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Unemployment Benefits Expire; What Will Congress Do?

November 29, 2010 - by Donny Shaw

Federal unemployment insurance, which provides a lifeline for millions of long-term unemployed workers, expires today, and from here on out it’s going to be harder than ever for the Democrats in Congress to pass another extension.

The Republicans have officially begun chipping away at the Democrats’ majority in the Senate. Republican Mark Kirk was sworn in Monday, taking over for Democrat Roland Burris as the junior Senator from Illinois and knocking the Democrats’ Senate majority down to 58. Kirk has made his opposition to the Democrats’ plans for extending unemployment benefits clear, saying on Fox recently that he would vote against any extension that is not offset by new revenue.

The last time the Democrats tried to pass an unemployment extension, with Sen. Ben Nelson [D, NE] defecting, it took them six weeks to find the two votes they needed to get to 60. Assuming Nelson is still a “no,” now they will have to find three votes now to get 60 votes and break a filibuster. Not likely to happen given the time constraints.

So the Democrats have basically two options for getting this done. Either they find an offset — some kind of targeted tax increase or spending cut — or they tie this together with something the Republicans really want and force them to accept the unemployment extension along with it. Right now, the latter approach is looking most likely, with Democratic leaders already discussing a “grab bag” of compromise ideas to tie in with a vote on extending all of the 2001 Bush tax cuts.

From the perspective of the unemployed, the advantage of this approach is that the Democrats would actually have some bargaining power and could ask for a longer extension. A couple weeks ago when House Dems tried a stand-alone unemployment extension bill, they were trying for only three months. Today, Sen. Max Baucus [D, MT] introduced a bill to extend benefits for all of 2011, and that seems to be an emerging Democratic consensus given the Fed’s recent projections that the unemployment rate will stay pretty much where it’s at now for all of 2011.  Combined with an extension of the Bush tax cuts, the Democrats could go for a longer extension, or even try for adding more weeks for unemployed workers who have exhausted all their available benefits. There operable word here, of course, is “could.” There’s really no way to know at this point beyond pure speculation what they will actually do.

Of course, the grand irony in all this would be that the Republicans, who have positioned themselves against the unemployment benefits because they are not paid for, would end up accepting them because they so badly want to extend the Bush tax cuts, which are also not paid for. The result of all the compromising would be a massive deficit enhancing package, which is something both sides say they don’t want, but which neither are willing to oppose if they get a bit of something they really want in it. That said, the Congressional Budget Office has determined that unemployment insurance is about five times more effective at increasing overall economic output than reducing income taxes in 2011 (e.g. a la an extension of the Bush tax cuts).

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