Your Money Mindset

Democrats and GOP still fighting over $600 jobless benefits. Where things stand

Key Points
  • House Democrats passed a $2.2 trillion measure last week that would extend a $600 weekly unemployment supplement through January.
  • The White House has proposed a $1.6 trillion measure providing a $400 weekly enhancement. 
  • Even if something passes, lawmakers would likely have to negotiate again in a few months' time, one expert said.
The U.S. Capitol stands in Washington, D.C., U.S. on Thursday, Oct. 1, 2020. Talks Thursday between Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin brought no immediate breakthrough on a deal for a new pandemic relief package, while the House prepared to vote on a Democrat-only plan.
Stefani Reynolds | Bloomberg | Getty Images

Democrats and Republicans still seem unable to find common ground on enhanced unemployment benefits, more than two months after the expiration of a prior, $600 weekly subsidy that had buoyed household income for millions.

White House officials and senior congressional Democrats were still trying to hammer out details of a fifth financial relief package through Tuesday afternoon to help counter the negative economic effects of the coronavirus pandemic.

President Donald Trump upended those talks around 3 pm E.T. on Tuesday, tweeting that he was instructing White House representatives to cease negotiations until after election day in early November. It wasn't immediately clear whether that was a hard line or a negotiating tactic. 

Unemployment benefits appeared to be a key sticking point in the negotiations, despite consensus in other areas like stimulus checks and aid for small businesses.

House Speaker Nancy Pelosi, D-Calif., at the U.S. Capitol on Oct. 1.
Chip Somodevilla | Getty Images News | Getty Images

More than 26 million Americans were receiving jobless benefits as of mid-September, according to the most recent data from the U.S. Labor Department.

House Democrats narrowly passed a $2.2 trillion relief package on Thursday that would extend a $600-a-week supplement to unemployment benefits through January 2021.

Federal lawmakers had enacted that weekly enhancement as part of the $2.2 trillion CARES Act relief law in March. That subsidy stopped at the end of July.

More from Your Money Mindset:
What to know before investing stimulus money
Consider these factors before accepting an early retirement package
Many forced to raid retirement money amid pandemic

Meanwhile, Treasury Secretary Steven Mnuchin proposed a $1.6 trillion measure last week in negotiations with House Speaker Nancy Pelosi, D-Calif., that would include a $400-a-week unemployment supplement. That aid would reportedly last through December.

Senate Republicans had previously proposed a $1.1 trillion measure in July that offered an extra $200 a week in jobless benefits.

'Tremendous pressure'

It's unclear whether congressional Republicans would support a $400-a-week policy or a bill with an overall price tag as high as the White House proposal.

"Negotiations are ongoing," according to a White House spokesman said Monday. "The White House continues to reach out to Democrats in good faith to try and reach a deal on delivering relief to American workers."

Treasury Secretary Steven Mnuchin during a Senate hearing on Sept. 24.
Toni L. Sandys-Pool/Getty Images

Some experts remain hopeful lawmakers can still come to an agreement, especially as unemployment remains high seven months into the economic crisis and the presidential election looms in a month's time.

"I think there's tremendous pressure on both sides to pass something," said Michele Evermore, a senior policy analyst at the National Employment Law Project. "Nobody wants to go home and campaign on, 'We didn't give you anything.'"

$600 unemployment

Republicans have criticized the supplement as a disincentive to return to work since it paid many people more than they'd earned on the job.

While anecdotal evidence suggests this may have been the case for some businesses, numerous economic studies found that, in aggregate, the $600 enhancement didn't discourage people from looking for work or accepting job offers.

VIDEO2:5502:55
Jim Cramer: There is urgency coming to stimulus talks

"Expanded UI benefits from the CARES Act appeared to be an important source of aggregate stimulus rather than an impediment to labor market improvement," according to a paper published last month by the Federal Reserve Bank of San Francisco.

Democrats want to extend the $600 weekly payments, which come on top of state-allotted aid, to help bolster consumer spending and the U.S. economy as signs have emerged that the recovery is sputtering.

"We still have a massive gap in the labor market, and job growth is slowing," said Heidi Shierholz, director of policy at the Economic Policy Institute and a former chief economist at the Department of Labor during the Obama administration.

The unemployment rate fell to 7.9% in September after businesses added 661,000 jobs, the Bureau of Labor Statistics reported Friday. That rate is down from a 14.7% peak in April, the highest recorded since the Great Depression.

There are 10.7 million fewer jobs now than in February before the pandemic-induced recession, according to the bureau. The true figure likely exceeds 12 million jobs when factoring in prevailing monthly job growth trends that had been occurring pre-pandemic, Shierholz said.

Lost Wages Assistance

President Donald Trump appears intent on passing another relief package before the November election.

"OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE," Trump tweeted Saturday from Walter Reed National Military Medical Center in Bethesda, Maryland, where he'd been receiving treatment for Covid-19.

The Trump administration had enacted a Lost Wages Assistance program in August that offered a $300 weekly supplement to unemployment benefits for up to six weeks, paid for with federal disaster relief funds. (A few states paid an extra $100, for a total of $400.)

Workers in some states haven't yet received that aid, however, due to administrative delays. And hundreds of thousands of workers, primarily low-income and part-time workers, weren't eligible for that money due to program guidelines.

If Congress and the White House reach a deal on unemployment benefits, a relief measure may be delayed by lack of common ground elsewhere, like additional aid for state and local governments. And extra jobless aid would likely only last for a few months.

"I do think there's been some progress made, and now it's [down to] whether they'll get something all the way through," Andrew Stettner, a senior fellow at the Century Foundation, said of relief talks. "Even if this thing passes, they'll have to come back to it in December or January."

VIDEO2:4802:48
How unemployment benefits are calculated