Congress Returns to Face Exaggerated "Fiscal Cliff" - But the Unemployed Face a Real Cliff in December
After an extended recess, Congress officially heads back to work this week — with a lengthy to-do list. Since the election, the attention of both Congress and the media turned to the so-called "fiscal cliff," which refers to the combination of tax cuts and numerous other provisions set to expire at the end of December and a series of automatic spending cuts scheduled to begin in January. You can read all about the decisions ahead in NWLC's latest roadmap to the federal budget debates, but in short: if Congress does not act to prevent the loss of jobs and services that deep spending cuts would produce and ensure that low- and moderate-income families do not face substantially higher taxes next year, the fragile economic recovery will suffer a significant setback.
Contrary to what some commentators might suggest, however, the economy will not immediately fall into a recession if Congress does not reach agreement on all of these issues by the end of 2012. Indeed, the "fiscal cliff" is better described as a "fiscal slope," as the economic impact of the changes is likely to be gradual. The hit to families' budgets from tax changes, and to federal program budgets from spending cuts, will be modest as long as Congress acts relatively early in 2013 to renew tax cuts for low- and moderate-income families and cancel automatic cuts.
But there is one program set to expire in December that will create a real financial cliff for millions of Americans: federal emergency unemployment insurance (UI) benefits for jobless workers who have exhausted their state benefits (typically after six months). After December 29, 2012, 2.1 million unemployed workers will see their benefits immediately cut off if Congress does not renew the federal UI program. (You can see how many would lose benefits in your state here.) Federal UI benefits provide a lifeline for jobless workers, helping families avoid falling into poverty and promoting job growth by keeping dollars flowing into the economy. Allowing these benefits to expire while unemployment remains very high would pull vital support from families struggling to make ends meet and create a serious drag on the recovery. Congress has never before terminated federal UI benefits when the unemployment rate was above 7.2 percent — and the current rate is 7.9 percent.
Real and lasting damage will be done if Members of Congress allow misguided fears to pressure them into a bad deal that piles more program cuts on top of the $1.5 trillion enacted in recent years, without doing a thing to boost the recovery or make the wealthiest among us pay their fair share of taxes. I'm counting on progressive Members to hold out — until 2013 if necessary — for a budget plan that protects vulnerable women and families, promotes job growth and economic recovery, and requires the richest Americans and corporations to pay their fair share. But I'm also counting on Congress to recognize that 2.1 million jobless workers can't wait until January to know that federal UI benefits will still be there for them.
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