The Costs of Making ‘unemployment Benefits on Steroids’ Permanent

Temporary expansions in unemployment benefits enacted last March in response to the pandemic are only the beginning of what Democrats have in mind for growing this major entitlement program. That’s why House Speaker Nancy Pelosi (D-CA) and Senate Democratic leader Chuck Schumer (D-NY) in December called last month’s extension law just “an important first step that Democrats look forward to building on under the new Biden-Harris Administration.”  President Biden’s recent $1.9 trillion “American Rescue Plan” reveals the next steps, which include not only more temporary benefits but also the permanent extension of what Senator Schumer called “unemployment on steroids” — current unprecedented benefits designed to help those in need “during this crisis.”

The nonpartisan Center for a Responsible Federal Budget estimates the Biden plan’s added temporary unemployment benefits could cost $350 billion, or nearly triple the price of the December extension. That would lift federal unemployment benefits since the crisis began in March 2020 to over $850 billion — more than two and a half times the federal support provided in six years during and after the Great Recession. Counting state unemployment checks, total benefits would soar to well over $1 trillion.

The details of the Biden plan reveal why its price tag is so big. For example, the December law extended federal unemployment benefits for roughly three months, while the Biden plan would extend them for over six months. Current $300-per-week bonuses payable over 11 weeks would swell under the Biden plan to $400 per week payable over 29 weeks. As a result, unemployment checks would be payable for up to 99 weeks to recipients in some states, matching highs previously reached only after the Great Recession. Total payments to someone qualifying for just average weekly benefits and unemployed between April 2020 and September 2021 would reach an astonishing $51,000. And over half of recipients of “Biden bonuses” would collect more from benefit checks than their paychecks. The Biden plan suggests expanded benefits “provide long-term financial security” and never discusses helping millions now collecting benefits return to work – where real financial security is found.

These expansions would lock in elevated benefits for the bulk of 2021, regardless of how rapidly the economy recovers. But the Biden plan doesn’t stop there. Applying former Chicago mayor and Obama chief of staff Rahm Emanuel’s famous dictum that proponents of bigger government “never want a serious crisis to go to waste,” it also suggests leveraging the current temporary crisis into a permanent expansion in unemployment benefits payable well after the pandemic has passed:

The president-elect is proposing to extend these emergency unemployment insurance programs through September 2021, and will work with Congress on ways to automatically adjust the length and amount of relief depending on health and economic conditions so future legislative delay doesn’t undermine the recovery and families’ access to benefits they need.

The Biden plan doesn’t detail the “health and economic conditions” on which such permanent expansions would depend. But the December 2020 “American Worker Holiday Relief Act” introduced by Schumer and Senator Ron Wyden (D-OR) fills in the gaps. In addition to paying $600-per-week bonuses into 2022, the legislation proposes making today’s extraordinary federal unemployment aid payable “in every state until the state’s three-month average total unemployment rate and the national three-month average total unemployment rate are below 5.5 percent.” If applied after the Great Recession, that criteria would have continued extraordinary federal benefits for years longer than they were actually paid in some states, literally making “emergency” benefits there the norm during the past decade. That ignores the fact that extensions delay returns to work, contribute to lower incomes, and increase taxes on jobs, all slowing job creation and harming workers in the long run.

The long-term cost? Given recent trends, it would certainly be enormous. Supporters are silent on how they would pay for that, which in the past would have required major new taxes on jobs, in turn harming workers by reducing wages. But for those who advocate making “unemployment benefits on steroids” permanent, such details shouldn’t get in the way of action while Washington seems inured to trillion-dollar bills and Democrats seek a new era of permanent stimulus that could be impossible to ever unwind.