We have a deal. Five Senate Democrats and five Senate Republicans have agreed upon legislation to extend emergency unemployment insurance for five months, retroactive to December 28. Here’s everything you need to know:
Wait, a deal on what? Unemployment benefits? I remember something going on with those. What’s happening again?
When the economy collapsed in 2008, Congress did what it has customarily done: It bolstered unemployment insurance, by allowing people who were out of work for more than 26 weeks to collect benefits for up to 73 weeks (though states had discretion over the precise length). Congress twice renewed the program, called, Emergency Unemployment Compensation (EUC). when it was set to lapse. But on December 28, Congress failed to renew it again. The program expired and 1.3 million people immediately lost their benefits. More than 700,000 have had their benefits run out since the new year.
Democrats have been fighting for an extension of the program since it expired and have come up short a couple of times. They originally wanted to extend it for a full year, without any spending offset. Republicans wouldn’t go along—in some cases, like Rand Paul’s, because they believe the program discourages work (even though the best evidence suggests otherwise). But other senators, like Rob Portman and Kelly Ayotte, said they wanted an extension—just as long as it had some kind of offsetting spending cuts. Democrats went to work on that, floating various combinations of shorter extensions and payment gimmicks. Last month, they came within one vote of breaking a filibuster for a six-month extension, paid for with something called “pension smoothing” as an offset.
It’s an accounting technique that allows companies to backload their pension contributions. This increases their profits in the near-term and increases revenues the government collects from them. But over the long-term, companies have to contribute the full amount to employee pensions. And that means less revenue for the government later on. So it’s a trick designed to pay for something today by running up higher bills in the future.
OK. That’s the back story. What happened today?
Today, a bipartisan group of senators (five Democrats, five Republicans) agreed to a five-month extension of unemployment insurance, retroactive to its expiration on December 28. To pay for it, the senators included the “pension smoothing” gimmick and extended customs fees through 2024. The legislation also includes reforms, from Senators Tom Coburn and Jon Tester, that prevent people who earned more than $1 million in the previous year from collecting unemployment benefits.
In English, what does that really mean?
It means people who have been out of work more than 26 weeks and less than 73 would receive a big check from the government for unemployment benefits they would’ve been collecting over the past 10 weeks. If you were out of work 70 weeks as of December 28, you’d receive three weeks of unemployment insurance. If you were unemployed 50 weeks as of then, you’d receive 10 weeks of benefits now and continue receiving them until the five month extension expires. Oh, that’s assuming you didn’t make more than a million dollars last year. If you did, then you wouldn’t get anything.
As for the amount, unemployment benefits generally make up half a person’s previous wages by average, although the exact amount varies by state. In 2012, average benefits ranged from $133 in Puerto Rico to $653 in Massachusetts.
Yay! That sounds great.
Well it would be. People struggling to find work would have an easier time paying their bills. And the economy would get a much-needed boost, since people who get unemployment benefits tend to spend that money quickly. That grows the economy.
But this deal is only in the Senate. It still has to pass the House and Speaker John Boehner earlier this week said he opposed it. Since legislation has actually passed the Senate—with support from some Republicans—Boehner will be under more pressure on him to bring it up for a vote. But House Republicans are still opposed to an extension. And Boehner has shown repeatedly—most recently with immigration reform—his reluctance to bring up measures that will anger the ultra-conservatives in his party. So this deal is a big step forward, but many steps remain before the people who need this assistance can finally get it.