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Senate advances extension in benefits for long-term unemployed

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(Bloomberg) — The U.S. Senate advanced legislation extending unemployment benefits for the long-term jobless, a battle Democrats plan to escalate as part of an election-year focus on income inequality.

The vote today was 60-37, with 60 needed, to move forward a measure to restore for three months the emergency jobless benefits that expired Dec. 28 for 1.3 million Americans.

“There are lots of people who are in desperate shape,” said Senate Majority Leader Harry Reid, adding that on his way to the Capitol in Washington today, he noticed a reporter and cameraman trying to wake up a person asleep on a sidewalk on Constitution Avenue. “It’s not good for the country.”

Besides casting the measure as a moral imperative, Democrats are stepping up efforts to demonstrate the economic benefits of restoring the weekly payments to individuals who they say will spend the money on goods and services that create jobs. President Barack Obama plans to emphasize that argument in a speech at the White House today, the administration said.

“It is unprecedented for the Congress to allow emergency unemployment benefits to expire at a time when long-term unemployment is as high as it is today,” according to a statement from the White House yesterday. The nationwide jobless rate for November was 7 percent.

Many Republicans say the program is a disincentive for the unemployed to secure long-term employment and that it feeds a culture of dependency. Republican leaders are demanding that Democrats find a way to cover the $6.4 billion cost of a three-month extension.

National debt

Senate Minority Leader Mitch McConnell, a Kentucky Republican, said his party would support additional jobless benefits “if we could find a way to extend them without actually adding to the national debt.” He proposed paying for the extended aid by delaying for a year the health-care law’s requirement that most individuals obtain insurance.

McConnell faulted the economy during the sixth year of Obama’s administration, saying “record numbers” of poor and working-class people “have been having a perfectly terrible time.”

Before the vote, Democratic leaders including New York Senator Chuck Schumer said the bill was part of a broader income-inequality agenda they are rolling out in the months before the November midterm election. The party also will focus on raising the minimum wage and boosting federal spending on infrastructure projects to create jobs.

High unemployment

Democrats are seeking to help U.S. workers weather the longest period of high national unemployment since the Great Depression, and if they fail, to put Republicans on defense before the election.

For every dollar the U.S. government spends on unemployment insurance, $1.55 returns to the gross domestic product, said Reid, citing an analysis by Mark Zandi, chief economist of Moody’s Analytics.

“This is a good investment for us,” New Hampshire Sen. Jeanne Shaheen, a Democrat, said in a Jan. 5 conference call. “If we don’t provide this extension, these families will be looking for help from government in other ways.”

Last week, Democrats on the House Ways and Means Committee released a state-by-state analysis of the effect of lost unemployment dollars that feed local economies. In Illinois, almost 82,000 people lost an average $313 weekly benefit for a total statewide effect of $25 million. Ohio lost about $12 million in one week, and the total estimated effects in all states combined was $408 million.

Job creation

Many Republicans say renewing the benefits fails to address the root problem of how to create jobs. Rep. Peter King, a New York Republican who often works with Democrats on legislation, said he could compromise on a short-term extension as long as Democrats pair it with job-creation measures.

“I don’t want to have this permanent state of unemployment insurance where we end up like Europe,” King said on CBS’s “Face the Nation Program” on Jan. 5. The benefits should be renewed “with restrictions on it so we don’t have a permanent class of people on unemployment insurance and it doesn’t become an impediment to jobs,” he said.

The Heritage Foundation, a Republican-aligned group that supports free markets and opposes the extended benefits, said the previous extension to 99 weeks as part of an economic stimulus program increased the national unemployment rate by 0.5 percentage point. Each 13-week extension of benefits increases the average length of time a worker stays unemployed by approximately one week, the group said.

Speaker Boehner

House Speaker John Boehner has said he’s willing to negotiate as long as Democrats cover the cost of the measure, which currently contains no funding provisions.

Democrats say they’ve already offered the spending cuts that Republicans demand. Rep. Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, offered an amendment before Congress left for the holidays to pay for the plan with cuts to agricultural subsidies.

Following a two-year budget deal reached in December, both parties are focusing their campaign messages on the U.S. economy’s struggles and how to help workers.

Republicans plan to take aim at the health-care law and federal regulations they say hamper job growth.

Heritage Action

Groups that support Republican lawmakers and oppose extended jobless benefits, including the Club for Growth and Heritage Action for America, said they plan to include the vote in their ranking of lawmakers’ records.

The extended unemployment program started in 2008 and at one point provided as many as 99 weeks of benefits. At the end of 2013 the maximum was 73 weeks, including 26 weeks of state-funded benefits.

The emergency benefits have been renewed 11 times since President George W. Bush put them in place in 2008, when the U.S. jobless rate was 5.6 percent. All extended benefits are covered by federal dollars, while initial jobless insurance comes from federal, state and employer funds.

Democrats maintain that unemployment insurance has been routinely extended by Republican and Democratic presidents and Congresses during periods of high unemployment.