Half of all US states are scrapping stimulus-era jobless benefits, cutting off 4 million workers from federal aid

GettyImages protest dc covid-19 stimulus relief
Demonstrators rally near the Capitol Hill residence of Senate Majority Leader Mitch McConnell, R-Ky., to call for the extension of unemployment benefits on July 22.

  • 25 states are pulling the plug on federal jobless benefits enacted during the earliest days of the pandemic.
  • The GOP-run states are halting the flow of jobless aid to 4 million jobless people.
  • A top Democrat suggested he was drafting a plan for the federal government to step in and provide aid.
  • See more stories on Insider’s business page.

Half of all US states are moving to scrap federal unemployment programs over the summer.

Twenty-five GOP-run states are pulling the plug on federal unemployment benefits several months before their scheduled termination in September. Republican governors and lawmakers argue the $300 weekly jobless aid is keeping people from searching for jobs.

Maryland was the latest on Tuesday. Gov. Larry Hogan announced the state would end its participation in federal benefits effective July 3. The coronavirus relief programs were set up in the earliest days of the pandemic last year during a surge in unemployment.

“While these federal programs provided important temporary relief, vaccines and jobs are now in good supply,” Hogan said in a statement. “And we have a critical problem where businesses across our state are trying to hire more people, but many are facing severe worker shortages.”

The labor story is probably a bit more complicated than that. Everything from COVID fears to childcare to a mismatch between the workers seeking roles and open jobs is likely contributing to the current situation.

A JPMorgan note last week said politics was playing a major factor in moves to halt the stimulus relief measures. “It therefore looks like politics, rather than economics, is driving early decisions to end these programs,” the bank said.

Regardless of the factors, though, the decision to prematurely end federal benefits will impact 4 million workers, according to an estimate from Andrew Stettner at the liberal-leaning Century Foundation.

And a good chunk of those workers will lose their benefits completely. That’s because they’re on Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC), two federal programs that expanded the eligibility for benefits and how long workers could receive them.

One of those workers is Susan Hardy, 70. She lives in West Virginia, where federal benefits will end on June 19 – just a little over two weeks away. Hardy is a longtime independent contractor working in gas and oil title research, and has been receiving PUA benefits since she was laid off from a project.

Susan Hardy
Susan Hardy.

“I sent messages to the governor begging him not to do that. At least let us go till September,” Hardy said. “It looks like my job, my work, could open back up a little bit in October, or maybe by November. At least going to September would allow me to get through more of the difficult periods before hopefully things will open up.”

But the Labor Department has recently concluded it cannot step in to prevent the loss of benefits for unemployed workers. Chair of the Senate Finance Committee Ron Wyden told Politico in an interview published Wednesday he was eyeing a new plan for the government to intervene.

“If it takes changing the law, I’ll change the law,” he said. A spokesperson for the Senate Finance Committee declined to comment further.

In the meantime, workers like Hardy – who said she made less on unemployment than in her prior work – are facing down an unemployment cliff in the coming weeks.

“Our work has not opened up. I mean, they want to say, go to work, go to work, go to work,” Hardy said. “But if your work is not there, you cannot go to work. And we need those – I realize it’s only till September, it’s not that much longer – but September definitely beats June.”

Are you unemployed and have a story you want to share? Contact these reporters at jkaplan@insider.com and jzeballos@insider.com.

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There’s no help coming anytime soon for the millions about to lose federal unemployment benefits in two dozen GOP states

Joe Biden sad
President Joe Biden.

  • At least 24 red states are starting to end their federal jobless benefits within weeks.
  • The moves will impact 4 million people on unemployment, with about half losing all government aid.
  • The Labor Department has concluded it has limited authority to step in to keep aid flowing.
  • See more stories on Insider’s business page.

Almost half of all US states have decided to end their participation in federal unemployment benefits, setting up some workers to receive drastically reduced payments – and others without any federal relief coming through the door.

Twenty-four GOP-run states are moving to slash federal unemployment benefits within weeks, citing a so-called labor shortage and lack of hiring. Governors in those states are ending programs set up in the early in the pandemic, which added federal cash onto state unemployment checks and extended the weeks people were eligible for aid. Nebraska was the latest to pull the plug on all stimulus jobless aid programs, on Tuesday.

