December 19, 2002

 TEMPORARY FEDERAL UNEMPLOYMENT BENEFITS SHOULD BE
EXTENDED IN ALL STATES AND STRENGTHENED
Administration Position Remains Unclear Despite President’s Statement

By Wendell Primus, Isaac Shapiro, and Jessica Goldberg

PDF of this report

Number of Workers Potentially Affected by Extension of TEUC Program in Each State

Additional Analyses

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The federal Temporary Emergency Unemployment Compensation (TEUC) program, which provides additional weeks of unemployment insurance to jobless workers who have exhausted their regular, state-funded unemployment benefits without finding a job, is scheduled to expire on December 28.  In his December 14 radio address, President Bush, who previously had not acted to prevent this program from expiring, called on Congress to make “extending” the program “a first order of business” upon its return in early January.  The President was unclear, however, as to what type of extension he supports.[1]

The issue of how TEUC should be extended is important.  The House and Senate passed very different bills to extend TEUC in November:  the House bill, designed by that chamber’s leadership, would have scaled back the program sharply and ended it after five weeks, while the bipartisan Senate bill would have extended the program in full for three months.  While neither bill would have done anything to help the roughly one million workers who already have run out of TEUC benefits without finding work, there may be some renewed interest in Congress in providing these workers with additional weeks of benefits in light of the worsening unemployment situation — and in light of the fact that doing so would provide a greater “bang for the buck” than competing economic stimulus proposals.

This report finds that the TEUC program should be extended fully and should be strengthened by providing additional weeks of benefits to workers who have run out of TEUC benefits without finding jobs.  Fully extending and strengthening the program:

 

What Is the TEUC Program and Which Groups of Workers Would Be Affected By Extending and Strengthening It?

Unemployed workers in most states are eligible for up to 26 weeks of regular, state-funded unemployment benefits.  In March 2002 Congress created the Temporary Emergency Unemployment Compensation (TEUC) program to supplement these benefits.  TEUC is designed to assist workers who run out of these state benefits before they are able to find jobs.  TEUC — and the similar temporary federal programs that were enacted during the economic downturns of the early 1980s and early 1990s — reflect the understanding that during recessions, people who become unemployed tend to be out of work longer than during more prosperous periods and that the typical 26 weeks of state benefits may be inadequate.  These temporary federal programs also are designed to stimulate a slow economy by injecting dollars directly into local communities.

Under TEUC, workers generally qualify for up to 13 weeks of federal benefits.  In states that meet the program’s “high unemployment” criteria, workers are eligible for up to 26 weeks of federal benefits, but those criteria are sufficiently restrictive that only three states — Alaska, Oregon, and Washington — currently qualify.

TEUC will expire December 28, at which point all benefits provided under the program will cease.  Congress is expected to reconsider the future of the program when it convenes in January.  The decisions Congress makes in this matter would affect three groups of unemployed workers:

The chart below shows how these three groups of workers would be affected by the major legislative proposals that have been made to extend TEUC.

How Three Different Groups of Long-Term Unemployed Workers Fare Under Various Proposals

  Workers Who Have Exhausted TEUC and Remain Unemployed as of the End of December Workers Receiving TEUC Who Will Be Cut Off on December 28 Workers Who Will Exhaust Regular State UI Benefits Each Week After December 28
Number of workers in each category 1 Million 780,000 95,000 per week
1.2 million -- first quarter of 2003
Assisted by Various Proposals?      
  President's Plan Unclear Yes Unclear
  Bi-partisan Senate Bill (HR 3529) No Yes Yes, until the end of March
  House Republican Leadership Bill (HR 5063) No Yes, for 5 weeks Only in AK, OR, WA, for 5 weeks*
  Comprehensive TEUC Extension (HR 5491/S 3009)** Yes Yes Yes, until the end of June
Note:  *Currently, only AK, OR, and WA meet the stringent "high unemployment" trigger.  If unemployment increases sufficiently in other states, workers who exhaust regular state UI benefits in those states would also qualify for additional federal assistance under the House bill.  **This package was introduced by Rangel in the House and Wellstone, Kennedy, and Clinton and co-sponsored by Gordon Smith in the Senate.  It extends the program for six months in all states, provides additonal benefits to workers who have exhausted their temporary federal benefits under the existing program, and modifies the "high unemployment" trigger.

Table 1 at the end of this document shows how many workers in each state fall into each of these three categories.  It shows, for example, that

 

Why Should TEUC Be Extended in All States?

The single best measure of the need for an extension of the full TEUC program is the number of people exhausting their regular state-funded unemployment benefits without finding work.  These are the workers whom TEUC was designed to assist.

