Congress Deadlock Threatens Jobless Aid, May Add State Costs

Jephanie Thomas lost her retail job about two years ago. Since then, her almost weekly efforts to find work while getting extended unemployment benefits have failed. Her assistance may end amid a deadlock in Congress.

Too many people are applying for too few jobs, Thomas said yesterday as the U.S. House rejected a two-month extension of the jobless program the Senate passed on Dec. 17. The jobless aid is now in limbo.

“I don’t know what I’ll do,” Thomas, 22, said in an interview as she stopped in a career center in Brooklyn. “It isn’t fair because the unemployment rate isn’t really falling.”

Ending extended jobless benefits will slice almost a half percentage point from U.S. economic growth, and will pinch retailers and companies doing business with the unemployed, Mark Zandi, chief economist at Moody’s Analytics Inc., in West Chester, Pennsylvania, said in an interview.

Congress also failed to agree on extending a payroll-tax cut past this month, which will trim U.S. gross domestic product another half point as the economy struggles to recover and cope with global financial woes in Europe, Zandi said.

“The economy is going to take a big hit and recession risks will become uncomfortably high next year,” Zandi said. “It would be a serious error to do nothing.”

Job seeker Joyce Bennett, right, speaks with Cyndi Holzhauser, a consultant from Kelly Service Business Development, at the JobLink Career Expo in Raleigh, North Carolina. Ending extended jobless benefits will slice almost a half percentage point from U.S. economic growth. Photo: Jim R. Bounds/Bloomberg Close

Job seeker Joyce Bennett, right, speaks with Cyndi Holzhauser, a consultant from Kelly... Read More

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Job seeker Joyce Bennett, right, speaks with Cyndi Holzhauser, a consultant from Kelly Service Business Development, at the JobLink Career Expo in Raleigh, North Carolina. Ending extended jobless benefits will slice almost a half percentage point from U.S. economic growth. Photo: Jim R. Bounds/Bloomberg

The congressional deadlock puts in jeopardy two unemployment expansion programs, the first of which was approved in July 2008 by former President George W. Bush. Regular unemployment insurance programs run by the Labor Department would continue.

Assistance Ending

Without action, unemployment benefits would end after 26 weeks, the coverage provided by most states, compared with as many as 53 weeks in states with high unemployment.

Assistance may end as soon as January for 1.8 million people who get unemployment checks, according to a report from the Washington-based National Employment Law Project. Labor Secretary Hilda Solis said last month that about 5 million Americans would lose federal jobless aid without action by lawmakers.

“It’s catastrophic,” Judith Conti, the group’s federal advocacy coordinator, said in an interview. “For lots of families, this is the only lifeline they have. And for Congress to walk away from a deal that could keep these programs up and running in the holiday season and through the new year is about as callous as anything I have ever seen.”

States’ Share

The expanded-benefits program, fully paid by the federal government, is set to expire by Jan. 4. Next month, without congressional action, the U.S. will pay half the cost, with cash-strapped states picking up the remainder.

The program cost the federal government about $9.5 billion this year, up from $7.8 billion last year and $4.9 billion in 2009, said Michael Reed, a policy associate with the National Conference of State Legislators in Washington.

Workers such as Thomas have been seeking jobs as U.S. unemployment has remained higher than 8 percent for 34 consecutive months. The rate in November fell to 8.6 percent, the lowest since March 2009, from 9 percent a month earlier. Last week, the Labor Department said the fewest workers in more than three years filed claims for unemployment benefits.

The Senate voted 89-10 Dec. 17 to continue the expanded unemployment benefits for two months, while extending an expiring payroll-tax cut and preventing a cut in doctors’ reimbursements under Medicare. House Speaker John Boehner said he opposes the measure because the short extension creates uncertainty for employers as they plan for 2012. The House rejected the Senate measure 229-193 yesterday.

‘Bite Bullet’

The Emergency Unemployment Compensation program, which expires Jan. 3, provides as many as 53 weeks of benefits in states where unemployment is higher than 8.5 percent. States struggling with tight budgets would need to find additional cash to pay their share, or would stop paying, Reed said.

They may “decide they will bite the bullet and pay for it themselves or let it fall by the wayside because they don’t have enough to pay them out,” Reed said in an interview.

House Republicans who opposed the Senate’s measure may be tested when explaining their votes, especially to constituents who get benefits or know people who do, Julian Zelizer, a professor of history and public affairs at Princeton University in New Jersey, said in an interview. Democrats will cite the vote to show Republicans are only concerned about cutting taxes on the wealthy, he said.

Democrats’ Campaign

“It’s very clear the Democrats are planning a campaign that revolves around this, focused in on unemployment insurance and the willingness to extend those benefits, and willingness to raise taxes on the middle class and not the richest Americans,” Zelizer said. “I would not be surprised if you hear about it a lot from congressional candidates.”

Senator Scott Brown, a Massachusetts Republican, faulted House members of his party, saying their actions will result in smaller paychecks and hurt families that rely on unemployment benefits.

“It angers me that House Republicans would rather continue playing politics than find solutions,” Brown, who will stand for re-election next year, said in a statement.

German Garcia, 29, who lost his job at a property management company and now is taking resume and interview classes at the same Brooklyn center where Thomas seeks work, said lawmakers should do more.

“They should extend those programs because at the end of the day, what will people do?” he said. “People need a safety net.”

To contact the reporters on this story: Esme E. Deprez in New York at edeprez@bloomberg.net; William McQuillen in Washington at bmcquillen@bloomberg.net

To contact the editor responsible for this story: Steve Geimann at sgeimann@bloomberg.net

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