The measures will slash jobless aid from 4 million people, per an estimate from Andrew Stettner at the liberal-leaning Century Foundation. That projection means that nearly one in four of all Americans receiving unemployment are poised to experience some reduction in their benefits.

One of them is Scott Heide, a 35-year-old in Florida. His state’s governor, Ron DeSantis, announced this week that the state would be terminating its participation in the extra $300 in weekly federal benefits effective June 26.

Heide told Insider that he’s been on unemployment for almost a year. When he lost his job, he also lost his health insurance, and has had to pay over $800 a month for COBRA insurance since. He had to leave his apartment and move back in with his parents.

The original $600 supplement “really made a big difference,” he said, but that expired after just a few months. Then, Biden’s American Rescue Plan added in a $300 benefit. “That was like my lifeline” for paying bills, Heide said. But at a certain point he said he knew it was a “matter of time” before DeSantis went down the same road as other GOP governors.

“It’s just really tough because I’m trying to get a job, but it’s not that easy. And I feel like I’m being punished for no reason when it’s out of my control if somebody offers me a job. All I can do is apply,” Heide said.

Florida is an anomaly among the GOP states moving to end federal benefits in that it’s only stopping the additional $300 – for now, at least – and keeping in place programs that expand unemployment eligibility and the number of weeks recipients can access benefits.

In other states, about 2.1 million workers on those programs – Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) – will lose their benefits entirely, per Stettner’s calculations.

Some advocates and politicians have said that Biden’s Labor Department has an obligation to step in and provide PUA benefits, arguing that it’s mandated under the CARES Act.

Sen. Bernie Sanders wrote a letter to Labor Secretary Marty Walsh pressing the Labor Department to continue paying out benefits on its own.

Other Democrats have called on the agency to continue exploring options without specifically urging them to distribute the aid.

“I think the administration should be looking under every rock, and every nook and cranny for ways to protect the vulnerable,” Wyden said in an interview on Tuesday. He suggested he was looking at “next steps.”

Yet it appears that the Biden administration won’t be able to prevent a lapse in unemployment aid in the GOP states. The Labor Department has concluded it’s probably unable to help pay out the benefits, an administration official told Insider last week, given that unemployment systems are administered as a federal and state partnership built on agreement from the states.

The Labor Department did not immediately respond to a request for comment.

“I think there is still going to be litigation on this topic,” Stettner told Insider. “The real legal question is whether DOL has the authority to force states to pay benefits or find a way to get them out themselves.”

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Biden isn’t stepping in to stop 20 GOP-led states from yanking federal unemployment within weeks

Joe Biden sad
President Joe Biden.

  • The Biden administration isn’t stepping in to prevent the loss of jobless aid in GOP-led states.
  • Around 3.4 million people are set to lose some federal aid starting next month.
  • A White House official told Insider the Biden administration wants to strike a “balance” between workers and employers amid a labor shortage.
  • See more stories on Insider’s business page.

At least 20 Republican-led states are terminating federal unemployment aid programs starting in June in an effort to force more people back to work – Texas became the largest one yet on Monday. Some Democrats urged the Biden administration to step in and prevent this from happening, but there’s no sign they will.

Sen. Bernie Sanders of Vermont called on the administration to keep jobless aid flowing under the Pandemic Unemployment Assistance program for millions of gig workers, contractors, and freelancers, set up under a federal rescue package early last year. In a letter to the Labor Department sent on Thursday, Sanders argued the agency had a legal obligation to do so.

The legal fight that Sanders is urging would be a bruising one at a moment Biden is pressing ahead with his $4 trillion economic agenda.

“They have not yet come out with a position that they can enjoin these states, and I know it’s a difficult legal and practical consideration for them,” Andrew Stettner, a senior fellow and unemployment expert at the left-leaning Century Foundation, told Insider. He said continuing the programs would either require buy-in at the state level, or the White House would have to confront Republican governors.

“They’d really have to clash with these states and it’s still unclear their appetite for that clash,” he said. Stettner recently projected that 2.1 million people would lose some form of unemployment aid in Republican states.

The largest chunk of that figure are on PUA and another federal program for the long-term unemployed. An estimated 1.3 million people would be deprived of all their jobless aid since they don’t qualify for regular state benefits. The remainder would receive the state payouts, but they typically replace only 40% of an individual’s past wages.

