Higher Taxes Matter More to Obama Than UI

Unemployment line / AP
December 19, 2012

Without an extension of unemployment insurance as part of a fiscal cliff compromise, more than 2 million Americans, or roughly 43 percent of those receiving unemployment benefits, will lose Emergency Unemployment Compensation (EUC) benefits at the end of the year, according to a report from the Department of Labor.

Unlike previous extensions of federal unemployment compensation benefit programs, the most recent extension eliminated a phase-out period for recipients. As a result, 2,147,100 Americans would immediately feel the effects of going over the fiscal cliff, writes Gordon Gray of the American Action Forum:

Under current law, the Unemployment Insurance system is comprised of multiple stages of  unemployment assistance. According to the latest data, 4,959,201 Americans were receiving benefits from one of these stages of assistance. The three largest unemployment insurance programs by participation are the regular Unemployment Insurance (UI) program, the federal Emergency. [...]

The regular UI program is a state-federal partnership. Federal law sets major guidelines for program requirements; however, individual states design and administer their individual programs. According to the Department of Labor, most states currently pay beneficiates for a maximum of 26 weeks, although Massachusetts and under certain conditions Washington (WA) pay 30 weeks. This program also includes compensation for individuals recently separated from the Armed Services and other federal positions.Benefit payments are financed by state levies, principally on employers. According to the latest data, 2,885,614 individuals (58 percent of current recipients of unemployment compensation) were receiving benefits through this system. [...]

At present, the EUC08 program provides up to 14 weeks of benefits in every state, and up to 33 additional weeks in states with "high unemployment" (for a maximum of 47 weeks) through 4 tiers of eligibility. Tiers II, III, and IV are available to individuals in states with progressively higher total unemployment rates (TUR) of 6, 7 and 9 percent; providing compensation for 14, 9, and 10 additional weeks (33 total), respectively. The program is financed entirely by the federal government. According to the Department of Labor: "Under current law, no EUC08 First, Second, Third, or Fourth-Tier payments may be made for any week of unemployment ending after January 2, 2013. [...]

The Department of Labor has estimated that 2,147,100 (approximate 43 percent of recipients) will lose EUC benefits in January unless benefits are extended. This figure is higher than the number of beneficiaries as of the latest data: 2,008,608.

The report concluded that if Treasury Secretary Tim Geithner's remarks that the administration is prepared to go over the fiscal cliff are true, these people would be drastically affected by the administration's refusal to compromise on taxes:

Recent reports have suggested that the executive branch may exercise certain administrative authorities  to mitigate or otherwise spare individuals from the impact of the fiscal cliff in the near term, such as through the use of IRS withholding tables that assume current tax policy is in place. However, current law does not appear to provide for any mitigation to the 2.1 million individuals who will lose, virtually overnight, unemployment compensation they were receiving during the holidays. As such, when public officials such as Secretary Geithner state with confidence that the administration is prepared to go over the fiscal cliff, they must do so with the full knowledge that they will be taking over 2 million Americans with them.