Time running out to act on unemployment insurance
Emergency unemployment benefits will expire unless Congress renews them by Nov. 30.
The reason is that the Unemployment Compensation Act of 2010, which provides an additional 53 weeks of federal benefits to eligible workers who exhaust their 26 weeks of benefits from the regular state-funded unemployment compensation program, will end.
Providing emergency benefits isn't new. During every major recession since the mid-1950s, Congress enacted temporary, federally funded emergency unemployment benefits to provide a cushion for workers out of work for longer-than-usual periods.
Unfortunately, the November expiration date comes at a time when the national unemployment rate, at 9.6 percent, is still persistently high. Colorado's unemployment rate was 8.4 percent in October, with 222,577 workers unemployed; this is the state's highest unemployment rate in more than two decades.
Congress must act fast to extend the benefits to maintain some financial stability for families, particularly around the holidays, and to help keep economic growth moving. If the program were to expire, no extended federal unemployment insurance will be available, and newly unemployed workers will receive only state benefits. In Colorado, that means up to 26 weeks of state benefits.
If benefits are not extended, 41,000 Coloradans will be cut off from federal unemployment insurance in December alone, according to the National Employment Law Project. In addition, 7,800 Coloradans who exhaust their state unemployment benefits each month will not have access to any federal unemployment benefits. These workers would have a harder time buying groceries and paying rent and utilities. Consequently, businesses will experience lower sales due to reduced amounts of money flowing into Colorado's economy.
There is overwhelming public support for extending the federal unemployment benefits, because Americans understand that they keep millions of their fellow citizens out of poverty. With national unemployment at 9.6 percent, millions of people are actively looking for work but cannot secure employment. There are five unemployed workers competing for every job opening.
Though the economy is starting to recover, unemployment is predicted to remain high for some time. In fact, the Congressional Budget Office projects that the unemployment rate will remain as high as 9.5 percent for 2010 and 9.0 percent in 2011.(1) The 5 percent pre-recession levels may not return until the end of 2014.
Economists argue that unemployment insurance benefits are a much more cost-effective stimulus than other forms of federal spending, generating $1.61 in economic activity for every $1 spent.(2) Workers and their families quickly spend most of the modest benefits on necessities, thus pumping the money back into the economy every month.(3) The Economic Policy Institute estimates that providing emergency unemployment compensation would generate 531,000 jobs in 2011 and 172,000 in 2012.(4) Additionally, these benefits shield cash-strapped states from pressure to expand food assistance, Medicaid and child care programs, not to mention the possibility of mass layoff of teachers, police and firefighters.
Since the unemployment insurance program was created more than 50 years ago, Congress has never cut emergency benefits when unemployment was this high. History shows that Congress pulled back only when unemployment reached 7.2 percent or lower nationwide.
Until the economy recovers and more jobs are created, Congress must extend emergency unemployment benefits. Allowing the program to expire now would hurt thousands of hard-working Colorado families. Plus, the recovery effort would be dealt a major blow, because less spending would hurt sales at local businesses, undermine job creation and put pressure on the housing market, where foreclosures will likely continue.
(1) Congressional Budget Office. The Budget and Economic Outlook: Fiscal Years 2010 to 2020.
(2) National Employment Law Project (2010). A Long Road Ahead: Why Federal Benefit Extensions are Crucial to the Economy in 2011.
(3) Mishel, L. and Shierolz, H (2010). Two for the Price of One: Providing Unemployment Insurance Both Assists the Unemployed and Generates Jobs. Economic Policy Institute Brief Paper #281.
(4) Fieldhouse, Andrew (2010). What Would You Do With $67 Billion? Economic Policy Institute Briefing Paper #285.