Biden is taking a hands-off approach on the issue after an unexpectedly dismal jobs report earlier this month. Last week, he underscored the ability of states to reimpose job-seeking requirements that were scrapped early in the pandemic as jobs vanished and unemployment surged. He also stressed that jobless aid was not the main factor keeping people on the sidelines, an argument economists largely agree with as well.

The White House is strongly indicating it’s leaving it up to states to decide whether to yank the unemployment aid ahead of its end in early September.

A White House official who spoke to Insider on condition of anonymity cited progress made on distributing vaccines and said the administration expects more workers to reenter the labor force in the next few months. The official said they’re attempting to find a middle ground between businesses and the unemployed as the economy recovers.

“We recognize that every state has different conditions on the ground,” the official told Insider, adding “the announcements [Biden] made last week are designed to balance the needs of both workers and employers as we work through this unprecedented transition.”

On Friday, Press Secretary Jen Psaki said, “I would say that we certainly understand that governors and leaders are going to have to make a decision in regard to unemployment benefits, but what’s important to remember and what we remind people of is that, again, we don’t see this as a major driver in preventing people from seeking employment and seeking work.”

Republicans are urging governors to continue dropping the programs. “Our local job creators should not have to compete with the federal government for workers,” House Minority Leader Kevin McCarthy of California wrote in a letter to governors last week.

The White House is doubling down on its proposed spending programs. But it appears unlikely that the $300 federal supplement will be extended after Sept. 6 given the opposition of at least one Democrat, Sen. Joe Manchin of West Virginia.

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Joe Manchin says he won’t support extending the $300 federal weekly unemployment benefit from Biden’s stimulus

Joe Manchin
Sen. Joe Manchin (D-WV).

  • Manchin says he won’t vote to extend the $300 federal jobless benefit when it expires in September.
  • “We need people back to work,” West Virginia’s Democrat senator told Politico.
  • There’s some division among Democrats on whether the Biden stimulus measure should be renewed.
  • See more stories on Insider’s business page.

Sen. Joe Manchin said he won’t back extending the $300 federal unemployment benefit from President Joe Biden’s stimulus, which could possibly torpedo the jobless measure once it expires on Sept. 6.

“I’ll never vote for another extension as long as I know that with the vaccines, there’s not an excuse for no one to be vaccinated,” the West Virginia Democrat told Politico. “I understand there’s millions of jobs in America that we can’t fill right now. So we need people back to work. There’s more and more people understanding they’re in trouble.”

Manchin’s opposition highlights a rift among the Democrats over the extension of federal unemployment benefits later this summer. But some centrist Democrats are waiting to see how the economic recovery plays out before deciding on the issue.

Sen. Jeanne Shaheen of New Hampshire cited the low unemployment rate in her state, and told Politico “if that continues it probably should not be extended.”

During Senate debate to approve Biden’s $1.8 trillion stimulus law, Manchin withheld his support from a provision to put in place a $400 weekly federal jobless benefit that would expire at the end of September. After a spate of last-minute negotiations, he pushed to cut it to $300 per week with an early September expiration date.

Manchin’s office did not immediately respond to a request for comment asking whether he supported terminating programs providing jobless benefits to gig workers, freelancers, and the long-term unemployed in September.

The recent April jobs report showed employers adding 266,000 jobs, a lackluster amount that prompted Republicans and business groups to increasingly argue the jobless aid is luring people away from the workforce.

The Chamber of Commerce has called for an immediate end to the stimulus measure, and at least 10 GOP-led states are ending their participation in the federal program in June. Still, many experts say the federal unemployment benefit did not dissuade people from seeking jobs last year, and other factors like school closures, fear of the virus, and lack of access to childcare are playing larger roles keeping workers on the sidelines.

Senate Majority Leader Chuck Schumer said at a press conference on Tuesday there was “overwhelming support” among Democrats to renew it. “Many more people are helped by this $300 extra,” he said.

Other Democrats are warning about the end of enhanced unemployment insurance in many states. Sen. Ron Wyden of Oregon, chair of the Senate Finance Committee, called for the Biden administration to step in and prevent workers from losing jobless aid in GOP-led states.

