A Record Benefits Cliff is Coming Thanks To Democrats’ American Rescue Plan

In the face of growing labor shortages, 25 states are ending federal pandemic unemployment benefits in the coming weeks. Their Republican governors argue those benefits make unemployment pay better than working, keeping workers on the sidelines of the economy. But the staggered expiration of benefits in those states over the next four weeks is just a foreshadowing of the far larger benefits cliff ahead on Labor Day. That’s when federal benefits for as many as nine million recipients will abruptly end, marking the largest benefits cliff in American history. The cliff will result directly from Democrats’ March 2021 American Rescue Plan and will disproportionately affect recipients in blue states.

The federal response to the pandemic has included unprecedented extended and expanded unemployment benefits already scheduled to total over $700 billion. While current $300-per-week bonuses have gotten outsized attention because they pay some workers more to remain unemployed, most recipients collect benefits due to two other federal pandemic programs. One extends unemployment checks to over 18 months for those exhausting state benefits. The other offers federal checks to millions who never qualified for benefits before. That latter program has seen astonishing levels of fraud and now supports more people than any other unemployment program. Except where states end them sooner, these federal benefits are scheduled to end the weekend before Labor Day.

How many people will hit the Labor Day cliff and see their federal unemployment benefits, which currently average around $600 per week, come to an abrupt end? It’s hard to know for sure because some current recipients will return to work and give up those benefits before then. But as the chart below displays, there were recently 9.2 million recipients in states where federal pandemic benefits will end on September 4, including over 8 million in states led by Democratic governors:

Federal benefit recipients potentially affected by coming state shutoffs and the Labor Day cliff

Those 9.2 million potentially losing benefits on Labor Day are over four times the number who may lose benefits due to state shutoffs across the next four weeks. That potential Labor Day cliff is also six times bigger than the cliff when federal benefits paid after the Great Recession expired in December 2013 and 1.3 million recipients saw their benefits end. – READ MORE