Congress and America's Unemployment Crisis

Congress and America's Unemployment Crisis

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There are now five unemployed for every available job
in the U.S. Growing numbers of former middle-class Americans are being forced into food stamps, welfare and homelessness.

WASHINGTON -- America’s nearly 15 million unemployed hope the July 4th recess changed at least a few lawmakers’ minds about extending out-of-work benefits.

Otherwise millions will continue losing unemployment compensation this month, adding further drag to the economy, if the congressional stalemate over benefits continues, some policy analysts contend.

Rising voter outrage
The issue, they add, has become a microcosm of the broader fight over deficits and the national debt and threatens to heap still more incendiary material on the bonfire of voter rage as November’s mid-term congressional elections approach.

“It will feed the impression that Congress isn’t doing its job,” political analyst William Schneider of George Mason University and Third Way, a moderate think tank, said in an interview.

Are repeated extensions of unemployment benefits throwing a life preserver to the financially drowning, many of whom report draining retirement accounts, moving in with extended family and holding garage sales to get by? Or is it enabling sloths who don’t give job boards a hard-enough look, needlessly adding to deficits?

Historic levels of unemployment
With unemployment hovering near 10 percent, and long-term unemployment at its highest in decades, the question is one of many on which labor market analysts and politicians of varying stripes disagree.

What’s certain is that for many of the recession-battered, federal funding of extensions stopped on June 5 and with each passing week still more drop off the rolls. By July 31, 3.23 million will have exhausted benefits this summer, unless lawmakers act.

Those numbers will include 555,700 in California; 189,900 in Texas; 256,200 in New York; 230,800 in Florida; 141,900 in Ohio; and 227,500 in Pennsylvania, according to the National Employment Law Project’s analysis of Labor Department data.

Is Congress 'accepting the unacceptable'?
“I think this Congress has really given up on jobs. They have decided to accept the unacceptable,” Heidi Shirholz, economist at the liberal-leaning Economic Policy Institute, said in an interview.

But conservative economist Bill Conerly of the National Center for Policy Analysis counters there are “good [job] opportunities” even in a slack economy. “There is good evidence that extended benefits delay job searches and a return to employment,” said Conerly, who also runs an Oregon economic consulting firm.

Some Senate Republicans say they will support benefit extensions if they can be funded with money taken from other programs so as not to add to the deficit. Some have suggested taking the money from last year’s nearly $800 billion stimulus package, an idea Democrats resist.

The 'Great Recession'
Congress has a long history of providing extended benefits during recessions, and many have dubbed the current one, the worst in 70 years, the “Great Recession.” Since it began in December 2007, lawmakers have patched together a series of extended benefit periods -- “tiers” -- that can give workers in particularly hard-hit states up to 99 weeks of unemployment insurance.

Never before has Congress extended unemployment compensation for so long, a testament to the current economic weakness, Shierholz said.

Unemployment benefits, depending on applicants’ most recent wages and job stints, range from as low as $230 per week in Mississippi to $942 per week in Massachusetts.

The first 26 weeks are state funded; nearly all the rest are federally provided. Both the federal and state governments tax employers based on the size of their payrolls. Some states tax employees as well.

State unemployment systems backrupt
The length and depth of this recession has resulted in insolvency for 33 state unemployment insurance systems, putting more strain on Washington. Once states run out of their own unemployment funds, they turn to the Treasury Department to borrow them.

While some in Congress have advocated going beyond 99 weeks of benefits, there seems to be little support for the idea among either Democrats or Republicans.

Sen. Max Baucus, D-Mont., the chairman of the Senate Finance Committee, said recently: “You can’t go on forever.”

Since funding stopped June 5, the debate has been about continuing to fund a 99-week system.

Senate's procedural knots
It’s the latest of several times this year that benefits, caught in maelstrom over deficit concerns, have been allowed to lapse. On every occasion, Congress, especially the Senate, has tied itself in procedural knots before passing more funding. The extensions have included retroactive payments to cover the missing weeks.

Shortly before the July 4 recess, attempts to pass another extension fell short due to repeated Republican filibusters.

On June 30, Senate Democrats came within one vote, that of the late Sen. Robert Byrd, D-W.Va., of overcoming the filibusters. Byrd, 92, had passed away just two days earlier.

Unless they can win over more Republicans, Senate Democrats will await Byrd’s replacement before making another move on the issue. West Virginia Gov. Joe Manchin, a Democrat, may appoint a temporary replacement by the end of the week. A special election is expected this fall.

80% of House GOP vote no
In the House, where there are no filibusters, extensions have still met considerable Republican resistance: 80 percent of GOP members voted no on the July 1 vote, the most recent.

