Unemployment in America skyrocketed thanks to the nationwide shutdown caused by the Coronavirus outbreak. Everyone knows that, but what is worrying the millions collecting expanded benefits from the CARES Act is that the extra $600 per week, ends on July 31st, 2020. What happens after that? The uncertainty is excruciating.
The federal government funds the CARES Act. The updated version of which was signed into law on March 25th, 2020, by President Trump. The debates about whether to extend the unemployment provision continue. News from the Congressional Budget Office (CBO) has weighed in on the argument and, we’ll examine their findings here.
While the federal government funds the extensions and additional unemployment benefits for self-employed people and gig workers, states fund regular unemployment benefits. Initially, the idea behind the benefits was to fill the void left by the sudden decrease in pay and bring income back to pre-unemployment levels.
Democrats and Republicans at Odds
As the end-date draws ever nearer, there’s talk about extending the unemployment deadline through 2021. Unemployment filings reached 42 million since the pandemic took hold across America.
Democrats continue to push for the extension, reasoning that a sudden loss of income will devastate already struggling families. The cost to the economy and businesses will only make a bad situation worse.
Republicans see the extension as prolonging the pain caused by the Covid-19 outbreak. They are citing encouraging employment numbers that showed a decrease in the unemployment rate of 1.4% from April with the addition of a record of 2.5 million jobs.
The Republican camp argues the economy is recovering. Thus, additional help beyond July 31st, 2020, is unnecessary.
The CBO Report
The June 4th report favors both sides of the argument about extending unemployment benefits. Long-term implications are such that employment numbers would not improve at the record rates seen in April.
In the report, findings indicate a more significant economic output in the second half of 2020, assuming extended benefits. The reason is that people wouldn’t experience a sudden loss of income and could continue purchasing food and housing at a rate similar to pre-coronavirus levels.
With the economy showing signs of a robust turnaround, some say it shows how vital the benefit extensions are. Without them, people with little or no financial resources suffer most, especially family members in ill health. Still, the significant impacts of the extension will diminish over time, according to the report.
More Help from the CARES Act
The known issue of unemployed people receiving more money by staying home, thanks to the extra $600 per week, will have a detrimental effect on the economy in 2021. The result will be slow growth and creating a more massive budget deficit, furthering the decline.
Regardless if Congress extends the benefits through 2021 or not, provisions in the CARES Act will continue checks beyond the usual 26-week period in most states to 39 weeks.
Beware the Looming Deadline
If Congress fails to extend the unemployment benefits, recipients will suffer a sudden cut to their income, bringing their checks down to their state’s regular weekly allowance. According to a Credit Karma survey conducted recently, some people are unaware of the July 31st, 2020 deadline for the benefits extension.
Financial experts suggest that you create a plan to help soften the blow if the benefits do end at the end of July.
In states where the unemployment stubbornly stays high, states can extend benefits with federally funded payouts up to 13 or 20 weeks, based on current state laws. As of June 1st, 2020, 44 states have enacted Pandemic Unemployment Assistance (PUA) benefits, available for up to 39 weeks, according to the Center on Budget and Policy Priorities (PEUC). PEUC or PUA benefits end December 31st, 2020.
Renewed Talk of a Second Stimulus
As Congress reviews several proposals from Republicans and Democrats, President Trump said he favors another stimulus check. He stated that the second stimulus would be very generous.
But, not so fast. Treasury Secretary Steven Mnuchin stated today, June 24th, 2020, that they’re talking about several different ideas. The main focus is on jobs and kids. Also, the Democrats favor another check included in the HEROES Act that passed in May. It’s unlikely to gain traction in the Senate.
The debates and back-and-forth negotiations show no signs of letting up soon.
