Will Congress Pass a Bipartisan Stimulus Package, or Send the Unemployed a Lump of Coal for Christmas?

The COVID-19 pandemic has released an unprecedented and unrelenting wave of unemployment. Forty-one million Americans have received support from unemployment insurance (UI) benefits during the pandemic, and have benefited from enhanced aid provided by the CARES Act, enacted in March. The record amount of assistance delivered has included Pandemic Unemployment Assistance (PUA), new benefits for those not usually eligible for UI; PEUC (Pandemic Emergency Unemployment Compensation), which provides thirteen additional weeks of benefits to the long-term unemployed; and PUC (Pandemic Unemployment Compensation), an additional $600 per week on top of the typical benefits provided (a provision that expired at the end of July).

All of this aid will be immediately cut off at the end of this year. If Congress does not pass an emergency relief package, twelve million Americans will face losing PUA or PEUC benefits on December 26. These meager benefits—averaging $240 per week for PUA and $317 for PEUC and state UI—have become the sole lifeline keeping millions of families out of poverty and extreme hardship. Without an unemployment check or paycheck, families will have little way to keep food on the table, maintain their family home or vehicle, or pay for essential medicines, hardships that will make it even harder for them to find employment or dig out of the hole of recession. Furthermore, these legions of struggling Americans are staring at a New Year not only absent any income, but without federal protections against eviction, and thus at possible homelessness during a raging pandemic. The burden is increasingly falling on Black and Latinx workers, who are making up a growing share of those relying on unemployment benefits, as white workers were far more likely to be called back to work and able to get off of benefits as the economy emerged from the initial lockdown over the summer. Moreover, on a macro level, the cut-off of benefits will kneecap the economic recovery for workers of color and communities across the country—costing as many as 5.1 million jobs because of the reduction in consumer spending and resulting in a cut of 1.5 percentage points off of GDP.

The cutoff comes at a perilous time for the nation’s pandemic ravaged economy. With the daily death toll from COVID-19 surpassing 3,000 on December 9, states have been forced to enact new restrictions on businesses. Not surprisingly, more workers filed new claims for unemployment in the week ending December 5 than in any week since September. Job growth had already screeched to a near halt in November, as the economy only added 245,000 jobs and another 400,000 Americans gave up looking for work altogether. In November, 39.6 percent of those unemployed had been out of work for six months or more, the highest level since December 2013.

Congress has known about these expirations—alongside other expiring parts of the CARES Act and other unmet needs—for months, but has failed to craft a viable piece of legislation.

Congress has known about these expirations—alongside other expiring parts of the CARES Act and other unmet needs—for months, but has failed to craft a viable piece of legislation. At last, a meaningful option has been presented. As the deadline rapidly approaches, a bipartisan group of eight legislators, including Senators Mark Warner (D-VA), Joe Manchin (D-WV), Bill Cassidy (R-LA), and Mitt Romney (R-UT), has crafted a compromise package that provides the essential elements of an end-of-the-year unemployment relief package.

There are major omissions from the agreement, including direct payments to individuals and the continuation of emergency paid family leave, and a cut in PUC from $600 to $300 without retroactive UI; this package only offers $900 billion in stimulus, whereas previous bills that passed the House offered as much as $3 trillion in aid. It’s far from perfect, and negotiations with Senate leaders and the White House are ongoing; but these elements represent the minimum vital elements that must be done before the end of the year, paving the way for a more robust stimulus package in 2021.

This commentary outlines the critical components of the package, how it contrasts to offers being made by the president and the Republican majority, and the consequences of failing to act. Among other critical findings, we conclude that the bipartisan agreement accomplish the following:

• It will provide the unemployed on PEUC and PUA with an average of $9,950 and $8,200 in assistance, respectively, which is 52 percent and 60 percent more than Secretary Mnuchin’s counterproposal of just $600 in stimulus and a thirteen-week extension.
• States will get as much as $25 billion (California) in economic stimulus between January and mid-April from the bipartisan agreement. Nine states would gain more than $3 billion each in stimulus from the proposal in this short period (Florida, Georgia, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, and Texas).
• It will mitigate immediate economic hardship. Around 4.7 million renters who have lost employment income are facing eviction in the New Year; with this package, they could maintain their homes, and possibly their lives, if the bipartisan agreement is enacted.
• According to research from Columbia University, 4.8 million more individuals (including 1.3 million children) will be in poverty in January 2021 if the unemployment rate remains the same as now and PUA/PEUC expire. Food insecurity is on the rise among the unemployed and will certainly grow if these programs expire.

With time quickly running out, Congress should implement the key aspects of bipartisan agreement, and more, before December 26.