Meanwhile, the continued lapse in funding especially harms those workers who haven’t had a chance to get to 99 weeks, said Gary Burtless, a scholar at the Brookings Institution, a liberal think tank.

“Some got 99 weeks; some are not even getting 27 weeks,” the Brookings expert said. News media accounts, he added, “seem to be ignoring the incredible unfairness of this.”

And it’s widely estimated that for more than 1 million Americans, the issue is moot. They have already received all the benefits they can get this recession.

Food stamps, welfare, homelessness
Many of the latter are resorting to food stamps or other forms of welfare, if they can qualify. And for some it can means homelessness.

“It’s a lot of strain on families,” said Harry Holzer, a labor force expert at Georgetown University.

Added a spokesman for the National Employment Law Project: “It’s just devastating. They’ve tapped out their savings, retirement, everything.”

Of the current unemployed, 45.5 percent have been out of work more than six months.

Five unemployed for every job opening
Other statistics from the Labor Department and the National Employment Law Project are similarly daunting: Five unemployed workers for every job opening; an average unemployment spell of 35.2 weeks; median unemployment of 25.5 weeks and an “underemployment rate” of 16 percent. The underemployed, now counted at close to 25 million, include the unemployed, plus those who have given up looking or have accepted a part-time position instead.

Equally chilling for the aging baby boomers are studies, such as one done at Texas A&M University, that indicate employers tend to discriminate against older workers, even though federal employment law prohibits it.

“The older you are, the longer you are going to take finding a job,” Burtless agreed, adding that concern about older workers’ effects on pension and health plans plays a role.

And remaining economic headwinds should make the case for more unemployment benefits clear, Shirholz said.

Continued lack of confidence
Unemployment remains stubbornly high; the housing slump and foreclosure crises continue; sovereign debt problems remain in Europe; a continued lack of confidence exists among businesses and consumers; and state and local governments are laying off workers left and right.

Further, a new Census Bureau report in September is expected to show an uptick in the nation’s poverty rate, according to

Regardless, conservative economists such as Conerly and James Sherk of the Heritage Foundation, a Washington think tank, contend repeated benefit extensions create incentives to delay searching for work or be too picky about what jobs to take.

While acknowledging the job environment is hardly encouraging, Conerly said statistics mask many employment opportunities that remain. For instance, when someone replaces someone who retires, he said, it doesn’t show up as a net increase in the job figures. “There are opportunities in a slack economy,” Conerly said.

Impact on retirees
But in fields like nursing, USA Today recently reported, the recession is causing many to delay retirement or come out of retirement, adding to the competition.

Conerly and Sherk, though, still maintain endless benefit extensions keep some workers from facing facts. “The problem is in this downturn a lot of jobs disappear” and don’t come back as firms move on, Sherk said.

Conerly added workers need to consider alternative fields. “At some time, you have to say this is the new reality,” he said.

One of the most striking aspects of this recession is the mismatch between the skills of the unemployed and the skills required for the jobs that are available. “It’s stunning,” Holzer, the Georgetown expert, said of the mismatch.

Ideas for revamping the unemployment insurance are many.

Temporary jobs and retraining
Holzer said he would like a system that encourages displaced workers to take temporary jobs, such as working at a McDonald’s, while giving them education and retraining assistance to prepare them for a better field.

Conerly, the conservative economist, advocates giving workers individual unemployment benefit funds similar to health savings accounts. It would provide more incentive for them to return to work sooner, he said, and leftover money at the end of their working lives could be transferred to a retirement account.

Meanwhile, unemployment benefits continue to be part of the larger debate about economic stimulus.

Some economists contend funding unemployment compensation is stimulus at its most basic, because the money goes to those likely to spend it immediately. Historically, Congress has also recognized economic stimulus as a reason for extending benefits in a recession.

Conservative dubious
Conservatives, though, tend to be dubious of any talk of providing stimulus through additional spending, even if it’s for unemployment insurance. Last year’s mammoth stimulus package struck many as providing too few returns for what it added to the national debt.

“History conclusively shows that governments cannot spend their ways out of recessions,” said Brian Riedl, another economist at the Heritage Foundation.

Shierholz, however, said the economy would clearly be in worst shape today without the 2009 stimulus, with unemployment rates of possibly 11 or 12 percent. The stimulus kept the economy from falling off a cliff, she said, which is “exactly what it was supposed to do.”

IMF: U.S. economy fragile
The International Monetary Fund said earlier this month the U.S. economy remains so fragile that Washington should consider further stimulus before launching a measures to bring down the debt and deficits.

In any case, Schneider, the Third Way political analyst, warns Congress that it ignores the problems of the unemployed at its peril.

Voters, he said, understand unemployment [compensation] is a safety net measure” and not pork.