In 2008, Rahm Emanuel, chief of staff to President-elect Barack Obama, famously issued Rahm’s rule: “You never want a serious crisis to go to waste. And what I mean by that [is] it’s an opportunity to do things that you think you could not do before.” Lawmakers applied Rahm’s rule liberally during the pandemic, providing record stimulus checks, massively expanding unemployment benefits, and far more at a cost of trillions of dollars.
Some of those actions were understandable given the scale of the pandemic. But what makes little sense is how now, months after the health emergency officially ended and over a year after President Biden declared the pandemic was over, some lawmakers continue to call for reviving long-expired pandemic benefits.
Continued efforts to revive the expanded child tax credit paid in 2021 offer one example. But the latest attempt comes in the form of a draft unemployment benefit proposal released last week by senior House and Senate Democrats, including Senate Finance Committee chairman Ron Wyden (D-OR). Unsurprisingly, their proposed “Unemployment Insurance Modernization and Recession Readiness Act” drops references to the pandemic from the pandemic benefit expansions it proposes reviving. But a review of this proposal—which closely tracks a mid-2021 proposal—reveals how the change is only cosmetic.
The following reflect ways this legislation would permanently revive pandemic unemployment benefits.
1. Permanently paying far larger unemployment checks. At the beginning of the pandemic, federal lawmakers provided unemployment benefit recipients an unprecedented $600 per week (and later $300 per week) in Pandemic Unemployment Compensation (PUC) supplements. Those controversial payments increased benefits so much that initially two-thirds of recipients collected more in unemployment benefits than they would have earned from working. By mid-2021, even President Biden admitted the supplements should expire.
Yet lawmakers’ “modernization” proposal would effectively revive pandemic supplements in two ways. First, it would require states to permanently expand weekly UI benefit amounts. Currently, UI checks nationwide average $424; the legislation would force states to raise that to at least $739 (for the average state, an increase of 74 percent or $315 per week). Second, during emergencies, the federal government would automatically add another $247 per week, again on average. In effect, states would be forced to pay PUC-like bonuses all the time, supplemented during emergencies with still more federal funds. At that point, the combined $562 average weekly benefit increase would far exceed current average benefits and approach the $600 initial PUC supplement Chairman Wyden argued was needed “while the consumer economy is shuttered” at the start of the pandemic.
2. Expanding and permanently nationalizing the Extended Benefits (EB) program. Congress created the EB program in 1970 to automatically provide additional state and federally funded benefits to the long-term unemployed. Except during the Great Recession and the pandemic, states have always contributed 50 percent to EB costs. The proposal would increase EB benefits from a current maximum of 20 weeks to 52 weeks, and mandate that federal funds cover all EB costs. Counting 26 weeks of state UI checks, the proposal would create a permanently elevated baseline of up to 78 weeks of unemployment checks, to which future temporary expansions would only add.
3. Reviving the fraud-riddled Pandemic Unemployment Assistance (PUA) program. The proposal would create a new federal “jobseeker allowance” program, offering non-workers and the self-employed a flat $250 per week for 26 weeks (and up to 78 weeks when unemployment rises). That would permanently revive the now-expired PUA program, and in most states significantly increase PUA’s former guaranteed minimum benefit.
DOL recently admitted that, while it operated, PUA experienced an astonishing improper payment rate of 36 percent. PUA-related improper payments may have totaled $118 billion—the equivalent of four regular years of state UI payments nationwide. Reviving PUA would contradict the testimony of Robert Asaro Angelo, New Jersey’s labor commissioner and a recent Democratic witness before the House Ways and Means Committee. He testified that PUA created a “perfect recipe for fraud” and advised that lawmakers “don’t ever pass a program like PUA again.”
4. Adding new benefit costs to federal deficits. The proposal is silent on offsets for its permanent federal benefit expansions. That suggests those costs would be supported by federal general revenues and added to the deficit, as were the $700 billion in federal benefit expansions legislated during the pandemic.
In at least one important respect, this proposal differs from pandemic policy, which generally expanded federal and not state benefits. It also would force states (and especially red states) to significantly expand UI benefits, requiring historic payroll tax hikes. Economists agree such payroll tax hikes are passed along to workers as lower wages, which is a real-life crisis most workers would no doubt prefer to avoid.