by Mitch Kokai
Senior Political Analyst, John Locke Foundation
On Labor Day, an estimated 7.5 million individuals are expected to see their temporary federal unemployment benefits come to an abrupt end. But even though that will mark the largest shutoff of such benefits in American history, two political dynamics have made mention of the approaching benefits cliff all but taboo in progressive policy circles: The cliff was designed by the Democratic authors of the March 2021 American Rescue Plan, and it will disproportionately affect residents of blue states. …
… The primary cause of this predicament is that more people have been made eligible for, and continue to collect, the federal benefits in question than ever before. As a result of the pandemic and unprecedented new federal benefit programs, recipients of unemployment checks peaked at almost 33 million in June 2020 — more than two and a half times the prior record. Today, despite 10 million job openings and an unemployment rate that has fallen to 5.4 percent, 12 million Americans remain on benefits — a figure that approaches the pre-pandemic record for recipients, set in January 2010 when unemployment was a far-higher 9.8 percent.
About three-quarters of current recipients collect only federal benefits, and thus stand to lose all unemployment checks when temporary federal programs expire on Labor Day. Others will remain eligible for up to 26 weeks of state unemployment checks, but lose a $300-per-week federal supplement.
One of the ironies of the coming cliff is that it was intentional. The Democratic authors of the March 2021 American Rescue Plan that extended benefits through Labor Day insisted on replacing the “soft phaseouts” created in a bipartisan December 2020 law, which would have allowed current recipients to continue collecting benefits for some time after the program closed to new applicants, with a “hard cutoff” that took away all recipients’ benefits at the same time.