The budget deal reached in Congress left out funding for the extension of unemployment benefits, meaning almost 1.3 million unemployed Americans will lose these benefits as of December 28.
Negotiations between the Senate and the House of Representatives could have resulted in an extension of the Emergency Unemployment Compensation program. It is very possible that the cost of the program, $26 billion per year, was too high to include it in a negotiation where differences between Democrats and Republicans could not handle such a number.
However, excluding the issue also avoided ideological debate about the impact of this benefit. For a conservative wing, extending the program is detrimental to the unemployed, because it removes incentives to look for work. Nevertheless, the fundamental problem is the lack of jobs because of the Great Recession, and not the need to encourage the unemployed to look for existing jobs.
The latest unemployment numbers show improvement in the private sector, although the sector is still very far from replacing the jobs lost and creating new jobs to bring into the workforce the natural increase in labor.
On the other hand, according to the Congressional Budget Office, extending the benefits has its advantages, including raising the GDP and stimulating the economy.
This extension must now be added to another bill to be approved in these last days of the legislative session. Otherwise, an estimated 241,800 Californians will lose their benefits and an additional 325,000 will also see them removed in six months.
Democrats and Republicans recognize that an acceptable economic recovery with enough job creation is still far away. Not extending unemployment benefits harms improvement prospects on both fronts.