40 million unemployed

McConnell and Pelosi's next battle: How to help the 40 million unemployed

The divide over jobless benefits will dominate the fight over a new coronavirus aid package.

By MARIANNE LEVINE and SARAH FERRIS

The debate over whether Congress will approve a new round of pandemic aid is over. Now it’s just a question of what’s in the package.

After brushing off Democrats’ demands for more relief, Senate Republicans now say the next major coronavirus package is likely to move in the coming weeks. And a key conflict ahead will be over how to help the 40 million Americans out of work.

The shift comes as the state of the economy grows worse and more GOP senators call for action. But Senate Majority Leader Mitch McConnell (R-Ky.) is already making clear Republicans will not support an extension of the extra unemployment benefits Congress passed in March. GOP lawmakers say the additional aid — which expires at the end of July — provides a disincentive to return to work and some are now proposing alternatives they can rally behind.

Democrats counter that Congress must extend benefits for the millions struggling to pay bills as the U.S. faces its most uncertain economic climate in generations. Regular unemployment insurance, they note, covers just half of workers’ pay on average.

In fact, some top Democrats want to go further. Senate Minority Leader Chuck Schumer (D-N.Y.) is eyeing a push to automatically tie unemployment benefits to the condition of the economy, according to a Senate aide — a move that has not been previously reported. Supporters of the automatic stabilizer idea, which Speaker Nancy Pelosi has also publicly endorsed, say it would avoid the political wrangling that could otherwise threaten to hold up much-needed aid.

The divide over jobless benefits is likely to surface as one of the biggest flashpoints for McConnell and Pelosi as they lead their parties in talks on the next major aid bill. The outcome will determine not just how much help goes to the roughly 1-in-4 unemployed Americans but how the parties can position themselves in a fierce campaign in which Congress and the White House are up for grabs.

McConnell said in Louisville over the Senate's Memorial Day recess that he is “still in favor of unemployment insurance,” but he strongly criticized the additional $600 each week unemployed workers get under the CARES Act, which he said hampered certain industries’ abilities to bring back workers as the economy reopens.

“What I thought was a mistake was the bonus we added that small businesses all over the country are saying make it more lucrative to not work than to work. That’s exactly the opposite of what we want to do,” McConnell said. The GOP leader also vowed to end enhanced unemployment benefits on a recent call with House Republicans.

Democrats, however, have been adamant that Congress can’t cut off that economic lifeline.

“They’ve said that they don't want workers to get this money that they need to pay rent and groceries,” Sen. Ron Wyden (D-Ore.), who negotiated the unemployment provisions in the March package, argued in an interview. “It expires July 31. And we'll see if they want all those workers hurting all summer long.”

The debate over the government’s role in supporting unemployed workers comes amid the worst economy since the Great Depression and as each state has begun to gradually reopen its economy.

Some businesses — particularly in industries like food service — are struggling to bring back workers whose prepandemic salaries don’t match their current unemployment benefits. Other workers have complained that their previous pay isn’t enough to justify the risk of working as a virus that has killed more than 100,000 Americans continues to spread.

The enhanced unemployment benefits nearly tripped up the $2 trillion coronavirus relief package just hours before it was passed by the Senate in March. Several Republicans, led by Sen. Ben Sasse (R-Neb.), threatened to hold up the bill because of the provision, which Schumer called “unemployment insurance on steroids.”

Now, even Republicans who were initially open to the boost in benefits are showing little interest in extending them.

“Future coronavirus relief legislation must provide a better system to help make people whole, but not receive more through unemployment compensation than they were previously earning,” Sen. Susan Collins (R-Maine) said in a statement.

Collins was one of only two Senate Republicans alongside Cory Gardner of Colorado to oppose a Sasse amendment to cap benefits at workers’ previous salary. The Maine Republican, referring to her state’s Department of Labor, said that at the time she was “informed by both the Treasury Department and the Maine DOL that the only way to quickly begin administering expanded benefits was through a flat rate increase.“ But now, she said, “states have had sufficient time to adjust“ their unemployment insurance systems.

In a sign that lawmakers are now eager to spur an economic recovery rather than just extend a lifeline, members of both parties have introduced legislation recently to boost employment with “return to work” proposals.

Sen. Josh Hawley (R-Mo.) is pushing to have the federal government subsidize business’ payrolls during the pandemic. Sen. Rob Portman (R-Ohio) has a proposal that would provide workers with an additional $450 a week bonus on top of their current wages as an incentive to go back to work — an idea that has caught the attention of the White House.

“We need policies that encourage those individuals that can to return to the workplace to help get our economy going again,” Portman said in a statement. Top White House economic advisor Larry Kudlow said recently on Fox News that Portman’s plan is “a good idea” and “something we're looking at very carefully.”

Even as Democrats back an extension of the benefits for those out of work, many also advocate for more aggressive plans to save jobs.

Sen. Mark Warner (D-Va.) has a proposal supported by moderates and liberals in the Democratic caucus — as well as Schumer — to dramatically expand the employee retention tax credit. A similar provision, from Rep. Stephanie Murphy (D-Fla.), was backed by the House.

Warner said in an interview there could be "some collaboration" between his proposal and Portman's, in a sign that some consensus could be found when bipartisan talks begin in earnest.

“A lot of what we’re focused on is those employees who at this point have been furloughed, how you reconnect them, but recognizing there may be some additional time before business generates enough to bring the employee back,” he said.

Meanwhile, the Labor Department is strongly encouraging state unemployment agencies to ask employers whether recipients of unemployment insurance benefits refuse to return to work. Under federal rules, once workers accept unemployment benefits, they must take any suitable job offer or will become ineligible, although states have some flexibility in implementing work search requirements.

Most Democrats in the House and Senate have argued that the additional jobless benefits should last beyond the summer. A bill approved by House Democrats earlier this month would extend the extra $600 in assistance through January of next year.

“We are just seeing record-breaking unemployment rates and so many people signing up for it, it breaks your heart. But we have the unemployment insurance that will be renewed in this legislation,” Pelosi said of the House’s recently passed Heroes Act.

Democrats have also argued that lower-income Americans are often hit harder by the economic fallout. Nearly 40 percent of people with a household income below $40,000 lost their job in March, according to a Federal Reserve survey last month.

That compares to just 13 percent of people who made over $100,000 who lost their job over the same period.

Still there are a small number of moderate Democrats — particularly from areas of the country that appear to be suffering more from the recession than from the virus itself — that have privately opposed calls to extend enhanced unemployment benefits. Those Democrats say they’ve heard from employers in their districts that are struggling to bring workers back who earn more on unemployment.

“This is an example of where there are two truths,” said Rep. Dean Phillips (D-Minn.), who supports renewing the aid and has closely studied the effects on small businesses.

“One truth is that yes, the $600 amplification is going to complicate things for many businesses to reattract their employees. That is a fair assessment,” he said. “But the other truth is that we have a problem in our country with people struggling to put food on their tables and a roof over their head.”