April 19, 2014

Congress Extends COBRA and Unemployment Benefits, Considers Additional Jobs-Related Legislation

Prior to the April recess, the Senate failed to approve a month-long extension of unemployment and COBRA health insurance benefits. Upon returning, however, the Senate reached agreement on a two-month extension of the benefits. The House then approved the measure, and it was quickly signed by President Obama.

Looking ahead, House and Senate leaders hope to reach agreement on a longer-term extension of unemployment benefits, which would avoid the need for more of the temporary measures that have been used. That legislation (H.R. 4213) would also include extensions of tax cuts that Congress routinely approves annually.

By classifying benefit extensions as emergency spending, Democratic leaders have avoided pay-as-you-go (PAYGO) constraints that would otherwise have prohibited deficit-financing for new spending. Some Republicans, particularly in the Senate, have argued that legislation to extend unemployment benefits should be offset with spending cuts in other programs.

Deficit spending can stimulate the economy during economic downturns, and the Congressional Budget Office has estimated that extending unemployment benefits is one of the most cost-effective methods of stimulus. As the economy continues to improve, however, Congress and the President should avoid classifying legislation as “emergency” spending simply to avoid making the hard trade-offs required by PAYGO rules.