Bipartisan Relief Agreement Provides a Ray of Hope—and a Potential Down Payment for the Economic Recovery

On December 9, 2020, the bipartisan group of negotiators named above released a framework for a $908 billion dollar stimulus package that includes up to $180 billion for unemployment benefits, including extensions of PEUC and PUA and a restart for FPUC. The proposed bill language was released on December 14, 2020, and includes the following:

• Extension of PEUC and PUA: The proposal includes a sixteen-week extension of both federal PEUC and federal PUA benefits. In other words, the twelve million workers impacted by the cut-off of benefits would be able to receive an additional sixteen weeks of benefits through April 19, 2021. In addition, those who were not collecting either PUA or PEUC in December could begin receiving benefits in January and continue collecting them through at least April 19, 2021.
• A restart for PUC: The package would also restart the Pandemic Unemployment Compensation program, adding $300 per week on top of the meager base PEUC (just under $320 per week) and PUA (under $240 per week) benefits. These additional benefits have not been available in any form since September, but the proposal did not make their payment retroactive. The additional $300 would be added on top of all federal and state unemployment benefits, including the regular first twenty-six weeks and smaller programs, like extended benefits.
• Other provisions: The bipartisan agreement would continue other key provisions of the CARES Act. These include temporary federal support for other key aspects of UI, including 100 percent funding for work-sharing schemes that prevent layoffs and 100 percent funding for federal–state extended benefits (EB) for the long-term unemployed. In addition, it provides federal financing for the benefit costs of nonprofits and government agencies (which typically pay 100 percent of the benefits for their laid off workers) and federal financing for the first week of UI benefits, and waives the “waiting week” normally required by federal law to receive federal financing for extended benefits.
• New PUA provisions: While the proposal largely continues the CARES Act, it includes several changes to PUA. Of critical importance is that states would be allowed to waive overpayments for PUA if collection would violate principles of equity and good conscience, or if the claimant was not at fault for the overpayment (such as an agency error). Under the CARES Act, no PUA overpayments could be waived. This would level the treatment of overpayments under PUA with PEUC. Another significant change is a new requirement that new PUA applicants “provide documentation to substantiate their employment or job offer no later than 21 days after their application.” While this only applies to those applying for PUA after January 1, 2021, it will bring challenges to overburdened states which will have to process uploaded documents for thousands of additional claimants. To this point, such documentation is required for those currently on PUA to earn more than the minimum benefit—but states have struggled to fulfill this aspect of PUA, and a recent Government Accountability Office (GAO) report found that many on PUA are being underpaid benefits, and that this new rule may cause many applying newly for PUA to be ineligible. If this proposal makes it into the final bill, the Department of Labor should encourage states to explore electronic data matching for the 1099 workforce to complement these manual submissions. This is one way the provision can fulfill its goal of preventing fraudulent claims using stolen identities without denying eligible benefits to workers.

An Assessment of the Proposal

The group of legislators behind this package should be commended for coming up with the most detailed, bipartisan agreement in many months. Given that the proposal originated from moderate members of Congress, it is not surprising that the result is a pragmatic, immediate proposal in line with historic norms. For example, federal extended benefits have been provided after every economic recession in the post-World War II period, and have never been cut this soon in a jobs recovery. But the norm is not enough, and bipartisan negotiators have recognized that. Unemployment aid is even more important now as joblessness is hitting frontline service work—like restaurants, hotels, and personal services—that is disproportionately performed by women and people of color who have less of a personal financial safety net. Adding the additional $300 will provide vital assistance to these families, enabling them to meet a greater share of their basic needs and avoid falling further behind on their bills.

Especially at a time when impacted renters are behind an average of $5,800 in rent—amounting to $70 billion nationally—even this extra aid won’t be sufficient to prevent all families from severe risks such as eviction. It’s far less than the $600 per week originally enacted by the CARES Act that unemployed activists have eagerly campaigned to restore. It does not include retroactive payments covering the period since supplements from PUC and its successor Lost Wages Assistance were cut off in September. This lower amount of PUC will still leave many freelancers living in high-cost cities such as New York or Los Angeles, where a typical one-bedroom apartment can easily cost over $2,400 per month, sucking up the entire new proposed benefit, and still short of what they need to pay rent.

The absence of a stimulus payment to individuals (a key feature of the CARES Act) will make the lack of a retroactive payment sting even more for jobless families. A separate bipartisan effort by Senators Josh Hawley (R-MO) and Bernie Sanders (I-VT) seeks to issue another round of these checks. Moreover, the proposal would not extend emergency paid family and medical leave, which will put even more pressure on state unemployment agencies to help families who cannot work because they are ill with COVID-19 or lack child care to get into the PUA program. It will mean those reaching out for help for caregiving will receive far less than they would from paid leave programs.