Figure 1
Note:  Month 10 corresponds to August 1992 and December, 2002.  Data in months 9-13 are projections for the Senate and House bills.

The House Republican leadership has argued that TEUC does not need to be extended in all states because the current unemployment rate is lower than when the temporary federal benefits program of the early 1990s ended in April 1994.[3]  As noted above, it is the number of workers exhausting their regular benefits that is the best criterion for determining whether TEUC should be extended.  But even if one uses the unemployment rate for this purpose, there are significant weaknesses in the House leadership’s argument:

 

Why Should TEUC Be Strengthened?

In addition to re-establishing the TEUC program in full, Congress should strengthen TEUC by providing more weeks of assistance to those who have exhausted their TEUC benefits and still not been able to find work.  There are now about one million workers in this situation.

More jobless workers are exhausting their federal benefits today than in the last downturn.  The actual number of workers who have exhausted their federal benefits since the TEUC program began in March is twice as large as the number who ran out of federal benefits over a comparable number of months in the downturn of the early 1990s.[4]  (See the graph above.)

One reason why many more workers are exhausting their federal benefits today is that TEUC is considerably more parsimonious than the earlier program.  In particular, TEUC provides significantly fewer weeks of benefits:  under the earlier program, each worker was eligible for at least 20 weeks of benefits some ten months after the federal program was enacted, while under TEUC, most workers are eligible for a maximum of 13 weeks of benefits.

 

Why Is Extending and Strengthening TEUC Good Economic Stimulus?

Since its inception in 1935, unemployment insurance has served two purposes.  The first is providing income support to jobless workers and their families to help them absorb the shock of unemployment and the loss of their paycheck.  The second is bolstering the economy as a whole by sustaining consumer demand during economic slumps.  This part of the analysis discusses that second role.

The Bush Administration is expected to propose shortly a large set of proposals that it will describe as an economic stimulus or growth plan.  This will be one of the central focuses for Congress in early 2003.  Because the plan responds to a real need — the economy is currently shaky and the labor market is weak — the political momentum behind it will be strong.  The proposals, however, should be scrutinized carefully.  There is a significant possibility that in the name of economic stimulus, an ill-designed package may be enacted.

In assessing new stimulus proposals, the questions to be asked include:

Extending the TEUC program fully and strengthening it passes all of these tests with flying colors.  It is likely to be more efficient than any other stimulus measure because it would target funds to people who would spend them quickly since these benefits go to jobless workers who have typically been out of work for more than 26 weeks and face pressing needs.  In addition, TEUC benefits go to those who are bearing a large part of the burden of the slump (unemployed workers) and concentrate those funds in the areas of the country with the worst long-term unemployment.  Finally, TEUC would continue only for a temporary period.  As in the past, the program should be allowed to expire once employment growth has established itself in a decisive manner.  Its costs would thus be restricted to the appropriate time frame.

A final point is worth noting here.  In opposing a full extension of the TEUC program, House Republicans pointed to the $4.8 billion cost of the Senate proposal, arguing that their $1 billion proposal was more affordable.  This argument overlooks both the greater stimulative effects of the Senate proposal and the fact that the unemployment insurance trust fund contains about $24 billion, enough to pay for the Senate-passed bill five times over.  Moreover, while strengthening TEUC by providing additional weeks of benefits to workers who have exhausted them would increase the cost of the Senate bill, the result still would pale in comparison to the “stimulus” tax cuts that many members of Congress and the Administration appear to support.  “Stimulus” or “growth” proposals that cost $100 to $300 billion are now being discussed.  Such proposals are both skewed towards the affluent and entail permanent rather than temporary costs.

 

What Should Be Done?

Policymakers should act promptly to institute a full resumption of the TEUC program.  Since House Democrats and the full Senate already support such a resumption, support for such action by the President and House Republican leaders could pave the way for Congress to enact legislation expeditiously in January to provide TEUC benefits to the 1.2 million jobless workers who are expected to exhaust their regular unemployment benefits in the first three months of 2003.  The roughly 780,000 workers whose benefits will be cut off prematurely December 28 should have those benefits restored on a retroactive basis, and states should take whatever action is necessary to minimize any gap in the receipt of unemployment checks.

At the same time, Congress should strengthen TEUC by providing more weeks of assistance under the program and should make these additional weeks available to workers who have used up their TEUC benefits but have been unable to find employment.

It is imperative that Congress move quickly.  Each week of delay will result in more jobless workers going without either a paycheck or an unemployment check.  For many of these workers, who typically have not received a paycheck for half a year or more and who have already likely depleted their financial resources, additional time without benefits or a paycheck can create new difficulties, from unpaid rent or mortgage payments to lack of adequate food.

