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Emergency Jobless Benefits Could Slow Payroll Tax-Cut Talks

Feb. 1 (Bloomberg) -- U.S. Senate Democrats seeking an agreement to extend a payroll tax cut through 2012 say they would consider reducing emergency jobless benefits in states hit hard by the recession from the current maximum of 99 weeks.

Most Democrats said they wanted to stay as close to 99 weeks as possible and wouldn’t say how much time they would be willing to slice from the program. Any reduction would represent a major concession from Democrats who have maintained that the expanded benefits are necessary to fuel the U.S. economy and support laid-off workers.

Unemployment compensation is one of the most polarizing parts of a legislative package including a payroll tax cut, which was extended in December for two months until Feb. 29. In trying to hammer out a deal to continue the benefits through 2012, Republicans want to cut the maximum to 59 weeks, a level that Democrats have said is unacceptable. Extending the jobless benefits for 59 weeks would cost $26.1 billion over 10 years, according to the Congressional Budget Office.

House and Senate lawmakers appointed to resolve the impasse over the payroll tax cut will discuss the jobless benefits issue at a meeting today. Ahead of that gathering, Democrats said they aren’t ruling out options when it comes to unemployment compensation.

“We’ve got to talk it over,” Senate Finance Committee Chairman Max Baucus, a Montana Democrat who sits on the House-Senate conference committee, told reporters yesterday.

Baucus said today that his fellow Senate Democratic conferees would make a proposal on unemployment insurance to House Republicans tomorrow.

Seeking Conditions

Republicans are seeking conditions for continuing the emergency unemployment insurance -- such as authorizing states to require drug testing and requiring individuals without high school diplomas to enroll in GED programs -- that House Democratic negotiators have said they won’t accept.

To be adopted and sent to the House and Senate floors for a vote, the negotiators’ report must win the backing of a majority of each chamber from among the 20 lawmakers on the conference panel.

If Congress doesn’t act by Feb. 29, the 2 percentage-point cut in the payroll tax for workers would expire, unemployment benefits would be scaled back to 26 weeks and doctors who are reimbursed through Medicare would receive lower payments.

Open to Talks

Several Senate Democratic conferees said they are open to negotiations on the length of time for the jobless benefits.

Senator Ben Cardin, a Maryland Democrat, described his preference for continuing the benefits for 99 weeks as “where I’m starting from.”

“I’m certainly going to listen to the arguments that are made” at the conference, Cardin told reporters yesterday. Senator Bob Casey, a Pennsylvania Democrat who sits on the negotiating panel, said he wants lawmakers to end up “as close” to 99 weeks “as possible.”

Democratic leaders in the Senate say they want the 99-week threshold while encouraging the conferees to make a deal.

“I would encourage 99 weeks but it’s not a deal breaker,” Senate Majority Whip Richard Durbin, an Illinois Democrat, told reporters yesterday. “If you’ve lived around Capitol Hill for awhile, you know that some things are going to be negotiated.”

Timing Criticized

Senator Jack Reed, a Rhode Island Democrat who was appointed to the negotiating panel to focus on the unemployment issue, said this is a bad time to start reducing benefits.

“If we truncate the number of weeks, we might find ourselves still in a situation with 8 percent unemployment” while the jobless would be “left without support,” he said at today’s committee meeting.

If Democrats agree to back away from 99 weeks of benefits, Republicans could be pressured to accept a package that extends compensation beyond the 59 weeks they have been seeking. Senator Mike Crapo, an Idaho Republican on the conference panel, said he was open to allowing workers to claim benefits beyond 59 weeks.

“When we get to the details, I may or may not be willing to agree to some of the positions,” he said in a Jan. 30 interview.

Cutting Benefits

House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, said he still wants to cut benefits to 59 weeks. The Republican-led House passed a bill in December that would have made those reductions.

“Even the president has suggested it is time to reduce the number of weeks UI benefits are available and House Republicans couldn’t agree more,” he said in an emailed statement yesterday. “The House-passed bill reflects a level of benefits in line with what was offered after previous recessions, while also supporting training for the unemployed so they have the skills to successfully get back to work.”

Lawmakers need to “do better” than continuing the existing unemployment program, said Representative Tom Reed, a New York Republican. The panel should “lead to reforms that lead to paychecks for Americans.”

Obama has proposed changes to the unemployment system including more training to help laid-off workers find a new job.

The federal government establishes the framework for the nation’s unemployment system and states administer the program. States provide the first 26 weeks of compensation. That amount has been supplemented by additional compensation from the federal government in response to high unemployment.

High-Unemployment States

The next two levels of assistance -- known as Tier 1 and Tier 2 -- provide workers with 20 weeks and 14 weeks of jobless benefits, respectively. In states where the unemployment rate exceeds 6 percent, workers can take advantage of Tier 3 and claim an additional 13 weeks of benefits. Tier 4 allows workers to claim six more weeks of benefits in states where the unemployment rate exceeds 8.5 percent.

The final 20 weeks are available to people in the hardest-hit states where the number of unemployed workers is 110 percent of the level during any of the previous three years.

Republicans say they would simplify the program by eliminating three of those building blocks -- the final benefits for workers in states with the highest unemployment rates along with Tiers 2 and 4 -- to bring it down to 59 weeks of benefits.

To contact the reporters on this story: Steven Sloan in Washington at; Kathleen Hunter in Washington at

To contact the editor responsible for this story: Jodi Schneider at

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