Reagan budget aims to deflate unemployment cushion
Since New Deal days, the federal government has helped cushion the fall of Americans who lost their jobs. But the Reagan budget proposes to take away some of the padding.
The move would save about $2.4 billion by 1982, according to administration figures. Depending on your point of view, anywhere from 460,000 to millions of people with hit the ground a little harder.
Two major programs would be affected: unemployment insurance and trade adjustment assitance.
State programs provide basic unemployment insurance benefits -- up to 26 week's worth. When the jobless rate is high enough, the federal government springs for an additional 13 weeks of extended aid. Reagan's budget proposes to make these extended benefits harder to get, and would cut off payments to those who refuse the offer of even a low-paying job. Specifically, the unemployment insurance changes would:
* Eliminate one of the two "triggers" that turn on extended benefits.Currently, such payments start when the national insured unemployment rate tops 4.5 percent, or can be paid in any individual state whose IUR is 4 percent. The administration would permanently switch the national trigger to "off," thus targeting extended benefits to hard-hit states with high unemployment rates.
* Raise the state "trigger" from 4 percent to 5 percent, and tighten the method used to calculate the figure.
* Require extended-benefit recipients to have worked at least 20 weeks before losing their jobs.
* Require recipients to accept any written offer of a minimum-wage job after 13 weeks of benefits -- even though state programs provide 26 weeks of payments.
These changes would save $0.5 billion in 1981 to $1.2 billion in 1982, according to the Reagan budget.
Trade adjustment assistance was created in 1974 to supplement the unemployment insurance of workers thrown from their jobs by competition from imports. TAA lasts 53 weeks, and pays up to 70 percent of the average weekly manufacturing wage, now $269. Waves of invading imports have pushed the cost of this program up to $2.7 billion for this fiscal year. Reagan would:
* Limit payments to the size of a worker's unemployment insurance benefits. And TAA would not start until unemployment insurance ran out.
* Tighten the standards for determining who has been thrown out of work by imports.
Administration figures claim the changes in trade adjustment assitance will save taxpayers $1.2 billion in 1982.
Estimates of how many people these jobless-pay moves will affect vary widely.
Administration figures say 460,000 will be affected this year by the changes in unemployment insurance. The Congressional Black Caucus says it will be closer to 1 million. And Americans for Democratic Action estimates the proposals would "impact" on 3.5 million workers.
The Congressional Budget Office estimates 87 percent of the workers who would otherwise have received TAA in 1982 will lose it under the Reagan program.
Critics of the proposed change claim it is false economy. As a result, they say, other government programs will have to shell out more in the long run. If the proposals pass, "folks will be forced to go on public assistances" says Maudine Cooper, a vice-president of the National Urban League. "The states won't be able to handle it."
She says further that the cuts would hurt blacks disproportionately, since they account for one-third of those out of work over 26 weeks. Overall, she claims 162,000 blacks would lose their benefits.
The benefits are not a welfare plan, other observers say, but are designed to tide workers over and keep an "economic floor" in communities.
"It keeps the mortgage and auto payments up," says Geri Palast, assitant director at the National Employment Law Project.
Mr. Palast says the economic cost to communities may override the budgetary savings of cutting the programs.
Proponents say the cuts are just part of a plan that needs to be passed in its entirety for the US economy to recover.
Business leaders, testifying before a House Ways and Means subcommittee, endorsed the cuts.
"A dynamic economy, with increased job opportunities, would obviate the need for a large portion of unemployment-compensation payments now required," says Sam Dyer, a vice-president of Federated Department Stores, speaking on behalf of the US Chamber of Commerce.
The effect of hardening the federal cushion for the unemployed depends on two notoriously unpredictable factors: the number of people who lose their jobs, and the length of time it takes them to find new work.
"If you look at this from an individual's point of view, what's the price?" says Dr. Paul Gerhart, an associate professor of industrial relations at Case Western Reserve. "It's really hard to measure the soci al cost of being unemployed and running out of money."