Congress poised to scale back unemployment benefits from 99 weeks

The days when an out-of-work person could collect 99 weeks of unemployment benefits are coming to an end.

Congress and President Obama appear to be heading toward an agreement to reduce the number of weeks someone can collect benefits – perhaps 75 weeks, or a lower number that is phased in through the year. Pretty much gone will be Extended Benefits, which now amount to an extra 13 to 20 weeks of benefits for the unemployed, depending on a state’s unemployment rate.

House and Senate negotiators have agreed to a reduction in the maximum number of weeks of benefits allowed, according to Politico. But the agreement, which would last through the year, would mean that millions of people on Emergency Unemployment Compensation (EUC) will continue to get some form of assistance. If Congress did not act, some 3.4 million unemployed people were in danger of losing their benefits by June 2.

“All the parties have agreed to some reduction,” says Pete Davis of Davis Capital Investment Ideas, who watches Congress for Wall Street and is a former tax economist on Capital Hill. “It’s a tough issue.”

The breakthrough came Monday, when the House Republican leadership said it would agree to extend the temporary payroll-tax cut through the end of the year without the need for “pay-fors.” Now, with the resolution on Tuesday of two other issues – the extension of unemployment benefits and extension of the “doc fix” for Medicare – lawmakers can tell their constituents that the legislation can pass without triggering gridlock.  

“There is good reason to reach agreement on this early in the election year,” says Mr. Davis. "When you shift from 99 weeks to 79 weeks, you get a big lump of people who drop out of the labor force,” he explains. This results in a lower “headline” unemployment rate – an advantage for an incumbent.

Congress still has to approve the agreement, of course.

But even if Congress had completely renewed the current law, keeping extended benefits at 99 weeks, many states would have started to scale them back anyway. To keep the program going, under current law, a state’s unemployment rate for one quarter must rise 10 percent compared with the rate for that same quarter in any of the three previous years.

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