Talk about a hard landing: About 2 million Americans will abruptly lose their unemployment benefits after December unless Congress votes to continue federal funding for extended benefits.
This part of the fiscal cliff has received less attention than tax increases and other spending cuts scheduled to take effect Jan. 1, but its well known to people like Suzanne Schellenberg of San Francisco. The 53-year-old graphic artist has been cycling between contract and freelance jobs and unemployment benefits for almost four years.
Its a crappy way to live, but (unemployment insurance) is a safety net I would be in very bad shape without, she said.
During recessions, the federal government pays states to provide additional jobless benefits to people who exhaust their regular state benefits, which typically last up to six months.
About 2.1 million of the 5 million Americans receiving jobless benefits are on a federal extension that will end after Dec. 29, even if they have weeks remaining in their federal claim, according to Maurice Emsellem of the National Employment Law Project. Its a hard cutoff, he said. There is no phase-out, like there would have been every other time the program was in danger of extinction.
Congress has renewed extended benefits 10 times since the current round started in June 2008. At its peak, the program provided up to 73 weeks of benefits (99 weeks if you include state benefits), but now it provides only 14 to 47 weeks, depending on the states unemployment rate.
The maximum benefit has come down because it shrinks automatically when a states unemployment rate falls, but also because Congress trimmed it the last time it renewed the program in February.
In addition to those losing extended benefits at years end, another 1 million jobless whose state benefits run out in the first quarter of 2013 will not qualify for any federal benefits unless they are extended.
When the program started, the national unemployment rate was 5.6 percent. After peaking at 10 percent in October 2009, it fell to 7.7 percent in November.
Andrew Biggs, a resident scholar with the American Enterprise Institute, said extending federal benefits for people who really, really cant get a job is the humanitarian thing to do and may help the economy, since most of them will spend their benefits immediately.
But it can also prolong unemployment by allowing people to be more selective about a new job, he said.
Congressional Democrats and the White House want to extend the program again, but Republicans say it should be done only if there are offsetting budget cuts.
Assuming there is a deal, there is a pretty good likelihood they will be extended, said Elizabeth Lower-Basch, policy coordinator with Clasp, a nonprofit that lobbies on behalf of low-income people. Of course, nobody knows if there will be a deal or when. In the meantime, she said, its frightening for workers and perplexing for states wondering who will get benefits.