Biden's new plan pledges unemployment reform, but doesn't put money behind it

• President Joe Biden unveiled the sprawling second part of his infrastructure package today.
• It pledges an effort to reform unemployment benefits, which Democrats have championed.
• However, the details are still vague and it doesn’t allocate funds; Democrats have been pressing for more.
• See more stories on Insider’s business page.

On Wednesday, President Joe Biden unveiled a $1.8 trillion economic plan that would invest heavily in childcare, education, and workers.

One part of the sprawling package includes a pledge to work with lawmakers on reforming unemployment insurance, a top priority for Democrats like Sens. Ron Wyden and Michael Bennet. The White House briefing document states the president seeks a system that puts jobless aid on autopilot, meaning government help would automatically increase when the economy crashes and there’s a sudden spike in the unemployment rate.

However, the administration’s plan does not list specific goals such as a wage replacement level, nor set aside federal money for it. Still, some experts are cautiously optimistic about the trajectory of negotiations to strengthen that element of the safety net.

“It’s a good start,” Andrew Stettner, an unemployment expert at the Century Foundation, told Insider. “It’s really clear this part of the economic policymaking is definitely going to be a partnership between the White House and Congress.”

“This part is certainly not fully baked and there needs to be additional baking for what would get into the final basket of items,” Stettner said.

Acknowledging the need for reform is ‘important,’ and eyes turn to what comes next

Arindrajit Dube, a professor of economics at the University of Massachusetts, Amherst, has created his own plan for reforming UI. It includes making unemployment insurance federally administered, expanding eligibility, and upping the benefit replacement rate.

The US has various state unemployment systems “with varying degrees of dysfunction” that are being held together by pandemic-era federal policies that will expire in a few months, Dube said, underscoring the need for reform.

Dube was one of the economists who’s been calling on the Biden administration to include UI reform in the infrastructure package. 

“The fact that the White House did clearly acknowledge the importance of fundamental UI reform is important, even though obviously it’s better when that’s paired with specific proposals, with specific dollar amounts, and funding stream,” Dube said. He said he credits the White House for being “ambitious and thoughtful,” and looks forward to seeing more.

In Congress, Wyden and Bennet have introduced a bill to permanently bulk up unemployment insurance payments. And last week, 38 Democrats — including Sen. Bernie Sanders and Wyden — sent the White House a letter calling for permanent unemployment reforms.

Chief among their concerns is the role that temporary pandemic measures played in bolstering benefits and income. An analysis from left-leaning Economic Policy Institute (EPI) found that the Pandemic Unemployment Assistance (PUA) program — which expanded unemployment eligibility to freelancers and gig workers — made up the largest share of UI assistance by the end of 2020.

A chance to have a ‘broader conversation’

Pandemic UI also made up an unprecedented share of Americans’ incomes in 2020, and bolstered benefits (like the additional $600 in weekly benefits from the CARES Act) helped plug holes in states’ offerings.

Early in the pandemic, state unemployment systems struggled to distribute a $600 weekly federal unemployment benefit, causing delays stretching for weeks or even months for many laid-off workers.

“One thing to keep in mind is we’ve never had as many Americans who themselves or their family members have relied on unemployment insurance since probably the Great Depression,” Dube said. He added, “I think it’s a chance for us to, in the public sphere, have a broader conversation.”

Democrats argue they want to avoid repeating mistakes of the last recession in 2009. Among them are preventing painful cuts to unemployment insurance during the recovery.

“We can’t fail again to fix and update it in the wake of the second economic crisis in 10 years,” Wyden said in a statement on Wednesday. “This is a top priority of mine as we move forward.”

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