Will Congress Say “Just Kidding” About Extending Jobless Benefits but Keep Tax Cuts for the Wealthy?

The federal government is funding emergency Unemployment Insurance (UI) benefits for workers who have been looking for a job for more than six months – just as it has always done when the national unemployment rate is high. These benefits give a boost not only to workers and their families, but also to local economies. In fact, Moody’s Analytics estimates that every $1.00 in federally funded UI benefits increases economic activity in California by $1.56.

Last December, President Obama signed a two-year extension of the Bush-era tax cuts for all taxpayers – including the nation’s wealthiest individuals – as part of a measure extending emergency UI benefits. Now, some in Congress propose to modify that deal and transfer $31 billion from emergency UI benefits – including approximately $5 billion currently slated for California workers – into a new block grant. States could use the block-granted funds for a variety of purposes, including repaying funds borrowed from the federal government to pay state UI benefits or reducing employers’ contributions to UI trust funds. Proponents of this change argue that it would allow states to address shortfalls in state UI systems. In fact, the proposal is designed to allow states to divert funding earmarked for UI benefits and shift it to prevent increases in payroll taxes that are slated to occur automatically under federal requirements aimed at helping restore UI funds to solvency.

There are better options for ensuring that states’ UI programs have adequate funding, as we recently wrote – options that don’t harm workers. For instance, Congress could forgive principal due on federal UI loans for states that make moderate adjustments to their UI financing systems, such as increasing the share of wages that is subject to the UI tax, to help build long-term financial stability.

More than 2.1 million California workers are currently out of work, and more than 1 million – 46.8 percent of the unemployed – have been job-hunting for six months or more. These workers desperately need the emergency UI benefits they’ve been promised. For them, and for the state’s economy, keeping that promise couldn’t be more serious.

— Vicky Lovell