Democrats shift tone on unemployment benefits

Democrats shift tone on unemployment benefits
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Some congressional Democrats who forcefully advocated for emergency unemployment benefits earlier this year are now signaling they’re willing to let a weekly supplement expire in early September.

The shift in tone from Democratic lawmakers comes as 26 states, nearly all led by Republican governors, have moved to cut off the $300 benefit early, arguing it has discouraged many residents from seeking employment, particularly for jobs that end up paying less than the combined state and federal benefits.

Any effort to extend the benefit beyond its September expiration date would likely run into fierce political headwinds, not to mention an economy that’s struggling with both inflation and modest job growth.

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House Budget Committee Chairman John YarmuthJohn Allen YarmuthDemocrats look to flip script on GOP 'defund the police' attacks Democrats hit crunch time in Biden spending fight Republican immigration proposal falls flat MORE (D-Ky.) said Wednesday that the politicization around the weekly supplement would make it difficult to renew.

“I wouldn’t be surprised if it doesn’t get extended. But we’ll see over the next couple of months what the job reports show,” he said.

On the Senate side, Finance Committee Chairman Ron WydenRonald (Ron) Lee WydenOn The Money: Senate braces for nasty debt ceiling fight | Democrats pushing for changes to bipartisan deal | Housing prices hit new high in June Top Democrat presses IRS for improvements to web tool on child tax credit Democrat stalls Biden's border nominee MORE (D-Ore.) also signaled the challenges to renewal.

“I’ve long said pandemic unemployment programs should be tied to economic conditions on the ground,” said Wyden, who has been a major advocate for the expanded benefits during the pandemic.

“If that had been done in the [COVID-19] rescue plan there wouldn’t be these concerns about the arbitrary September cut off. But the way the budgetary effects of these policies are scored is an obstacle,” he added.

Republicans argued vociferously against the additional weekly supplement from the early days of the pandemic. Sen. Lindsey GrahamLindsey Olin GrahamSenate braces for a nasty debt ceiling fight Bipartisan group says it's still on track after setback on Senate floor How Sen. Graham can help fix the labor shortage with commonsense immigration reform MORE (R-S.C.) in March of last year sought to offer an amendment that would strip the weekly supplement, then at $600, out of the $2.2 trillion CARES Act, the first major coronavirus relief bill that was passed with overwhelming bipartisan support.

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That benefit lapsed over the summer amid fierce partisan battles over how to approach further relief, leading then-President TrumpDonald TrumpNew Capitol Police chief to take over Friday Overnight Health Care: Biden officials says no change to masking guidance right now | Missouri Supreme Court rules in favor of Medicaid expansion | Mississippi's attorney general asks Supreme Court to overturn Roe v. Wade Michael Wolff and the art of monetizing gossip MORE to find a temporary workaround to provide $300 in additional funds through the Federal Emergency Management Agency.

The benefit was then restored in a bipartisan December bill, and extended under President BidenJoe BidenOvernight Defense: Senate panel adds B to Biden's defense budget | House passes bill to streamline visa process for Afghans who helped US | Pentagon confirms 7 Colombians arrested in Haiti leader's killing had US training On The Money: Senate braces for nasty debt ceiling fight | Democrats pushing for changes to bipartisan deal | Housing prices hit new high in June Hillicon Valley: Democrats introduce bill to hold platforms accountable for misinformation during health crises | Website outages hit Olympics, Amazon and major banks MORE’s $1.9 trillion rescue plan in March.

But as the economy improved and more Americans got vaccinated, COVID-19 case counts retreated, and states began lifting coronavirus restrictions. When employers struggled to find workers, GOP-led states moved to cut off the benefit, with the first four states ending the program this past weekend.

Wyden castigated GOP states last month for prematurely moving to cut the benefits, saying it would "pull the rug out from under jobless workers" and "sabotage the economic recovery."

But Republicans argue that weaker-than-expected jobs data prove that the benefits are keeping would-be workers on the sidelines collecting government checks instead of earning a paycheck.

“As people are rational, as long as they can make more money not working than working, they’re going to choose not working,” said Sen. John KennedyJohn Neely KennedyMORE (R-La.), noting that the labor participation rate remained significantly depressed.

“We’re not going to have a full recovery until we get back to at least pre-COVID levels,” he said.

Labor experts say the expiration of federal unemployment benefits in September may have a muted impact if the economy keeps growing, as it’s projected to do.

“If the economy continues to grow at the rate that people are expecting, the unemployment rate will come down to around 5 percent and the lapse in the benefits won’t be nearly as serious,” said Wayne Vroman, a senior fellow at the Urban Institute.

The jobless rate in May was 5.8 percent, according to the Labor Department.

Economists also point to schools reopening as a likely improvement to the labor market.

With schools expected to reopen with in-person learning in the fall, parents, and women in particular, may find it easier to rejoin the workforce.

Rep. Ro KhannaRohit (Ro) KhannaProgressive fighting turns personal on internal call over antitrust bills Liberal lawmakers praise Senate Democratic budget deal How Congress can advance peace with North Korea MORE (D-Calif.), a progressive leader, said it’s important to gauge the economic conditions on the ground when it comes to unemployment benefits.

“We have to look at the data then and make a decision then,” he said. “We don’t know where the data is going to be and where inflation is, so I think all of that has to be considered.”

Some economists see the unemployment benefits, combined with multiple stimulus checks, playing a role in driving inflation since they've allowed more Americans to boost spending, contributing to higher prices. Others, however, argue that the size of the unemployment benefits makes them marginal in the inflation debate.

The Federal Reserve on Wednesday increased its inflation expectations for 2021, and indicated that it could raise interest rates twice in 2023 to counter it, a departure from earlier guidance.

Other proponents of a wait-and-see approach on unemployment benefits argue that an unexpected resurgence in COVID-19 cases caused by new variants could upend the entire calculus.

“The expansion of unemployment insurance benefits was as much a public health measure as an economic relief measure, allowing people to stay home instead of venture off to work,” said Alex Arnon, an associate director of policy analysis for the Penn-Wharton budget model.

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While the question of what to do with the $300 in additional weekly benefits remains unclear, Wyden says he wants to ensure that other emergency programs remain in place.

He is primarily focusing on extending Pandemic Unemployment Assistance (PUA), a program that offers benefits to the self-employed and gig economy workers who had no access to unemployment before the pandemic. Wyden also wants to extend a program providing extra weeks of unemployment insurance for those who have exhausted the 26 weeks typically offered by states.

Shai Akabas, director of economic policy at the Bipartisan Policy Center, said the pandemic laid bare parts of the unemployment system that need to be fixed, but warned against simply extending emergency programs.

“Those programs were established on an emergency basis to respond to the pandemic, so I’m not sure that exact policy reflects what we should have in place permanently,” he said. “But it does point to the need for permanent solutions for these workers.”

For Democrats, the question is now shifting from whether to provide additional unemployment benefits to the need for overhauling a patchwork, state-by-state program they say proved inadequate on unemployment insurance (UI) when the pandemic first hit.

“We’ll see where the PUA specifically ends up, but I think we need to make more investments in UI generally and increase and make more effective the ability for all people to access UI,” said Rep. Pramila JayapalPramila JayapalSchumer feels pressure from all sides on spending strategy Liberal House Democrats urge Schumer to stick to infrastructure ultimatum Democrats ramp up spending sales pitch MORE (D-Wash.), chair of the Congressional Progressive Caucus.

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“Right now, as you know, so many people are left out of unemployment assistance,” she added.

Yarmuth said advancing such a fix would take time, setting the timeline as “post-pandemic.”

“Probably not this year,” he said.