Merry Christmas! Join the Breadline!

Unless Congress continues unemployment benefits, the new year is going to be tough for millions of jobless Americans. REUTERS/Jason Reed

This holiday season, Congress is preparing to give Americans a big lump of coal, economically speaking.

The Great Recession technically ended in the summer of 2009, but millions of Americans are still reeling from its effects: more precisely, more than 11 million are out of work, and over 4 million have been unemployed for more than six months (known as the long-term unemployed).

One in six Americans is living in poverty and battling hunger. To help Americans cope, Congress took steps in the throes of the downturn to expand the safety net by extending unemployment insurance and nutrition benefits, commonly called food stamps.

But this holiday season, Congress, in its wisdom, has decided the time has come to cut these benefits. Unless Congress extends the Emergency Unemployment Compensation program, 1.3 million Americans will lose their unemployment benefits on Dec. 28, and another 850,000 will lose them in March. And a happy new year to you, too.

Eyeing an opportunity to go on offense, House Democrats have made extending the benefits program their cause celebre in the final week before Congress recesses for the holidays. With just a week before the break, the likelihood that these benefits will be extended is shrinking by the minute.

Already, on Nov. 1, the 47 million food stamp recipients saw their benefits cut when an expansion of the program baked into the 2009 stimulus bill expired without congressional action. For a family of four, monthly benefits went down by $36, an estimated 20 meals per month.

Congress is poised to cut the food stamp program by billions more as soon as January when the House and Senate hash out a compromise on the Farm Bill.

“Christmastime is no time for Congress to tell more than 1 million of these Americans that they have lost their unemployment insurance, which is what will happen if Congress does not act before they leave on their holiday vacation,” President Obama said Wednesday during a speech on economic inequality in Washington, D.C.

Lawmakers say they are talking about extending the federal emergency compensation program. But it’s unlikely the talks will lead to an extension. As one senior House Republican put it, Republicans think it’s time to roll these benefits back.

“I don’t think Republicans are inclined for an extension,” Rep. Tom Cole, R-Okla., said this week. “Most Republicans think it’s time to return to normal order of business. The unemployment rate is coming down, the economy is growing modestly, not as fast as any of us would want, but those unemployment extensions were adopted for extraordinary circumstances. Those circumstances are slowly disappearing. So, you would expect to phase out the extension of unemployment insurance.”

Democrats, on the other hand, think it’s still too soon to pull back. The stock market may be up, but the job market isn’t strong enough. Although the unemployment rate fell to 7 percent on Friday, for every job opening there are three Americans looking for work.

“We still have historically very high shares of long-term unemployed,” said Jared Bernstein, a senior fellow at the left-leaning Center on Budget and Policy Priorities. “We are pulling the safety net out from under some folks prematurely, when the job market really isn’t back yet the way they need it to be.”

The unemployed are the ones who stand to lose the most, but the economy as a whole loses too. Because folks losing unemployment and some food stamp beneifts will spend less money, consumer demand across the board goes down. The nonpartisan Congressional Budget Office (CBO) estimates that extending unemployment benefits will boost GDP .2 percent by this time next year and add 200,000 jobs.

“Unemployment insurance is one of the most effective economic stimuli that we have,” Christine Owens, executive director of the National Employment Law Project, told Congressional Democrats at a hearing Thursday on the expiring unemployment benefit program.  

The Republican leadership has not foreclosed on the idea of extending the program, but they don’t seem enthusiastic either. At a press conference on Thursday, House Speaker John Boehner, R-Ohio, said only, “If the president has got a proposal, I will look at it.”

But unemployment benefits and cutbacks in food assistance aren’t the only thing that will weigh down the economy next year. On top of it all are the looming sequester cuts.

The House and Senate are struggling to reach a budget deal before Dec. 13, and the sequester cuts for the next year or two hang in the balance. If no deal is reached, it’s likely the across-the-board cuts totaling $109 billion in fiscal year 2014 will take effect next year. If a deal is reached, it’s still likely some of the cuts will take place.

And since many sequester cuts would be offset by cuts elsewhere, it’s unclear how much of a favor that will be to the economy, even if it is vital to preserving important government functions. “There’s really no low-hanging fruit left,” said Harry Stein, a legislative aide to retired Sen. Herb Kohl, D-Wis. “Those will be painful choices.”

If left untouched, sequester cuts will cost the economy 800,000 jobs next year and .6 percent in GDP growth, according to CBO. Long-term, the effects would be much worse. There are the people whose jobs are directly affected by the automatic mandatory cuts, like those in the defense industry. In the long term, cuts to research and development will have a high economic cost.

“We know that an enormous amount of economic growth comes from innovation, and that that is a big competitive advantage in our economy,” said Stein, who authored a study on the sequester cuts last month for the liberal Center for American Progress. “We don’t know what medical cures and treatments we are not discovering.”

The cuts to food assistance, unemployment and discretionary spending aren’t enough to put the economy back in a recession; they are more likely to be the difference between strong growth and middling growth next year.

In their crusade to extend emergency unemployment benefits, Democrats are highlighting the human impact of the Dec. 28 cut-off in an attempt to get Congress to act.

On Thursday, the House Democratic Steering Committee invited three long-term unemployed Americans to testify about their experience looking for work and the importance of the emergency benefits. Tears were shed as the witnesses described the difficult process of applying for jobs, day after day, month after month.

“Now, in the eighth month of my job search, I am happy to say that I have secured a job just three days ago,” Lisa Floyd of West Virginia, one of the witnesses, told lawmakers Thursday. The room applauded.

“And although my new job pays much, much less than what I was making, it is a good job with a livable wage, and for that I am grateful.” She began to choke up.  A woman behind her wiped away a tear.

The Democrats on the panel promised Floyd they would do everything in their power to renew the benefits, including Minority Leader Nancy Pelosi’s call for a budget compromise to address the unemployment compensation issue. The clock is ticking, and Democrats have just a week to persuade the rest of Congress.

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