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Prospects Dim for Unemployment Insurance Extension

October 11, 2011 - by Donny Shaw

The American Jobs Act contains a provision that would be extremely stimulative in terms of GDP expansion and jobs growth while also providing direct relief to the workers who have been hardest hit by the recession. Yet in discussions over which parts of the bill to keep for inclusion in a smaller, bipartisan package after the American Jobs Act is officially killed (later today), that provision doesn’t seem to be popular.

I’m referring of course to the extension of federal unemployment insurance. Unless Congress acts, on January 1, millions of long-term unemployed workers will begin to lose their benefits. According to National Employment Law Project, 6 million would lose their benefits in 2012, and 2.2 million would lose their benefits by mid-February.

Without action, the length of time a person could receive unemployment insurance benefits would be scaled back dramatically, from the current 99 weeks to just 26 weeks.

In September, the average length of unemployment rose to a record high of 40.5 weeks. Cutting back benefits to 26 weeks would mean the average unemployed person would go nearly four months without any form of income after going six months on the limited income unemployment insurance provides (on average about $300/week, or about 70% of the poverty level for a family of four) . And that would be just the average scenario. For millions of unemployed workers the situation would be much, much worse.

Letting extended unemployment benefits expire could also slow job growth. According to the Congressional Budget Office, every $1 spent on unemployment insurance increases GDP by as much as $1.90. And every $1 million spent on unemployment benefits creates as much as 15 cumulative years of full-time equivalent employment. No other policy options on the table come close to those effects.

Yet, as Politico reported recently, extending unemployment insurance has become a bargaining chip in talks over reducing the deficit and creating jobs. In a report out this morning about provisions from the American Jobs Act that are being discussed for inclusion in a smaller package that could get bipartisan support, extending unemployment insurance is nowhere to be found. WIth very little to no Republican support for extending unemployment insurance on its own, the only chance for an extension is in a larger package with something the Republicans want.

As the 2012 elections approach, Democrats are more likely to fight harder for new stimulus ideas, like the infrastructure bank plan, rather than extensions of existing programs. That might be smart politics, but abandoning extended unemployment insurance is not smart policy and it will hurt millions of unemployed Americans.

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