“Mothers without childcare are not going to be back on the job in just a few weeks’ time, and they shouldn’t face financial ruin for living in states run by Republicans,” Wyden said in a Tuesday statement.

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How Biden’s stimulus could cause some large companies to raise wages and bring childcare to the forefront

joe biden amtrak
President Joe Biden.

  • Wages climbed modestly in April, a signal that businesses may be boosting pay to attract workers.
  • Some big employers are boosting pay and expanding the types of incentives they are offering.
  • Biden is signaling he will start encouraging states to reimpose job-seeking requirements for unemployment recipients.
  • See more stories on Insider’s business page.

The picture of American employment – and unemployment – is a confusing one right now.

Some employers say there’s a rampant labor shortage in sectors of the economy such as restaurants, with workers opting to remain on generous unemployment benefits instead of returning to work. The April jobs report on Friday showed that employers added 266,000 jobs, an amount well below forecasts for a million new payrolls or more.

The data provided new heft for Republicans and business groups to argue that the $300 weekly federal unemployment benefits from President Joe Biden’s stimulus are keeping people from seeking open jobs, curtailing the economic recovery. The Chamber of Commerce slammed the jobless aid, saying in a statement that “the disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market.”

The labor-shortage increasingly looks evident, as job openings data from March out on Tuesday morning show openings at an all-time high and the job-filling rate at an all-time low, per Jed Kolko, chief economist at Indeed.

Some large companies are increasing hourly pay to fill open positions and coax people who left the labor force or drawing down unemployment to accept a new job. Chipotle announced on Monday it was raising pay for workers by around $2 an hour, bringing its average pay to $15 per hour by June for all employees. It’s one of several major employers to hike compensation over the last year, including Walmart and Amazon.

The $300 weekly federal UI expansion is currently set to expire in September.

Some chain restaurants in the historically low-paying industry are also expanding the type of incentives they’re offering prospective hires instead of hiking hourly pay. They range from signing bonuses to leadership conferences to 401(k) matching. Still, the Biden administration is doubling down on its stance that simply paying workers higher wages will speed up the recovery.

“My expectation is that, as our economy comes back, these companies will provide fair wages and safe work environments,” Biden said Monday from the White House. “And if they do, they’ll find plenty of workers and we’re all going to come out of this together better than before.”

The childcare effect

Childcare is a prohibitive factor in preventing workers from returning, according to experts. A UBS note last week said that, while the “impact of the unemployment benefits may be overstated,” a large participation gap remains among workers with young kids – a key group in the labor market.

“I think we’ve all been very hopeful that we’re turning the corner, and we’re moving forward, and that components of this pandemic – that the big principal issues of the pandemic are behind us – but I think that we need to rethink that,” Misty L. Heggeness, a principal economist and senior advisor at the US Census Bureau, told Insider.

“That’s not true for a subset of our workforce. I think we’ve seen improvements until now because these have been the low-hanging fruits.” The lack of childcare is “crippling” our ability to return to work and facilitate economic growth, she said.

According to an analysis from the National Women’s Law Center (NWLC), 165,000 women dropped out of the labor force in April. Women only accounted for 161,000 of the jobs added in April. That means that – not accounting for any population growth – it will take women 28 months to return to pre-pandemic employment levels at that pace.

On Monday, the White House said it would be accelerating the distribution of childcare assistance included in the American Rescue Plan. Childcare is also a major plank of Biden’s $1.8 trillion American Families Plan.

‘Some upward pressure in wages’

The April jobs report showed wages climbing modestly overall, which could partly be due to businesses ramping up efforts to lure people back into the workforce. A Bank of America note on Monday from a team led by Joseph Song noted that average hourly earnings rose 0.7% for all workers after the latest April jobs report.

“When you dig into the details, you saw some pretty remarkable increases in wages in categories like transportation and warehousing, retail, leisure, and hospitality – all sectors that should be seeing a real boom in demand and hiring,” Michelle Meyer, the head of securities at Bank of America’s US economics team, told Bloomberg. “There’s obviously some friction there where there’s a whole lot of demand for workers but there isn’t enough of a supply at the moment and that’s creating some upward pressure in wages.”

