Key Democratic leaders have proposed future unemployment benefit expansions that significantly exceed even recent pandemic policies, which resulted in a record $900 billion in state and federal unemployment benefits paid in 2020 and 2021. For example, instead of enacting more temporary federal benefit expansions like those in the pandemic, in April 2021 Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Michael Bennet (D-CO) proposed permanent expansions in state and federal benefits. A Biden administration official, Michele Evermore of the US Department of Labor, testified in July that such changes were needed before the next recession, so that the system would “respond automatically” and “Congress would not be required to enact discretionary UI legislation in downturns.” But history suggests caution for anyone who believes such permanent expansions would mark the end of future temporary benefit increases.

Wyden and Bennet’s April 2021 proposal includes permanent policies that would automatically extend and expand federal benefits whenever unemployment rates are elevated. If that sounds familiar, it’s because the US has a permanent program called Extended Benefits (EB) that already does that, in concert with eligible states. Under EB, the federal government provides states with sufficiently high unemployment rates half of the funds needed to pay up to 20 weeks of extended benefits to individuals who have exhausted up to 26 weeks of state unemployment checks.

When EB was created in 1970, lawmakers hailed it as the dawn of a new era. House Ways and Means Chairman Wilbur Mills (D-AR) extolled the “permanent program of extended benefits,” saying “now is the time we can do the best job of modernizing the system so that it will withstand future emergencies and crises.” Committee Ranking Member John Byrnes (R-WI) said he had been “advocating a permanent program of extended benefits for the last 8 to 10 years,” adding the new program meant “we are now funding extended benefits during a time when funding is most appropriate, rather than waiting to face the problem when we are confronted with a recession.”

Those statements suggest EB’s authors expected the new permanent program would keep Congress from creating further temporary federal benefits, as it had in the 1950s and 1960s. But they were quickly proven wrong. In December 1971, Congress enacted a new temporary program offering federal extended benefits in 1972–73, which was followed by similar programs in 1975–78, 1982–85, 1991–94, 2002–04, and 2008–13. A federal “pandemic” extended benefits program was created in March 2020 and operated until September 2021.

The chart below reviews how much has been spent on extended benefits under those programs since 1970. It shows that $854 billion has been spent on the series of temporary federal programs, dwarfing the $59 billion spent on the permanent EB program since 1970 by a factor of 14 to one. So much for Wilbur Mills’ claim of “modernizing the system so that it will withstand future emergencies and crises.”

State and Federal Spending on Extended Benefits under the Permanent EB Program and Temporary Federal Programs since 1970 (in Billions of 2021 Dollars)

The chart actually understates the real gap, since EB was temporarily converted into a federal program from February 2009 through December 2013, and again from March 2020 through September 2021. During those times, EB was 100 percent federally funded, which significantly expanded state take up and thus federal EB spending. Of the $59 billion in state and federal EB spending displayed above since 1970, $41.1 billion was during the two periods since 2009 when EB was fully federally funded. If those temporarily 100 percent federal EB funds are added to the $854 billion in other temporary federal benefits paid since 1970, the split between all temporary federal benefits (a revised $895 billion) and EB spending while it was partially state funded as lawmakers originally intended ($17.6 billion) skyrockets to over 50 to one.

One key lesson from this experience is that lawmakers have an insatiable appetite to provide expanded federal unemployment benefits around recessions—especially when the costs are declared an emergency and simply added to the deficit. That suggests that, if enacted, proposed new permanent benefit expansions will not be the end, but instead will only create a new and forever higher baseline for temporary federal benefit expansions to come. As we have repeatedly seen since it legislated permanent reforms in 1970, Congress always wants to “do something” to take credit for helping the unemployed during recessions. For some, that political itch is unlikely to ever be fully scratched, no matter how big permanent benefits may become.

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