Posted by: JanF | December 28, 2013

What lesson will be learned?

Republicans are congratulating themselves over extracting concessions in the recent 2-year budget deal that left the extension of unemployment benefits to 1.3 million Americans on the cutting room floor.

Those benefits are from the Emergency Unemployment Compensation (EUC) Act passed in 2008 and extended 11 times, usually as a hostage held by the Republican Party to force President Obama and the Democrats to give in to their demands. At the end of 2010, Republicans in Congress used the threat of real harm to millions of Americans, from the expiration of EUC benefits, to extend the Bush tax cuts (a compromise for which the president took a lot of heat from his “base”).

What is EUC?

Extended Benefits are available to workers who have exhausted regular unemployment insurance benefits during periods of high unemployment. The basic Extended Benefits program provides up to 13 additional weeks of benefits when a State is experiencing high unemployment. Some States have also enacted a voluntary program to pay up to 7 additional weeks (20 weeks maximum) of Extended Benefits during periods of extremely high unemployment.

Before the expiration:

After the expiration:

Here are some facts from the State of Wisconsin, where I live:

– The maximum length of unemployment insurance benefits will immediately drop to the 26 weeks of state benefits, which is slightly less than half the current limit in Wisconsin of 54 weeks of combined state and federal benefits. (That has already been reduced from a maximum of 99 weeks during the worst of the recession.)
– There are 1.3 million long-term unemployed workers across the country who will lose this lifeline next week, including about 23,700 jobless workers in Wisconsin.
– Over the course of 2014, the program’s termination is expected to adversely affect 99,000 long-term unemployed workers in Wisconsin and their households, as well as 2.2 million jobless workers across the U.S.
– The average weekly EUC benefit in Wisconsin over the past year was about $240.

Note that $240 per week is less than $1,000 a month or about $12,000 per year. This is not “living large” or as Rep. Paul Ryan (R-WI) puts it “transform[ing] our social safety net into a hammock”. It will probably barely keep people from being homeless, might help them make a car payment (or pay for bus fare), or could put a small amount of food on the table. In Wisconsin, the unemployed who will be left without a hammock safety net are in every county.

The cut impacts every state, red and blue, from Alabama, where 11,500 people will lose benefits to Washington state, where 25,000 will be left without this basic support.

Lots has been written about how the unemployment benefits are good for the economy and that macro view shows statistics on how the loss of those benefits will be a setback for the recovery:

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. While that statistical change may look good on the surface, Feroli cautioned the drop could be accompanied by a similar decrease in consumer spending. That would also hurt clothing retailers, car dealers and other Main Street businesses.

Extending the program, on the other hand, would boost GDP growth by some 0.2 percent and increase full-time employment by 200,000 next year, the Congressional Budget Office estimated.

But on the micro level, it is stories like this one that we all need to hear:

[Michelle} Marshall, 56, has been out of work for a year, since she lost an administrative assistant job that paid her $44,000 per year.

She started collecting $624 each week in New Jersey unemployment benefits, but the state benefits ran out after 26 weeks. When federal benefits kicked in, she collected $521. […]

Even the cut from the larger state check to the federal benefits was hard for Marshall. She had to consolidate her $12,000 worth of credit card debt and enroll in a mortgage assistance program.

When the benefits stop entirely, she doesn’t know what she’ll do.

“I imagine I will go apply for food stamps,” she said. “Depending how long this goes on, I might lose my car, which will impact my ability to get a job. I won’t be able to drive to interviews.”

Those who are set to lose benefits, like Marshall, haven’t lost hope, but they are urging Congress to do something.

“Give us a little more time to try and make some plans,” she said. “I can’t give up. I have no one to take care of me.

Ms. Marshall is not alone. As a share of population, New Jersey will take one of the biggest hits: 90,000 people will lose benefits, about 1% of the state’s population.

So why are we even arguing over this?

The argument for letting the benefits expire is that the job market shows clear signs of improvement, and the program adds to federal deficits.

It will cost about $25-26 billion dollars to extend the program, about what the Republicans cost the economy by shutting down the government it a fit of pique last October.

Oh, and there is a second reason. To “help” the unemployed to avoid the “stigma” of unemployment. From Sen. Rand Paul (R-KY), noted Concerned Person, about the lesson to be learned:

There was a study that came out a few months ago, and it said, if you have a worker that’s been unemployed for four weeks and on unemployment insurance and one that’s on 99 weeks, which would you hire? Every employer, nearly 100 percent, said they will always hire the person who’s been out of work four weeks.

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. And it really — while it seems good, it actually does a disservice to the people you’re trying to help.

And in Oklahoma, it will get 4,900 folks off the “gravy train”:

[Jonathan Willner, Professor of economics at OCU] says to the individuals losing these benefits, the impact will be significant, but the economic impact to our state as a whole will be minimal.

“Almost nothing. It’s just not that many people nor that much money on the scale of the overall economy,” he said.

In fact, it may have a positive impact. For those who are capable of getting a job and just didn’t, this may be a nudge in the right direction.

“This is sort of an end to the gravy train and they’ll go ahead and take the job they would have taken six months ago, but for the extended benefits,” said Willner.

The Bureau of Labor Statistics estimates that there are now almost 3 unemployed workers for every job opening so the job prospects for the long term unemployed is grim.

Ezra Klein goes to the point:

The problem for the long-term unemployed isn’t that their lavish government checks keep them from wanting jobs. It’s that they can’t get jobs — in part because they’re unemployed. And that makes them even less likely to get jobs in the future. The long-term unemployed are slowly becoming unemployable.

The lesson we should all learn (right after “Do NOT move to Oklahoma!!”), is that caring for the least among us is not a Republican Party principle. When Republican policies put our country into depressions and recessions, Democratic Party policies are needed to get us out and to keep people afloat until the economy can be turned around. Time and time again, the party of “I’ve got mine, screw you” has shown a willingness to let people fend for themselves when they are in desperate straits.

“I have no one to take care of me.”

Yes, you do, Ms. Marshall. The government is there to help those who can’t take care of themselves, whether they are elderly or infirm or jobless or homeless or hungry … whether the cause of their current situation is from a natural disaster or from a man-made disaster like the Bush Recession.

Let’s remind Congress about what makes our country great. President Barack Obama, made it clear when he replied to the Ryan Republican Party’s Budget in 2011:

From our first days as a nation, we have put our faith in free markets and free enterprise as the engine of America’s wealth and prosperity. More than citizens of any other country, we are rugged individualists, a self-reliant people with a healthy skepticism of too much government.

But there has always been another thread running throughout our history – a belief that we are all connected; and that there are some things we can only do together, as a nation. We believe, in the words of our first Republican president, Abraham Lincoln, that through government, we should do together what we cannot do as well for ourselves. […]

Part of this American belief that we are all connected also expresses itself in a conviction that each one of us deserves some basic measure of security. We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff, may strike any one of us. “There but for the grace of God go I,” we say to ourselves, and so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, and those with disabilities. We are a better country because of these commitments. I’ll go further – we would not be a great country without those commitments.

Tell Congress to act to honor our commitments to those who need the government’s help. Let’s be the country that President Obama believes we are, a people connected to each other, picking each other up when one of us is down.

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