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Unemployment Extension Standoff, Day 37: Mugged By Deficit Hawks

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Congress has not reauthorized unemployment insurance for the long-term jobless because Senate Republicans (and Nebraska Democrat Ben Nelson) say the federal budget deficit can't bear another $33 billion.

Outside of Congress, fiscal conservatives actually aren't unanimous that holding unemployment benefits ransom is a smart way to reduce the deficit. Take it from Robert Bixby, president of the Concord Coalition, which exists solely to raise the alarm about big bad deficits:

"As a deficit hawk, I wouldn't worry about extending unemployment benefits,'' Bixby told Boston Globe columnist Scot Lehigh. "It is not going to add to the long-term structural deficit, and it does address a serious need. I just feel like unemployment benefits wandered onto the wrong street corner at the wrong time, and now they are getting mugged.''

The mugging started at the end of May, when the Senate adjourned for the Memorial Day recess before the House even had a chance to send over a domestic aid bill that included the benefits. Since then, to appease the hawks, Democratic Senate leaders delivered some gut-punches to reduce the bill's deficit impact but ultimately wound up one vote short before Congress adjourned for its July 4 recess.

By the time lawmakers return to Washington next week, more than 2.1 million people who've been out of work for longer than six months will have missed checks as they finish up their state benefits or current "tier" of federal benefits and find themselves ineligible for the next level up. Without the federally-funded extended benefits, most unemployed are eligible for just 26 weeks of state-funded unemployment benefits, whereas people laid off in 2008 could have received checks for 99 weeks.

"It's just amazing to me," said Christy Zvonar of the deficit debate. Zvonar, 27, said she lost her job as an accountant at an expense management company in Chicago last December. "I understand the whole issue of the deficit, but that doesn't seem to be a problem when they're making tax cuts for the wealthy and spending money on the war."

Zvonar said she received her last unemployment check, for just $342, on June 5. "I've been putting everything on credit cards -- phone, utilities, food," she said. "There are a lot of people in worse situations that have lost their houses. I'm thankful that I have as much as I do."

Senate Democrats rejected GOP counter-proposals to reauthorize the benefits and pay for them by cutting spending elsewhere. "Congress could easily extend unemployment benefits that are paid for by eliminating a tiny portion of the $350 billion Congress wastes every year," said John Hart, a spokesman for Sen. Tom Coburn (R-Okla.). "If we don't change the culture in Washington and force Congress to make hard choices we will never address our long-term structural deficits."

The Democrats' refusal to offset the cost of extended unemployment benefits is based on the fact that the cost of extended benefits has never been offset during previous recessions. Rep. Jim McDermott (D-Wash.) told HuffPost last week that doing so would set a precedent that would fundamentally undermine unemployment insurance.

"Congress has never worried about offsetting emergency extended unemployment benefits, and with good reason," said Judy Conti, a lobbyist with the National Employment Law Project. "They are designed to be both an important social safety net, and economic stimulus, and they are so effective precisely because they pump money into the economy without taking it away from somewhere else."

Larry Mishel, president of the progressive Economic Policy Institute, agrees: "Paying unemployment compensation is one of the most stimulative things you can do and paying for it tremendously weakens that impact: you're injecting spending into the economy with one hand and taking it out with the other," wrote Mishel in an email to HuffPost. "The net cost on the long-term debt is minimal since the expenditures only last a few years and are not permanent. Plus, there's a return that such spending provides in higher revenues and lower outlays since UI expands the economy and creates more jobs."

David Walker, president of the Peter G. Peterson Foundation, joined Mishel earlier this year to argue in an op-ed that a "focus on jobs now is consistent with addressing our deficit problems ahead." (The Peterson Foundation funds all manner of deficit reduction efforts, including the Concord Coalition.)

Mark Zandi, chief economist with Moody's Economy.com and a former adviser to Sen. John McCain (R-Ariz.), has repeatedly said it's more important to help the unemployed and stimulate the economy now than to worry about deficits. Zandi has said he would support reauthorizing the benefits with a built-in plan to offset the cost three years from now -- an idea also supported by former Bush administration economist Keith Hennessey, who wrote on his blog that "Congress should extend unemployment insurance benefits as long as the unemployment rate is above 8 percent."

It's possible that cutting off extended benefits will actually worsen the deficit. The Wall Street Journal reported Wednesday that extended benefits keep older workers, who face longer durations of unemployment when they lose their jobs, from deserting the workforce in favor of Social Security disability payments.

"The biggest point in the deficit is the war....What we're wanting is just a trickle of what the deficit is," said Donna Price of Fort Worth, Texas, who was laid off from an interior design company in October. Price, 60, said it seems to her that Republicans are trying to crater the economy to make the president look bad and win elections. But she said she didn't understand why Democrats "won't let go of some of the stimulus money" to win GOP votes and reauthorize the benefits. Either way, if it doesn't happen, Price said her benefits will soon expire.

"I've got one more week left on that and that's it," she said. "My anniversary was this week. It was the first time in 35 years I did not buy anything for my husband. We didn't even go out to dinner."