The Fiscal Cliff No One Is Talking About

Well, not no one. But no one with the political clout — and determination — to keep many millions of Americans from falling off a cliff.

And it really is a fiscal cliff — unlike the convergence of action-forcing events that everyone is talking about, i.e., the expiration of the Bush tax cuts and the onset of the across-the-board spending cuts triggered by the Super Committee’s failure to agree on a more sensible way to reduce the deficit.

In late December, the Emergency Unemployment Compensation program will expire, unless Congress extends it.

This, recall, is one of two federal programs that provide benefits for a limited period of time after jobless workers have collected as many weeks of benefits as their regular state programs allow — generally 26 weeks, though fewer in some states now.

Congress has already retrenched both programs.

As a result, the Extended Benefits program — the last phase in the benefits sequence — will shut down by mid-August because the law funds benefits only in states where unemployment rates are higher than they were in the recent past.

That leaves the EUC program. It’s already shrinking, such that jobless workers will soon get, at most, 73 weeks of benefits, counting the 26 most states offer.

The latest state-level unemployment figures suggest that benefits will end sooner in all but seven states and the District of Columbia.

But as things stand now, workers who lose their jobs this month will be on their own if they don’t find work before their state benefits end because the EUC program won’t be there for them.

Nor for workers who’ve already been jobless long to be getting EUC benefits. They’ll face what the National Employment Law Project calls “a hard cut-off.”

Hard indeed, especially when we see that nearly 5.2 million jobless workers have been actively looking for employment for more than 27 weeks — many for much longer.

Those who find work at all look, on average, for about 40 weeks, according to NELP. No wonder when there three and a half times as many job seekers as job openings.

The Congressional Budget Office expects the nationwide unemployment rate to remain over 8% through 2013. Congress has never let federally-funded unemployment benefits expire when the rate was this high.

But it’s a new day on Capitol Hill. Senator Max Baucus, Chairman of the Senate Finance Committee, says the issue isn’t on the radar screen — yet. Not a peep from his counterpart in the House, Congressman Dave Camp.

And President Obama doesn’t seem to be jawboning the issue, though he played a key role in getting the benefits extended last time the Bush tax cuts were due to expire.

This may just be a replay of the last two extensions. Wait till the last minute before enacting some sort of save.

A good strategy for Republicans, who had the leverage to scale back EUC — and for all we know, may have another cutback up their sleeve.

But I wouldn’t bet on it. The price tag of the last extension was about $30.1 billion over 10 years. Another extension would presumably cost less because it wouldn’t have to include funding for the EB program, even for part of the year.

But Congress — and the President — are anxious to come up with a way to halt the across-the-board cuts and still hit the agreed-on deficit reduction target.

They’re for sure going to extend the Bush tax cuts — though when and for whom remains to be seen. Many economists believe they should — at least for all but the wealthiest 2% — because a broad-based tax spike now could set back our sluggish economy recovery.

But the tax cuts will increase the deficit — unless they’re offset by deeper spending cuts or a revenue-raising overhaul of the tax code, i.e., a massive clean-out of the deductions, credits and the like.

I’ve got a hard time seeing Democrats and Republicans come together on the “grand bargain” we’re told could emerge. But ultimately they’ll agree on something.

With all the complex, divisive priorities in play, it’s not hard to imagine the EUC program falling by the wayside.

Party leader will say the answer is more job creation. Jobless workers would no doubt agree.

But in the meantime, those who’ve been looking hard and finding nothing could fall off a cliff and into poverty — if they’re not there already.

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2 Responses to The Fiscal Cliff No One Is Talking About

  1. [...] back on my post about the expiring federal unemployment insurance benefits, I realized I’d left out important [...]

  2. [...] federal program that funds unemployment insurance benefits for longer-term jobless workers will also soon expire. Some two million workers and their families may face the new year with no source of cash [...]

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