1.3 Million People Lost Unemployment Benefits. It Could Get Ugly

Joshua Green 

businessweek.com
January 2, 2014

When Congress reconvenes on Jan. 6, one of the first issues it will take up is whether to renew an emergency federal unemployment program that expired on Dec. 28, cutting off 1.3 million jobless workers. Enacted in 2008 at the start of the recession, it provided up to 47 weeks of benefits for those still looking for work when their state unemployment benefits ran out. Senate Majority Leader Harry Reid says he’ll try to pass a temporary extension, but most Republicans have balked at the $25 billion-a-year cost. If the program isn’t revived, the impact could be significant—not just for the 1.3 million people losing a vital lifeline but on the broader economy.

How will these workers fare? One place to look for answers is North Carolina. Last February, at the behest of the business community, Republican Governor Pat McCrory signed a bill cutting the amount and duration of state jobless benefits, even though North Carolina’s unemployment rate ranked among the highest in the country. The state had exhausted its unemployment trust fund, paid for by business taxes, and had borrowed $2.5 billion from the federal government to pay jobless claims. “We’re going to pay down that debt, make the system solvent, and provide an economic climate that allows businesses, large and small, to put people back to work,” McCrory said at the time. When the new law took effect on July 1, the maximum weekly benefit fell from $535 to $350 and its duration fell to between 12 and 20 weeks (depending on the state’s unemployment rate) from 26 weeks—the standard in most other states.

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