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Robert Longley

Unemployment Benefits Cost Taxpayers $520 Billion

By December 3, 2012

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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.

Also See:
When Did the Great Recession End?
Household Net Worth Plummeted in Recession

Comments

December 3, 2012 at 4:42 am
(1) Lonely World says:

If our government and corporations would stop being so greedy and pay educated people a fair living standard, we would not have the poverty and unemployment problems we have today. The fix is simple: stop being greedy and start paying everyone out of college at least $15/Hour with full time work and structured income growth every 6 months of 10 – 30% based on performance. Modern feudalism will only destroy the foundation these companies are sitting on and then there will be no one to work for them. 16 – 35 year old’s are literally 4 – 8 years behind in prosperity growth and income equality. No money = no growth. More debt = tough shit for the banks because hard working or unemployed citizens have no way to pay you back and will not pay you back for the problem you created. Karma is a bitch when it catches up with the evils of the world.

December 3, 2012 at 11:39 am
(2) KColumbo says:

The vast majority of unemployed people seeking employment are in the situation due to no fault of their own, rather due to the variety of greed and corruption rampant in the American system. There seems to always be an implicit message in the controversy over continuing emergency unemployment benefits – that the unemployed are somehow to be blamed for the collosal and perpetual elephant of unemployment in this country. Meanwhile the unemployment numbers are politically engineered and are completely inaccurate, i.e. the reality in this country is likely 25% unemployment when real factors are utilized. Of course this steaming pile of reality must not be exposed as it will seriously further weaken the US postion and perception in the global economy. Bah.

December 3, 2012 at 11:40 am
(3) Dj says:

So can the author tell us which one is likely to occur?

December 3, 2012 at 2:57 pm
(4) keith says:

I can’t tell you how many times I thought I had the job only to have something fall through. My benifits will run out December 29 leaving me and my family with nothing to live off of. I take care of a sick mother who is 75 years old. I’ve looked and looked for a job and am willing to do anything. In NC where I live the mental health industry is horrible—the industry I work in. Many people are out of work. Extending unemployment is a no brainer. Believe me it does not discourage people from looking for work. I barely make it on the 300 and some change I get per week. Congress has to do this. Even the Republicans will have a hard time justifying being against this—-but be against it they will.

December 3, 2012 at 7:48 pm
(5) monique says:

I don’t see how stopping unemployment saves taxpayers money when taxpayer will still be paying taxes regardless, the government will just find something else to do with the money. The only people that stopping unemployment will save money for is the government because they will continue to collect taxes whether it is given to those on unemployment or used for more mass destruction and warfare, etc.

December 4, 2012 at 1:07 pm
(6) Blake says:

It must be nice up on your high horse! Jobs are hard to come by even in this recovering time. I can only hope you learn your lesson when it comes to perceived “handouts” before you get laid off!

December 7, 2012 at 2:43 pm
(7) angela says:

Please extend the unemployment. I am a single mother of three kids I been working since the age of 15 yrs old. I lost my job because the company close down I was there for 5 yrs. I been trying to look for work but it’s hard out here. All Im asking is to please extend the unemployment benefits.

December 9, 2012 at 8:20 pm
(8) Concernicus says:

Further reason why there should be a direct government hiring jobs program! Not training. Hiring. There are millions of people who are losing skills and falling behind while getting a pittance in an unemploment insurance check.

Put them to work at a decent paying salary. $15hr for workers, $20 for managers, $25 for supervisors. Get them paying taxes and spending money! We have a demand problem in our economy. The unemployed do not spend other than basics to live.

Look at the disaster on the East coast from Sandy. Why do we have above ground power lines anywhere in 2012? The unemployed could not be put to work on infrastructure projects while learning new skills?

December 11, 2012 at 1:15 pm
(9) Bill says:

More than once the Government has decided to devalue our dollar so our goods would look more sellable in Europe. A secret tax increase which benifits the wealthy.
Many times Major companies have legally cut pensions and healthcare benifits from retirees and thier lawyers tied up those retirees up in court till the day they died. Read “The Retirement Heist by Ellen E Schultz.
These same companies declared they were not American and owed no allegiance to America and sent jobs overseas. Now those who benifited from these actions are whining about high taxes and class warfare. Class warfare in America started when Teddy Roosevelt broke up large companies that were exploiting the American people. Republicans attempted to use class warfare in last two elections saying government workers make so much more than private industry. All our problems stem from greed and elected government not government employees.

February 4, 2013 at 9:26 pm
(10) Numbers says:

If the numbers are correct, which I am trusting for this example, the number of jobs created would have to equal 1 million instead of 300,000 to be cost effective. If every job created had an average income of $30,000 ( around the poverty line established for 2013 in America for a household of 6 even though the average household for 2007-11 was only 2.6 ) it would take 1 Million jobs produced to make the program even break even. If the 300,000 jobs created is a true figure than it is costing taxpayers $100,000 per job that unemployment creates. Like previous people have said, they need jobs not a handout. Creating jobs with this money by paying them to do something would be much more effective than stretching unemployment even further. For $30 billion we should be able to create more than 300,000 jobs. I do not have a proven plan to attack this problem but infrastructure is very key to this country and spending that much money per job created is the wrong way to go.

April 18, 2013 at 7:02 am
(11) Dave says:

Want to fix this? Pass the Fair Tax. The Fair Tax would create the best business environment on the planet, which would result in a surge of manufacturing of biblical proportions. The Fair Tax promises 2% unemployment by the end of the 2nd year of implementation, and the 100 billion dollars a year for unemployment would largely go away, probably by 90%. There would also be savings in “disability” payments since a lot of those people are just using that program to survive in a world without available jobs. And, after employing everyone in the USA that wants to work, we could then import half of Mexico’s population and continue generating even more tax money to the gov’t, and probably zerioze the deficit and start paying down the debt.

July 28, 2013 at 11:53 pm
(12) josie says:

To “Lonely World”

I completely agree with your comments. Please look up Ken Robinson’s ideas on education. You will love him! Here is one of his youtube videos:

copy and paste the youtube link!

http://www.youtube.com/watch?v=zDZFcDGpL4U

Jos

October 29, 2013 at 12:57 pm
(13) T. A. Frazer says:

I have been unemployed since 2-18-2013. There are no jobs available that even make one half of what I was making, I have come to terms with that and have been applying for jobs that pay less than I made 20 years ago. I keep getting told that I am overqualified for these jobs and am obviously stuck in a trap that I see no way out of.

Employers should be able to not select candidates that are under qualified to do the work to be done for obvious reasons, but to discriminate against those they deem overqualified should be illegal. If I am overqualified, I should obviously be able to do the job very well indeed.

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