Taking Politics Out of Unemployment Insurance
By Senate Democratic Leader Charles E. Schumer
There is a long road ahead before the U.S. economy gets back on its feet. More than 33 million Americans are receiving unemployment or waiting to see if they will be approved for benefits, the unemployment rate for African Americans is increasing, and the coronavirus continues to present severe health risks to our workers.
It is therefore essential that we strengthen and recalibrate our unemployment insurance system to reflect the conditions in our country. We must ensure Americans, particularly lower-wage workers and those in underserved communities, have the relief necessary to stay afloat not only during the crisis this year, but also the lengthy recovery period that may follow.
There is one major problem. Congress often moves too slowly to enact the necessary relief during prolonged economic downturns.
In the early days of the coronavirus pandemic, the scale and immediacy of the crisis forced Congress to quickly assemble and pass emergency relief legislation, which included a historic expansion of unemployment insurance secured by Senate Democrats. But now, a few months into the crisis, even as economic conditions in the country remain dire, Senate Republicans are delaying additional action and appear willing to let expanded unemployment benefits expire on July 31st.
So today I am introducing a bold new piece of legislation, the American Workforce Rescue Act, with my friend and colleague, Senator Ron Wyden, the Ranking Member of the Senate Finance Committee. This proposal would extend critical unemployment benefits in each state based on economic conditions, rather than arbitrary cut-off dates. Together, we will be leading the charge to include this legislation in the next coronavirus relief legislation.
Increasing unemployment relief based on data and economic necessity, rather than the political whims of Senate Republicans, will not only provide Americans with greater economic certainty and security, but it will also allow for long-term growth and stability for the entire U.S. economy. It’s also an idea strongly supported by the American people, according to new surveys from Data for Progress.
How does our bill work?
Our proposal would tie unemployment benefits to a specific indicator, or “trigger”—in this case, a state’s level of unemployment—meaning the benefit amounts are adjusted to account for fluctuating economic conditions, not arbitrary political calculations in Washington. When unemployment rates are high, the enhanced benefits are automatically triggered. When unemployment rates lower, the enhanced benefits would gradually phase-out.
To be specific: our bill would guarantee that after July 31, the federally-funded $600 increase in unemployment compensation will remain in place until a state’s three-month average total unemployment level falls below 11 percent. The extra $600 benefit amount would then begin to gradually phase-out by $100 for each percentage point decrease in the unemployment rate, until it falls below 6 percent.
The bill also extends a number of other expanded unemployment benefits included in the CARES Act, such as Pandemic Unemployment Assistance (PUA) which provides coverage to the self-employed, gig workers, and others who are not eligible for traditional unemployment insurance, through March 27, 2021, regardless of states’ unemployment rates. Afterwards, the enhanced benefits will remain in place until a state’s unemployment rate drops below 5.5 percent to automatically trigger financial relief for however long it is needed.
Why is our bill so important?
The $600 increase in unemployment benefits serves as a critical lifeline for low and moderate-wage workers and families across the U.S. who are struggling to pay their rent, keep up with mounting medical bills, and put food on the table. As noted in a recent Federal Reserve report, it will be challenging, if not impossible, for many households to meet their financial commitments if the health and economic crises persist and the expanded benefits are not renewed.
These enhanced unemployment benefits, combined with other relief for workers provided in the CARES Act, have greatly reduced the number of Americans in poverty during the coronavirus pandemic. According to Columbia University’s Center on Poverty and Social Policy, without the direct individual assistance enacted in March, the U.S. poverty rate would have risen to 16.3 percent of the population. Instead, the poverty rate rose a nearly indiscernible amount – around 0.2 percent – between 2019 and 2020. This relief prevented nearly 12 million additional Americans from falling into poverty (the reduction largely concentrated among African American and Latino households).
The same study warns that ending the $600 weekly benefits in July may exacerbate racial and ethnic disparities in poverty levels, furthering economic injustice for communities of color.
Extending the enhanced unemployment benefits in the CARES Act is even more essential given the significant amount of time it is expected to take for the economy to fully improve. The Congressional Budget Office (CBO) has released harrowing projections that the coronavirus pandemic will take more than 5 percent – or close to $16 trillion – off of U.S. nominal gross domestic product (GDP) over the next decade. This means it could take ten years, or longer, for unemployment in the U.S. to return to pre-pandemic levels. According to CBO, these economic projections could change if additional coronavirus relief legislation is enacted, which reinforces both the immense urgency and the necessity of further action to support the American people.
Distinguished economists on both sides of the aisle have lauded policies like unemployment insurance for being “workhorse anti-recession programs” that have been effective in fighting economic crises since the Great Depression. In fact, it is estimated that during economic downturns, every $1 increase in unemployment insurance generates $1.64 in GDP.
For both American workers and the economy itself, the automatic extension of expanded unemployment assistance would be a crucial lifeline.
Why now?
Enhanced unemployment benefits will expire in 31 days, but the unemployment crisis will not. We cannot let these benefits perish so abruptly, or allow Senate Republicans to pre-emptively declare “mission accomplished” when many individuals are still anxiously waiting for their first unemployment check to arrive.
To take no long-term action to protect out-of-work Americans in the most severe economic crisis in decades – as President Trump and Leader McConnell have suggested – is callous, irresponsible, and unacceptable.
We need to quickly enact the American Workforce Rescue Act so critical benefit programs, like unemployment insurance, continue to provide the essential, lifesaving relief that American workers and families need for as long as our economy is in recovery.
Charles E. Schumer is the Senate Democratic Leader.