GOP proposal to cut jobless benefits could cost economy billions, says study

The study measures the estimated effects of what advocates say is $2 in economic activity for every $1 the federal government spends.

The House measure continues federal unemployment benefits but cuts them from a maximum of 99 weeks down to 79 weeks on Jan. 1 and then to 59 weeks by the summer. The plan would determine each state's number of weeks by previous and current unemployment rates.

“Congress is facing what should be an easy choice,” Owens said. “Before Members leave for the holidays and return to their homes full of food and presents, they need to decide whether they support the unemployed and local communities with an unemployment safety net that is commensurate with the need out there," she said.

"Or, will they slash and burn, cutting benefits from precisely the workers and communities who have suffered the most.”

House Democrats, including Minority Leader Nancy Pelosi (D-Calif.), have said they oppose the 40-week cut to unemployment insurance while the jobless rate remains high. House and Senate Democrats have introduced legislation that would extend 99 weeks of benefits — including a maximum of 26 weeks of state benefits and 73 weeks of federal benefits — through 2012 at a cost of about $44 billion.

The Republican proposal reduces the yearly cost to about $34 billion, according to the Congressional Budget Office.

A vote is expected as early as Tuesday.

At a time when more than a third of the nation’s unemployed have been jobless for a year or more, eliminating more half of the unemployment benefits available for the long-term unemployed will also drive those workers and their families to greater reliance on dwindling state, local and community resources like food pantries and shelters, the report found.

The report also found that the reduced level of income support in the legislation would further strain state and local budgets due to the loss of payroll taxes, sales taxes and other revenue generated by spending on local goods and services.

In addition, the analysis found that the GOP bill would put additional burdens on states to oversee new eligibility requirements for workers — including a high-school diploma or GED — and states that eligible workers must be in a GED program if they haven't completed high school.

The report called a proposed new drug-testing provision "a deep affront to the character of millions of Americans who desperately want to get back to work."

"Devising new ways to insult the unemployed only distracts from the current debate over how to best restore the nation’s economy to strong footing and the discussion over how to best support the unemployed and get them back to work," the report found.

Unemployed workers in the following states would lose access to 40 weeks of unemployment insurance: Alabama, California, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Michigan, Missouri, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Texas and Washington.