Still, wages aren’t rising quickly enough to address the hiring shortage. Employers may be reluctant to hike pay at this stage, fearful that high consumer demand could taper off later in the year and leave them with excessive payroll costs.

“You’re competing with a temporary unemployment supplement,” Neal Bradley, executive vice president of policy at the Chamber of Commerce, told The New York Times. “You’re not going to make a permanent wage adjustment for a temporary, government-induced distortion,” he said, referring to the September expiration of expanded federal aid.

Biden has defended the $300 federal jobless aid as a measure that isn’t dissuading people from leaping back into the workforce. However, on Monday he said that the Labor Department would be helping states reimpose job-hunting requirements that were largely waived during the pandemic.

“We’re going to make it clear that anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment benefits,” he said. Twenty-nine states have already done so, according to a White House fact sheet.

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Why at least 300,000 people in 33 states are losing unemployment benefits earlier than expected

Unemployment filing coronavirus
  • A key tool to provide jobless aid to long-term unemployed people is broken in 33 states, per a new report.
  • The shut-off is affecting at least 300,000 people in at least 33 states, researchers say.
  • The study said unemployment benefits for some claimants could turn off in New York and California.
  • See more stories on Insider’s business page.

A policy instrument designed as a buffer for unemployed Americans is broken in 33 states, according to a new report released Tuesday from the California Policy Lab.

The Extended Benefits program is meant to provide jobless aid to people who exhausted regular benefits in high-unemployment states. Earlier federal rescue packages that Congress approved lengthened the eligibility period for people to get the assistance.

But it appears the program is shutting off because it’s not counting long-term unemployed people collecting emergency federal stimulus aid in a measurement used to gauge the share of the workforce claiming unemployment benefits.

“It’s as if the Titanic had stopped loading the lifeboats because some people had already gotten off of the ship,” TJ Hedin, a co-author of the study, tweeted on Tuesday.

“If these triggers were updated to count all people receiving unemployment benefits, then it would mean benefits would be available to impacted workers for longer durations, which seems sensible during times of extended job losses like the pandemic,” Alex Bell, another co-author of the study, said in a statement.

“Unfortunately, in state after state we see that the counter-intuitive design of the program’s trigger system is causing the exact opposite to happen,” he said.

Some states such as Alabama, Maryland, Ohio, South Carolina and Virginia have experienced an early shut-off of the EB program, impacting around 20% to 30% of jobless claimants.

Researchers warned some people’s benefits could be yanked in California, New York, Massachusetts, Nevada, and New Mexico over the coming weeks. These states have over 30% of claimants receiving aid under the program, the report said.

A $300 weekly federal unemployment benefit is in place until September 6, a key part of President Joe Biden’s recent stimulus law. Unemployment claims last week dropped to a new pandemic-era low, as 576,000 people filed for benefits.

Some Congressional Democrats are pressing to overhaul the nation’s battered unemployment system. Sens. Ron Wyden and Michael Bennet unveiled a plan last week to beef-up state unemployment checks and penalize states who stray from new benefit standards.

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Around 2 million people could face delays getting $300 federal unemployment benefits

Unemployment filing coronavirus
A person files for jobless benefits.

  • Around 2 million people could see delays receiving unemployment benefits, including a $300 bonus.
  • It could amount to a two-week delay that hits mostly gig workers and long-term unemployed people.
  • Some states like New York say they can pay out enhanced unemployment aid this week.
  • See more stories on Insider’s business page.

Around two million people could face delays receiving enhanced unemployment insurance, including a $300 federal benefit, despite Democrats approving a $1.9 trillion stimulus plan ahead of government aid expiring for many people this month.

The estimate comes from a new analysis from Andrew Stettner, a senior fellow and unemployment expert at the liberal-leaning Century Foundation.

The delays, per Stettner, could largely hit those enrolled in programs set up in 2020 to provide unemployment relief to freelancers and laid-off workers who depleted regular state jobless payouts: Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation, respectively.

“We do expect some states to have delays, getting those who ran out of benefits back on and even starting up PUA and PEUC again,” Stettner said in an interview. “You can’t get the $300 without those underlying benefits.”

Still, jobless workers may not have to wait for long to receive critical benefits. Stettner said he believed it would be a two-week setback for most, largely because the new stimulus law didn’t make major changes to the flow of unemployment benefits. That makes it easier to administer for overburdened state labor offices.

