News Column

Safety Net for Jobless Is Set to Unravel

Dec 3, 2012

Todd Spangler

Jobs

After years of extensions through the national recession and a slow recovery, the federal program paying for emergency unemployment benefits will end Dec. 29 unless a deal to extend it is brokered by a deeply divided Congress.

While there seems to be some general agreement that the program should be saved, its future remains uncertain amid partisan negotiating and Republican demands that if it is to be extended, the $30-billion cost needs to be offset by budget cuts elsewhere in the government.

Barring an extension, roughly 2 million people nationwide could lose unemployment benefits the week ending Dec. 29, unraveling a portion of the social safety net that, a couple of years ago, provided up to 99 weeks of total benefits in high-unemployment states, including Michigan.

In Michigan, about 87,000 people would lose their checks Dec. 29 and leave new recipients -- such as Kevin (Dutch) Wittbrodt, a 56-year-old cement truck driver from Warren who was laid off last week -- looking at no more than 20 weeks of state support.

"That's outrageous," Wittbrodt said. Without benefits, he could last "about two months, that would be it," and then he'd have to move.

In the last extension, Congress pared back the potential length of benefits under the federally backed Emergency Unemployment Compensation, or EUC.

Gov. Rick Snyder and the state Legislature also cut the basic state benefit from 26 to 20 weeks and -- because of a declining unemployment rate -- Michigan, like practically all other states, lost access to an additional extended-benefit program.

Together, that reduced the length of benefits from a total of 99 weeks to about 54 weeks total in Michigan for someone who loses a job now.

The length of benefits varies depending on a state's unemployment rate. Without an extension of the EUC, the length in Michigan would be cut by 34 weeks: And the drop would come all at once, even as the state is showing an uptick in the number of those receiving benefits.

On Thursday, the state's Unemployment Insurance Agency (UIA) said the average number of people receiving benefits, both through the regular state program and the EUC, increased from 159,683 in September to 172,033 in October.

The UIA began mailing letters to claimants this week telling them that the EUC is set to end Dec. 29.

In Washington, talks regarding the EUC are entangled with the negotiations over the fiscal cliff at year's end -- a series of automatic tax increases and spending cuts that, if not averted, could send the nation back into recession.

U.S. Rep. Sander Levin of Royal Oak, the ranking Democrat on the House Ways and Means Committee, has been pressing for an EUC extension and said he considers Dec. 29 "a human cliff."

"It's very serious for individual families," he said, "but it also has implications in terms of the economy."

Throughout the recession and recovery. Democrats have pushed successfully for extensions to unemployment benefits, citing economists who say they provide an almost-direct infusion of cash into the economy. People who are unemployed have to spend every dollar they receive, providing a boost to local markets that would otherwise be devastated by a loss in spending, or so the theory goes.

Democratic allies cited a report by the nonpartisan Congressional Budget Office that said an extension would create or retain 300,000 jobs, in contrast to what happens if the program expires.

Heidi Shierholz, an economist with the Economic Policy Institute, a Washington, D.C., think tank with links to labor organizations, said that it makes sense to have the length of unemployment benefits expand and contract with circumstances.

But, she added, according to federal estimates, the recovery has still left 3.4 people for every job opening out of work, meaning the unemployment problem is still acute.

"If every job opening was filled immediately, the vast majority of unemployed workers would still be unemployed," she said.

At the conservative Heritage Foundation in Washington, James Sherk, senior policy analyst for labor economics, disputed the argument that unemployment benefits have the dollar-for-dollar effect Democrats claim, but said he agrees that there should be some kind of extension.

In the hardest-hit states, the maximum allowed-benefits time now is 73 weeks total, he said. Sherk said bringing that down to around 50 weeks total makes more sense, given the state of the economy.

He added that there remain concerns, however, that extending benefits only delays decisions by some beneficiaries to re-enter the job market as it exists -- either moving or taking a job in a different, possibly less lucrative career -- instead of waiting for the job they want where they want it.

For now, the bigger question may be whether Republicans and Democrats can reach some sort of wider agreement that allows for an extension.

"That's something that will have to be considered in the context of the fiscal cliff negotiations, keeping in mind that we've already added $180-billion to the debt from spending on federal unemployment benefits," said Allie Walker, spokeswoman for U.S. Rep. Dave Camp of Midland, the Republican chairman of the House Ways and Means Committee, which oversees unemployment benefits.

"I think it will be fixed," Levin added, "as it becomes more and more apparent what the consequences might be for families."



Source: (c)2012 the Detroit Free Press. Distributed by MCT Information Services


Story Tools