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Another Jobless Benefit Extension: What It Will and Won't Do

Senate Democrats now have the votes to extend unemployment benefits that ran out on June 1 for some 2.5 million people.

The measure is expected to pass the Senate and the House and be signed by President Barack Obama within a day. Jobless benefits could be restored, retroatively, as early as Thursday. The extension will fund those benefits through November.

The extended benefits will surely cushion and comfort the recipients and their families, but the broader impact remains less certain. Some considerations:

  • It's a stripped-down bill. None of the tax extenders that were originally part of this legislation are still in it. That means breaks like the deduction for state sales tax instead of property taxes, the above-the-line deduction for property taxes and college tuition, the extra deduction for teachers who spend their own money on supplies, all expired at the end of 2009. Whether they will come back at all are anybody's guess.
  • Not everyone will get all the unemployment coverage they think they will. That got stripped down, too. Virtually everyone who has been laid off is eligible for the first 26 weeks of jobless benefits, as has always been the case. But after that it gets dicey. There are four different "tiers" -- really multi-week extensions -- that require different prerequisites before they kick in. The first 34 weeks (beyond that initial 26) are broadly available. But only states with high unemployment will be eligible for the next two tiers of extended benefits (specifically, states with over 6 percent unemployment will be eligible for an additional 13 weeks, and then states with over 8.5 percent unemployment rates will be eligible for another 6 weeks beyond that). And the bill does not add a proposed new "fifth tier" which would have offered more than 99 weeks total to laid off workers in the hardest-hit areas. Oh, and the average benefit now is $309 a week, so nobody is going to get rich on their fat new unemployment checks.
  • It's not going to fix the economy. Economists contend that federal spending on unemployment benefits have a multiplier effect on the economy, saying that for every $1 paid out in unemployment benefits, the economy sees $1.60 in activity. The National Employment Law Project has estimated that this $33 billion measure could create $58 billion in economic activity. That's better than a stick in the eye, as the saying goes, but in a $14.6 trillion economy, it's unfortunately not very much. Unless, of course, your income has been cut to zero. In which case $309 a week is very nice, thank you very much, and you'll take it.
Photo by Clementine Gallot on Flickr.
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