CHN: Relief Comes for Long-Term Unemployed Workers
In good news for hundreds of thousands of the long-term unemployed, Congress enacted an extension of unemployment benefits after some months of delay. Unemployed workers whose unemployment insurance (UI) recently ran out or is about to expire will receive an extension of benefits. On September 22 the House passed the Unemployment Compensation Extension Act of 2009 (H.R. 3548) extending UI benefits for 13 weeks. It took the Senate until November 4 to pass an amended version of H.R. 3548 which was approved by the House the next day and signed into law by the President on November 6. The final bill includes 14 additional weeks of UI for unemployed workers on top of whatever benefits they were already entitled to receive, and up to 6 more weeks for those in the 29 states, the District of Columbia and Puerto Rico whose unemployment rate is over 8.5 percent. The Senate added two other provisions to the bill – an extension and expansion of the Homeowners Tax Credit and a new business tax credit.
The added unemployment benefits are critically important because the Department of Labor reports that the average duration of unemployment is at a record of nearly 27 weeks and over 35 percent are unemployed for even longer. In October the unemployment rate jumped to 10.2 percent with 15.7 million workers now officially unemployed. According to the National Employment Law Project, 600,000 workers exhausted their benefits in September and October and 700,000 more were expected to by the end of the year prior to passage of the legislation. Unemployed workers whose UI expired before November 6 when H.R. 3548 was signed into law, cannot retroactively receive benefits, but they can now begin to receive the additional weeks of assistance.
The bill extends the $8000 first-time homebuyer’s credit on homes with contracts signed by April 30, 2010 and closed on by June 30, 2010. In addition, homebuyers who have owned their current primary residence for at least 5 consecutive of the past 8 years can receive a $6500 credit for the purchase of a new home costing up to $800,000. The income caps to qualify for the credits were increased from $75,000 to $125,000 annually for individuals and from $150,000 to $225,000 for couples. The estimated cost of the credit is $10 billion. Critics contend that this is an unnecessary expenditure of scarce federal resources because most of the homebuyers who receive the credit would have purchased the home without it.
H.R. 3548 also contains a provision that allows businesses that have lost money in 2008 and 2009 to receive a tax refund based on taxes paid on profits for up to 5 years.
In ordinary times, regular Unemployment Insurance (UI) benefits are available to workers for 26 weeks and funded by states from a tax on employers. In times of high unemployment workers may receive Extended Benefits (EB) for 13, and in some cases up to 20, additional weeks. The cost of the extended benefits is shared by the state and federal government. The American Recovery and Reinvestment Act (ARRA) passed in February provides for the federal government to assume the full cost both of the EB program and any additional weeks of temporary Emergency Unemployment Compensation (EUC). ARRA also provides for an increase of $25 per week for unemployed workers receiving both regular and extended benefits. In addition, ARRA provides some unemployed workers a subsidy for up to 9 months that covers 65 percent of COBRA Health Insurance coverage they previously held through work.
The ARRA benefits are set to expire on December 31, 2009 unless Congress acts to extend them. Workers receiving EB or EUC on December 26 would continue to receive benefits until they exhausted their weeks, but those who become unemployed after that date would receive the regular state-funded 26 weeks of UI but not the additional weeks. Most economists anticipate that high unemployment rates will continue at least well into 2010. Based on this assumption, it is imperative that Congress pass an extension of the ARRA provisions.