Unemployment benefits drop below poverty line in 13 states

Unemployment insurance benefits for Americans in 13 states dipped below the poverty line after the extra $600-a-week in federal aid expired at the end of July, according to a new report from the Government Accountability Office.

The $2.2 trillion CARES Act that Congress passed in March boosted jobless aid by $600 a week for laid-off workers.

When the $600-a-week ended in July, the typical unemployment check returned to an average of $330 per week. But in 13 states, the average weekly unemployment check actually fell to less than $245 -- the minimum weekly income needed to live above the poverty threshold in the U.S, the congressional watchdog reported.

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For months, Congress has tried to pass another coronavirus relief deal, but lawmakers remain sharply divided over the size and scope of the legislation.

One of the key sticking points in negotiations has been the size of unemployment benefits: Democrats maintain that $600-a-week is needed to bridge the gulf between jobless aid and median income, while Republicans have insisted that it's a disincentive to work, noting that about two-thirds of workers on unemployment received more government aid than what they earned at their old job, according to a paper written by economists at the University of Chicago's Becker Friedman Institute. Most economists dispute that notion.

In September, President Trump signed a series of executive orders, including one that provided an additional $300 a week in benefits for up to six weeks. The GAO noted that money has since ended.

The lack of federal funding, and the persistently high unemployment number, has strained states financially, 20 of which reported holding federal loans worth about $40.2 billion -- equal to what a larger group of states owed following the 2008 financial crisis.

“This total loan balance is about equal to the approximately $40.2 billion held by 30 states and territories at the end of 2010, the height of borrowing after the 18-month long 2007-2009 recession and early recovery,” the report said.

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Meanwhile, a separate CARES Act program -- the Pandemic Unemployment Assistance (PUA) -- that was created for workers who are typically not eligible for benefits fared even worse: in 29 out of 41 states that reported data, the benefits fell below poverty levels.

When PUA and another federal jobless aid program expire at the end of December, some 12 million workers will be left with no income, according to a study published by the Century Foundation, a nonprofit think tank.

Job losses remain elevated, and as COVID-19 cases surge across the country, prompting state and local governments to implement new lockdown measures, economists are increasingly warning of a bleak winter.

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“There hasn’t been a bigger need for [stimulus] in a long, long time here,” Federal Reserve Chairman Jerome Powell said last week, his latest appeal to Congress and the White House regarding another stimulus package.