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Friday, July 2, 2010

Will the United States economy suffer, if the unemployment extension is dropped?

There are differing views that the U.S. economy will suffer long-term financial harm, if The American Jobs and Closing Tax Loopholes Act-HR 4213, ultimately is not passed within the Senate.

On June 24, the effort to end debate on the bill was defeated by a 57 to 41 vote margin. With a Republican Senatorial firewall and Moderate Democratic Senator Ben Nelson (D-NE) voting against proceeding to an up or down vote, on the bill.

Michigan's Governor Jennifer Granholm believes Michigan difficult financial state will get worse. The Governor said that failure of the U.S. Senate on Thursday to approve an extension of unemployment insurance benefits and federal Medicaid money is “devastating” for Michigan, noted Crain's Detroit Business, and for other states across the country.

Dropping to a 13.6 percent unemployment rate in a June 18 Bureau of Labor Statistics report, Michigan finally released the hole of being the highest unemployment rate state in the nation. Nevada now holds the somber title, with a 14 percent unemployment rate.

Could Michigan’s slight drop be the result the unemployed running out of benefits prior to finding employment? The numbers of those exhausting their benefits are rapidly climbing. Michigan's Unemployment Insurance Agency (UIA) estimates that 87,000 people will exhaust their jobless benefits by July 3, and that number will double by the end of July, reports Crain's. Another 180,000 individuals would stand to lose all benefits by July if the H.R.-4213 is not passed.

Senator Debbie Stabenow (D-MI) believes Republican that aligned with defeating the bill, want the economy to fail. The Senator is quoted as stating:

It is very clear that the Republicans in the Senate want this economy to fail. They see that things are beginning to turn around. You know the numbers. When this president took office, we were losing 750,000 jobs a month. … Now we are gaining jobs. … Unfortunately, and cynically [on their part], in cynical political terms, it doesn’t serve them in terms of their elections if things are beginning to turn around.

Some economics believe that the extension of unemployment benefits, is what causing the U.S. economy to suffer. Starting with end of the Bush Administration to President Obama tenure, the unemployment benefits have been extended four times, creating up to 99 weeks of payments for workers who lost their employment by no fault of their own.

I don't think there's going to be a big disaster by letting the extended unemployment insurance expire," said Phillip Swagel, a former Bush Treasury official and a Georgetown University professor, told the Wall Street Journal. Still, he said, "it's going to be tough for some people."

Republican Minority Leader Mitch McConnell (R-KY), notes that the Democrats want to assist growing United State deficit by passing continuing unemployment benefits; without concerns on the balancing revenue increases with offsets of savings in other areas of the budget.
The principle Democrats are defending is that they will not pass a bill unless it adds to the deficit", reports the same Wall Street Journal article.

Other Senators of high unemployment states believe the deficit should come first. They argue that continuing harm is occurring to the long-term U.S. economy, by allowing precipitants to extend to the next tier of benefits.

Ohio's unemployment rate is also in the double digits at 10.7 percent. Yet, moderate Senator George Voinovich, (R-OH) told the Associated Press,

We're talking $50 billion in new taxes, $80 billion in new borrowing. ... I've gotten to the point where I've had it.

A report on Lansing Michigan based station WITX, states the Department of Human Services (DHS), is bracing for the tidal wave effect of the ending of unemployment benefits will have on its' food, medical and cash assistance programs.

Right now we have 1.8 million people receiving food assistance....that is a record high for Michigan. We have been slagging records over the last year. Every month, there has been an increase, Edward Woods III, spokesperson for the DHS stated.

The DHS is known by many Michiganders as the last resource for assistance, when all other avenues of benefits have concluded. The agency has vowed to assist residents, facing deep economic crisis, with the loss of unemployment benefits.

We have a responsibility. We are the safety net. We need to ensure the safety net because this is a temporary transition," WITX reported.

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