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Analyst predictions for unemployment benefits in stimulus package

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  • Millions of people are getting paid an extra $600 a week on top of their unemployment benefits, thanks to a coronavirus bailout from March. 
  • That measure is set to expire at the end of July, and Democrats are pushing to extend it.
  • Republicans and the White House want to rein it in.  
  • Business Insider asked three analysts what they expect to unfold. They said the next coronavirus stimulus will have a boost in unemployment payments, though at a lower amount. They also predict people would get a bonus for going back to work.
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Congressional Democrats and Republicans are butting heads over whether to extend a coronavirus bailout that helps laid-off workers make an extra $600 every week on top of their state unemployment benefits.

The provision was part of the $2 trillion CARES Act and is set to expire in July, pushing talks about what to do next. Republicans worry that the payments are encouraging people not to work, while Democrats insist they won’t get behind another stimulus unless the payments are included. There are 33 million Americans on unemployment as the US struggles to get the virus under control.

Three analysts interviewed by Business Insider predicted lawmakers and the White House would reach a compromise. Under the deal, which they think will pass in early August, the payments won’t be as generous as they are now, they projected. Still, they think that unemployment benefits will see a slight boost from pre-pandemic levels — and that people will get a bonus if they go back to work. 

“I could see some conjunction of reduction in unemployment with a combination of back-to-work assistance,” said Ben Koltun, senior research analyst at Beacon Policy Advisors. 

Read more: Trump insiders say an investigation into pandemic failures is unlikely because he thinks ‘everything is cool’

Republicans don’t want people choosing unemployment just because it pays more

Under the current unemployment payment structure, about two-thirds of people who were laid off are making more than what they were making when they were working, shows a recent paper from the National Bureau of Economic Research. 

Republicans worry that the arrangement gives workers a reason to stay unemployed. There’s also grumbling about the fact that grocery store and healthcare workers, who’ve stayed in their jobs and put themselves at risk of infection, aren’t making more during the pandemic unless their employers authorized hazard pay

Treasury Secretary Steve Mnuchin said on CNBC Thursday that the White House didn’t want people to get much more in unemployment than they used to get at their jobs. 

“We want to incent people to go back to work,” he said. 

But to pass a bill, they’ll need Democrats to get onboard, and Koltun called unemployment extensions a “red line” for the party. 

Analysts expect a boost to unemployment benefits will remain

Goldman Sachs Economic Research predicted in a June 14 analysis that “it will be politically challenging to let the payment expire completely,” saying that instead payments likely would be lowered to around $300 a week. The NBER paper said that level of payments would mean that 42% of workers would still be making more money than they were at their jobs. 

“There’s more room for cooperation there than people might have expected early on,” Clayton Allen, senior vice president for trade, policy, and geopolitical risk at Height Capital Market, said of negotiations on unemployment benefits. 

Henrietta Treyz, director of economic policy at Veda Partners, said that there’s a recognition that federal lawmakers still need to help the unemployed, and predicted $400 billion would be set aside for unemployment payments.

Part of the calculus is the recognition that even businesses that are reopening aren’t doing so at full capacity, she said, leaving millions of people still out of work. She predicted the stimulus talks would go into August, but that Congress would make unemployment payments retroactive. 

The analysts also anticipate payments for those going back to work 

Treyz predicted there will be a “combination of back to work booster payments and unemployment booster payments.”

Under a coronavirus bailout the Democrat-controlled House passed in May, the $600 boost in unemployment benefits would extend through December. The bill also would create hazard pay of as much as $25,000 for front-line workers. 

The deal in the works now isn’t going to look like that, but the White House has acknowledged that it’s considering back-to-work bonuses. 

It’s not yet clear what exactly that would look like, but analysts predicted the bonuses would make it into the next stimulus. 

One bill from GOP Sen. Rob Portman of Ohio would give workers a $450 bonus for going back to their jobs. Another bill, from Rep. Kevin Brady, the top Republican on the Ways and Means Committee, would let workers keep up to two weeks of unemployment benefits if they accept a job offer. 

Kolton predicted Democrats would be receptive to the idea of a bonus because of their past support for hazard pay. 

Allen said the unemployment payment boost helped keep the economy humming along to make sure people are still spending money during the pandemic. At the same time, he said, it will be difficult to get people to go back to work when they know they’d otherwise be making more money and when they’re not feeling safe from the virus. 

Allen said he could see bonuses of around $250 to $300 a week to encourage people to return to work. 

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