How will the presidential election affect unemployment benefits in the US?
Additional funding for weekly unemployment benefits depends on a new covid-19 stimulus bill. What can Trump and Biden offer to out-of-work Americans?
In late March President Donald Trump passed the CARES Act which provided federal funding for weekly payments of unemployment benefits worth $600. It gave Americans affected by the coronavirus pandemic some much-needed support during a tough time but since then little else has been done to offer financial help.
The upcoming election and recent confirmation of Supreme Court justice Amy Coney Barrett has made a pre-election stimulus bill impossible. Whoever is victorious on 3 November, the President will need to act quickly to prevent the unemployment crisis spiralling out of control.
Whether it's Trump or Joe Biden, here's how the election outcome will affect unemployment benefits...
What has happened to the second covid-19 economic relief bill?
Unemployment benefits have proved to be a major sticking point during negotiations over a new stimulus package in recent months. Trump and the Republicans have accused the Democrats of demanding too much federal funding for their plans. In response, Leader of the House Nancy Pelosi has accused the GOP of scrimping on welfare and has refused to offer any significant concessions on the HEROES Act, which passed the House months ago.
Trump signed an emergency executive order in August to provide short-term funds to be used for unemployment benefits but those $300 payments have now run out. Negotiations between Trump, Pelosi and Senate Majority Leader Mitch McConnell have seen little movement in recent weeks and the matter will now have to be left until after the election to be resolved.
Deutsche Bank: ‘Blue Sweep’ would provide the most generous unemployment benefits
Business Insider have published a study carried out by Deutsche Bank which looked at likely scenarios to emerge from Election Day. They have speculated as to how the various outcomes could affect covid-19 financial support, and therefore unemployment payments, going forward. They suggest that a ‘Blue Sweep’ is the most likely result, meaning a Joe Biden presidency and a Democrat-held Senate, with a 60-70% probability.
Over a million Kentuckians applied for unemployment benefits. 40% of renters at risk of eviction. Nearly 1,500 Kentuckians have lost their lives.— Amy McGrath (@AmyMcGrathKY) October 30, 2020
We can't wait until 2021 for relief. Our lives are at stake. Vote.https://t.co/jcL7FNItMT
This would be good news for those waiting to receive their unemployment payments because Deutsche Bank also rank it as the outcome that would lead to the most generous stimulus package. They predict that a clean sweep for the Democrats would see an additional $2 trillion stimulus package passed which could boost the economy and lower the unemployment rate by almost two percentage points.
At the other end of the scale, a Biden presidency with a Republican-held Senate is ranked as the worst possible outcome for the those waiting for financial support. Deutsche give this eventuality a 20-25% probability and it could make negotiations between the White House and the Upper House even more difficult than we have seen recently. As a result, they would expect the financial support package to be much slimmer and the unemployment benefits more limited.
Their report says this scenario could leave Americans waiting even longer for economic relief:
"With control of the Senate possibly not determined until January, there could be a prolonged period of uncertainty about fiscal policy prospects following the election," Deutsche Bank said.
Rising unemployment could cause further issues
Aside from the amount of federal resources being spent, the post-Election Day prospects for the unemployed will also be very dependent on the number of people who need the support. Put simply, if unemployment is particularly high then the amount of money that the government commits will be spread more thinly.
For that reason economic prosperity is a key factor when understanding how the election will impact on unemployment benefits. A report from the Department of Labor on Thursday showed that around 22 million jobs were lost to the pandemic, with only about half of them so far recovered.
If you wanna focus on the latest numbers, the Labor Department just released initial unemployment claims data for *last week*.— Justin Wolfers (@JustinWolfers) October 29, 2020
More Americans applied for unemployment benefits last week than in any week in the Great Recession (or any prior recession).https://t.co/fx7tr4o7TF
Ryan Sweet, senior director of economic research at Moody’s, told NBC News: “The hard part is associated with the improvement in the economy, and now that we have no fiscal stimulus coming until after inauguration, you could start to see [jobless] claims creep back up, especially if we see layoffs in leisure and hospitality and airlines.”
In recent days Boeing have announced that they will have to cut 11,000 additional jobs over the next year, while other airlines and businesses in the hospitality sector have also warned of the dangers of receiving no financial aid.
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