Millions of workers face jobless benefits cliff with lifeline set to expire

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A failure by Congress to enact a new economic relief package would prolong the pain of the coronavirus crisis for many Americans, but those without jobs face a special threat — millions could run out of unemployment benefits altogether by the end of the year.

The Senate reconvenes on Monday, giving lawmakers about two weeks to send legislation to President Donald Trump before the Nov. 3 election. But the sides are far apart, with Democrats demanding at least $2 trillion in funds, Republicans pushing for $500 billion, and the White House attempting to bridge the gap even as Trump sends conflicting signals about what he wants.

Meanwhile, the U.S. is inching closer to a Dec. 31 deadline when several key federal jobless aid programs created under the March CARES Act will be cut off entirely. If the government doesn’t pass legislation, more than half of those receiving unemployment benefits — about 13.4 million people — stand to be left with no income.

“We’re making a deeply fundamental mistake not reauthorizing all our unemployment insurance programs,” Rep. Don Beyer (D-Va.), vice chair of Congress’s Joint Economic Committee, told POLITICO. “When we take the money away, that’s what’s been propping up consumer spending and the ability of people to get by.”

Pandemic Unemployment Assistance, a new program that has provided jobless benefits to gig workers and others not traditionally eligible for help, and Pandemic Emergency Unemployment Compensation, which extends state unemployment benefits an additional 13 weeks, are both set to lapse at the end of the year. Another program — Federal Pandemic Unemployment Compensation — provided an extra $600 a week in jobless aid for four months before it expired on July 31, and Democrats are pushing to restore it.

Those workers “don’t know how they’re going to make it through the month,” Rep. Steven Horsford (D-N.V.) said. “I have nearly 200,000 Nevadans who are contacting my office on a regular basis and other members of our delegation to express their anxiety with the situation.”

States “have very few options available to them. And that is why it is really only the federal government that can help at this critical time.”

With the pandemic nearing its 30th week, millions of Americans have now been unemployed for more than six months. Regular state benefits typically last only 26 weeks, meaning that many workers are tapping into the extra weeks of benefits funded by the CARES Act.

Already, more than 352,000 workers have used up the 13 weeks of Pandemic Emergency Unemployment Compensation created under the March package. Now, they’re relying on an additional federal safety net program known as "Extended Benefits,” which allows states to offer an additional 13 to 20 weeks of jobless aid during periods of high unemployment.

The resulting shock to states and workers should these programs be allowed to lapse could set off a downward spiral as Americans stop buying goods and are unable to pay rent, economists and lawmakers warn.

“It will have so many reverberating effects,” Rep. Judy Chu (D-Calif.) said. “We haven’t even seen the full extent of it.”

Currently, 46 states and territories are participating in Extended Benefits and more workers are expected to pour into this program as they use up the 39 weeks of jobless aid provided in the CARES Act. But without an extension of coronavirus aid, states may no longer be able to afford to participate. Extended Benefits requires them to share 50 percent of the tab. The CARES Act offered full federal funding for the program, but only until Dec. 31.

Republicans have been opposed to extending the beefed-up pandemic jobless aid past December, arguing that the benefits paid people more to be unemployed than they were making on the job, taking away their incentive to rejoin the workforce. They also point out that the states have not even tapped into $150 billion that Congress set aside for them in the CARES Act.

With a historically high number of individuals pushed out of work, states are already struggling to pay regular unemployment benefits. Forced to take loans from a federal trust fund, several states may be facing a cliff of their own.

Twenty-one states have borrowed a total of some $36 billion from the Treasury Department, according to the most recent data. Though those states have not yet been required to pay interest on the loans, they are slated to start on Jan. 1 — and may soon be forced to start cutting costs.

“If you put the states in a big financial bind on [unemployment insurance], they immediately start pulling back access,” said Morna Miller, staff director of the House Ways and Means Subcommittee on Worker and Family Support. “Because the only way that they have, if they’re out of money, to pay benefits is to make it harder for people to apply for them and receive them.”

Another option may be raising taxes on businesses, many of which are already battling to stay afloat. In fact, some states have automatic triggers that raise taxes as soon as their unemployment insurance trust funds are fully depleted.

Doing so "would be incredibly damaging to the many small businesses struggling to hang on during pandemic conditions," National Governors Association spokesperson James Nash said. It could also create more unemployment if businesses must shed jobs.

As it stands, an updated version of the Democratic-backed Heroes Act, which passed the House earlier this month, would only extend the provisions until Jan. 31 — weeks into a new presidential term and new session of Congress.

That would still give a new Congress little wiggle room to extend the benefits before they expire. The presidential inauguration is scheduled for Jan. 20, 2021, giving a new Congress a few weeks to hammer out another deal.

“The Jan. 31 end date was a Heroes-wide policy set by the Speaker’s office essentially intended to give us a couple weeks into the next administration and the next Congress to get things extended or fixed or addressed in the future before anybody got cut off,” said a Democratic policy aide involved in the drafting process. The idea was “to set the cliff close enough that there was some chance Republicans would agree to the package but enough time that we could be ready.”

Another factor was an unwillingness to admit that the recession may still be in full swing come 2021, the aide said. “People are unwilling to provide for unemployment benefits in February because they’re unwilling to admit that a lot of people are going to be unemployed in February.”

Some conservatives say they oppose the Democrats’ sweeping economic relief plans because a one-size-fits all approach may no longer be helpful for the economy. Rachel Greszler of the Heritage Foundation notes that the unemployment rate varies widely across the country. In August, the rate was 4 percent in Nebraska and 13.2 percent in Nevada.

“Now’s the time that state and local policymakers should be thinking about their unique residence constituents and also what’s just happening in their economies,” Greszler said. States have some funding left over from the CARES Act to adjust the benefits they offer once the federal programs expire, she said.

Jared Walczak, vice president of state projects at the Tax Foundation, said the states have been holding onto the $150 billion that Congress allocated in March with the hope that certain costs, like unemployment benefits, would be eventually funded in a future relief package

“There are a lot of states still sitting on coronavirus relief fund money that they’re allowed to be spending on unemployment compensation benefits right now and are not,” Walczak said.

For Beyer, the debate isn’t over boosting the economy but keeping people afloat.

“This isn’t really stimulus, it’s more of a life preserver,” he said. “It isn’t like we’re trying to make the economy come back, we’re just trying to help people that have been terribly hurt by the economy, allow them to get through without hunger without eviction.”

Katherine Landergan contributed to this report.

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