WASHINGTON — With expanded jobless benefits put in place to help laid-off workers weather the pandemic set to expire by the end of July, Republicans and Democrats in Congress are at odds over whether to continue to provide substantial payments to tens of millions of Americans who are still out of work.
Lawmakers in both parties and administration officials appear to agree that Congress should consider some form of assistance to workers as part of another round of coronavirus aid that is likely to be debated in the coming weeks. But while Democrats want to continue a supplement of $600 a week past July 31, when those benefits are set to lapse, Republicans and the White House — citing an unexpected improvement in jobs numbers — are resisting the move, arguing that doing so could discourage people from returning to work.
The debate reflects a broader divide between Democrats who favor enacting another broad-based round of economic stimulus aimed at helping individuals suffering financial ruin because of the pandemic and Republicans who are eyeing a narrower package that seeks to incentivize reopening the country as the key ingredient in any recovery. Some lawmakers in both parties are trying to find a middle ground, proposing a back-to-work bonus that would reward people who returned to the workforce.
In testimony on Capitol Hill this week, the top Trump administration labor official signaled that he did not believe the enhanced unemployment benefits would be necessary beyond their expiration date. On Thursday, the Labor Department said more than 1.5 million Americans filed new state unemployment claims last week, marking the lowest number since the crisis began. It remains, however, far above normal levels.
“We’ll be in a very different place in July,” the secretary of labor, Eugene Scalia, told lawmakers Tuesday at a hearing of the Senate Finance Committee.
A day later, Steven Mnuchin, the Treasury secretary, was noncommittal, even as he warned that keeping the $600-a-week benefit could have detrimental effects.
“We knew there was issues with enhanced unemployment, when in certain cases we were paying people more not to work than work,” said Mnuchin, who agreed to the package during intense negotiations on the stimulus measure, angering many Republicans who regarded it as too generous.
“We’re going to need to look at doing something” to continue to help workers, he said.
Although lawmakers in both parties were quick to praise the new benefit after it was first established in late March, Republicans have since proposed paring it back, arguing that it should be capped to avoid discouraging people from returning to work. Even before the $2.2 trillion stimulus became law, Republicans tried a last-ditch effort to limit the benefit to no more than what a worker was earning before the pandemic prompted businesses to close in an effort to slow the spread of the virus.
House Democrats, who included a six-month extension of the full benefit in the $3 trillion relief measure they pushed through last month, argued that the benefit was necessary to cushion workers against continued economic shocks and to help spur consumer spending.
But some Republicans have vowed to oppose the move. Sen. Lindsey Graham, R-S.C., went so far as to ask President Donald Trump to reject any future coronavirus relief package that maintained the benefit. (Trump made no such agreement.)
Republicans argued that the unexpected news Friday that the unemployment rate had declined and employers had added 2.5 million jobs in May was evidence that the benefit was no longer needed. Congress should redirect its focus to ensuring people were headed back to work and not remaining on unemployment, they said.
“It’s obvious you’ve got to do something different from what we’re doing,” said Sen. Charles Grassley of Iowa, chairman of the Senate Finance Committee. “Right now, I would say that probably, if we legislate in that area, it would not be just continuing it for another six months.”
Instead, Sen. Rob Portman, R-Ohio, has proposed a “back-to-work” bonus that would give workers a temporary $450 weekly payment once they are again employed. In the House, Rep. Kevin Brady, the top Republican on the Ways and Means Committee, introduced a similar bill that would allow workers to keep up to two weeks of the supplemental federal unemployment benefits — amounting to a $1,200 bonus — after taking a new job.
The expanded benefit was “well-intentioned — to help people who lost their jobs through no fault of their own, which we needed to do,” Portman said. “But we put the numbers so high that it’s really creating a disincentive to work, and so the back-to-work bonus solves that.”
Top Democrats, however, maintain that the rebound in hiring is evidence that the benefit is critical to preventing the economy from cratering again. Despite the improvement shown in the report released Friday, the unemployment rate remains worse than in any previous postwar recession, with tens of millions still out of work.
“My view is, you don’t take your foot off the gas right now,” Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, told reporters Tuesday. “If millions of Americans lose their supercharged benefits and are unable to pay their bills, the economy is not going to be in a position to rebound.”
Wyden said Portman’s alternative was “certainly an idea worth exploring,” although he said he would want to see any such bonus paired with additional hazard pay for essential workers.
Progressive groups have praised the expanded benefits as a crucial support for workers thrown off the job by the pandemic, and they have made clear to Democratic lawmakers that they would oppose any new economic rescue package that includes payments to workers who regain jobs but does not extend the additional unemployment benefits.
Some moderate Democrats share Republicans’ concern that a universal $600-a-week benefit is an enticement for workers to stay home, particularly in states with lower minimum wage.
“It doesn’t work in West Virginia,” said Sen. Joe Manchin, D-W.V., adding that he had heard concerns from small businesses in his state. “In some areas, such as New York, California, all that, it’s probably nothing — more attractive for them to go back to work because of the money. So it’s just a difference of cultures where we’re living.”
A report from the Congressional Budget Office further muddied the debate on Capitol Hill, projecting that allowing the enhanced jobless aid to expire would hurt the economy this year but help it next year.
The budget office essentially found merit in both arguments put forward by lawmakers, reporting that if the benefits were to be extended, economic output would be higher in the second half of 2020 than if the benefits were to expire. But it said output would be lower in 2021 if the benefits were extended, because fewer Americans would be working.
On Tuesday, the director of the budget office, Phillip Swagel, said in a virtual panel discussion broadcast by the Peterson Foundation that the lift to consumer spending had initially been the much stronger effect of the benefits while many businesses were unable to open amid government lockdowns.
He said he expected that to shift as restrictions lift and more businesses open.
“As the economy reopens,” he said, “we are going to see a natural tension between these two effects.”
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