The coronavirus pandemic has ripped through the economy, leaving 13.3% of Americans unemployed. Their ongoing relief is now uncertain.
The Coronavirus Aid, Response and Economic Security (CARES) Act significantly expanded unemployment insurance as a lifeline for those included in the most devastating unemployment numbers since the Great Depression. But one major provision, an additional $600 per week for the unemployed, is set to expire at the end of July.
There has been much debate about the additional weekly benefits that are funded by the federal government. Now, new research from the Congressional Budget Office (CBO) could serve as an argument against the extension of the benefits, but that doesn’t mean Americans will be left without assistance.
Here’s what you need to know.
Additional Unemployment Benefits to End in July
The CARES Act significantly expanded unemployment benefits for Americans. The act, which made self-employed individuals and gig workers eligible for benefits for the first time, also provided a hefty boost in benefits to help the unemployed through the COVID-19 crisis.
Congress authorized the enhanced weekly benefits for four months ending July 31. The bonus benefits are paid by the federal government, unlike regular unemployment benefits, which are funded by each state.
The additional money was intended to hike unemployment benefits to around the full salary Americans were making while they were working. Regular unemployment benefits vary by state, but averaged $385 a week nationwide in January. The additional $600 brings the average weekly unemployment check to $985, which is $49 more than the median weekly earnings of $936 in the fourth quarter.
Controversy and Research Over $600 Boost
As the deadline for the $600 unemployment benefit approaches, there has been much debate about extending them through 2021. More than 42 million Americans have filed for unemployment since the coronavirus pandemic hit the U.S.
Democrats are fighting to get an extension to the $600 weekly benefits. Democrats on the Joint Economic Committee describe the cut off of additional benefits as a “human and economic catastrophe,” stating it would “damage the well-being of American families, but it also would strike a severe blow to businesses and the economy.” Republicans, including Senate Majority Mitch McConnell, have largely been against prolonging the additional $600 period.
Additionally, the May unemployment report released June 5 showed the unemployment rate dropped 1.4 percentage points from April, as the country added 2.5 million jobs. The report has become fuel for Republican arguments that the economy is on its way to recovery, and additional help to Americans households won’t be needed.
What the Research Says
New research could strengthen Republican pushback. The CBO released a report on June 4 about the impacts of the $600 boost, which argued it could cause a drag on employment in the long term.
According to the CBO report, the additional $600 would keep household spending on food, housing and other goods and services closer to what Americans would spend if they were employed. Additionally, the report finds U.S. economic output would “probably be greater” in the second half of 2020 than it would be without the extension.
This would result in increased supply demand, showing how critical the payments are as lifelines to Americans with little to no savings or retirement funds to tap into. To keep up with that demand, more jobs would be filled.
However, the report finds the positive impacts of these additional payments start to wane as time goes on.
Although economic output would be greater through the end of this year, it would drop in 2021. The report states that an extension in the weekly benefit boost would “weaken incentives to work” since unemployment benefits could be greater than potential earnings; the CBO estimates that roughly 80% of people would take home more money through unemployment than they would if they were employed, should the benefits be extended until Jan. 31, 2021.
Additionally, the report points out how funding the additional benefits would increase the federal budget deficit—and leave lasting marks on the economy.
“In CBO’s assessment, large deficits tend to slow the growth of the economy in the long term, thereby reducing overall income and the consumption of goods and services in the future,” according to the CBO report.
Where This Leaves Extended Unemployment Benefits Under the CARES Act
Even if Congress doesn’t renew the weekly unemployment boost, some extended unemployment benefits provided by the CARES Act will continue.
Unemployment benefits are a joint effort between federal and state governments. In most states, unemployment benefits last for up to 26 weeks. But the CARES Act extended eligibility to 39 weeks total.
These weeks are covered first through regular unemployment insurance (UI) through the state, and then an additional 13 weeks of federally funded Pandemic Emergency Unemployment Assistance (PEUC). These benefits kick in for individuals who exhaust their regular state benefits.
For states that continue to have high unemployment rates, additional weeks of federally funded extended benefits will be available (up to 13 or 20 weeks, depending on state laws). According to the Center on Budget and Policy Priorities (CBPP), these extended benefits have been triggered in 44 states as of June 1. Pandemic Unemployment Assistance is only available for a period of unemployment of up to 39 weeks, so if you received regular UI and PEUC benefits that in total are fewer than 39 weeks, PUA will kick in to cover the remaining weeks.
Under current law, PEUC or PUA benefits will not be paid after Dec. 31.
The largely debated $600 additional unemployment compensation provided by the CARES Act is slated to expire on July 31. New research from the CBO backs arguments that the additional weekly payment can have lasting effects on labor participation rates, the national deficit and the economy. Even if the weekly $600 isn’t extended, Americans are still covered by expanded unemployment provisions in the CARES Act.