Debate over extending coronavirus unemployment benefits continues

Unemployed workers have been able to collect an additional $600 per week under the March coronavirus relief bill. That benefit runs out at the end of July and now Congress is debating whether to extend it. CNBC's Steve Liesman reports.

Lawmakers should replace a $600 unemployment supplement for jobless workers with a maximum $400 a week, according to a new proposal issued by a group of powerhouse economists.

The proposal comes as Democrats and Republicans debate the merits of extending the $600 weekly enhancement to unemployment checks, which is scheduled to end after July 31.

Democrats want to extend the $600 checks past July to avoid a severe drop in household income at a time when unemployment is likely to remain elevated. Republicans want to end the payments outright or replace them with a back-to-work bonus that pays Americans to find new jobs.

The proposal, published Tuesday by the Aspen Institute, appears to assuage both parties.

The policy would continue weekly aid at a reduced amount. It would also offer a payroll subsidy, either via an extra tax credit or “hiring bonus,” to incentivize workers to rejoin the workforce.

The four authors are: Jason Furman, former chair of the Council of Economic Advisers under former President Barack Obama; Timothy Geithner, former Treasury secretary during the Obama administration; Glenn Hubbard, who chaired the Council of Economic Advisers under former President George W. Bush; and Melissa Kearney, director of the Aspen Institute’s Economic Strategy Group.

The current $600-a-week federal supplement, created by the CARES Act, replaces more than 100% of lost wages for about two-thirds of American workers, according to economists at the University of Chicago.

While the current supplement may encourage some workers to remain unemployed, ending federal aid after July would cause “hardship for tens of millions of households,” according to the new proposal.

It would also inflict greater damage to the economy due to a big drop in consumer spending, the authors said.

Jerome Powell, chairman of the Federal Reserve, supported the notion of extending the timeline for extra unemployment aid despite the likelihood of “strong job creation” between now and the end of July.

“It probably is going to be important that we continue it in some form,” Powell testified Wednesday in a House Financial Services Committee hearing. “I wouldn’t say what form, but you wouldn’t want to go all the way to zero on that.”

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