Are unemployment benefits the new welfare? Short-term assistance becoming long-term 'trap,' report warns

Expanded federal unemployment benefits, put in place as an emergency measure during the COVID-19 pandemic, are on course to become another long-term "welfare trap," a government fiscal watchdog group warns in a new report. 

Under emergency response legislation, the federal government expanded eligibility for unemployment benefits, extended the number of weeks, and gave bonuses to state unemployment benefits. The expansion will sunset in September, but congressional Democrats have pressed President Biden for an extension. The benefits have been extended before. 

"It has started to look more like welfare and more like another piece of the welfare package. It’s starting to look like a long-term benefits program rather than a short-term temporary supplement it was supposed to be," Alli Fick, a senior research fellow with the Foundation for Government Accountability, told Fox News. "Unemployment insurance program should promote work and reject government dependency."

Fick wrote the FGA study that dug into the legislative history of federal unemployment insurance when it began in 1935 as part of the New Deal, going through committee reports and hearing debates.

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"Unemployment insurance cannot give complete and unlimited compensation to all who are unemployed," the 1935 House Ways and Means Committee report on the legislation states. "Any attempt to make it do so confuses unemployment insurance with relief, which it is designed to replace in large part. It can give compensation only for a limited period and for a percentage of the wage loss."

But now, jobless benefits are available for more than a year, according to the FGA report titled, "How Unemployment Benefits Have Become the New Welfare and How to Fix It." 

"Instead, unemployment benefits were meant to temporarily tide over the average worker," the report states. "But unfortunately, due to the recent COVID-19-related changes, unemployment insurance has been morphed into more of a long-term benefits program. The Pandemic Emergency Unemployment Compensation program now extends unemployment insurance by an additional 53 weeks."

The changes also add an extra $300 per week on top of unemployment insurance. 

"For example, an individual can receive nearly $3,700 a month—or more than $44,000 a year— by staying at home," the FGA report continues. "On top of tax credits, food stamps, and state unemployment benefits, an individual can receive an additional $1,300 per month with the $300 weekly unemployment bonus."

However, Democrats in Congress believe the benefits are not strong enough and should be extended permanently. 

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In an April letter to Biden, 11 Democratic senators and 27 House Democrats called for the president to make "substantial and permanent" unemployment insurance available. The letter argued that "benefit levels and duration must be increased" and that unemployment insurance "must reach more workers."

"Finally, the permanent-law Extended Benefits (EB) program must be reformed to better respond to economic downturns," the letter concludes. "EB is designed to provide additional weeks of benefits as unemployment rises, but the triggers are not as responsive to economic changes as they should be, nor do they provide sufficient weeks of benefits during recessions. As a result, Congress has had to pass legislation providing additional weeks of benefits during the last two recessions, leaving workers’ financial security contingent on arbitrary deadlines and Congressional action. A stronger EB program with more effective triggers would provide future unemployed workers with more certainty and better support."

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A majority of states, 26, have opted out of the extra $300-per-week payments and reimposed a requirement that individuals search for a job to continue receiving the benefits. However, the FGA also said Congress must allow the benefits to expire. 

Otherwise, there is the risk that like other government programs that grew beyond the intended scope, the unemployment benefits could be politically more difficult to control.

"The longer someone is on something and the longer a program keeps going, the harder it is to roll it back," Fick said.