Can Obama Compel the GOP to Extend Unemployment Benefits?
President Barack Obama lined up his sights, prepared the political calculus, and fired a shell at the GOP on Tuesday night. In his State of the Union address — which was packed with pointed criticism of Congress — President Obama explicitly called on the legislature to “restore the unemployment insurance you just let expire for 1.6 million people.”
The president was referring to the federally funded emergency unemployment insurance extensions passed in the wake of the financial crisis. Headline unemployment in the U.S. peaked in severity at 10 percent two years after the recession technically ended in 2011 and only really began to moderate in 2013. Benefits were extended for those hardest hit by the crisis and subsequent recession, with programs increasing the number of weeks for which an unemployed person could claim benefits from around 26 to as much as 73. An additional extended benefits program can add between 13 and 20 weeks of insurance — depending on the state-level situation — and costs are split between the state and the federal governments.
As President Obama mentioned, extended benefits expired at the end of December in the midst of partisan disagreement over their efficacy. Generally speaking, liberal Democrats want to extend federal funding for the benefits to the tune of about $25 billion, while conservatives don’t believe extending the program is worth the cost. Democrats appear to be pushing for a three-month extension of the program that would be funded by extending pension-smoothing provisions of the Moving Ahead for Progress in the 21st Century Act.
In his State of the Union address, President Obama offered a real-life example of how the expiration of extended unemployment insurance benefits is harming hard-working Americans. Aggregated data for the U.S. as a whole, though, may be more compelling.
In December, the headline unemployment rate fell to 6.7 percent, its lowest level since the crisis. At 10.3 million, the total number of unemployed persons in the United States also hit a post-crisis low, down 15.6 percent from December 2012. Even U-6 unemployment, a measure that includes marginally attached workers such as those working part-time for economic reasons, has been on the decline, although at 13.1 percent the rate is still elevated.
This may seem good at a glance, but there’s cause for concern just behind the headline figures. Just 74,000 payrolls were added in December, according to the Bureau of Labor Statistics, a miserably low figure and well below the 200,000 expected by economists. Meanwhile, the labor force participation rate declined by 0.2 percentage points to 62.8 percent, well below pre-crisis levels of about 66 percent. The number of unemployed people declined by 490,000 people, but few of them were actually put on payrolls.
Perhaps most troubling, though, is that the average duration of unemployment remains enormously high at 37.1 weeks, about twice what it was before the financial crisis. The percentage of the total unemployed who have been without work for 27 weeks or more, placing them under the umbrella of the long-term unemployed, currently sits at 37.6 percent, or nearly 3.9 million Americans.
Millions of people without income means millions of people who aren’t participating in the economy. A calculation performed by the Democratic Policy & Communications Center puts the total economic loss to date of the expiration at $1.76 billion — $400 million evaporated from local economies in the first week alone, according to the calculations, which used Congressional Budget Office data.
At the beginning of January, the office of Senator Sander Levin (D-Mich.) wrote that, “Overall, failing to renew the EUC program will cost the economy 200,000 jobs this year,” an estimate that used the same data. The White House pegs job losses at about 240,000. The impact could shave between 0.2 and 0.4 percentage points off annual GDP growth.
But despite the presidential bump, the debate on unemployment insurance may have to wait. The senate voted on Monday to begin work on a flood insurance bill and soon must tackle the farm bill. ”Right now, there’s not any kind of concrete proposal that’s gaining support on either side, so we’re in a wait-and-see period,” a Democratic aide told The Hill.