“It is a simpler program,” he told Insider. “I do think it will go better than it has and some states are indicating as such – that this will go a little more smoothly, but not without hiccups.”

Stettner cited California, which issued a release saying people would be able to certify weeks – one of the steps to obtain jobless benefits – in April.

Around 18 million Americans are still claiming unemployment insurance a year into a pandemic which decimated vast swaths of the economy. Additional research from Stettner and Elizabeth Pancotti, policy director of Employ America, indicated that one in every four workers relied on unemployment at some point during the crisis.

Delays to obtain jobless insurance have been common during the pandemic, particularly early last year as the calamity exposed the antiquated state of unemployment offices across the US. The crush of people filing for emergency aid caused a massive backlog.

The stimulus law approved by Biden and Democrats renewed a $300 federal unemployment until Labor Day on September 6. That’s also the expiration date for PUA and PEUC.

Some states are indicating they are prepared to pay out benefits as soon as this week. The New York Department of Labor said on March 17 there would be no lapse in aid, though the agency posted a tweet Monday notifying people there could be a 1-2 day delay at most.

As the benefit-year ends, unemployed people should expect to continue receiving benefits without applying for them again, Stettner said.

“States should not direct people to reapply, and individuals should not reapply unless they worked since they first got laid-off,” he said.

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4 measures in the Biden stimulus law that provide extra cash for Americans

Joe Biden
President Joe Biden.

  • The $1.9 trillion Biden stimulus law was enacted last week.
  • Some elements could strengthen the nation’s social safety net in the wake of the pandemic.
  • Provisions include larger tax credits and enhanced unemployment insurance.
  • See more stories on Insider’s business page.

President Joe Biden signed a $1.9 trillion stimulus law last week, among the largest government rescue measures in American history.

Many of its provisions are directed at keeping individuals and families afloat as vaccinations become more widely available. Still, some aspects of the law may end up dramatically remaking the social safety net.

“This package sets a new and powerful precedent, especially for helping children and their families when they have limited or no income,” Indivar Dutta-Gupta, co-executive director of the Georgetown Center on Poverty and Inequality, said in a recent interview with Insider.

(1) $1,400 stimulus checks

The relief law includes a $1,400 direct payment for most taxpayers. Those will be distributed over the next few weeks, and some are already going out the door.

Individuals earning up to $75,000 and couples making up to $150,000 qualify for full checks. A married couple, then, can get $2,800. People can also collect an extra $1,400 per adult dependent, a change from the first two federal payouts.

People earning above those thresholds still qualify for a smaller direct payment. But eligibility is capped at individuals earning more than $80,000 and joint filers bringing in more than $160,000, meaning people and households making above those amounts are paid nothing.

(2) $300 federal unemployment benefits through Labor Day

The law provides $300 in weekly federal unemployment benefits until September 6. The measure renewed the government supplement to state unemployment checks for an extra six months.

It extends the length of various programs, such as the Pandemic Unemployment Assistance program for gig workers and the Pandemic Emergency Unemployment Compensation for long-term unemployed people. Both will expire in September without additional action in Congress.

(3) Expanded tax credits

The law also beefs up the child tax credit for millions of families. For the next year, it provides $3,600 per child aged 5 and under, and $3,000 for each kid aged 6 to 17.

Payments were designated as “periodic” to clear Senate procedural hurdles, but Democrats want to implement advance monthly checks to families of up to $300, although it’s unclear if the IRS can accommodate that request. Advance checks could start going out on July 1, the legislation indicates.

Other tax credits are augmented as well, such as the Earned Income Tax Credit. The law nearly triples the maximum amount a childless worker can receive, from $540 to $1500. The income cap for adults is also lifted from $16,000 to $21,000, a step widening its reach.

(4) Bigger SNAP benefits

The measure also aims to address hunger and food insecurity through the Supplemental Nutritional Assistance Program. It renews a 15% boost to SNAP benefits through September.

Put another way, the increase is equal to $27 more in SNAP benefits per person each month, or just over $100 monthly for a family of four, according to the Center on Budget and Policy Priorities.

