Will the next stimulus bill include an extension of the extra $600 unemployment benefit?
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At the end of this month more than 18 million Americans receiving unemployment benefits could see their weekly benefits cut by $600 as the Pandemic Unemployment Assistance expires.
On Monday, Senate Majority Leader Mitch McConnell said the debate for another round of stimulus funding will begin next week. That includes debating a replacement for the extra $600 per week in unemployment benefits, on top of their state benefits, that jobless are Americans are currently receiving through the CARES Act.
The $3 trillion relief package passed by House Democrats in May included a provision to extend the $600 benefit into January 2021. But that bill died in the Senate. Republicans leaders have voiced opposition for renewing the benefit all spring and summer. Back in April, Republican Sen. Lindsey Graham of South Carolina said the benefit would get extended “over our dead bodies.”
But the opposition is less forceful of late: Treasury Secretary Steven Mnuchin suggested last week that Republicans may be on board to renew some of the benefit.
Why the sudden reversal? The debate to extend the benefits—or provide a replacement benefit—is happening as the road to economic recovery appears to be getting prolonged by spiking COVID-19 cases. Already a number of states have halted or even reversed reopening.
Here’s what jobless Americans need to know before the Senate begins debate next week regarding pandemic benefits.
- When do the extra $600 in unemployment benefits end?
- Will the extra $600 in unemployment be extended?
- What could replace the extra $600 in unemployment?
- What will happen to the economy if it isn’t extended or replaced?
- What Pandemic Unemployment Assistance provisions remain past July?
When do the extra $600 per week in federal unemployment benefits end?
The week ending July 25 is the final week that jobless Americans will receive the extra $600 federal unemployment benefit.
Will the extra $600 in unemployment be extended? What is holding it up?
The $600 weekly unemployment bonus pays out the same regardless of what workers made before losing their job. So millions of jobless Americans got a raise by going on unemployment. In fact, a paper from University of Chicago researchers that finds 7 in 10 jobless Americans are receiving more in unemployment benefits than they did while working. Many business leaders and conservative politicians worry that is disincentivizing or detering some unemployed Americans from looking for work.
But those concerns are easing. Americans on unemployment rolls is down 6.8 million from its 24.9 million peak on May 9. As states reopened in May and June, millions of Americans chose to forgo the $600 weekly benefit to return to work.
What might replace the extra $600 in federal unemployment benefits?
The bill that cleared the House would’ve extended the full weekly $600 into January 2021. But that full extension is looking unlikely. Instead Treasury Secretary Steven Mnuchin suggested lowering it to $200 or $400 per month.
Some politicians have suggest the federal government, when including state benefits, make sure laid-off workers see a 100% wage replacement. The problem with this idea is it presents a massive administrative challenge, which could slow down the checks.
Another idea is to couple an extension of the benefit with “back-to-work” bonuses. This would pay jobless Americans a bonus if they return to work and leave unemployment rolls. The idea being to prevent the generous extra $600 weekly benefit from deterring jobless Americans from accepting job offers.
What happens to the economy if the expiring unemployment bonus is not replaced?
Moody’s Analytics Chief Economist Mark Zandi told Fortune last month that allowing the benefit to expire without a replacement could stall the economy.
“The economy going back into recession is likely if we cold-turkey cut the extra unemployment insurance benefits,” Zandi said.
The reason? The extra $600 weekly unemployment benefits boosted incomes by around $70 billion in the month of May, according to Fortune‘s analysis of U.S. Bureau of Economic Analysis income data. Losing that money could cause millions of households to cut back on spending—the main driver of the economy.
What Pandemic Unemployment Assistance provisions remain past July?
Some provisions of the Pandemic Unemployment Assistance will remain through the end of the year regardless of whether the weekly $600 federal unemployment bonus gets extended. That includes the expansion of who is eligible for UI, like part-timers and independent contractors, and the extension to 39 weeks of benefits for anyone who is added to the unemployment rolls before the end of the year.