Unlike the Democratic UI proposal by Senate Finance Committee Chair Ron Wyden (D-OR) and Minority leader Chuck Schumer (D-NY), the eight-senator proposal does not guarantee continued aid until the unemployment rate drops, nor does it address structural failings in UI. President-elect Biden and the new Congress must craft an agreement that keeps PEUC and PUA benefits flowing for as long as the unemployment rate remains elevated and while the implementation of a vaccine facilitates an economic recovery. Moreover, the COVID-19 crisis has made the need for structural fixes to the unemployment program even clearer, including higher levels of state benefits that don’t require a supplement and more complete coverage for women, low-wage workers, gig workers, and workers of color. This safety net infrastructure is a vital component of rebuilding the economy with the lessons of the pandemic close at hand.

The proposal represents a strong downpayment of assistance for unemployed workers and the entire economy; and it’s an investment that absolutely cannot wait until the New Year.

Nonetheless, the proposal represents a strong downpayment of assistance for unemployed workers and the entire economy; and it’s an investment that absolutely cannot wait until the New Year. Table 1 estimates the dollars that could be delivered through three key components of the proposal: a sixteen-week extension of PEUC and PUA, and sixteen weeks of FPUC at $300 to all on state benefits, PUA, and PEUC. California would receive the most aid of any state—$25 billion. Nine other states (Florida, Georgia, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, and Texas) would also each receive more than $3 billion in aid. As indicated by Table 1, the bipartisan agreement represents a dose of economic stimulus that is indeed timely and targeted to those at greatest need.

Table 1

Stimulus Payments Are a Supplement—Not a Replacement for the Unemployment Benefit

Since the details of the bipartisan package were released on December 9, much of the attention has been on the exclusion of direct stimulus payments in the package. Direct stimulus payments in the CARES Act of $1,200 for every adult ($500 for every child under the age of 17) were popular and effective: they added to the spending power of low-wage workers, seniors, and the disabled. Such payments have bipartisan support, including from Senators Josh Hawley (R-MO) and Senator Bernie Sanders (I-VT), as well as, most recently, President Trump and Treasury Secretary Mnuchin. However, while adding a stimulus payment to an end-of-year package would increase its overall impact on the economy, a stimulus payment is by no means a replacement for the enhanced and extended unemployment benefits package in the bipartisan proposal. The types of stimulus payments being discussed can serve to enhance the income of Americans, but they will simply not be large enough to replace the employment income lost due to the pandemic.

As a case in point, Secretary Mnuchin is reported to have proposed his own $916 billion package to Speaker Pelosi, which would include a $600-per-person stimulus package, but would not reactivate the $300 per week additional federal unemployment benefits. The package was reported to have $40 billion for unemployment insurance, which would presumably cover the cost of a thirteen-week extension of PEUC and PUA—but only at the low base rates. (Note that the details of this proposal were not released, and it could have contemplated even less aid, but the $40 billion for UI matches the cost of such a policy.) Table 2 compares the combined income from stimulus payments and unemployment benefits for typical long-term unemployed workers. More specifically, it compares a policy that would deliver $4,800 of FPUC (sixteen weeks at $300) and sixteen weeks of either PUA or PEUC at the state’s base weekly rate to a counter policy that would provide $600 in stimulus and only thirteen weeks of PEUC or PUA.

As Table 2 indicates, unemployed workers would be badly shortchanged by a plan that leads with a direct stimulus as an alternative to enhanced UI benefits. On average, jobless workers on PEUC would receive just under $10,000 if the bipartisan agreement passes, while those on PUA would receive an average of $8,200 because of that program’s lower base benefits. This is a far more generous aid package than the one contained in the Mnuchin proposal. Those on PEUC would receive 52 percent more from the bipartisan agreement, given that they would get the $4,800 instead of just $600 on top of their base checks, and at least three more weeks of core assistance. The additional supplement is even more important for those on PUA, who receive an extremely low base benefit. Those on PUA would gain on average 60 percent more from the bipartisan agreement than they would from a Mnuchin-type proposal. The difference would be the most acute in those states that pay the lowest unemployment benefits and where workers gain the most from a federal supplement. When it comes to PEUC, workers in Louisiana, for example, would receive 61 percent more from the bipartisan agreement. PUA benefits are based on state benefits and thus those with low state benefits get the least in PUA. As a result, Alabama and Mississippi workers would gain 69 percent more from the bipartisan agreement, more than any other state. Not coincidentally, each of these states has among the highest proportion of African-American UI recipients.

