Extra jobless aid ends now for 1.3 million

Recovery feared to take hit

Richard Mattos, 59, looks for jobs at a state-run employment center in Salem, Ore., on Thursday, Dec. 26, 2013.  Mattos is one of more than 1 million Americans who will lose federal unemployment benefits at year's end. (AP Photo/Jonathan J. Cooper)
Richard Mattos, 59, looks for jobs at a state-run employment center in Salem, Ore., on Thursday, Dec. 26, 2013. Mattos is one of more than 1 million Americans who will lose federal unemployment benefits at year's end. (AP Photo/Jonathan J. Cooper)

WASHINGTON - More than 1 million Americans are bracing for a post-Christmas jolt as extended federal unemployment benefits end this weekend, entailing potentially significant implications for the recovering U.S. economy and setting up a battle when Congress reconvenes in the new year.

Nudging Congress along, a vacationing President Barack Obama called two senators proposing an extension to offer his support.

“The president said his administration would, as it has for several weeks now, push Congress to act promptly and in bipartisan fashion to address this urgent economic priority,” said Josh Earnest, a White House spokesman.

For families dependent on cash assistance, the end of the federal government’s “emergency unemployment compensation” will mean some difficult belt-tightening as enrollees lose their average monthly stipend of $1,166.

Jobless rates could drop, but analysts say the economy might suffer with less money for consumers to spend on products such as clothes and cars. Having let the “emergency” program expire as part of a budget deal, it’s unclear whether Congress has the appetite to start it anew.

An estimated 1.3 million people will be cut off when the federally funded unemployment payments end today. With the federal program’s expiration, just 1 in 4 unemployed Americans will receive jobless benefits - the smallest proportion in half a century.

Between January 2008 and September of this year, 172,392 Arkansans have received such benefits, according to a White House report released earlier this month.

An estimated 9,300 people in the state will immediately lose benefits when the program ends, according to a report released by Democrats on the House Ways and Means Committee.

Labor Secretary Thomas Perez called the unemployment benefits a “critical lifeline” during a conference call with reporters Friday afternoon. The program is designed to gradually diminish benefits as the economy improves but should not be cut in the middle of that improvement, he said.

Perez said he was hopeful and confident that Congress would pass an extension of the program after members return Jan. 6.

If the program is not extended, an estimated 40,300 Arkansans will be affected, including those who will immediately stop receiving benefits and those who will not receive federal unemployment aid when their state unemployment runs out next year, according to the White House report.

In Arkansas, a person can receive state unemployment benefits for up to 25 weeks and federal benefits for up to 14 weeks.

Elsewhere, about 214,000 Californians will lose their payments, a figure expected to rise to more than a half-million by June, the Labor Department said. In the past 12 months, Californians received $4.5 billion in federal jobless benefits, much of which went back into the local economy.

More than 127,000 New Yorkers also will be cut off this weekend. In New Jersey, 90,000 people will immediately lose their benefits.

Started under President George W. Bush, the benefits were designed as a cushion for the millions of U.S. citizens who lost their jobs in a recession and failed to find new ones while receiving state jobless benefits, which in most states expire after six months. Another 1.9 million people across the country are expected to exhaust their state benefits before the end of June.

But Obama has no quick fix. He hailed this month’s two-year budget agreement as a breakthrough of bipartisan cooperation while his administration works with Democratic allies in the House and Senate to revive an extension of benefits for those unemployed more than six months.

The Obama administration said those payments have kept 11.4 million people out of poverty and benefited almost 17 million children. The cost of them since 2008 has totaled $225 billion.

At the depth of the recession, laid-off workers could qualify for up to 99 weeks of benefits, including the initial 26 weeks provided by states. The most recent extension allowed a total of up to 73 weeks, depending on the state.

Restoring up to 47 extra weeks of benefits through 2014 would cost $19 billion, according to the Congressional Budget Office.