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Democrats are giving average Americans a load of cash, setting up a clash with Republicans over the social safety net

Biden Schumer Pelosi Harris Democrats
Vice President Kamala Harris, President Joe Biden, Senate Majority Leader Sen. Chuck Schumer (D-NY) and Speaker of the House Rep. Nancy Pelosi (D-CA) host a press conference on the stimulus law at the White House.

  • Democrats are pouring stimulus cash onto Americans, selling it as part of an anti-poverty crusade.
  • But those provisions will expire later this year if Congress takes no further action.
  • Experts say the child poverty rate could double next year.
  • See more stories on Insider’s business page.

President Joe Biden secured his first major legislative victory on the 51st day of his new administration. He signed a $1.9 trillion economic aid bill into law Thursday, paving the way for a large infusion of federal cash onto middle-class and lower-income Americans.

The package includes various measures to help struggling households a year into the pandemic: A wave of $1,400 stimulus payments, beefed-up tax credits for children and adults, larger food-stamp assistance, and enhanced unemployment insurance. Democrats cast it as among the most historic pieces of legislation that Congress has taken up in many years.

Speaker Nancy Pelosi compared the relief bill to the Affordable Care Act (ACA) passed a decade ago under President Barack Obama, which provided health coverage to millions of Americans. “I think I can safely say, and I’ve said this to my colleagues in the House on the Democratic side, this is the most consequential legislation that many of us will ever be a party to,” Pelosi said on Thursday.

Unlike the ACA, though, the stimulus package does not permanently strengthen America’s social safety net. Passed via reconciliation on a party-line vote to bypass a Republican filibuster, all the government aid expires in 2021. It’s one reason Wall Street analysts are projecting a strong economic recovery in 2021 – but it may prompt clashes on Capitol Hill.

The law’s provisions are designed to provide a temporary boost now or expire later this year. The stimulus checks are one-time payments; $300 federal unemployment benefits are set to lapse on Labor Day; advance child tax credit payments for parents will last only a year.

“I think the fundamental choice policymakers will face then is whether or not they want to swing from maybe the largest one-year child poverty reduction in US history to the largest one-year increase in child poverty,” Indivar Dutta-Gupta, co-executive director of the Georgetown Center on Poverty and Inequality, told Insider.

Numerous studies indicate the legislation will make a major dent in the nation’s poverty rate, cutting the overall level by one-third and slashing it by half for children. Experts also project millions of Black and Latino kids will be lifted out of poverty due to the child tax credit expansion. The bottom 20% of Americans are estimated to receive a 20% boost in their incomes, per a Tax Policy Center analysis.

Republicans have uniformly opposed this bill as too large and stuffed with progressive priorities. No Republican lawmaker in either chamber of Congress voted for it, viewing it as a slippery slope towards bigger government.

In control of Congress and the White House for the first time since Obama took office, Democrats consider the moment as an opportunity to wage a fresh assault on poverty and leave their mark while in power. Without further action in Congress, child poverty will double next year.

“This package sets a new and powerful precedent, especially for helping children and their families when they have limited or no income,” Dutta-Gupta said, adding it was an “earnest attack” on the racial inequalities that the pandemic worsened.

FILE PHOTO: U.S. Sen. Marco Rubio (R-FL) speaks during a Senate Intelligence Committee nomination hearing for Rep. John Ratcliffe (R-TX), on Capitol Hill in Washington, U.S., May 5, 2020. Andrew Harnik/Pool via REUTERS
Sen. Marco Rubio (R-FL).

The Democratic push to make permanent changes

Democrats are starting to become vocal about pressing to make at least some of the provisional parts of the law enduring – the child tax credit in particular. It would annually provide up to $3,600 per child age 5 and under, and $3,000 for each kid between ages 6 and 17. It also expands it to millions of families who previously did not qualify because of low or zero tax obligations.

Many Republicans oppose it. “If pulling families out of poverty were as simple as handing moms and dads a check, we would have solved poverty a long time ago,” Sen. Marco Rubio of Florida wrote in a National Review op-ed. However, they may begrudingly support the measure given its wide scope once it’s up and running.

“Republicans will probably end up voting to extend the child credit because they understand it would be political suicide not to,” Brian Riedl, an economist at the right-leaning Manhattan Institute, said in an interview. “Once a middle-class benefit is created, it is nearly impossible to let expire. This is so broad, and it is going to be received by so many families.”

