The end of July has been referred to by some as the "unemployment cliff." Fiscal stimulus and aid passed by Congress have cushioned the blow of unemployment by giving people a lifeline. Specifically, Congress approved four months of expanded unemployment, giving laid off workers an extra $600 weekly to go along with their regular unemployment benefits. However, this extra aid is drawing to a close, and the prospects to extend it appear uncertain at best, causing families extra angst during the pandemic.

For the households who are receiving these benefits, they have been a lifeline to help get them through the crisis. Now, with the average unemployment benefit being roughly $378 per week, these families face a 60% income cut. Unemployment alone would not nearly be enough to keep up with rent payments for those without savings. Many American families do not even have the savings necessary to pay for several months of expenses if they were out of work.

The reason for the passage of this aid was that the unemployment rate has skyrocketed due to the pandemic. Even with a jobs report that was hailed as a blockbuster, unemployment is still well north of the worst levels of the Great Recession. There is an expectation that the job situation will not fully recover until the end of 2021 at the earliest. Thus, there is still a continuing need for some kind of further stimulus to help the unemployed.

The Possible Extension of the Benefits Has Ignited a Policy Debate

There is a policy debate underway about whether the extend these benefits. Republicans have vowed that these benefits will not be renewed when the payments expire. They claim that the payments have actually served as a disincentive for employees to go out and work. The Republicans argue that paying people $600 per month in addition to unemployment benefits actually makes them better off staying home and receiving unemployment since they make more money not working. As many as 40% of workers are actually making more now on unemployment than they were when they were employed.

What is beyond dispute is that the expanded unemployment benefits are unprecedented. In the last recession, the policy response was to increase the amount of time that people could collect unemployment as opposed to adding more money to the payment. However, some have said that the policy intent here was not to help workers during an economic calamity but to keep them home during the worst of the pandemic. When the pandemic appeared to be easing, it would be safer for people to go out and look for work.

However, the Democrats view this issue as one of protecting workers in trouble. What is particularly concerning to them is that all of the benefits of the CARES Act expire at the same time. Along with the ending of the expanded unemployment benefits, the moratoriums on evictions and foreclosure also expire at the exact same time. This leaves Americans particularly vulnerable financially if the expanded unemployment was helping them make the rent or mortgage payments.

There Is No Extension of the Expanded Unemployment Benefits on the Immediate Horizon

The prospects for the renewal of these payments in a subsequent stimulus package appear dim. The Senate is about to embark on a long recess surrounding the 4th of July holiday that stretched until almost the end of the month. The Democratic House passed a large stimulus package in May that the Republican Senate will not bring up for a vote. The parties are so far apart right now that any type of agreement appears to be unlikely at best. Moreover, the expanded unemployment is an area where Republicans have staked out a firm and public position from which it would be difficult to retreat.

What is certain is that some sort of federal relief is needed for households to stay afloat during the pandemic. It is the federal stimulus that has propped up the economy while it has been closed and has kept the country from going off the economic cliff. The Republicans are proposing a one-time bonus for workers who return to work, but that does not address those with no income. In the meantime, unemployment benefits have been extended to run for 39 weeks. However, the effects of the expiration of expanded unemployment benefits will begin to become apparent almost immediately after households stop receiving the extra $600.