Congress is under pressure to extend expiring unemployment benefits as COVID-19 infections continue to rise in some states and as jobless rates remain at levels not seen in decades.
The expanded benefits included in March's CARES Act helped tens of millions of workers get through coronavirus-related lockdowns, but are set to go away in August.
Republicans object to continuing to add an extra $600 to weekly benefits for all unemployment recipients, noting that it could make unemployment more lucrative than working for a large percentage of recipients. That, they say, could provide a disincentive for people to return to work as the economy reopens.
But Democrats are worried that cutting or reducing the benefit would leave poor people without a safety net.
A Friday report from the Federal Reserve noted that recipients could find themselves in a dire situation without the expanded benefits.
"The supplementary UI (unemployment insurance) will end this summer. At that point, it will be difficult for many families to meet their financial commitments — rent, food, utilities, and other payments — if the economic downturn continues and the benefits are not renewed," the report said.
They also argue that if Republicans curb the enhanced unemployment benefits, low-wage workers will feel like they have to return to working, regardless of whether it’s safe to do so.
Lawmakers agreed to increase weekly unemployment benefits by $600 across-the-board in the CARES Act because that amount is the difference between the average weekly wage and the average weekly state unemployment benefit.
Lawmakers increased benefits by a flat dollar amount rather than limiting them to a percentage of prior earnings so that states could easily administer the change.
But some Republicans have been criticizing the boost as too generous since before the CARES Act became law. The $600 per week increase is currently set to expire on July 31, and its fate is set to be one of the key questions facing lawmakers and the administration when they negotiate a subsequent coronavirus relief package.
Recent health and economic developments could shape the response.
Although the unemployment rate fell in May, it is still very high, at 13.3 percent, levels not seen since World War II. At the same time, the number of Americans who permanently lost their jobs increased in May.
Many states, including some such as Texas and Florida that began reopening their economies earlier on, are seeing COVID-19 infections rise dramatically, raising the prospect of potential new restrictions and another wave of unemployment.
The increase in coronavirus cases in a number of states has rattled investors, with stocks falling last week after steady gains in April and May, though the Dow Jones Industrial average rose 158 points on Monday.
White House economic adviser Larry Kudlow said Sunday on CNN that the $600 weekly boost to unemployment benefits is a “disincentive.” He predicted that the enhanced benefits will end in July but that Trump is looking at some type of bonus for people who go back to work.
GOP lawmakers also say that the economy has been improving, requiring a different approach to unemployment benefits.
“States are reopening, employment recently turned positive, and we need to shift our focus to helping people safely return to work, making sure businesses are able to come back quickly and put the country back on a path to economic growth,” Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said during a hearing last week. He also called the $600 per week boost “poorly targeted.”
Doug Holtz-Eakin, a former Congressional Budget Office director who is now president of the right-leaning American Action Forum, said that policy makers should let individuals drive decisions about going back to work as much as possible, since some groups are more at risk from the coronavirus than others and people have varying tolerance levels for risk.
“The $600 benefit gets in the way of that” because it’s too large, he said. He predicted that Congress would provide some type of enhanced unemployment benefit after July 31 that’s less than $600 a week.
But Democrats say that now isn’t the time to let up on federal assistance. House Democrats last month passed a bill that would extend the $600 weekly increase until Jan. 31, 2021.
“It would be extremely irresponsible for Congress to take a step back at the first sign of improvement,” House Ways and Means Committee Chairman Richard Neal (D-Mass.) said in a statement on the day the May unemployment report came out.
“If they dial back [unemployment insurance] support, these folks will have to go back to work, even in unsafe workplaces,” said Jared Bernstein, a senior fellow at the left-leaning Center on Budget and Policy Priorities who is informally advising former Vice President Joe Biden’s presidential campaign.
The recent increase in coronavirus cases in some states “just increases the risks,” Bernstein added.
There are several policy questions lawmakers have to wrestle with beyond whether to provide some type of boost to weekly unemployment benefits after July 31.
One question is whether Congress continues to increase unemployment benefits by a flat amount, or whether they shift to providing an increase in benefits that’s based on a percentage of prior wages.
Senate Finance Committee ranking member Ron Wyden (D-Ore.) said the only reason he and other Democrats pushed the $600 approach was that state unemployment offices didn’t have the capacity to administer the alternative, which would have caused serious delays.
Last week, Wyden and Labor Secretary Eugene Scalia got into a heated exchange on the matter, with Wyden accusing Scalia of giving misleading testimony on the issue.
Scalia testified that states had made progress since March in their ability to administer the 100 percent wage policy, which Wyden said differed from what Scalia told him in private.
Several state unemployment offices said that they would find it nearly impossible to implement a wage-specific strategy quickly.
"There's absolutely no way we could get that done by August 1," said Joyce Fogg, a spokeswoman for the Virginia Employment Commission.
"It would take several months of planning and reprogramming our system," she added, not to mention verifying wage levels for every recipient and parsing out varying amounts for the federal government to subsidize. The agency, she said, has already been under immense pressure to get the programs from the CARES Act up and running.
Cathy Muñoz, the deputy commissioner of Alaska’s Department of Labor and Workforce Development, said such changes would take six to nine months to implement.
Beth Townsend, Director of Iowa Workforce Development, testified to the Finance Committee that the "one-size-fits-all" approach was not ideal, but also said that a wage-specific approach “would require an individual review of each claim, thereby creating a labor intensive and lengthy process for each claim."
A Wyden aide said there had been no additional contact between Wyden and Scalia since the hearing, and the Labor Department did not return a request for comment on the status of state readiness.
Lawmakers are also considering some type of “return to work” bonus that allows people to keep receiving some or all of the boost to unemployment benefits for a period of time after they start working again.
Several prominent GOP lawmakers have been pitching this idea, and administration officials have said they are considering it.