Cuts to Social Welfare Programs are being Considered at a Time When Unemployment is High and More Americans are Dependent on Medicaid and Food Stamps

For America's "99ers," Jobs Crisis is Hard to Escape

July 7, 2011

Reuters - Mary Kay Coyne has just filed what she says is her 1,862nd job application since being thrown out of work three years ago.

She is one of millions of Americans whose unemployment benefits have expired -- after 99 weeks in many states -- as the United States suffers its highest level of long-term unemployment since 1948.

Coyne had to move in with a friend after benefit payments ran out last year. Now she gets by on Medicaid -- U.S. health insurance for the poor -- and food stamps, contributing what little she can to her friend's household costs.

"You're 56-years old and you feel like you are sitting on a big pile of nothing," said Coyne, who spends about four hours a day sending out resumes.

"For the better part of a year, I have something sitting on my chest. It's not a medical condition. It is that pressure of 'Is this going to end, when is this going to end?'"

Unlike in much of Europe, the safety net of the U.S. welfare system times out for the long-term unemployed. The federal government and many states have provided extra help for those caught up in the worst labor market in decades but the U.S. debt crisis rules out further extension of the programs.

Coyne is typical of many middle-class Americans now struggling to get by.

She used to earn $70,000 a year as an administrative assistant until her firm began to downsize and left Coyne among the growing number of Americans struggling to live on unemployment benefits, and eventually on minimal food aid.

Now Washington is considering cuts to social welfare programs to shrink a swelling budget deficit.

It may not only be Americans like Coyne who feel the pain. Some economists say the cuts could make it even harder to shrink long-term unemployment that damages the wider economy by dampening consumer demand and lowering output.

In 2010, an estimated 3.9 million unemployed Americans exhausted unemployment benefits, according to the National Employment Law Project, an advocacy group that campaigns for lower-wage workers.

More than 14 percent of the U.S. unemployed have been out of a job for 99 weeks, or longer.

The Labor Department’s report on Friday showed that the unemployment rate climbed to a six-month high of 9.2 percent in June.

Many so-called "99ers" subsist on social services like food stamps and Medicaid, programs now in danger of deep cuts demanded by many Republicans in Congress in exchange for allowing the federal government to go deeper into debt.

"An increase in demand for social services is what you would expect in a downturn of this magnitude and so the fact that they are cutting the social safety net is quite perplexing," said Sylvia Allegretto, a labor economist at the University of California at Berkeley. "We've just never seen (long-term unemployment) at these levels, period."

Forty six percent of those looking for work have been jobless for six months or more and the average length of job searches that eventually result in a hiring has doubled to 10 weeks between 2007 and 2010.

NO MORE SHOPPING TRIPS

Cindy Paoletti had no idea she would still be unemployed more than three years after being laid off by JPMorgan Chase.

The 59-year-old accountant -- who volunteered to be laid off to care for her dying father --- now survives on loans borrowed against the falling value of her home, Medicaid and food stamps.

"By the end of the month we are down to practically nothing in the house," she says.

The $200 in food aid she now receives each month goes furthest when spent on frozen vegetables and potatoes.

That's a far cry from Paoletti's lifestyle as a 23-year veteran at JPMorgan.

Although on a modest annual salary of $34,000, Paoletti went shopping, dined out with friends, smoked cigarettes and traveled each year to visit friends around the country.

That all changed after her severance package ran out.

"I stay home all the time," says Paoletti, who has given up smoking to save money and has found new ways of spending her spare time. "I work in the yard or play with the dog."

Paoletti says she has all but given up finding a job.

"I just got so discouraged," she said. "You apply for jobs online and you get an email the same day saying this job is no longer available."

The long-term unemployed have a tougher time than others landing a job. In 2010, someone unemployed for less than five weeks was three times more likely to get a job than someone unemployed for 27 weeks or more, according to the Bureau of Labor Statistics.

DEMAND SURGES FOR FOOD STAMPS

Just as the United States prepares to tighten its belt and deal with its fiscal crisis, demand for key aid programs has never been higher.

The number of Americans signed up for the Supplemental Nutrition Assistance Program (SNAP) -- which provides food stamps -- has reached its highest level since it began in 1939. One in seven Americans now receive aid from the program.

Medicaid enrollment as of 2010 surpassed 68.2 million, its highest level in the program's history. Cuts to these programs now seem inevitable as states struggle to plug budget gaps and lawmakers on Capital Hill turn their attention to the budget deficit. The White House has reportedly agreed to $100 billion in cuts to Medicaid over the next 10 years. Some House Republicans want cuts of more than seven times that amount.

Last week, federal stimulus programs providing billions of dollars for state Medicaid programs ran out.

The cuts are piling on the pressure for the long-term unemployed.

Coyne -- who has a chronic thyroid condition -- received notice last month that her New Jersey Medicaid benefits would be cut by $25. That means she will have to skip some doctor visits because she cannot afford to cut down on her medication.

But Coyne worries most about losing her food stamps.

"That would be the kick in the mouth I could not take," she said. "To have to depend on someone completely who is not related to me, that would make me feel awful."

Cuts to the program are being negotiated in Washington. A Republican version of the U.S. budget for 2012 would cut $127 billion -- about 20 percent -- from food stamps over 10 years.

Unemployment benefits are under pressure too. Two federal programs are set to expire in January though unemployed workers receiving emergency benefits may be eligible to draw checks through May.

There are some signs the number of people stuck in long-term unemployment may be easing from its historic highs.

The total number of people on the last available phase of jobless benefits and those exhausting them each month is falling. Economists say seasonal factors may be causing some of the decline.

Stories like Coyne's and Paoletti's make some economists question whether now is the time to cut benefits. Persistently high unemployment should spur more spending to aid the jobless and prop up consumer demand, they say.

Other economists argue the existing benefit system is overly generous and makes Americans too dependent on social services that are untenable at a time of skyrocketing debt.

"The government is not here to ensure whatever standard of living you're at, that you're not going to go below that," said James Sherk, a labor economist at the conservative Heritage Foundation. "That is just not the purpose of the safety net."

He says the benefit system is flawed because it provides support to the wealthy unemployed who could support themselves for a while without a job. Sherk says the labor market is still too weak to eliminate the federal unemployment extensions. He recommends cutting them to around 70 weeks total.

Coyne hopes government support is only a temporary fix. She keeps applying for jobs despite the hundreds of rejections and tries to keep alive her hopes that she can one day return to work and pay her friend a fair share of their living costs.

"I can curl up on the sofa and cry and pretend that it is going to get better but it is not going to go better unless I make it better."