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The Finance 202: Millions of Americans face financial shock as benefits set to lapse in days The $600 a week in extra jobless aid lawmakers of both parties approved back in March as part of the $2.2 trillion Cares Act officially expires at the end of the month, leaving some 30 million Americans now relying on it in the lurch. With Republicans divided among themselves on key issues in the next economic rescue package, and a widening gulf between them and Democrats, quick passage looks increasingly remote. “We’re going to have a lot more households that are dangerously close to the lowest levels available to sustain their living,” Richard Curtin, director of the University of Michigan Surveys of Consumers, tells me. Republicans want to scale the benefit back, at a minimum. How far to go in doing so remains an open question as Republicans seek to contain the overall cost of the relief package. But many in the party argue the payment discourages Americans' return to work and is slowing the recovery, since it offers many workers more than they would otherwise earn on the job. President Trump, in an Oval Office meeting with congressional Republican leaders on Monday to discuss the relief package, said the benefits never should have been approved in the first place, three sources familiar with the meeting told Erica Werner, Jeff Stein, Bob Costa and Seung Min Kim. House Democrats, in a roughly $3 trillion package they approved in May, extended the $600 bump-up through January. In the Oval Office meeting, Treasury Secretary Steven Mnuchin confirmed that Republicans planned to reduce the benefit in their bill. “We’re going to make sure that we don’t pay people more money to stay home than go to work,” he said, per my colleagues. "GOP lawmakers have discussed proposing the federal benefit be cut from an additional $600 per week to between $200 per week and $400 per week. The lower number is viewed as the likelier outcome in their bill,” Jeff and Erica reported this weekend. education nn education nn education nn/ education nn/ education nn/ education nn education nn education nn/ education nn education nn/ education nn education nn/ education nn/ education nn/ education nn/ education nn education nn education nn/ education nn/ education nn/ education nn/ education nn/ education nn education nn education nn/ education nn education nn education nn education nn/ education nn/ education nn/ education nn/ education nn education nn education nn education nn education nn/ education nn/ education nn/ education nn education nn/ education nn/ education nn education nn/ education nn/ education nn/ education nn/ education nn/ education nn/ education nn/ education nn/ education nn/ education nn education nn/ education nn education nn education nn/ education nn/ education nn education nn/ education nn/ education nn education nn education nn/ education nn education nn/ education nn education nn education nn/ education nn/ education nn education nn education nn education nn education nn/ education nn education nn education nn education nn/ education nn/ education nn education nn education nn education nn education nn education nn education nn/ education nn/ education nn education nn education nn/ education nn/ education nn/ education nn education nn education nn education nn education nn/ education nn/ education nn/

Mnuchin is correct that the enhanced benefit, when combined with state assistance, is supplying most of the jobless with more than they earned before they lost work. A University of Chicago study found more than two-thirds of recipients are collecting more now, and a fifth of them are being paid double or more what they were earning. 

But with businesses still shuttered amid the coronavirus resurgence and the unemployment rate at 11.1 percent – a high not seen in modern history before the pandemic – employers are hardly scrambling for workers at the moment. Posts for open positions on the jobs site Glassdoor, for example, are down 22 percent from pre-crisis levels, Glassdoor senior economist Daniel Zhao tells me. 

“Encouraging Americans to look for work might increase job search activity, but the economic benefit of that will be limited if there are no jobs to be found,” Zhao said. “In addition to being in a particularly deep economic crisis, the expiration of these benefits come at the absolutely worst time because [coronavirus] cases are rising, and we’ve seen some evidence that recovery is stalling.”  

Former top Obama economic adviser Jason Furman has estimated ending the payments would shrink economic activity by 2.5 percent in the second half of the year and cost 2 million jobs over the next year. Though Doug Holtz-Eakin, an adviser to President George W. Bush, told the Wall Street Journal's Eric Morath and Te-Ping Chen extending it will keep the jobless rate high. He favors phasing it out and replacing it with an incentive to return to work, an idea gaining currency among conservatives. 

The benefits aren’t just supporting the unemployed. They are propping up spending overall.

All households on average slowed down their spending at the start of the pandemic, according to a study by economists at the JPMorgan Chase Institute and the University of Chicago. But they found “unemployed households actually increased their spending beyond pre-unemployment levels once they began receiving benefits.” That unexpected outcome “has helped households to smooth consumption and stabilized aggregate demand,” the economists wrote.

Here’s how spending by households receiving the benefit has compared to those with employees who kept their jobs:

Indeed, low-income consumers have diminished their spending less than middle or high-income consumers:

And jobless people who experienced delays in receiving their benefits slowed their spending by 20 percent, a data point that drives home the JPMorgan study’s key finding. “This suggests that delays have imposed substantial hardship on benefit recipients,” the economists wrote.

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