Democrats and Republicans agree to cut long-term unemployment benefits 32,000 Americans

Even if Congress manages to pass a payroll tax deal, the long-term unemployed in some of the states hardest hit by the recession will see their federal benefits cut back in the first two months of 2012. Thirty-five states with high unemployment qualify for the federal Extended Benefits program, which lifts the maximum length of unemployment insurance from 79 to to 99 weeks. Under the Senate bill, two states will fall out of the program by the end of February, cutting off benefits for about 32,000 Americans who are the longest of the long-term unemployed.

( BLOOMBERG) The Senate bill technically maintains the status quo for unemployment insurance. But because of the way that states qualify for Extended Benefits, states will start being pushed out of the program in January, as Arthur Delaney first reported.

As it stands, states can receive these extra federal funds according to a complex formula that examines how quickly unemployment has risen over the past three years. While the unemployment rate has remained high, it hasn’t risen sharply in recent months as it had earlier in the recession. As a result, by simply continuing the three-year “lookback” for Extended Benefits into 2012, the Senate bill will begin dropping states from the program. So states that had a sharp rise in unemployment in, say, 2007, but have been stagnant since, could see their benefits cut.

The first two states to be cut off are Michigan and Minnesota. About 5,600 unemployed workers in Minnesota and 26,300 unemployed workers in Michigan will lose up to 20 weeks of additional benefits by mid-February under the Senate bill, the Democratic staff of the House Ways and Means Committee tells me. “They’re the longest of the long-term unemployed in some of the hardest-hit states,” says Judy Conti, federal advocacy coordinator for the National Employment Law Project. As such, Democrats had originally wanted a longer, four-year “lookback” for Extended Benefits that would let more states stay in the program in 2012, but they ultimately dropped the demand during the negotiations with Senate Republicans, Delaney explains.

Keeping more states in the program wouldn’t cost that much more money, relatively speaking. More than 500,000 unemployed Americans currently receive Extended Benefits nationwide, but changing the “lookback” from three to four years in 2012 would add about $1 billion to the $44 billion unemployment insurance program overall. (Keeping Michigan and Minnesota in the program would be a fraction of that cost.) That proposal, however, was rejected by Republicans, who are concerned that the long-term unemployed were relying on the government for too long. And Democrats say they gave up the demand to let more states keep 99 weeks of benefits to strike a deal with the Senate GOP.