Tuesday, December 22, 2009

Unemployment Benefits Extended Up To 99 Weeks; May Cost $140 Billion

Unemployment has been so widespread, so lasting and so costly that the federal government projects that 40 state programs will go broke within two years and need $90 billion in loans to keep issuing benefit checks.

Collectively, states are projected to run a $57 billion deficit in the program in 2010 alone. The federal government is obligated to lend them the money to cover that gap.

Many states will be faced with the unpleasant choice of raising taxes, cutting benefits, or both. Nationally, the average tax is about 0.6 percent of payroll; the average weekly check is about $300.

Currently, 25 states have run out of unemployment money and have borrowed $24 billion from the federal government to cover the gaps.

Unemployment benefits are typically paid for 26 weeks. But, due to the length and severity of the recession, Congress has repeatedly extended that period since June 2008.

The emergency extensions had previously allowed laid-off workers to collect benefits for up to 46 weeks in some states. But in other states the benefits had stretched up to 79 weeks, the longest period since the unemployment insurance program was created in the 1930s.

However, that period has now been extended up to 99 weeks in some states.

Saturday morning, the Senate approved a $626-billion defense bill that included a two-month extension of unemployment benefits for the long-term jobless.

The benefits of 1.5 Americans were set to expire at the end of this year. Those benefits will now be paid through the end of February.

According to AP, the costs of another extension of unemployment benefits will reach $100 billion. The estimated price tag includes the costs of extending unemployment benefits through 2010 for those who have been unemployed for more than six months, as well as costs to provide subsidies to assist in paying health insurance premiums.

This is in sharp contrast to the unemployment benefit costs of just two years ago. Back in 2007, the cost of unemployment benefits was only $43 billion dollars. Since that time, unemployment has ballooned from 4.8% to 10%.

Obviously, the unemployment problem will not improve significantly in the next two months, and Congress will once again be faced with the task of extending benefits further. The cost to the federal government and the states will be burdensome, and require taking on even further debt.

Even before the last round of extended benefits in November, the White House estimated the cost of unemployment compensation to exceed $140 billion for fiscal 2010, which began in October.

The Labor Department projects that eight million Americans will exhaust their regular 26 weeks of unemployment benefits in 2010.

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