Unemployment Benefits to Lapse as Congress Fails to Agree

Unemployment benefits for 1.3 million people in the U.S. are poised to end Dec. 28 as Democrats failed in their last-ditch effort to extend the jobless assistance before the House adjourns tomorrow.

Republicans who control the House refused to keep the aid flowing to the long-term unemployed without agreement on budget cuts elsewhere. Extending the benefits would cost $26 billion over two years, according to the Congressional Budget Office.

Senate Majority Leader Harry Reid today said the lawmakers won’t have a chance to act before leaving for the holiday recess. It will be the first issue taken up when Congress reconvenes next month, Reid said, and lawmakers would try to make the benefits retroactive.

“This is something we are focused on like a laser, and we’re going to continue working on it,” Reid told reporters today. “It’s been extremely difficult, procedurally, to move things along.”

The failure of Congress to agree could put a dent in the nation’s economy. The Congressional Budget Office estimates that extending the program would boost growth by 0.2 percent and add about 200,000 jobs.

“We still haven’t seen the type of employment improvement that would warrant allowing this program to expire,” said Chad Stone, the chief economist for the Center on Budget and Policy Priorities, a Washington-based group which supports programs that assist the poor. “This means real hardship for real people -- but it’s also bad for the economy.”

State Impact

While the national unemployment rate fell to 7 percent in November, there were still 4.1 million people, more than one-third of the unemployed, who had been out of work for 27 weeks or more, enough to exhaust state unemployment benefits. Failure to extend benefits would hit hard in states such as Nevada, Michigan and California, where unemployment remains higher than in the overall U.S.

Carlos Pacheco, a 53-year-old lab manager in New Jersey laid off in June, would be among those affected by the benefit lapse. Pacheco received what could be his final benefit check last week if Congress doesn’t agree to an extension before the House’s scheduled holiday recess after tomorrow.

“I was kind of optimistic when I saw that Congress passed a deal on the budget,” Pacheco said in an interview. “But the extension in 2014 of the unemployment insurance was not in this particular deal. It is surprising. They have until Friday to decide on this matter, otherwise they’re going to go and leave town.”

Extended Emergency

During the recession, Congress approved 73 additional weeks of unemployment benefits for individuals who were out of work. The extended benefits kicked in when regular aid expired after 26 weeks, meaning those who qualified received benefits for 99 weeks.

The duration of benefits phased down, as the economy improved. The median is now 28 weeks across states, down from 53 weeks in 2010, according to the White House.

Democrats began a renewed push this week after an extension of the unemployed benefits was left out of the budget accord reached by House and Senate negotiators Dec. 10, which would ease automatic U.S. spending cuts for two years, remove the risk of a government shutdown and cut the deficit by $23 billion.

Boehner’s View

House Speaker John Boehner supports the budget agreement, though not an extension of unemployment benefits without offsetting spending cuts.

“When the White House finally called me last Friday about extending unemployment benefits, I said that we would clearly consider it, as long as it’s paid for and as long as there are other measures that would help get our economy moving once again,” Boehner, an Ohio Republican, told reporters earlier this week. “I have not seen a plan from the White House that meets those standards.”

White House spokesman Josh Earnest said the long-term jobless aid has been treated as “an emergency program,” in which costs aren’t recouped from other accounts and instead are added to the deficit. The practice began during the administration of Republican President George W. Bush, he said.

“There is no reason they shouldn’t be able to get it done this year,” Earnest said of lawmakers. He said senior White House staff members “have been in touch” with key members of Congress on ways to renew jobless benefits.

“The president and his people are engaged, this is a priority,” he said.

State Impact

The loss of the jobless aid wouldn’t be felt equally across states: How long residents can collect emergency federally funded checks depends on the local unemployment rate. Such payments can now last as long as 47 weeks in Illinois, Nevada and Rhode Island, according to the Center on Budget and Policy Priorities. No one receives them in North Carolina, after a change in state law made residents ineligible.

States have been alerting recipients that their checks could be cut off. California estimates that checks could be cut off for more than 220,000 people in the state if Congress doesn’t act. About 127,000 in New York could lose benefits while the figure is 44,000 in Michigan, according to data compiled by House Democrats on the Ways and Means Committee. Illinois says about 80,000 people would be cut off there.

“While today’s job growth allows most newly unemployed individuals to find work after a several weeks, the long-term unemployed face additional hurdles,” Jay Rowell, the director of the Illinois Department of Economic Security, said in a statement. “Ending this modest program based on a calendar date rather than economic principles and job skills could slow economic growth.”

Lab Manager

Pacheco, who last worked managing an analytical chemistry lab at the University of Connecticut, has been receiving about $600 a week over 26 weeks. Being over 50 years of age and seeking a job in a specialized field poses tough challenges, he said.

Pacheco said the prospect of losing jobless aid had him considering the possibility of dipping into his savings account to pay his mortgage and other bills.

“If you try to find a job in this competitive market, it takes two, two-and-a-half months just to get through the process,” Pacheco said. “It doesn’t make sense not to continue this benefit.”

Before it's here, it's on the Bloomberg Terminal.