So, what happens — and to whom — if Congress doesn’t extend unemployment benefits?
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Among the issues that didn’t get dealt with in the Congressional budget deal: unemployment benefits.
Normally, states fund unemployment insurance programs, with benefits running a few months. Since the Great Recession began, the federal government has funded extra weeks of benefits after state-funded payments expire.
Now, if nothing changes, an estimated 1.3 million people will get cut off on January first. Those are the people collecting extended benefits right now. But then there are the people whose regular benefits are scheduled to run out on, say, January second. And third. And… you get the idea. All year.
“The Department of Labor estimates that’s almost 5 million people,” says Chad Stone, chief economist for the Center on Budget and Policy Priorities. “And their families of course.”
The effects will also ripple out to the broader economy. People who get unemployment benefits spend them, and that creates more jobs. The Congressional Budget Office says extending benefits could create as many as 300,000 more jobs by the end of 2014.
Jon Gruber is an economist at MIT. He thinks that because of these ripple effects, ending benefits is a bad idea for the economy as a whole.
Just not bad enough to force Congress to act. And if there’s no action now, he says the pressure won’t be there later.
“In some sense, once we get past expiration,” he says, “the world doesn’t end, and it becomes harder and harder to make the argument for spending the extra money to extend the benefits.”
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