Cutoff in federal jobless aid looms Saturday

Paul Davidson | USA TODAY

Some 1.3 million Americans are set to lose their unemployment benefits Saturday, escalating a battle between proponents of smaller government and advocates for the jobless who say the move will hurt the overall economy.

Federal emergency benefits will end when funds run out for a program created during the recession to supplement the benefits that states provide. The cutoff will initially affect 1.3 million people, but 1.9 million more will lose benefits by mid-2014 when their 26 weeks of state paychecks run out, according to the National Employment Law Project.

Benefits average about $300 a week.

"From a human level, cutting 1.3 million Americans off their lifeline doesn't make any sense and it's not anything we should be doing," Sen. Jack Reed, D-R.I., said Thursday in a conference call with reporters.

Opponents say it's time to end the program now that unemployment has fallen from a Oct. 2009 peak of 10% to 7.0%.

"These are called emergency benefits," says economist Chris Edwards of the libertarian Cato Institute. "The U.S. economy has been out of recession for over four years."

Moody's chief economist Mark Zandi says cutting benefits would likely lower the unemployment rate, mostly because many workers getting benefits would stop looking for work and cease to be counted as unemployed. Others would take lower-paying jobs they once rejected.

Economic growth and job gains would be slightly lower because those losing benefits would reduce their spending, he says.

Reed and Dean Heller, R-Nev., are proposing to renew the program early next year for three months while lawmakers seek ways to offset the $25 billion annual cost. House Speaker John Boehner, R-Ohio, has said he could support an extension on that basis.