The tax deal’s biggest losers

December 18, 2010, 1:30 AM UTC

It’s easy to declare the winners in the new tax bill, but let’s not forget the unluckiest of them all — those who have been jobless for 99 weeks.

Now is just not the time for higher taxes. That’s the message delivered by President Obama’s tax deal, an $858 billion package that will extend tax breaks enacted under former president George W. Bush.

The bill will prevent taxes from rising on New Year’s Day for virtually every American household. What’s more, it will create major incentives for businesses and consumers to spend more, as the package includes reductions in the Social Security payroll tax that would let workers pocket as much as $2,136 more from their paychecks.

This is all very promising, but it’s hard not to wonder if the measure might fall short of responding to long-term unemployment – an economic reality that’s expected to last for some time.

The package will guarantee unemployed workers in hard-hit states up to 99 weeks of jobless benefits through the end of next year. Surely this is welcome news for the jobless, but anyone unemployed longer than that is virtually out of luck.

As The Wall Street Journal notes, this is concerning because the number of so-called “99ers” may be rising. As of October, more than 1 million people had received their final payments from extended benefits programs since the start of this year. And during the third quarter of 2010, nearly 10% of the unemployed had been jobless and looking for work for about two years or more.

Furthermore, as Fortune’s Nina Easton noted earlier this week, “the longer people are unemployed the less employable they become,” due in part to the sad reality that hiring managers misjudge the long-term unemployed as lazy or incapable.

It’s true there are reasons not to be too liberal with unemployment benefits. For one, it’s very costly and some would even argue that it gives the unemployed  incentive to pass up opportunities and hold out for others. The program is structured so that anyone can get it — the IRS reported that 2,840 households with income over $1 million in 2008 collected unemployment insurance that year, and 17 of them made more than $10 million. And the wonkiest of opponents might even argue that extended benefits just inflate number of unemployed — only people actively searching for work are counted in the unemployment rate, and extended benefits might keep some collecting even after they’ve abandoned a true job search.

But then it’s hard to discount the labor market workers face today. For various reasons, there’s a huge mismatch of jobs, as Easton highlighted. The number of available jobs has swelled by 44% since the month after the recession – it’s still far less than pre-recession levels, but that’s as many as 3 million vacant jobs.

Indeed, the extension of tax cuts is a win-win for most American households. It took much compromise for Washington to get to this point, but in the end, let’s not forget the losers in the deal.

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