House Democrats led by Reps. Sander Levin of Michigan and Chris Van Hollen of Maryland sought to include an extension through March by offsetting the costs with potential farm bill savings. They were rebuffed.

Senate Democrats and some Republicans plan another push in 2014. Sens. Jack Reed, D-R.I., and Dean Heller, R-Nev., have introduced a bill offering a similar three-month extension, and Senate Majority Leader Harry Reid, D-Nev., has promised to bring it up. But as with much in Congress, an extension is no sure thing.

In phone calls Friday, Obama told Reed and Heller that he was glad they were working together to address the problem. Obama said the abrupt cutoff in cash assistance during the holidays will hurt economic growth and jobs.

“It defies economic sense, precedent and our values,” Obama economic adviser Gene Sperling said in a statement. Sperling said the Senate will likely hold a vote on the proposal as soon as Congress returns next month.

House Speaker John Boehner spoke with Obama about an extension earlier this month. Boehner said his caucus would consider the possibility “as long as it’s paid for and as long as there are other efforts that will help get our economy moving once again.” He said the White House has yet to introduce a plan that meets his standards.

For other Republicans, the bar is higher. Many of them look at signs of economic growth and an unemployment rate now down to 7 percent and expected to drop further as evidence the additional weeks of benefits are no longer necessary.

The effect of jobless benefits on the unemployment rates has been fiercely debated for decades. To qualify, people have to be seeking work. Tea Party-backed lawmakers such as Sen. Rand Paul of Kentucky argue that the payments aggravate rather than relieve unemployment.

“I do support unemployment benefits for the 26 weeks that they’re paid for,” said Sen. Rand Paul, R-Ky., on Fox News. “If you extend it beyond that, you do a disservice to theseworkers. When you allow people to be on unemployment insurance for 99 weeks, you’re causing them to become part of this perpetual unemployed group in our economy.”

Expanding on his remarks during an interview with NBC News, Paul argued that the longer workers are unemployed, “the less likely they are to ever get a job again.”

Democrats were eager to debate that view. House Minority Leader Nancy Pelosi, D-Calif., released a statement Friday accusing Republicans who oppose the extension of being heartless.

“Neglecting to extend this vital lifeline to millions of workers is simply immoral - an abdication of our obligation to do what we can to support those who worked hard, played by the rules, and lost their jobs through no fault of their own,” Pelosi said. “For the Americans affected by this Republican inaction, there’s no time to waste. The first item on Congress’ agenda in the New Year must be an extension of unemployment insurance.”

Congress has approved extensions of unemployment benefits 11 times since the summer of 2008.

The benefits allow some job seekers to hold out for higher wages. Without the benefits, they might accept lower-paying jobs, reducing the unemployment rate. Others might be looking for work only to keep the benefits flowing and will drop out of the job market entirely once the checks stop. In theory, that also would push the unemployment rate lower.

The flip side is that the benefits - in addition to alleviating suffering - are mostly spent on consumer goods, stimulating the economy and creating jobs.

Extended unemployment insurance “is really a lifeline to help pay the bills, put food on the table, and put gas in the tank so people can look for work,” argued Maurice Emsellem, policy co-director at the left-leaning National Employment Law Project.

Michael Feroli, an analyst at JPMorgan Chase, said ending the extended benefits will lower the unemployment rate by half a percentage point as the long-term unemployed leave the labor force. Although that statistical change might look good on the surface, Feroli cautioned the drop could be accompanied by a similar decrease in consumer spending. Such a drop would hurt clothing retailers, car dealers and other Main Street businesses, he said.

Extending the program, on the other hand, would boost GDP growth by about 0.2 percent and increase full-time employment by 200,000 next year, the Congressional Budget Office estimated, but at the price of increasing the government’s debt.

Information for this article was contributed by Josh Lederman of The Associated Press, Maeve Reston of the Los Angeles Times, Annie Lowrey of The New York Times and Sean Beherec of the Arkansas Democrat-Gazette.

Front Section, Pages 1 on 12/28/2013

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