The debate over the fiscal cliff has centered on big spending items like the Bush tax cuts and entitlement reform. But there’s another multibillion-dollar program that could end completely if not renewed by Congress before the end of the year: federal unemployment insurance. ideastream’s Nick Castele reports.
At the Cuyahoga County jobs center in Parma, Valerie Dede is browsing job openings online. She did the billing for a trucking company, until she lost her job in May. Her savings have run down, but she’s got a backup plan: unemployment benefits.
DEDE: “As a matter of fact, I just applied today.”
If she’s approved, and as long as she keeps looking for a job, she could receive a few hundred dollars a week. She’d spend it on…
DEDE: “Your basic needs. Your rent, or house payment, food, medical…It may not be as much, but it would certainly help.”
But she wouldn't be able to stay on the program for as many weeks as the people who have come before her.
Back in 2008, as the bottom started to fall out of the economy, Congress appropriated federal money to extend unemployment benefits past the usual six months offered by states such as Ohio. At the height of the recession’s fallout, people could receive that money for up to 99 weeks.
According to the Department of Labor, currently about 2.2 million people are receiving federal benefits -- including about 50,000 people in Ohio. The program has been phasing out this year, state-by-state as unemployment levels fall.
But at the end of this year, unless Congress approves another extension, the spigot turns off.
HILL: “Bottom line: it’s not a good thing.”
Ned Hill is the Dean of the Maxine Goodman Levin College of Urban Affairs at Cleveland State.
HILL: “One, people will be destitute. Two, you’ll actually be withdrawing spending from the economy because these people do spend money on food and clothing and necessities, and that will actually further slow down the recovery.”
That’s a common argument among many economists and among advocates for keeping the federal benefits program going. Democrats in Congress cite analysis by Mark Zandi of Moody’s Economy.com that shows ending the program could cut economic growth by $58 billion.
But economists also say keeping the benefits in place can actually prolong unemployment – and, in effect, raise the unemployment rate. Murat Tasci, an economist at the Cleveland Federal Reserve Bank, explains.
TASCI: “The unemployed worker, if they are receiving these benefits while they are unemployed, they might choose not to take some wage or job offers that they would otherwise have taken.”
One study by the Federal Reserve Bank of San Francisco shows that disincentive factor buoys the unemployment rate by just under a half a percentage point. Zach Schiller of the left-leaning Policy Matters Ohio thinks the net effect is negligible.
SCHILLER: “The share of unemployment that results from unemployment insurance, in comparison with the number of people that’s unemployed, is tiny.”
But for Alex Brill at American Enterprise Institute, a conservative-leaning think tank, it’s enough to say it’s time to end federal benefits.
BRILL: “I think that it’s appropriate during the recession to provide additional weeks of unemployment benefits. That said, the degree and the extent to which this program was expanded is something that we’ve never seen before.”
Nearly everyone we spoke with said the uncertain future of extended benefits reveals another problem facing the workforce: long-term unemployment. Forty percent of the unemployed have been out of work for longer than six months.
Some say that’s reason enough to continue extending unemployment benefits and provide that safety net for those living just above the poverty line. Others believe the money would be better spent on more job training programs.
There’s even a pilot program that allows the funds to subsidize actual jobs – but so far, no states have applied to participate.
Back at the jobs center in Parma, Valerie Dede, who is just now making a first time claim, feels she can still afford to be choosy in her job search. She wants a job that’s close to home and pays as much as she made before.
DEDE: “Certainly don’t want to go out of town to work. You think about, OK, is it really worth going out there for this? Or how much you're going to make?”
And, she says, she’s learned to be patient.