together to address the
problem. "It defies economic sense, precedent and our values," Obama
economic adviser Gene Sperling said in a statement.
House
Speaker John Boehner spoke with Obama about an extension earlier this
month. Boehner and said his caucus would consider the possibility "as
long as it's paid for and as long as there are other efforts that will
help get our economy moving once again." He said White House has yet to
introduce a plan that meets his standards.
For
other Republicans, the bar is higher. Many of them look at signs of
economic growth and an unemployment rate now down to 7 percent and
expected to drop further as evidence the additional weeks of benefits
are no longer necessary.
The effect of jobless benefits on the
unemployment rates has been fiercely debated for decades. To qualify,
people have to be seeking work. Tea partiers such as Sen. Rand Paul of
Kentucky argue that the payments aggravate rather than relieve
unemployment.
The benefits allow some jobseekers to hold out for
higher wages. Without the benefits, they might accept lower-paying jobs,
reducing the unemployment rate. Others may be looking for work only to
keep the benefits flowing and will drop out of the job market entirely
once the checks stop. In theory, that also would push the unemployment
rate lower.
The flip side is that the benefits — in addition to
alleviating suffering — get spent on consumer goods, stimulating the
economy and creating jobs.
Extended
unemployment insurance "is really a lifeline to help pay the bills, put
food on the table, and put gas in the tank so people can look for
work," argued Maurice Emsellem, policy co-director at the left-leaning
National Employment Law Project.
Michael
Feroli, an analyst at JPMorgan Chase, said ending the extended benefits
will lower the unemployment rate by half a percentage point as the
long-term unemployed leave the labor force. While that statistical
change may look good on the surface, Feroli cautioned the drop could be
accompanied by a similar decrease in consumer spending. That would also
hurt clothing retailers, car dealers and other Main Street businesses.
Extending
the program, on the other hand, would boost GDP growth by some 0.2
percent and increase full-time employment by 200,000 next year, the
Congressional Budget Office estimated, but at the price of increasing
the government's debt.
Advocates
of extended benefits say communities hardest hit by the recession will
feel the sudden loss of cash in circulation the most.
They
cite a set of their own troublesome figures: three jobseekers still
competing for each opening; some 4 million people in the ranks of
long-term unemployed; unemployment lasting on average 37 weeks, two
months longer than most states provide insurance.
___
Associated Press writer Josh Lederman in Honolulu contributed to this report.
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