Along with food stamps, compensation payments through the New Deal-established unemployment insurance program is the main safety net for the jobless and the most effective stimulus to the economy, generating $1.90 in economic growth for every $1 spent.
For the past 50 years, states have covered 26 weeks of unemployment benefits. Because of the severity of Great Recession, Congress added layers of extended benefits for the jobless in states hardest hit by unemployment. In some states, that meant 99 weeks of benefits were available. As the unemployment rate has drifted slowly downward over the past 31 months, the eligibility threshold for those extended benefits has also fallen.
How many additional weeks are available in each state is determined by several factors. One of these is whether a state’s unemployment rate is higher than it was three years ago. Thus, in California, where the jobless rate is still nearly 11 percent, some 95,000 of the unemployed lost their benefits this month.
The budget deal has speeded up the cut-off process, making eligibility tougher:
“A growing number of long-term unemployed workers are being left behind,” said Christine Owens, executive director of the National Employment Law Project.“The final 13 to 20 weeks of jobless insurance that workers in high-unemployment states have been relying on is now being stripped away as a casualty of the legislation Congress passed in February reauthorizing the federal unemployment programs. These cuts are coming faster than the economy is improving, which means more workers will have to survive without any jobless assistance and families will have less money to put back into the economy.”That was mid-May. In June, another 70,000 workers will prematurely lose their benefits because of the deal. These cut-offs will continue month-by-month through September. By then, even in the worst-hit states, unemployed workers will be eligible for only 73 weeks of benefits and 40 weeks in the low-unemployment states. The cuts don't include unemployed Americans who have been out of work so long they have exhausted their benefits. Only about three-fourths of workers are eligible for any benefits because of the nature of their employment. But fewer than half are now receiving either state benefits or the federal extensions.
The expiration of benefits is one factor contributing to what many economists refer to as a “fiscal cliff,” or a drag on the economy at the end of this year when tax cuts and recession-related spending measures will all come to an end unless Congress acts. The Congressional Budget Office warned last week that the combination could contribute to another recession next year.On top of reductions in federally extended benefits, several states have tightened eligibility requirements, reduced the amount of benefit checks and/or reduced the number of weeks from the old nationwide non-recession standard of 26 weeks to as few as 12 in Florida.
In fact, Florida is the worst case in the nation currently. Only 15 percent of Floridians received benefits in the fourth quarter of 2011. The national average of unemployed who received state benefits in 2011 was 27 percent. Half of new applicants for unemployment benefits in Florida are being rejected.
In the long run, the nation's entire unemployment safety net needs to be reformed from bow to stern. In the short run, a lot of out-of-work Americans are going to find themselves even worse off than they have been as the benefits that kept a roof over their heads and some hope in their hearts vanish.