An estimated 1.3 million Americans will lose unemployment benefits Saturday when a federal emergency program initiated during the recession expires. The program was not extended in the bipartisan budget deal negotiated earlier this month, although some Senate Democrats have vowed to take up another extension of federal unemployment benefits when the next session reconvenes in 2014.
Yahoo Finance Editor-in-Chief Aaron Task says, “This is not going to be good for the economy.” Eliminating the benefits could have the initial effect of lowering the unemployment rate as some of the 4 million long-term unemployed stop looking for work and fall out of the government rolls. It could also decrease spending as more than a million Americans stop receiving checks. Proponents of eliminating the program, however, point to steady improvement in the economy and the job market, with businesses adding some half a million new jobs since October.
The federal program began under President Bush during the financial crisis of 2008 as a way to supplement state unemployment benefits. The Emergency Unemployment Compensation program provides federally funded unemployment benefits for those who have exhausted regular state benefits. The federal extensions run between 13 and 43 weeks, depending on the state's unemployment rate. The average benefit is about $300 a week.
According to the White House, nearly 24 million Americans have received benefits under the federal government program, which runs an annual cost of $25 billion. At the time the program began, the national unemployment rate was near 10%. Now, with unemployment down to 7%, opponents of the program say it is time for the federal benefits to come to an end.
This was a hard-fought issue in the most recent budget debate on Capitol Hill, with Democrats pushing hard to extend the benefits and Republicans holding their ground. “It was one of those issues where one side gave and the other side held out and that’s what compromise is all about,” says Task.