Taxpayer's Guide to the Stimulus: 8. Labor and Unemployment Assistance

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Summary: This section gives over $75 billion to the Department of Labor and Health and Human Services for general operations, grants, and programs related to job training, helping the unemployed, and promoting health.

>> Spending

Increased Unemployment Insurance (estimated cost $27 billion). The second section of the stimulus bill, Division B, has a provision that keeps a certain type of unemployment insurance available until the end of 2009. Under current law it would have ended in March 2009. The total cost of this extension is unknown, but the estimated additional cost is $27 billion.

Louisiana Governor Bobby Jindal rejected the money his state was offered for increased unemployment benefits because he viewed it as fiscally irresponsible. Louisana is eligible for over $98 million to increase unemployment insurance checks for its residents, but adding that money to the budget for the next two years would mean a permanent increase in spending or would result in benefits being cut in the future. States went through a period of grossly excessive spending the past five to seven years when tax receipts were high. Gov. Jindal has said he doesn’t want to continue this trend and believes it would be very hard to cut spending by $98 million in two years when the federal money runs out.

Economic Recovery Payment (estimated cost $14 billion). A one-time $250 check in 2009 to Social Security recipients, retired government workers, and disabled veterans. However, if someone is receiving the Making Work Pay tax credit of $400 (see “Tax Cuts & Tax Credits”), then they won’t receive this payment.

Increased Unemployment Checks (estimated cost $8.8 billion). The stimulus will compensate states for the cost of increasing their unemployment checks by an average of $25 per week, from $300 to $325.

State Unemployment System Modernization (estimated cost $7 billion). The stimulus bill will give an estimated $7 billion to the states in one-time grants to modernize their unemployment compensation systems.

$5.1 billion for Department of Labor Job Training Programs. This money will go towards job training related programs, including $4.4 billion for grants to the states for their programs helping unemployed workers gain new skills and find jobs, and $750 million for competitive job training grants in areas of the country that are experiencing strong economic growth and are promoting energy efficiency.

$5 billion for the Temporary Assistance for Needy Families Program (TANF). This money will give $5 billion to the emergency contingency fund of TANF for the Treasury to distribute to families in economic hardship.

$2.5 billion for HHS Health Center Grants. This money goes to hospitals, medical schools, and other health centers to build new buildings, improve existing ones, develop and install new technology systems for tracking health records, to hire new doctors, nurses, and other staff where needed, and to train medical service staff to serve in the National Health Service Corps.

$2 billion for the Neighborhood Stabilization Program. This money in Title XII is dedicated to turning vacant homes into affordable housing, eliminating blight, and helping people in the process of becoming homeowners.

$1.09 billion for the SSA National Computer Center. This money will mostly be used to replace the Social Security system’s National Computer Center for processing disability and retirement checks, while $90 million will be used for general operating costs in handling the new stimulus money.

$1 billion for a HHS Prevention and Wellness Fund. This new program will invest in immunizations, healthy living promotion, AIDS prevention, and other programs with the goal of preventing sickness.

This program was originally funded by the House with $5.8 billion, but was cut out of the Senate version of the stimulus because of fears that the cost would balloon. When negotiators from both sides worked out a compromise version, the program wound up with $1 billion. It is likely that Prevention and Wellness will be given a significant increase in funding in a future budget or have it’s budget grow as a part of universal healthcare reform.

$930 million for the Department of Labor Budget. This money will go into the Labor Department operations budget to enforce worker protection laws, for the Jobs Corps which helps people get job training and GEDs, for state unemployment insurance programs, and to help the elderly find appropriate jobs if they need one to pay the bills.

$650 million for HHS Programs. Health and Human Services will get $500 million from Title VII to spend on hospitals and doctor’s offices on Indian reservations, $100 million for the Administration on Aging to give meals to senior citizens, and $50 million to improve HHS technology security systems.

$160 million for the Corporation for National and Community Service. This money is for the operating budget of CNCS, with $89 million earmarked for AmeriCorps grants, $65 million for general programs, and $6 million for salaries and expenses to upgrade IT systems.

$131 million for Economic Recovery Payment Processing. The Treasury Department will get this money to process the one-time, $250 Economic Recovery Payment checks.

Section 2004, of Division B, Title II. This section makes all outstanding federal loans to the states interest free until 2011, and doesn’t require the states to repay any of those loans until the same time.

This has significant revenue implications for the Federal government, adding to the national deficit and national debt. The reduced revenue will have to be made up in the future with program cuts or tax increases.

Section 2005. This section removes any requirement for states to match the Federal funds for extended unemployment benefits until the end of 2009. While this is good for the states, it increases the federal financial burden. This has the effect of charging Florida residents more federal tax money to offer Michigan residents unemployment benefits.

(See here more detailed information on unemployment insurance provisions.)

>> Commentary

The increased unemployment assistance aid program has been one of the most scrutinized in the stimulus. Several states-including South Carolina, Texas, and Alaska-rejected money that would have allowed them to increase unemployment checks because the funding only lasts for two years. After the federal money for the increase ran out, the states would have to either reduce assistance, or increase their spending. At a time when state budgets are already bloated, governors are wise to reject these funds. This is an example of how certain money, intended to be helpful, is only going to hurt citizens (through increased taxes) and the economy in the long run.

Taxpayer’s Guide to the Stimulus: 8. Labor and Unemployment Assistance

Location in Stimulus Bill:
Division A, Titles VIII, VII, XII and Division B, Title II