Partisan politics, Congress' legislative language, and interest group lobbying are about to turn America's 160 million workers into guinea pigs. We're all about to be part of a huge study on whether unemployment insurance keeps people out of the labor market. The biggest variable in this 50-state experiment is the new unemployment benefits created during the pandemic. Republican governors in nearly two dozen states are rolling back key benefits that helped people through the downturn: expansions in unemployment insurance to workers not previously covered, increased length of coverage for unemployed workers, and topped-up weekly payments are some of the initiatives.
As the U.S. economy bounces back from the COVID-induced downturn, some employers say they’re having a hard time finding workers. GOP lawmakers like Rep. David Rouzer (N.C.) blame the safety net. “This is what happens when you extend unemployment benefits too long and add a $1400 stimulus payment,” Rouzer said on Twitter last week, posting a photo from a Hardee’s that said it was closed for lack of staff. “Right when employers need workers to fully open back up, few can be found.” It’s a dubious argument. Republicans said this same thing last year when Congress passed a big relief bill that added $600 per week to state unemployment benefits for four months. Democrats “are going to make the next four months impossible for small businesses to hire,” Sen. Lindsey Graham (R-S.C.) said.
With tax season well underway, many Americans who lost their jobs due to the coronavirus pandemic and found some relief in supercharged unemployment benefits last year are discovering that they now owe the federal government hundreds—even thousands—of dollars in surprise payments, an economic nightmare for low-income people and a looming political catastrophe for the party currently in power. Because unemployment benefits in the United States are classified as taxable income, a potentially significant portion of the estimated 40 million Americans who received unemployment insurance (UI) in 2020 "will be in for a rude awakening" when they find out "they are on the hook for thousands of dollars in owed income taxes at the federal and, in some cases, the state level," Brian Galle and Elizabeth Pancotti warned in a report for The Century Foundation last month.
Our unemployment insurance system has failed the country at a moment of great need. With tens of millions of workers struggling just to pay rent and buy food, Congress was forced to pass two emergency spending bills, providing one-time stimulus payments, special weekly unemployment insurance payments, and temporary unemployment benefits to those not covered by the system. And, because of their limited short-term nature, President Biden must now advocate for a third. The system’s shortcomings have been obvious for some time, but little effort has been made to improve it. In fact, those shortcomings were baked into the system at the beginning, as President Roosevelt wanted, not by accident.
Washington, DC - Congressional leaders agreed Sunday on a nearly $900 billion economic aid package to extend federal unemployment payments and forgivable loans for small businesses, and to give direct cash payments to many Americans. The leaders — under increasing pressure from constituents and rank-and-file lawmakers, and confronted with both a slowing economy and surging coronavirus infections and related deaths — are racing to pass it into law before millions of Americans lose their financial lifeline. The final text of the aid package, the second largest in U.S. history, was expected to become available Sunday evening, leaving members of Congress little time to review it before voting Monday.