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Published on Wednesday, July 14, 2010 by Reuters

Fears Grow as Millions Lose Jobless Benefits

by Nick Carey

CINCINNATI - Deborah Coleman lost her unemployment benefits in April, and now fears for millions of others if the Senate does not extend aid for the jobless.

Richard Martinez looks at employment notices on the wall at the New York State Department of Labor employment center on June 4 in the Brooklyn borough of New York City. (AFP/Getty Images/File/Spencer Platt) "It's too late for me now," she said, fighting back tears at the Freestore Foodbank in the low-income Over-the-Rhine district near downtown Cincinnati. "But it will be terrible for the people who'll lose their benefits if Congress does nothing."

For nearly two years, Coleman says she has filed an average of 30 job applications a day, but remains jobless.

"People keep telling me there are jobs out there, but I haven't been able to find them."

Coleman, 58, a former manager at a telecommunications firm, said the only jobs she found were over the Ohio state line in Kentucky, but she cannot reach them because her car has been repossessed and there is no bus service to those areas.

After her $300 a week benefits ran out, Freestore Foodbank brokered emergency 90-day support in June for rent. Once that runs out, her future is uncertain.

"I've lost everything and I don't know what will happen to me," she said.

The recession -- the worst U.S. downturn since the 1930s -- has left some 8 million people like Coleman out of work.

Unemployment has remained stubbornly high at around 9.5 percent. According to the Bureau of Labor Statistics, in June 6.8 million people or 45.5 percent of the total are long-term unemployed, or jobless for 27 weeks or more.

Before the recession began in late 2007, the unemployed received benefits, usually a few hundred dollars a week, for 26 weeks or around six months after losing their jobs.

Under the federal/state programs, which are administered by state governments and partly funded by taxes on business, only full-time workers are eligible for benefits. Within federal guidelines, benefits and eligibility vary from state to state.

As the downturn left more Americans out of work for longer periods, Congress voted to provide funding to extend benefits to as long as 99 weeks in some areas.

Some critics say this adds to the country's large fiscal deficit, and may even discourage job-seeking.

FOOD BANKS FEAR STRAIN

An attempt to pass another extension has become bogged down in partisan political bickering in the Senate. Relief agencies fear that failure to extend benefits will strain their resources and may worsen the U.S. housing crisis.

"This will put a great deal of stress and strain on our organization, which has already been working hard," said Vicki Escarra, chief executive of Feeding America, which has a network of more than 200 food banks. In the year ended June 30, Feeding America distributed 3 billion pounds (1.36 billion kg) of food, a 50 percent increase over the past two years.

The benefits debate has pitted the majority of Democrats against most Republicans and some conservative Democrats.

When the House of Representatives passed a $34 billion benefit extension on July 1, 11 fiscally conservative Democrats voted against it. The Senate may take up the issue again in mid-July, but Republicans like Senator Tom Coburn have argued any extension must be paid for with cuts elsewhere.

"Even then he (Coburn) is not sure if that's a good idea," said John Hart, a spokesman for the Oklahoma senator. "The longer the unemployed have benefits, the less incentive there is to find a job."

Most economists argue that cutting benefits could slow recovery, describing benefits as direct economic stimulus because almost every penny of it gets spent. In a June 28 client note, Goldman Sachs said if all additional U.S. stimulus spending expires, it could slow the economy up to 1.5 percentage points from the fourth quarter 2010 to the second quarter of 2011.

The note added that extending unemployment benefits and a $400 tax credit would "substantially mitigate" that impact.

3 MILLION CUT OFF IN TWO MONTHS

During the Senate impasse, from the week ended June 5 to the week ended July 10, more than 2.1 million Americans lost their benefits. Another million will join them by July 31.

In Ohio alone, where unemployment stood at 10.7 percent in May, more than 83,000 people lost their benefits in June.

Sister Barbara Busch, executive director of non-profit housing group Working in Neighborhoods in Cincinnati, 65 percent of the people who come seeking help with their mortgages are unemployed or underemployed.

"I fear once the benefits run out, I suspect we'll see a new wave of foreclosures," she said. "I just hope I'm wrong."

Ohio is a bellwether U.S. state in elections. The state's Democratic attorney general Richard Cordray said blocking extending jobless benefits was politically motivated ahead of the midterm elections in November.

"If people lose their benefits they will blame the congressional majority and the administration," he said. "As unappetizing as it is, that would appear to be the strategy."

Senator Coburn's spokesman Hart said suggestions the Republicans were playing partisan politics were "ludicrous."

"The Democrats say that because they want to avoid making the hard decisions," he said.

Alonzo Allen, 55, a former aid agency worker in Cincinnati whose benefits will run out in September, spends two days a week volunteering at the food bank in Over-the-Rhine and the other three looking for work. He said he worries about the one-bedroom apartment he rents and how he will feed his dog Ginger, who is the "only family I have."

"If the benefits stop, I'll be out on the street and I'll lose all my furniture," he said. "That's going to be tough."

(Editing by Eric Walsh)

© 2010 Reuters
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