Democrats appear to be betting enough Republicans will come onboard with an expansion. It may be a risky one given GOP opposition to green-light more government spending after Congress approved $5 trillion in emergency aid over the last year. Sen. Mitt Romney of Utah rolled out a child benefit plan, one paid for by cutting some social programs.

Rep. Richard Neal, chair of the House Ways and Means Committee and an architect of the measure, told Insider this week that he believed the child benefit expansion would establish a pillar of support. “Once it becomes policy, I think there’s an acceptance level for it,” Neal said.

The shift in Democratic messaging, however, appears to lend credence to GOP arguments that the stimulus law veered from providing immediate pandemic relief to enacting lasting safety net changes.

“Republicans feel vindicated in their opposition,” Riedl said. “The ones I’ve talked to – they’ve been saying all along that this bill was never about the pandemic or stimulus, this was about permanently expanding the federal government.”

Some, like House Minority Leader Kevin McCarthy, are wagering voters will grow disillusioned once they learn more about the law’s sweeping reach. He labeled it “a payoff for Pelosi’s political allies,” though the GOP has struggled to arrange a consistent response.

In 2009, Congressional Republicans’ attempts to paint Obama’s $800 billion stimulus law as a huge waste contributed to Democrats losing the House in the midterms the following year. That dealt a crippling blow to Obama’s ability to push his legislative agenda in a divided Congress.

“I’m a lot less worried about the negative response as people learn what’s in the package,” Dutta Gupta said. “The depths of the crisis is far worse, the popularity of the bill going through is far greater. I think the benefits seem more salient this time around.”

So far, the Biden stimulus law has drawn broad support in multiple polls and surveys. It remains to be seen if other provisions, such as stronger unemployment benefits, could form part of a follow-up economic recovery package.

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House Democrats are inching closer to final passage of $1.9 trillion stimulus legislation

Nancy Pelosi
Speaker of the House Nancy Pelosi speaks during a press conference with other House Democratic leaders about COVID-19 financial relief.

  • The House is on course to vote on Biden’s stimulus plan on early Wednesday.
  • The legislation would provide stimulus checks and $300 federal unemployment benefits.
  • There were no imminent signs of progressive revolt after the Senate changed some parts of the bill.
  • Visit the Business section of Insider for more stories.

The House is set to vote on the final version of the $1.9 trillion relief plan early Wednesday and send the bill to President Joe Biden for his signature

The House Rules Committee is taking it up on Tuesday to set the parameters for debate on the floor.

The Democratic relief bill would provide $1,400 stimulus checks for most taxpayers; $300 federal unemployment benefits through August; $350 billion in state and local aid; and funds for vaccine distribution and virus testing among other provisions. It also contains a large boost to the child tax credit.

Rep. Hakeem Jeffries says Democrats were determined to quickly approve the plan and assailed the GOP for not supporting it.

“The question is not whether we’re going to pass the American Rescue plan – we will,” he said at a press conference. “The question is whether Republicans are going to step up on behalf of their constituents and support this effort to decisively crush the virus.”

Republicans are strongly critical of the legislation, assailing it as a wasteful endeavor that could have been improved with their involvement. The GOP has blasted the large price tag. No House Republican voted for its passage last month, and they are likely to be united in opposition again. No Senate Republican voted for it more recently in that chamber.

“We could have had a bill that was a fraction of the cost of this one, it could have gotten bipartisan approval and support,” Rep. Liz Cheney, chair of the House Republican Conference, told reporters on Tuesday.

Like with many large bills, the legislation being considered by the House looks different from the version that was submitted to the Senate weeks ago. Senate Democrats were advised by the parliamentarian to scrap a $15 minimum wage, a top progressive priority, and some moderate senators successfully pushed Biden to tighten the eligibility for a third wave of stimulus checks.

But there were no immediate signs of a revolt among House progressives. Rep. Bonnie Watson Coleman, vice chair of the Congressional Progressive Caucus, criticized the bill over the weekend and reiterated on Tuesday that the Senate had “failed” to put struggling Americans first, but said she would still vote for the final bill.

“While I will continue to pressure my party to live up to its banner as the party of the people I cannot ignore the immediate need for relief,” she said in a statement.

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