WASHINGTON — An emergency federal program that acts as a lifeline for 1.3 million jobless workers will end Saturday, drastically curtailing government support for the long-term unemployed and setting the stage for a major political fight in the new year.
The program, in place since the recession started in 2008, provides up to 47 weeks of supplemental unemployment insurance payments to jobless people looking for work. Its expiration is expected to have far-reaching ramifications for the economy, cutting job growth by about 300,000 positions next year and pushing hundreds of thousands of households below the poverty line.
An extension of the unemployment program did not make it into the two-year budget deal that was passed just before Congress left on its winter recess. When the federal program expires, just 1 in 4 unemployed Americans will receive jobless benefits — the smallest proportion in half a century.
“I really depend on unemployment,” said David Davis of Chantilly, Va., adding that the $1,600 a month he receives is helping keep him afloat while he interviews for new positions. “I’ve got a résumé that knocks your socks off. The reason for this long period of unemployment is that the work just isn’t there.”
At one point Davis, 68, made more than $100,000 a year as an information technology expert and Web designer. He is now living on ramen noodles and $140 he counted out from his change jar. Since being laid off over the summer, he has missed mortgage payments, forcing him to take out a reverse mortgage on his home. He sold his car and got a late-1990s model Taurus, and he is looking to cut his utility and cellphone bills. Soon, he might start taking Social Security.
“It’s very stressful,” Davis said. “At least I’ve had the ability to maneuver my finances so I don’t wind up homeless. That’s one goal, to avoid living on the street or in my car.”
Democrats on Capitol Hill are pushing for an extension of the program, although the constrained fiscal environment makes its reinstatement somewhat less likely, aides said. Members of the Republican leadership have indicated that they might be willing to extend the benefits but only if Democrats offset the new spending with other cuts.
On Friday morning, President Barack Obama called Sen. Jack Reed, D-R.I., and Sen. Dean Heller, R-Nev., to extend his support for their proposal to extend emergency unemployment benefits for three months.
“The president said his administration would, as it has for several weeks now, push Congress to act promptly and in bipartisan fashion to address this urgent economic priority,” said Josh Earnest, a White House spokesman.
As the last payments are distributed, Democrats have initiated a campaign aimed at shaming Republican members — particularly those in leadership and in swing districts — for letting the program expire over the holiday season.
“I don’t know if our colleagues who have opposed passing the unemployment-insurance legislation know or care about the impact on families,” said Nancy Pelosi of California, the House minority leader. “The impact is very, very strong. It hurts the dignity of a family, of a worker.”
Americans United for Change, a liberal group, is running an advertisement on cable television stations.
“You know who had a merry Christmas? The richest 1 percent, that’s who. Republicans in Congress made sure of that, protecting billions in taxpayer giveaways,” it says. “For those facing tough times? Republicans stripped 1.3 million Americans of jobless benefits — folks who want to work but cannot find a job — kicking them to the curb during Christmas.”
Republican aides said they remained willing to negotiate.
“Why didn’t they offer a plan that met the speaker’s requirements — fiscally responsible, with something to create jobs — or any plan, for that matter, before they left for the holidays?” asked Michael Steel, a spokesman for John A. Boehner of Ohio, the speaker of the House.
Some Democrats have suggested continuing the program for three months, with the estimated $6 billion in spending offsets coming from agricultural subsidies in the farm bill.
But some conservatives have shown stauncher opposition.
“I do support unemployment benefits for the 26 weeks that they’re paid for,” said Sen. Rand Paul, R-Ky., on Fox News. “If you extend it beyond that, you do a disservice to these workers. When you allow people to be on unemployment insurance for 99 weeks, you’re causing them to become part of this perpetual unemployed group in our economy.”
The loss of benefits is expected to drain billions in consumer spending from the economy next year. People losing their federal benefits — often benefits they expected to continue to receive for weeks or months into 2014 — described cutting back on Christmas, driving less, turning off the heat, draining retirement accounts, applying for food stamps, readying to move in with relatives and missing mortgage payments.
The psychological toll is significant, too.
“I get up. I check my messages. I go through my ritual,” said Margie Bogash, 52, a laid-off medical laboratory manager in Pennsylvania, describing her job application process. “When I’m done cleaning up around my house, I sit down, I go on again. When I can’t sleep, I go on again. The past year has been very stressful — it’s still just very stressful.”
Bogash said the loss of benefits has spurred her husband to collect his Social Security payment early, meaning smaller benefit checks in perpetuity.
Extending the program for a year would cost an estimated $25 billion. But because recipients tend to immediately spend the money they receive in unemployment benefits, the effect on the economy will be amplified, economists said. The left-of-center Economic Policy Institute has said that the end of the program will cut job growth in 2014 by about 310,000 positions.
Michael Feroli, the chief U.S. economist at JPMorgan Chase, has estimated that the loss of income will cut the country’s annual growth rate by about 0.4 percentage points in the first quarter of 2014.
“We are certainly seeing long-term unemployment as this deeply entrenched problem at a time when the economy seems to be growing,” said Christine L. Owens of the National Employment Law Project, a research and advocacy group. “This crisis of long-term unemployment has been unprecedented and remains unprecedented. It underscores that we need to maintain and frankly strengthen the kind of supports that long-term unemployed workers need to get jobs.”
Economists expect that the end of the emergency jobless benefits will, surprisingly, lead to a sharp drop in the unemployment rate, by as much as 0.5 percentage point.
That is in part because the loss of benefits might spur some workers to intensify their job search or accept an offer they might have turned down.
Since her federal benefits expired, Jamie Young, a library scientist living in Portland, Ore., has accepted a part-time job, taking a large reduction in her income.
“It’s embarrassing for me,” she said. “I dread going to parties or social functions and having people ask me what I do.”
Her unemployment has also spurred her to donate her eggs for $6,000 in compensation.
But the unemployment rate will primarily drop as workers, especially older workers, drop out of the labor force. Those receiving unemployment benefits are required to demonstrate that they are actively looking and applying for jobs. Without those benefits, and requirements, economists said, many might give up.
Analysts also believe the end of the federal program will lead to an increase in poverty. Already, cuts to unemployment insurance payments and reductions in the weeks of benefits have meant that the program has lifted fewer people out of poverty: 1.7 million Americans in 2012, down from 2.3 million in 2011 and 3.2 million in 2010.
“The opportunities that were there for my brother and my parents, they don’t seem to be there,” said Brett Ivey, a 29-year-old college graduate in Seattle, who lives on his $329-a-week unemployment insurance payment and about $15 a week in food stamps. “There’s hundreds of people fighting for the same job, just trying to get by.”