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Extension of Unemployment Benefits & Payroll Tax Reduction

On February 17, both the House and the Senate passed H.R. 3630, a bill to extend, until December 31, 2012:

  • unemployment benefits for the long-term unemployed,
  • the payroll tax reduction for workers,
  • elimination of the drastic cut in the repayment rate to doctors who treat Medicare patients, and

H.R.3630 also extends funding for Temporary Assistance for Needy Families (TANF); however, only through September 30, 2012.  This requires that advocacy will be needed on TANF throughout the spring and summer.

Unemployment Benefits

The extension of benefits to the long-term unemployed is critical to the economy, as well as to the individual households affected. The previous emergency extension had allowed benefits to continue for up to 99 weeks. However, this new extension cuts the maximum number of weeks to 63 weeks (or 73 in states with an unemployment rate above 9%). NETWORK feels that we have had success at two levels: there is a continued extension, and the punitive elements in the House version were not adopted.

Elements of the House plan would have limited payments to 59 weeks, included mandated drug testing and requiring recipients of benefits to have a high school diploma or its equivalency, or be in an educational program to meet this need. In the final bill, drug testing is allowed, if states choose, only where the person lost work due to a drug offense, or the individual’s work requires such testing.

Up to ten states may be granted waivers to divert the federal funding to programs which support re-employment, reducing the funding available to worker benefits in the state. This is, however, an improvement over the House plan to allow an additional ten states to divert funds each of the next three years.

There is a federal mandate, already in place in most states, that beneficiaries of UI are engaged in seeking work.  An additional one billion dollars is allocated for reemployment services and assessment for reemployment, both of which will contribute to lowering the unemployment rate where the resources are used. Part of this funding will also support “work-share” program grants, which will help employers retain workers.

Unemployment insurance is one of the most cost-effective programs we have to boost the recovery.  Workers require fewer other safety net supports, and will be supporting the economy with purchases such as food, clothing and gasoline. 

Without the extension, the 26 weeks of benefits provided by states would have been the total assistance available. At this time, many workers have been unemployed for more than two years.

Payroll Tax Reduction

For the last 14 months, workers have felt a 2% increase in their paycheck, due to a reduction of 2% in the employee portion of the “payroll tax.”  The 2% is being paid into the Social Security Trust Fund from the general treasury, to offset this tax break for middle-income workers. This provision was extended until December 31, 2012 at a cost of almost $100 billion, which will not be offset with spending cuts or other tax increases.  The added income will also be a great benefit to the economy, as workers feel a bit more secure to spend in the months ahead.

Medicare Repayment

The third extension controls the payment made to doctors who treat our elders. The law establishing the Medicare repayment to these doctors had a glitch in the formula, with meant that each year the reimbursement to doctors would cover a lower percentage of the cost. This is devastating to rural and other less desirable areas of practicing medicine – making it more difficult to ensure medical attention for elders in these areas. This year, the reduction would have amounted to over 27% of their doctors’ costs. 

Both the extension of unemployment benefits and the “fix” of doctor repayments require a “pay-for.”  This is being covered by increasing the percent of retirement program costs for new federal employees and sale of radio-broadband spectrum licenses. Historically, unemployment benefits have been accepted as emergency funding, not requiring “pay-fors,” however we are in a time when deficit reduction requires far more trade-offs.

TANF

Temporary Assistance for Needy Families (TANF) was also extended, but only through September 30, 2012, without changes to the program.  NETWORK continues to push for a positive re-authorization of this program.  For NETWORK recommendations on this, go to: http://www.networklobby.org/files/TANF_Report-Quarter3_3.pdf  This is a mandatory program, benefits are available to all qualified persons who pursue this assistance. 

Over all, NETWORK is pleased with the legislation as it passed.  The reduction in weeks of unemployment benefits will surely place a heavy burden on households without a working member over a long period, and may lead to even more foreclosures. The trade-offs are difficult in a time of serious economic deficits.  NETWORK remains concerned about meeting the human need deficits in this economic environment, and we count on members to continue to advocate for those who are in most desperate need.