After approving the most generous unemployment benefits in U.S. history to help counter the coronavirus, Congress is in a bind over what to do when they expire at the end of next month.

With America gradually heading back to work, there’s no majority among lawmakers to extend the $600-a-week extra payments in their current form. But with the economy more fragile than it’s been in generations, they don’t dare to just pull the plug. And that means weeks of wrangling lie ahead over the next phase of a rescue effort already costing almost $3 trillion.

Almost 2 million more Americans filed for unemployment last week, according to data published Thursday. While that’s slightly below the figures in the previous couple of weeks, it’s further evidence that U.S. labor markets remain mired in the deepest slump since the Great Depression.

The Senate announced late Wednesday that it will hold a hearing next week on unemployment benefits. Any plan that emerges will have to meet the concern, mostly voiced by Republicans, that too-high payments have become a disincentive to work. And it will have to win votes from Democrats who control the House and are pushing to keep safety nets in place for the tens of millions of Americans who’ve lost their jobs during the pandemic.

There are some indications of what a compromise could look like. One plan winning support from the Trump administration would redirect stimulus into topping up wages for the re-employed -- a so-called “back-to-work bonus.” A separate Democratic proposal would gradually whittle the jobless benefits back to pre-crisis levels as unemployment rates fall.

‘Off a Cliff’
Both ideas have at least the potential to win across-the-aisle support. They could even be combined with each other.

Doing nothing, and simply allowing the additional unemployment payments to expire without a substitute, is an option that has little support -- and would risk torpedoing the economy, after a crisis that’s left households relying on government benefits for a record chunk of their income.

“At the end of July, in that stage of the economic recovery, we really don’t want to see consumer spending go off of a cliff,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities who worked with Democatic presidential candidate Joe Biden when he was vice president. “Any kind of snapback to basic unemployment benefits would be a disaster.”

The federal top-up of $600 a week was approved with bipartisan support in late March as part of the first big package of pandemic measures, though many Republicans at the time thought the figure was too high and the duration too long. Delivery has been hobbled by overloaded local systems and unexplained shortfalls.

Even so, the Treasury has coughed up about $150 billion of unemployment payments under the plan -- equal to about 4% of GDP in the period, and more than it spent in the whole of 2009, when jobless rates peaked after the financial crisis.

White House Warm
Senate Majority Leader Mitch McConnell insists the $600 federal contribution, which is paid on top of each state’s normal jobless benefit, won’t be renewed after next month.

White House officials are showing interest instead in the so-called “back-to-work bonus” proposed by Ohio Senator Rob Portman.

The plan would offer a $450 weekly benefit to each returning worker in addition to their salary -– mirroring the top-up for jobless benefits. Kevin Hassett and Larry Kudlow, two of President Donald Trump’s top economic aides, have both signaled support for the idea in recent days.

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