Democrats in Congress plan to renew their efforts next week to extend the Emergency Unemployment Compensation program that expired on December 28.

An estimated 1.3 million long-term unemployed people lost their extended benefits last week when the program expired as members of Congress left Washington for the holiday break (see House Democratic Women Lawmakers Push for Unemployment Insurance Extension and Accountant Faces Cutoff in Unemployment Benefits).

Sen. Jack Reed, D-R.I., plans to introduce bipartisan legislation with Sen. Dean Heller, R-Nev., to extend the program for three months, with retroactive benefits for workers who lost their benefits last week, while Congress tries to find a way to offset the cost of the benefits for a full year. The cost of extending the benefits for three months is estimated to be $6.5 billion, and for a full year roughly $25 billion. Many Democrats argue that the cost of the federal benefits, which provide for workers who have been out of work for more than six months, does not need to be offset and should be counted as emergency spending, since the unemployment rate remains relatively high.

“We face in this country an unprecedented critical challenge,” said Rep. Sander Levin, D-Mich., the ranking Democrat on the House Ways and Means Committee, during a conference call with reporters Friday. “That is, last week, 1.3 million long-term unemployed people looking for work lost every dime of their unemployment insurance, and this week another 72,000.”

Levin noted that he met with some of the unemployed people who had lost their benefits last week in Michigan and one of them told him, “I just want to stay alive. I just want to keep a roof over my head.”

“As more of the long-term unemployed come forward, they will leave Congress with no alternative but to extend unemployment insurance,” Levin predicted.

Rep. Steny Hoyer, D-Md., the House Democratic Whip, noted that if Congress does not restore the jobless benefits, this will be the first time that Congress has not extended unemployment benefits under both Republican and Democratic administrations with unemployment so high. In his own state, Maryland, 22,900 people lost their unemployment insurance last week, an average of $326.30.

“We lost $7,472,270 in weekly benefits in the state of Maryland,” Hoyer added. “The total was over $400 million nationally. Only one in four Americans who are out of work have access to unemployment insurance. For Congress to let this program expire while our jobs recovery is continuing, in my view, is reckless and irresponsible.”

Hoyer pointed out that the long-term unemployed are facing one of the toughest job markets ever. “There is only one job opening for every three workers who need a job,” he added. “While the national unemployment rate continues to fall, there are still many states struggling with high unemployment. The long-term unemployment rate actually increased, not decreased, last month.”
Hoyer noted that 200,000 military veterans are among those losing their benefits. He plans to work with House Minority Leader Nancy Pelosi, D-Calif., and other members to restore the benefits as soon as Congress reconvenes next week. Hoyer predicted that Reed would bring up the matter again in the Senate as early as Monday night or by Wednesday. “We also will continue to push for job-creating legislation and fiscal policies that combine the certainty that businesses need to create more jobs and get more people back to work,” he added.

Robert Reich, a former Labor Secretary during the Clinton administration, also spoke during the conference call with reporters about the economic impact of the benefits cutoff. “It’s not a happy new year for 1.3 million jobless Americans and their families who have lost their unemployment benefits, and millions of others who will lose them if nothing is done,” he said. “Congress’s first responsibility when it reconvenes should be to restore unemployment benefits for these people. Long-term unemployment remains at record levels: 37 percent of America’s unemployed have been without work for over six months. The current rate of unemployment, along with the long-term unemployed, is at least twice as high as it was at the expiration of every previous unemployment insurance program going back all the way to 1958. A lot of people unfortunately in the Republican party say unemployment benefits deter people from seeking employment, but the real reason the unemployed don’t have jobs is because there are not enough jobs. There are still three unemployed people for every job opening in America and over a million fewer jobs today than when the recession began over six years ago.”

Reich contended that the cutoff in unemployment benefits not only harms the jobless and their families, but also hurts the economy because they can’t buy the goods and services that support other jobs. “Unemployment insurance in 1935 when it started was considered a countercyclical program to make sure that many other workers were not sucked into the vortex of unemployment because the unemployed have enough money to continue to buy,” he pointed out. “But when you have only one in four jobless Americans collecting unemployment benefits, as you do today, it is no longer a countercyclical program. In fact, the lack of unemployment insurance is making things worse. The Congressional Budget Office estimates that unless unemployment benefits for the long-term jobless are reinstated, the economy is going to lose 200,000 additional jobs this year. So restoring benefits is urgent, not only because of the harm that the lack of benefits is causing to these unemployed workers and their families, but also because of the harm that radiates out to the rest of the economy.”

Lawrence Katz, a professor of economics at Harvard University, agreed that the long-term unemployment rate remains at record highs. “While we are seeing some recovery, it’s really affecting mainly the short-term unemployed,” he observed. “The other key thing, on top of the human costs, is that it’s actually fiscally irresponsible not to extend unemployment insurance benefits. The long-run costs to taxpayers will be much higher from disconnecting people from the labor market and harming their families. It means more people ending up on more expensive programs such as disability insurance.”

Katz pointed to evidence of adverse effects on the children of the long-term unemployed when their family’s income is not supplemented by unemployment insurance, including the adverse impact on their children’s test scores and educational outcomes. “Not only are there the short-term technical benefits and stimulating function to keeping families whole and improving the labor market, there will be large long-run costs that will be greater than the short-run benefits,” he added. “While people argue that extending unemployment insurance benefits makes people less likely to take jobs, what we’re increasingly seeing is that in the current environment, with the weak labor market and limited demand and many people searching, what extending benefits does is it keeps people connected to the labor market.”

Katz also sees increasing evidence that long-term unemployment insurance is keeping the labor force participation rate up, so as the economy recovers, people will be available to work. “In states that have ended their extended benefits programs, such as North Carolina recently, while you see the unemployment rate fall, in fact that’s entirely driven by declining labor force participation,” he contended. “The labor force participation rate in the nation, not including North Carolina, actually increased over the last year. It’s only gone down because of declines in North Carolina, which have been dramatic, almost 2 percent, since they cut off extended benefits. So this is really worrisome.”

He argued that families would benefit dramatically and taxpayers would also benefit in the long run if Congress extends the program.