Unemployment aid in spotlight
WASHINGTON -- After the economy soured in 2001, millions of jobless workers waited and worried until Congress voted to temporarily extend their unemployment benefits.
The cycle is starting again.
The House, by a lopsided 385-35 vote Tuesday, passed a $150 billion economic stimulus package including personal tax rebates, business tax breaks and incentives for mortgage lending.
The bill now goes to the Senate, where Finance Committee Chairman Max Baucus, D-Mont., will try to add a $9 billion program providing an extra 13 weeks of unemployment benefits for workers who have exhausted their initial 26 weeks of aid.
Unemployed workers in states where the jobless rate is 6.5% or higher could qualify for another 13 weeks, for a total of 26 additional weeks of assistance.
The measure would be a boon to Tina Buzzo, 31, of Warren, Mich. Her husband, Thomas, 37, lost his construction job in June, and his unemployment benefits expired this month. The family, including a young son, is living on savings and Tina Buzzo's income as an administrative assistant at an auto firm. The state's unemployment rate is 7.6%.
"He's applied at different small companies for anything. He's got his résumé out. … We've talked to family members," says Tina Buzzo, who worries the family could lose their home if things don't turn around. "He's even applied for midnight jobs, and there's just nothing out there."
Spending quickly
The Senate effort to broaden the House-passed legislation is partly about efficiency, with the non-partisan Congressional Budget Office citing studies showing expanded jobless benefits are spent more quickly than other forms of economic stimulus.
It's also about growing need, given that 17.5% of the unemployed had been out of work 27 weeks or more as of December, according to the Labor Department. That's well above the 11% rate of long-term joblessness in the spring of 2001, when the nation last fell into recession. More than a million workers will run through their benefits between now and June.
But the Senate move is also a tacit admission that Washington and the states have failed to develop an unemployment compensation system that can keep up with changing work patterns or business downturns. Only 37.1% of unemployed higher-wage workers and 13.6% of low-wage workers in 2003 received jobless benefits, let alone extended aid. That's down from the near-50% coverage level of the 1950s, says the Government Accountability Office. Reasons include shrinking labor unions, more self-employed and more part-time workers. Further, Congress has been forced to pass emergency benefit expansions in the past several downturns.
Rep. Jim McDermott, D-Wash., complained during Tuesday's debate on the stimulus bill that the measures under debate don't "address the reforms needed to our unemployment programs to deal with the modern-day workforce. … People with part-time jobs can't draw benefits."
McDermott is working on a broader overhaul of the system.
Jeffrey Kling, a senior fellow at the Brookings Institution, told Congress in a recent hearing that it takes people longer to find new employment now than in past downturns. In 1961, for example, about 30% of people exhausted initial unemployment benefits. That rose to 43% in 2002.
Under the federal-state unemployment system, workers who lose jobs through no fault of their own may qualify for up to 26 weeks of basic unemployment benefits in most states.
There's also a permanent state-federal extended benefits program that is supposed to kick in when unemployment jumps. Critics such as the National Employment Law Project say the permanent program hasn't worked well for a number of reasons, including criteria that are too restrictive.
Although Michigan's unemployment rate is high, it doesn't qualify for extended benefits. Even if the state did qualify, it's not clear if it could come up with the funding match required.
How hard a push
Long-term unemployment changes are still down the line. The immediate question is how hard the Senate will push for a stimulus bill including a short-term boost in benefits.
Some lawmakers, such as Sen. Judd Gregg, R-N.H., say that while there are states in distress, it doesn't make sense to fund a national program, when the overall unemployment rate is a low 5%.
"What is being talked about here … basically creates an incentive, in a full-employment economy, for people to not be productive and not find jobs," Gregg says. He suggested targeted aid to states with unemployment around 6%.
Unemployment rates run the gamut from more than 6% in California to 3% in Idaho.
The CBO, while calling extended benefits an effective stimulus, also notes research showing that longer or more generous benefits may discourage some people from searching for jobs or taking less desirable positions.
Even some staunch supporters of extended aid say their first priority is getting quick action on a stimulus bill that President Bush will sign. Harvard professor and former Clinton Treasury secretary Larry Summers told a House hearing Tuesday that, "There is no possible improvement in this package that would warrant substantial delay in its passage."
Treasury Secretary Henry Paulson has warned the Senate not to load up the stimulus bill, but hasn't made explicit threats to oppose the measure if unemployment benefits are added.
Speaker Nancy Pelosi, D-Calif., didn't push for unemployment aid or more generous food stamp benefits in the House as part of a deal with the White House to provide tax rebates to lower-income workers.
"So far, there aren't many people in this difficult situation of being unemployed for 26 weeks," says Mark Zandi, chief economist of Moody's Economy.com "Three months from now, that could change. Trading unemployment and food stamps (for rebates) was a very reasonable thing to do."