Paying workers unemployed due to COVID-19 an extra $600 per week for the rest of the year would boost economic growth in the short term and help people afford food and shelter, the Congressional Budget Office said Thursday.
That would seem like good news. But the report may actually harm Democratic efforts to keep the benefits in place beyond their July 31 expiration date.
As the budget office explains, the extra cash may “weaken incentives to work as people compared the benefits available during unemployment to their potential earnings, and those weakened incentives would in turn tend to decrease output and employment.”
In other words, people who can already afford basic necessities may be less likely to take low-paying jobs, resulting in a higher national unemployment rate.
“Unemployment insurance is meant to help Americans who lose their job until they can get back on their feet and return to work,” Sen. Chuck Grassley (R-Iowa), the top Republican on the Senate committee that oversees benefits, said Thursday. “Democrats’ proposal would turn that upside down and encourage unemployment, government dependence and reduced productivity.”
The CBO said it expects an unemployment rate of 16% in the third quarter of the year without the benefits.
“There’s no way Republicans can look at this scenario and think Congress has done enough for unemployed workers in the face of a once-in-a-century pandemic,” said Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee.
Growth would be higher this year with the benefits, the budget office said, but lower next year. The report also noted that 5 out of 6 unemployment recipients would receive more from the benefits than from work.
Grassley said that if people are receiving public benefits instead of working, it’s “unhealthy for the economy and it’s unhealthy for the individual.”
Grassley’s word choice is ironic, considering Congress boosted jobless pay in the first place to help people stay home and avoid catching the highly transmissible coronavirus that has killed more than 110,000 Americans so far.
But Republicans seem far more troubled by another coronavirus statistic: 40 million newly unemployed.
The pandemic halted much of normal life in America and has severely damaged the economy in several sectors, such as dining, retail, leisure and hospitality.
In response, Congress swiftly passed the expanded unemployment benefits, which handed laid-off workers an additional $600 a week on top of what states already give out in unemployment. Democrats wanted a more precise wage replacement but settled on $600 because it’s roughly the difference between the average weekly benefits and the average wage. Some lawmakers had wanted to make up the actual difference in what laid-off workers received at their jobs and what they would receive on unemployment, but the Trump administration warned that such a process could be slow and difficult to calculate.
Lawmakers opted, instead, to just give everyone an additional $600.
Since that stimulus package was enacted in late March, Republicans have become increasingly critical of the policy, arguing that it disincentivizes work, as many workers actually now make more — or at least about the same — on unemployment. And the GOP has repeatedly signaled that it would not agree to extend the extra $600 for unemployment past its July 31 expiration.
Just this week, the ranking Republican on the Ways and Means Committee, Kevin Brady of Texas, proposed a one-time, $1,200 bonus for workers who come back to jobs before the July 31 deadline. And Republicans seem intent on pushing policies like that, which could force people back into their jobs despite a continuing risk of contracting coronavirus, rather than allowing people to stay home.
Democrats, for their part, have hinted that they would be willing to accept a lower number than $600 if they can keep extra benefits in place.
“To pay for food, housing, and other living expenses while unemployed, people can draw on their savings, borrow money, sell assets (such as cars or jewelry), or use funds received from other people or the government,” the CBO said, noting that many people who lose their jobs have no savings.
“The additional $600 per week in unemployment benefits under current law allows people to continue to consume goods and services that they might otherwise be unable to afford and to save for future contingencies,” the budget office said.
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