Paying emergency and extended unemployment benefits have cost taxpayers about $520 billion since 2007, according to the nonpartisan Congressional Budget Office (CBO).
The first 26 weeks of eligible unemployed workers' unemployment compensation (UC) benefits are paid for from state and federal taxes paid totally by employers, thus costing individual taxpayers nothing. But two federal programs intended as a safety net during times of very high unemployment provide additional weeks of benefits. Funds for these extended benefits must be authorized by Congress and are paid by state and federal funds collected from all taxpayers.
The Emergency Unemployment Compensation (EUC) program continues benefits for up to 47 weeks after the first 26 weeks of regular unemployment benefits have been exhausted. EUC benefits are paid for equally by state and federal funds.
The Extended Benefits (EB) program provides up to an additional 20 weeks of benefits to eligible workers in certain qualifying states only who have exhausted their 47 weeks of EUC benefits. EB benefits are paid entirely from federal funds. Currently, only unemployed workers in the state of New York are eligible for EB benefits.
As one of the jagged rocks at the bottom of the "fiscal cliff," funding for emergency (EUC and EU) unemployment benefits will expire on December 31, 2012, unless extended by Congress before then.
Chances are Congress will do "something" before the end of the year, and in its report, Unemployment Insurance in the Wake of the Recent Recession, the CBO considered four options and what each one might cost:
- Extend funding for both the nationwide EUC and state EB programs for one year at an estimated cost of $30 billion.
- Extend only EUC funding for up to 14 weeks at a cost of $14 billion.
- Allow current beneficiaries to finish getting up to 14 weeks of EUC benefits, depending on the number of weeks of benefits for which they will qualify on December 31, 2012, at a cost of $4 billion.
- Extend only the current EB program for one year, maintaining full federal funding and allowing states to more easily qualify for the program at cost of $3 billion.
The Good: According to the CBO, extending both the EUC and EB programs for a year would boost the U.S. economy by $1.10 for each dollar the programs cost taxpayers as the recipients will need to spend their benefits quickly to meet family needs. The CBO estimates that the gross domestic product (GDP) would realize a 0.2% rise and 300,000 jobs would be added.
The Bad: While extending the EUC and EB programs would allow the long-term unemployed to continue spending, it would also give them an incentive to remain unemployed longer than necessary.