Former Federal Reserve chairs Janet Yellen and Ben Bernanke on Friday warned against ending the enhanced pandemic unemployment benefit that expires at the end of the month.
“I think, frankly, it would be a catastrophe not to extend unemployment insurance,” Yellen said.
Bernanke deemed the payment “very important on a humanitarian and also an economic basis.”
The chairs made their comments while testifying before the House Coronavirus Crisis Subcommittee on the federal response to the pandemic. They were referring to the $600 enhanced unemployment payment that was enacted in March as part of the CARES Act, and it is currently scheduled to expire on July 31.
Unemployed workers currently receive a $600 payment each week, regardless of what they earned at their former job. Republicans have charged that the sum is so lucrative that it is a disincentive to find new employment. Yellen disagreed with that argument, saying the shortage of available jobs is the reason why people aren’t returning to the workforce.
“At this point, I really think that there is such a shortage of jobs that I really don’t think … there is evidence to suggest that this is going to stop … putting people back to work,” she said.
Yellen also cautioned that ending the payment would negatively affect the economy since most people who receive the money tend to spend it.
“Without it, we would simply see more weakness and spending contracts more throughout the entire economy,” she said, adding that “we need the spenders.”
The $600 enhanced unemployment payment has become a political issue as Democrats would like to extend it, while Republicans oppose the idea since they believe it creates a disincentive to find work.
The Democratic-controlled House already voted to extend the payment into January 2021, when it approved the HEROES Act in May. The Republican-led Senate is not expected to take up the measure.
Senate Majority Leader Mitch McConnell, a Republican from Kentucky, and several other Senate Republicans strongly oppose extending the $600 payment specifically. Meanwhile, Treasury Secretary Steven Mnuchin, on July 9, offered support for extending it but at a lower dollar amount.
Mnuchin described the payment amount as needing a “technical fix.”
“We’re going to fix that technical fix,” he told CNBC, adding that the White House and Congress will “figure out an extension to it that works for companies and works for those people who are still unemployed.”
Mnuchin said the payment should not be above a person’s former salary when they were employed.
“You can assume that it will be no more than 100% [of the former salary],” he said. “So, yes, we want to incentivize people to go back to work. … Enhanced unemployment is intended for people who don’t have jobs. … We will not be doing it in the same way.”
Bernanke said that lowering the payment amount might entice Republicans into supporting an extension.
“I think you can modify the structure to satisfy some of your Republican colleagues,” he said.
It is unclear if lowering the payment amount would prompt support from Senate Republicans.
