Republicans are proposing scaling back the $600 weekly federal boost to state unemployment benefits that Congress approved in March to an estimated $200 a week. But the move could shed 3.4 million jobs from the American economy, according to an estimate published Friday from the Economic Policy Institute, a left-leaning think-tank.
The analysis indicated that reducing the government supplement to state benefits would remove a pillar of support for 30 million Americans drawing unemployment checks, and likely compel cutbacks in spending propping up the economy.
It could also shave off 2.5% off GDP growth through next year.
"If we allow the $600 supplement to lapse, another huge constraint on growth will be imposed— collapsing incomes for the tens of millions of U.S. families that had to rely on these benefits in recent months," Josh Bivens, the organization's director of research, wrote in a blog post.
Combined with $1,200 stimulus checks sent in April and May, many economists credit the beefed-up unemployment payments with helping prompt quicker rebounds in consumer spending, particularly among low-income households that weathered a disproportionate share of job losses. They also say the benefits helped keep people afloat during a period of high unemployment and scarce job openings.
The GOP delayed unveiling their initial coronavirus relief bill until early next week. Lingering divides among lawmakers pushed back its introduction, particularly around the design of a newly enhanced unemployment aid system to replace the $600 weekly bonus, The Washington Post reported.
President Donald Trump and Treasury Secretary Steven Mnuchin say the GOP will pursue a plan for government payouts amounting to 70% of a jobless person's lost wages. That would mean reducing the federal supplement to $200 each week from $600.
Democrats are pushing to extend the $600 payouts through January 2021.
The Republican setback to rollout their proposal means that millions of people on enhanced unemployment insurance will see their benefits expire this weekend as state offices distribute their last payouts.
Jobless people relying on the beefed-up payments could experience sharp income drops ranging from 50% to 75% depending on their state payouts, according to Ernie Tedeschi, a policy economist at Evercore ISI.
"All of those tough choices that you didn't have to make before because you got unemployment insurance, now you have to make them," Tedeschi previously told Business Insider. "Like, 'Do I pay rent? Do I cut down on groceries? Do I skip a medical appointment?' That's going to cut really deep into family budgets."