Nearly two million Americans are set to lose unemployment benefits between now and Christmas – the victims of a deadlocked Congress that's been unable to agree on how to pay for extending aid to the long-term unemployed.
Extended unemployment benefits began to expire at midnight Tuesday, cutting off the last lifeline of income and guaranteeing a blue Christmas for thousands of people already struggling to make ends meet.
Lawmakers are at loggerheads over whether to finance an extension with borrowed money, as they did earlier this year when benefits were interrupted for more than a month.
Hours before extended benefits were set to lapse, Senate Democrats pushed a plan to extend them for another year by financing the $56 billion cost with borrowed money. But Republicans blocked the measure, led by Sen. Scott Brown, R-MA, who insisted that the extension should be offset with budget cuts elsewhere in the government budget.
"Is there a better way? Of course there's a better way, especially if we work together," he said, adding that Democrats should have taken more time to work out a compromise.
For their part, the Democrats portrayed the Republicans as insensitive to the plight of the unemployed.
"I think we have to deal with the immediate crisis," said Democratic Sen. Jack Reed, D-RI,. "I think we have to deal with the families that are struggling today."
About 8,400 Americans will see their unemployment benefits cut off by the end of this week, according to Labor Department data. By the end of the third week of December, aid to 1.36 million Americans will expire.
The number of long-term unemployed – those jobless for 27 weeks and over – stood at 6.2 million in October. Those folks now account for 41.8% of the 14.8 million unemployed workers in the country.
"I am not searching for a job, I am begging for one," Felicia Robbins, who lost her job as a juvenile justice worker in 2009, told Msnbc.com as she prepared to move out of a homeless shelter in Pensacola, FL., where she and her five children have been living. She is using the last of her cash reserves, about $500, to move into a small, unfurnished rental home.
The unemployment extension has now become a bargaining chip in the debate over whether to extend tax cuts enacted during the administration of President George W. Bush. Sen. Dick Durbin, D-IL, said yesterday that an extension of unemployment aid should be included as part of any deal extending the tax cuts.
"I find it difficult to understand how some of my colleagues on the other side would object to an extension of unemployment benefits for a year that are not offset, but at the same time insist that we provide tax cuts for the very richest Americans without paying for them," Sen. Reed said Tuesday.
Congress acted to extend unemployment benefits back in 2008 with the Emergency Unemployment Compensation Program (EUC) just after the recession began and has extended it four times.
The U.S. Department of Labor recently published the findings of a multi-year study that showed the EUC has played an important part in stabilizing the economy during the recession. In fact, the study claims that economic activity increased by two dollars for every dollar spent on benefits.
The study also showed that, at the height of the recession, the EUC averted 1.8 million job losses, kept the unemployment rate approximately 1.2 percentage points lower and boosted GDP $315 billion higher from the start of the recession through the second quarter of 2010.
Though the nonpartisan Congressional Budget Office has called unemployment payments one of the best ways of boosting the economy because it translates directly to consumer spending, lawmakers have been unable to agree over extending the payments amid growing concern over the governments $13.8 trillion deficit.
Meanwhile, a glimmer of hope surfaced as a report from ADP Employer Services said companies in the U.S. boosted payrolls more than forecast in November, fueled by increased hiring at small businesses.
Employers added 93,000 workers last month, the most since November 2007, after a revised 82,000 rise in October that was almost double the initial estimate, ADP reported. The median projection of 40 economists surveyed by Bloomberg called for a 70,000 gain last month.
"The report says the economy is expanding," Hugh Johnson, chief investment officer at Hugh Johnson Advisors LLC in Albany, New York, who projected a gain of 100,000 told Bloomberg. "You have to really anticipate that it's going to be small businesses that will be the primary source of hiring."
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