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New $100 billion safety net for jobless in works


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By ANDREW TAYLOR, Associated Press Writer Andrew Taylor, Associated Press Writer

WASHINGTON – As unemployment spikes, the cost of compassion is going up too.

By as much as $100 billion.

That's the potential price of a push by Democrats in Congress to continue providing extra help to the jobless beyond the core 26-week unemployment insurance package provided under permanent law.

The jaw-dropping numbers combine the approximately $85 billion cost of continuing emergency benefits through 2010 for the long-term unemployed — jobless more than six months — plus an estimated $15 billion to continue subsidies to help pay health insurance premiums.

Even before the last new round of extended benefits in November, the cost of unemployment compensation was estimated by the White House to exceed $140 billion for fiscal 2010, which began in October. Just two years ago — when the unemployment rate was 4.8 percent in contrast to the current 10.2 percent — the cost of unemployment benefits was only $43 billion.

Extending unemployment benefits again is an obvious solution to Democrats preaching compassion for the long-term jobless, as well as to economists who say cutting off the flow of money could harm the economy.

"This is the most effective way to get money into the economy. It's given to people who are simply out of money," said Rep. Jim McDermott, D-Wash., a key supporter. "They're spending it. They're not socking it away in a mattress somewhere."

Several temporary benefit extensions dating from mid-2008 are set to expire Dec. 31. In January alone, an estimated 1 million people will lose benefits as their extended coverage runs out. By March, 3 million people will have lost benefits averaging about $315 a week.

Also expiring is a program subsidizing 65 percent of insurance premiums for unemployed people who sign up for a continuation of health benefits formerly provided by their employer under the so-called COBRA program. The nine months of COBRA subsidies and the additional weeks of unemployment benefits were both core pieces of February's economic stimulus plan.

The COBRA health insurance subsidies expire Dec. 1 for those who signed onto the program when it first started last winter, though people who get fired before Jan. 1 are eligible for the full nine-month subsidy. People on unemployment would be able to finish out their present "tier" of benefits but would be ineligible for any of the recently passed additional coverage.

The benefits extension is under discussion among top Democratic leaders. While there's no agreement on a specific plan, there's a lot of sentiment behind a full-year extension, congressional aides say. The staggering cost, however, could preclude passing it.

With the budget deficit spiraling out of control, deficit hawks are certain to balk at the measure's price tag. And the White House, which is signaling that it is going to focus next year on trying to rein in the deficit, is not endorsing a full-year extension of benefits. Budget office spokesman Tom Gavin would only say the administration supports some extension beyond Dec. 31.

"We're past the point where anything can be deficit financed without some plan to pay for it," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "It has to come with offsets."

Many economists say increasing or extending unemployment payments is among the most efficient ways to jump-start the economy. It's easy to do and the people getting the benefits typically spend the money quickly. With the economy in a fragile recovery, cutting off benefits could be harmful.

"It would significantly raise the risk of falling back into recession next year," said Mark Zandi, chief economist at Moody's Economy.com.

Not all economists agree, however, especially if the benefits are financed by adding to the nation's $12 trillion debt. There's also evidence that unemployment insurance actually raises the jobless rate slightly because some people don't look for work as diligently as they do when they're on it.

"There are two downsides to extending unemployment benefits. One is the higher budget deficits that you get. Two is that unemployment benefits create a disincentive for some people to go back to work," said Keith Hennessey, an economic adviser to former President George W. Bush.

While most Republicans supported a recent bill adding 14 to 20 weeks of extra benefits for those who had exhausted payments lasting as long as a year and a half, many are likely to resist the upcoming measure.

"Calling more government spending and more debt a 'jobs package' is laughable, and the Democrats' frantic push for more of the same is yet another acknowledgment that their trillion-dollar stimulus isn't working," said Minority Leader John Boehner, R-Ohio.

The startling price tag of extending the benefits is due to two factors: the sharp spike in the jobless numbers and several layers of additional weeks of benefits that have been approved by Congress since June 2008.

The core benefit is 26 weeks, with up to 20 additional weeks in states with high unemployment. States collectively are already projected to run a $57 billion deficit in the core program in 2010. The federal government is already obligated to lend them the money to cover that gap.

Additional tiers of benefits were added in 2008. February's stimulus measure not only renewed those benefits but added $25 a week to every unemployment check.


Laid-off workers face expiration of health benefit

By ERICA WERNER, Associated Press Writer Erica Werner, Associated Press Writer

WASHINGTON – An auto parts employee laid off from his job last year has been able to hang onto his health insurance because the federal government has picked up most of the tab. That subsidy ends Tuesday for Don Hall and thousands of other Americans.

Hall's premiums will jump $500 a month, becoming unaffordable for him and his wife. A new study finds that many other workers will be in the same position unless Congress acts.

"That extra $500 is the difference between mortgage, insurance or a couple other items that are of course important to our health — food, utilities, those kinds of things," Hall, of Castalia, Ohio, said in a phone interview Monday.

Will he be able to keep paying for health insurance for himself and his wife at the higher price? "Not for very long," Hall said.

At issue is a provision of the economic stimulus bill signed by President Barack Obama in February that cut the price tag for COBRA, the federal program that allows workers to keep their company's health insurance plan after they leave their job.

Prior to passage of the stimulus bill workers had to pay the full cost of their premium — both their share and their employer's share, plus an additional administrative fee — in order to keep their coverage under COBRA. That made the policies so expensive that only a minority of eligible workers signed up.

The stimulus bill reduced the cost by 65 percent for workers laid off between Sept. 1, 2008 and Dec. 31, 2009. The measure was designed to stanch growth in the ranks of the uninsured as unemployment moved toward double digits. But the reduced-cost premium lasted only nine months, and with joblessness still high many workers are now facing the expiration of their health insurance subsidies before they've been able to find new jobs.

Those like Hall who started getting the subsidy in March — the first full month after the stimulus bill was signed — lose the subsidy Tuesday. After December it will no longer be available at all for laid-off workers, barring congressional action to extend it.

Democrats in the House and Senate want to act, but it's not clear how or when that could happen. One option is to include the subsidy extension in a larger jobs bill that's being discussed. Sen. Sherrod Brown, D-Ohio, whose office provided Hall's name, has introduced a stand-alone bill that would increase the subsidy and extend it for an additional six months.

A report being released Tuesday by the advocacy group Families USA finds that, on average, unemployed families who lose the COBRA subsidy will see their premiums increase from $389 per month to $1,111 per month, an amount that few long-term unemployed families will be able to afford, the group says.

It finds that premiums of $1,111 would consume 83.4 percent of the average unemployment check, leaving little for food, housing, and other necessities. In nine states — Alabama, Alaska, Arizona, Delaware, Florida, Louisiana, Mississippi, South Carolina and Tennessee — COBRA costs would actually exceed unemployment benefits.

The result will be tens of thousands of workers added to the rolls of the uninsured at a time when costs for people trying to buy insurance on their own are rising, Families USA says. Congress is searching for a long-term solution with Obama's health overhaul legislation, but even if that does get passed, it would take years to implement.

Meantime, "The federal COBRA subsidy has been a real lifeline for laid-off workers and their families and the withdrawal of that lifeline will probably mean that the laid-off worker and family are likely to join the ranks of the uninsured," said Ron Pollack, Families USA executive director. "So as an interim measure it is critically important to restore the COBRA subsidy so that health coverage continues to be affordable."

It's not clear how many workers are using the COBRA subsidy, though the Congressional Budget Office and the Joint Committee on Taxation estimated early on that 7 million would do so. IRS spokesman Anthony Burke said Monday that the agency does not yet have figures.

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