The partisan battle over unemployment benefits will shape the future of America's safety net — and we're about to find out the hard way which party is in the right

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The partisan battle over unemployment benefits will shape the future of America's safety net — and we're about to find out the hard way which party is in the right
President Donald Trump speaks during a Cabinet Meeting in the East Room of the White House, Tuesday, May 19, 2020, in Washington. (AP Photo/Evan Vucci)Associated Press
  • President Donald Trump's reported opposition to extending the weekly $600 bonus to unemployment benefits isn't unusual for his party, as Republican senators including Lindsey Graham and David Perdue have also expressed concerns over the benefit.
  • Treasury Secretary Steven Mnuchin agrees with them, restricting access to unemployment benefits for recipients of the Payroll Protection Program legislation, billed as rescuing small businesses.
  • The benefit is currently set to expire on July 31, and Democrats want to extend it through the end of the year. Democrats and Republicans are also divided on what a further stimulus package should look like.
  • Several Republicans have said the economic recovery depends on reopening and getting workers off unemployment as soon as possible, but analysts see double-digit unemployment lasting for months or even years.
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President Donald Trump's reported opposition to extending the weekly $600 addition to unemployment benefits has massive stakes for the shape of the economic recovery in 2020 — and which party's vision of the safety net either wins out or proves correct.

Currently, those eligible for unemployment benefits are receiving an additional $600 per week from the federal government. The measure, which is part of the CARES Act, began on April 5.

Trump's remarks, made to Republican senators at a private lunch, according to Seung Min Kim of the Washington Post, follow similar comments by several prominent Republicans who claim that laid-off workers on unemployment have an incentive not to return to work. But the House Democrats disagree and want to extend it through the end of the year. The wellbeing of Americans' finances this summer will largely depend on who wins the argument.

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The Wall Street Journal has reported on the apparent incentive problem with the unemployment bonus, while some companies have begun cutting back on "hazard pay" for essential workers.

The Democrats claim that support for laid-off workers is keeping the economy on life support. And some Wall Street firms agree with that view. A May 20 research note from Jefferies, for example, said that the March stimulus package, including the unemployment benefit, created "some near-term support for the consumer." Jefferies added, however, that the "heavily front-loaded" nature of the stimulus means it "will taper off quickly" whereas the damage to employment and compensation will likely be "long-lasting."

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Is the unemployment bonus too high, or were pre-pandemic wages too low?

The Republican viewpoint is largely that wages shouldn't be raised to compete with the unemployment bonus, regardless of how much the pandemic has hurt the labor market, or how unsafe it is for workers to return to their jobs. About half of American workers could earn more from the unemployment benefits than their previous regular salaries.

"You can extend some assistance, but you don't want to pay people more unemployed than they'd make working. You should never make more than your actual wages," Sen. Lindsey O. Graham (R-S.C.) told The Washington Post.

Earlier this week, Republican Sen. David Perdue expressed similar concerns in a Senate Banking Committee hearing, saying that the $600 benefit was "disincentivizing" work.

And, as Business Insider's Joseph Zeballos-Roig reported, Treasury Secretary Steven Mnuchin said that employees who refuse to return to work could lose unemployment benefits under the small business program.

Workers in Iowa have already been told that they should return to work or risk losing their unemployment benefits. That directive came after seven epidemiology and biostatistics professors warned the governor against loosening social-distancing restrictions.

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And an early reopening in Georgia — where businesses like fitness centers, hair salons, and massage-therapy centers have been allowed to reopen — previously prompted even Sen. Graham to speak out.

"I worry that our friends and neighbors in Georgia are going too fast too soon," Graham tweeted on April 21.

Graham told The Washington Post that, while Trump didn't explicitly say he wouldn't sign a bill that boosts the $600 benefit, "he agrees that that is hurting the economic recovery."

Read the original article on Business Insider
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