On July 31, the federal government's enhanced unemployment insurance providing unemployed Americans an extra $600 per week, provided for in the CARES Act, is set to expire. If Congress doesn't pass another stimulus bill extending these benefits soon, most states will send out their final payments on July 25 or 26. That's despite the fact that the economy has not made a swift, large-scale recovery: The national unemployment rate was 11% in June, and the week ending July 18 saw 1.4 million new jobless claims.
In May, the House of Representatives passed another stimulus bill, the HEROES Act, which would extend the $600 per week in enhanced unemployment insurance until 2021. The Senate has yet to vote on it; instead, the GOP and White House have been putting together their own bill. On Thursday, they said they had reached a tentative agreement about legislation they'll offer Democrats as a starting point for negotiations.
Republicans have considered lowering the benefits to just $100 per week, sources told CNBC on Wednesday. Then, when Treasury Secretary Steven Mnuchin spoke to CNBC directly on Thursday, he outlined a different proposal that included a less drastic reduction.
"We're not gonna continue [unemployment insurance] in its current form because we're not gonna pay people more money to stay at home than work," Mnuchin told CNBC. Republicans contend people who receive more money on unemployment than they otherwise would on the job have an incentive not to work.
"We want to make sure that the people that are out there that can't find jobs do get a reasonable wage replacement," Mnuchin told CNBC, "so [unemployment insurance] will be based on approximately 70% wage replacement."
Ernie Tedeschi, an economist at Evercore ISI, refuted that claim on Twitter, pointing out that, "in June, around 70% of the [unemployment insurance (UI)] recipients who returned to work were making more on UI than their prior wage, and yet still returned to work."
It is as yet unclear what the 70% wage replacement would look like in practice, but the GOP proposal means the average person would likely get an extra $310 per week versus the current $600, according to a CNBC analysis.
Using median instead of average figures to derive that 70% figure, which some Republican lawmakers have talked about doing in recent weeks, would lower that figure further to $188 per week, Tedeschi told CNBC.
Video by Stephen Parkhurst
Some economists believe the enhanced federal unemployment benefits have been crucial to propping up the U.S. economy throughout the pandemic, and continue to be key to a recovery.
"The $600 in incremental pandemic unemployment [insurance] is extremely helpful," says Samuel Rines, chief economist at Avalon Advisors. "It's continued to give people an income through this that's allowed spending to continue as though there wasn't a crisis. And without that, you're going to see a significant fall off [of the economy], because the only wage that [people can otherwise] get is going to be working and there simply aren't enough jobs to bring people back."
Congress faces a deadline of August 10, since that's when it breaks for recess, so lawmakers are rushing to nail down the details of a proposal so that they could come to the table with Democrats and pass a bill soon.
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