Table 2

The Unemployed Need Aid Immediately If Severe Hardship Is to Be Avoided or Alleviated

Senator Bill Cassidy has called this new proposal the only bipartisan game in town, which we judge to be true, and not only that: the stakes of passing this legislation could not be higher for unemployed families. New data underscore the vital and unique role that unemployment benefits play in preventing the tragedy of the pandemic from unleashing even further economic hardship. Here are some key recent findings:

• Eviction: About 4.7 million renters who have lost employment income report being at risk of eviction within the next two months. This is a real threat, as the end of unemployment would coincide with the lifting of FEMA’s national eviction ban, and the many landlords are girding for action against renters who will have no consistent income. Academic research found that having unemployment benefits cuts the chance of losing the family home in half, and it is no exaggeration that the agreement (which also includes eviction protections) would keep millions in their homes.
• Poverty: Single-earner households, especially those with children, will quickly sink into poverty without the protection of unemployment. Research to be released later today by Columbia University finds that 4.8 million more individuals (including 1.3 million children) will be in poverty in January 2021 if the unemployment rate remains the same as now and PUA/PEUC expire. The team finds further that if PUA and PEUC are continued into 2021 and coupled with a $300-per-week PUC, the number of individuals in poverty in January in 2021 would decrease by 7.6 million, including 2.6 million children (when compared to current law, under which all CARES Act unemployment provisions in January 2021 have expired).
   

  In October, more than one in ten children have at least one unemployed parent, and 16 percent of Black children have one unemployed parent: most of these children will likely fall into poverty if extended unemployment is prematurely ended. Indeed, the Columbia researchers that have modeled poverty changes during the pandemic found that the CARES Act provisions were initially strong enough to block any increase in poverty during the summer of 2020, and that the expiration of the $600 supplement was a key factor in its subsequent rise. In past downturns, jobless workers cut spending by 13 percent to 15 percent per month on essential items such as groceries and medicines, and cuts could be even larger given the impact of joblessness on those on the margins of the labor market.

• Food insecurity: In October, as described in research by Lauren Bauer at the Brookings Institution, nearly one in ten parents of young children reported that their children did not have enough to eat. Among families with incomes below $50,000, 60 percent have reported an income loss, and among families earning less than 25,000, one in five reported very low food security, and among those earning $25,000 to $50,000, more than one in five report food insecurity. One estimate from the Institute for Policy Research at Northwestern University found that food insecurity has nearly doubled overall, and that it has tripled for households with children. Unemployment benefits can help families keep food on the table, especially if the $300 supplement is added back in; but the complete ending of benefits is likely to make these numbers even worse than they already are.
• Health: As Lily Roberts and Sarah Jane Flynn write in Marketwatch, the continuation of CARES Act unemployment benefits as well as emergency paid leave provisions passed in the Families First Coronavirus Response Act could save thousands of lives. These benefits are what allows states to reduce economic activity that could put workers and their communities at risk of a deadly disease. Moreover, benefits allow families to stay in their homes and keep them away from large group living situations (with older relatives among others) that can increase the spread of COVID-19. This specific impact comes on top of the well-documented health risks of unemployment, with one study finding that there is one additional suicide for every 4,200 men and 7,100 women involved in a mass layoff. Suicides typically increase in risk as unemployment lasts longer and finances run thinner.

Nearly everyone on PEUC or PUA has been unemployed for six to nine months, and with the extra federal supplement long gone, their finances have been badly drained. These families can simply not afford going into January with uncertainty about unemployment benefits that would require the new Congress and president-elect to negotiate and enact a bill in February, March, or even later. The hardships described above, starting with eviction and poverty, would set in extremely quickly, forcing families into potentially life-threatening situations that cannot be undone by belated legislation.

Conclusion

The unemployment provision in the bipartisan proposal must rise to the top of the list in the extremely short time between now and when Congress exits Washington, D.C. There has perhaps never been a historical moment where so many unemployed Americans are counting on Congress to enact help—and it sadly remains to be seen if it will be delivered. It is unconscionable for senators representing millions of jobless workers to seem ready to let assistance slip over their desire for liability protections for corporations. To be sure, the proposal would be strengthened if it were to add key components like retroactive UI, stimulus payments to all Americans, and the continuation of paid family leave. Given the decline in economic growth, the economy likely needs a stimulus of $4–5 trillion to get back on the right growth trajectory. However, neither political objections nor the drive for a large package can be allowed to prevent Congress from stepping over the essential needs of the unemployed.

Research assistance for this report was provided byElizabeth Pancottiand Ellie Kaverman.

Tags: economy, unemployment benefits, unemployment rates, covid-19, UI data