Jun 10, 2021 - Politics & Policy

The risk in Democrats' generous unemployment benefits

Illustration of a foot about to step on a banana peel made of money.  
Illustration: Aïda Amer/Axios

The staff shortfalls Americans are finding as they head to restaurants and summer vacation spots illustrate the risk for Democrats over whether the government's extra $300 per week in enhanced unemployment benefits is to blame.

Why it matters: Twenty-five states — all run by Republican governors — are eliminating some or all of the UI benefits. Some are even offering back-to-work bonuses to further encourage a return to work. Expect the results to become midterm fodder next year.

  • “While these federal programs provided important temporary relief, vaccines and jobs are now in good supply,” said Maryland Gov. Larry Hogan, a Republican and potential 2024 candidate for president.
  • As of now, most Democratic lawmakers argue there are more factors contributing to the staff shortages — notably child care, especially for women, according to several members of Congress who spoke to Axios.
  • Yet many Democrats are increasingly willing to admit they may have gotten it wrong, and fear the spike in activity this summer will generate a backlash among their constituents.

Sen. Angus King (I-Maine) said he thinks the states rescinding the extra money will serve as a test case for the two parties.

  • "I can't deny that it appears to be having a significant impact, particularly on the hospitality industry," King added. "(The enhanced UI) is helping to support the economy. On the other hand, is it impeding job growth? I don’t know. We’ll have to find out."
  • He added that, as former governor of Maine, he believes states should have "wide discretion to make their own decisions."

Driving the news: Last week, President Biden said he wouldn't seek to extend the UI program beyond September, when it's set to expire. White House press secretary Jen Psaki went a step further, making clear governors “have every right” to “not accept” the extra benefits.

  • Some of the cuts will be offset for eligible families when they begin receiving Child Tax Credit expansion checks on July 15. The checks are worth up to $300 per month for children under 6, and up to $250 for children from age 6 to 17.
  • The White House's comments came despite allied lawmakers like Sen. Bernie Sanders (I-Vt.) imploring the administration to continue providing Pandemic Unemployment Assistance benefits to all eligible workers regardless of governors' mandates.

What they're saying:

  • Sen. Tim Kaine (D-Va.), former governor of Virginia: "We were trying to basically solve a once-in-a-century health pandemic that completely ravaged the economy. I think we did a very good job at it. Was everything calibrated perfectly? I don't know that I'd say that."
    • "I'm not questioning decisions that governors are making about it. I think if there's solid evidence that there's a disincentive, then governors may curb back. But I'm not exactly sure that that evidence is strong and uniform everywhere in the country."
  • Sen. Chris Murphy (D-Conn.): “There are a lot of reasons why some people have been reluctant to come back to work. Not the least of which is ... complicated child care challenges."
    • "These extended benefits were never supposed to be permanent, and if the economy comes back online, it certainly makes sense to pare them back to normal size.”

Editor’s note: This story has been updated to reflect the $300 payment is per week, not per month.

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