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Republicans Move to Cut U.S. Unemployment Benefits to Ease Business Taxes

House Republicans moved to let U.S. states cut federally paid jobless benefits and use the funds to avert tax increases on businesses, which Democrats blasted as an attack on the unemployed.

The Ways and Means Committee passed a bill by 20-14 today that lets states shift some of the $31 billion they are set to get for extended unemployment aid to prevent the tax increases, pay back federal loans or fund job-training programs. Republican David Camp, chairman of the House of Representatives panel, said the bill would allow states to target the money more effectively.

“Some argued that these benefits would increase economic activity and employment, but the only increase we have seen is an increase in unemployment taxes,” Camp, from Michigan, said in Washington today. “These taxes on jobs are only making it harder for the millions of unemployed workers to get back to work.”

Temporary federal funds allow the 26 weeks of unemployment aid typically paid by states to be extended to as long as 99 weeks. Today’s measure gives states greater sway over the money, now used only for unemployment checks. They could use it instead to shield employers from tax increases triggered in states that have borrowed $41 billion to pay their share of jobless claims after they ran out of funds.

People looking for jobs wait in line to speak with potential employers at the Brooklyn Job Fair on April 13, 2011 in the Brooklyn borough of New York City. A House bill would let states use $31 billion they are set to get for extended unemployment aid to prevent business tax increases, pay back federal loans or fund job-training programs. Photo: Spencer Platt/Getty Images Close

People looking for jobs wait in line to speak with potential employers at the Brooklyn... Read More

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People looking for jobs wait in line to speak with potential employers at the Brooklyn Job Fair on April 13, 2011 in the Brooklyn borough of New York City. A House bill would let states use $31 billion they are set to get for extended unemployment aid to prevent business tax increases, pay back federal loans or fund job-training programs. Photo: Spencer Platt/Getty Images

Lifeline for Jobless

Democrats said the bill chips away a lifeline for some 4 million unemployed workers and reneges on a deal with President Barack Obama last year that extended the unemployment aid along with 2001 and 2003 income-tax cuts for all Americans, including the wealthiest. That allowed for as many as 73 additional weeks of help for the jobless after state benefits run out.

“Calling this a jobs bill is a cruel hoax for the millions of Americans who could see their unemployment benefits disappear,” Representative Sander Levin from Michigan, the Democrats’ leader on Ways and Means, said of today’s bill. “Republicans act like the problem is the unemployed. No. The basic problem is the lack of jobs.”

Levin said extended unemployment benefits are necessary because there are four workers available for every job opening. By April, more than 6 million people were jobless for 27 weeks or more, enough to exhaust normal state-paid benefits, according to the Labor Department.

The bill now goes to the full House, which is controlled by Republicans. It must also pass the Senate, where Democrats hold a majority.

Higher Business Taxes

The measure is aimed at concern among businesses about the tax increases they face to repay what states borrowed from the federal government to pay their share of benefits since the recession depleted their funds.

Until the loans are settled, employers are subject to a decreasing federal tax credit for unemployment levies they have paid. Through 2015, they face as much as $24 billion in additional taxes in states with indebted funds, according to a study by the National Employment Law Project and the Center on Budget and Policy Priorities.

Representative Kevin Brady, a Texas Republican, said the current system hits businesses that create jobs. “This isn’t working,” he said.

Representative Ron Kind, a Democrat from Wisconsin, said the Republican plan is a “bailout” of profligate state governments that could deal a blow to the economy by allowing states to divert quickly spent unemployment-benefit cash to paying down debt.

“That gives you a zero multiplier effect on the economy,” he said.

Capital Concerns

In state capitals across the country, lawmakers have been raising concerns about tax increases needed to shore up their trust funds -- and the bill would provide them with cash to do so. It wouldn’t change unemployment benefits unless states pass laws to redirect the funds.

Michigan, Arkansas and Florida have already moved to reduce the number of state-paid weeks residents can collect after their trust funds went broke, forcing them to borrow from the U.S.

To contact the reporters on this story: William Selway in Washington at wselway@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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