Workers likely could have been spared the additional hardships caused by TEUC’s expiration if the Administration had shown leadership on this issue and pushed House Republican leaders to consider extending the full TEUC program before adjourning last month.   The Administration remained silent.  Despite overtures from the Senate, whose bill to extend TEUC fully had passed unanimously, House Republican leaders declined to negotiate a compromise or to allow a House vote on the bipartisan Senate bill.  As a result, Congress adjourned without extending TEUC.

President Bush broke his silence with his December 14 radio address, and Congress is expected to consider TEUC early in January.  Still, the President’s statement avoided any indication of where the White House stands on the issues that separate the Senate and the House Republican leadership, and this lack of agreement could delay the enactment of legislation when Congress convenes.  Moreover, it remains unclear whether the President and House Republicans are now ready to extend TEUC in full and to strengthen it in order to provide adequate assistance to the nation’s unemployed and more stimulus to the economy.

Table 1.
Number of Workers Potentially Affected by Extension of TEUC Program in Each State
  Number of Workers Who Have Exhausted TEUC and Remain Unemployed as of the End of December Number of Workers Receiving TEUC Who Will Be Cut Off on December 28 Number of Workers Who Will Exhaust Regular UI Benefits Each Week After December 28
     
Alabama 12,300 8,000 900
Alaska 3,700 2,600 600
Arizona 12,200 7,300 1,000
Arkansas 10,200 5,400 800
California 108,500 104,700 14,400
Colorado 17,000 11,200 1,500
Connecticut 15,400 11,800 1,100
Delaware 2,000 1,900 200
District of Columbia 3,700 2,100 300
Florida 58,500 31,300 4,100
Georgia 27,600 18,000 2,800
Hawaii 3,100 1,800 200
Idaho 3,200 2,900 500
Illinois 53,100 41,800 4,000
Indiana 20,600 11,100 1,900
Iowa 8,700 4,600 700
Kansas 7,200 5,800 700
Kentucky 10,700 9,100 700
Louisiana 10,500 7,100 900
Maine 2,900 1,800 200
Maryland 10,900 10,000 900
Massachusetts 30,600 26,900 2,900
Michigan 49,200 35,700 3,800
Minnesota 17,400 11,200 1,400
Mississippi 7,400 6,400 600
Missouri 15,600 12,500 1,600
Montana 2,800 1,200 200
Nebraska 3,200 2,600 500
Nevada 8,800 4,400 900
New Hampshire 1,200 1,500 100
New Jersey 47,800 39,000 4,400
New Mexico 2,400 2,200 400
New York 84,200 62,800 8,500
North Carolina 37,600 25,900 2,400
North Dakota 1,000 600 100
Ohio 43,500 26,300 2,300
Oklahoma 9,000 5,300 700
Oregon 13,300 22,000 1,600
Pennsylvania 44,000 46,500 4,100
Rhode Island 5,200 2,800 400
South Carolina 18,800 11,800 1,100
South Dakota 400 400 (fewer than 100)
Tennessee 27,400 14,900 1,700
Texas 56,800 45,900 11,600
Utah 8,900 1,200 600
Vermont 1,300 1,100 100
Virginia 14,700 10,700 1,400
Washington 31,500 39,700 2,400
West Virginia 3,300 3,100 300
Wisconsin 22,200 14,500 1,600
Wyoming 700 500 200
Total 1,012,200 780,000 96,300

End Notes:

[1] See “What Type of Unemployment Insurance ‘Extension’ Does the President Support?,” http://www.cbpp.org/12-14-02ui.htm.

[2] This estimate is six percent lower than an earlier estimate released by the Center on Budget and Policy Priorities.  In early October, a Center paper predicted that 830,000 workers would have their temporary federal unemployment insurance benefits terminated when the TEUC program expires on December 28.  The revised estimate reflects the most recent data and also incorporates improvements to the estimation methodology.

[3] For a Center analysis of the House Republican arguments against a full extension of TEUC, see Wendell Primus and Jessica Goldberg, “A Response to Arguments Against Extending the Temporary Federal Unemployment Benefits Program,” December 10, 2002, http://www.cbpp.org/12-6-02ui2.htm.

[4] Increasing the number of workers exhausting federal benefits in the previous recession to reflect increases in the labor market between the 1990s and the current period, the number of workers exhausting temporary federal benefits under the current TEUC program is still greater than the number who exhausted such benefits in the same number of months in the 1990s.  The number of exhaustions in the last recession have been increased in the graph to reflect increases in the number of workers between the early 1990s and the present time.