Erika Eichelberger

Erika Eichelberger

Reporter

Erika Eichelberger is a reporter in Mother Jones' Washington bureau. She has also written for The NationThe Brooklyn Rail, and TomDispatch. Email her at eeichelberger [at] motherjones [dot] com. 

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Unemployment Benefits Are Ending for 1.3 Million Americans. What's That All About?

| Tue Dec. 17, 2013 7:00 AM EST

On December 28, 1.3 million people will lose their unemployment insurance. That's because Congress failed to add an extension of those benefits into the budget deal that will likely pass the Senate this week. Here is some background:

Who is losing unemployment benefits? The long-term unemployed. After state unemployment benefits run out—usually after 26 weeks—federal emergency unemployment benefits kick in for up to another 47 weeks. Since Congress didn't renew the program, 1.3 million Americans will be kicked off benefits, which average $1,166 per month. By the end of 2014, another 3.6 million will lose their benefits.

Why are they called emergency benefits? In 2008, under President George W. Bush, Congress authorized emergency unemployment compensation to help the jobless cope with the recession, giving workers a total of 59 weeks of unemployment compensation. A year later, President Barack Obama signed a law giving the unemployed 14 more weeks of jobless benefits. At the height of the recession, Americans could get up to 99 weeks of unemployment pay. That number has since dipped to a maximum of 73 weeks. This is the first time since 2008 that Congress hasn't extended the program.

Under another federal program initiated by President Richard Nixon, Americans can still get an extra 13 weeks of benefits if the unemployment rate in their state is high enough. (This threshold varies by state).

The recovery is picking up pace. Is it time to end the program? Many Republicans think so. Sen. Rand Paul (R-Ky.) said last week that he thinks extending the benefits fosters unemployment. "I do support unemployment benefits for the 26 weeks that they're paid for. If you extend it beyond that, you do a disservice to these workers," Paul told Fox News. "When you allow people to be on unemployment insurance for 99 weeks [sic], you're causing them to become part of this perpetual unemployed group in our economy."

The long-term unemployment rate—the percentage of those without a job for 27 weeks or longer—remains at record levels, though, in an economy with three job applicants for every job opening. The overall jobless rate has dropped to its lowest in five years, but the long-term unemployment rate is at 37 percent of the total unemployed.

In past recessions, extended unemployment benefits ended when the long-term unemployed represented about 1.3 percent of the workforce. Today, the long-term jobless represent more than 2 percent of the labor force.

What will happen to Americans who lose their benefits? Even though the average monthly unemployment payment isn't nearly enough to support a family of four, the benefits do help people scrape by. When extended unemployment insurance expires, many Americans will fall deeper into poverty. In 2012, jobless benefits helped keep 1.7 million people—including 446,000 children—out of poverty, according to the National Employment Law Project.

Expiring benefits may also result in fewer Americans looking for jobs. Jobless insurance allows people to continue an active job search because it helps them afford presentable clothing and transportation to interviews. And Americans may be less motivated to look for work if they lose their benefits. Matt Yglesias at Slate explains:

[S]ome fairly substantial fraction of the long-term unemployed will just stop looking for a job and drop out of the labor force. If you're long-term unemployed, then almost by definition looking for work has not been very successful at getting you work. What it has gotten you is a UI [unemployment insurance] check. Take away the check, there's no point in bothering.

So why wasn't unemployment insurance included in the budget deal? Republicans say there's no urgent need to extend the $26 billion federal emergency unemployment insurance program because the economy is getting healthier. Democrats, who counter that the long-term unemployed are still struggling, wanted a budget deal more than they wanted the benefits extension.

Could the expiring benefits stall the recovery? Unemployment benefits act as a short-term economic stimulus, because unemployed people spend their benefits checks immediately. If the benefits were to continue, the economy would gain 200,000 jobs, and the GDP would grow by 0.2 percent in 2014, according to the Congressional Budget Office.

Is there any way out of this mess? When Congress reconvenes in early January, Senate Majority Leader Harry Reid (D-Nev.) will push a retroactive extension of the benefits. Rep. Chris Van Hollen (D-Md.) is urging Democrats to withhold support for the farm bill unless it addresses unemployment insurance.

"The people that are unemployed for a long period of time are Democrats and they are Republicans," Reid said last week. "This is an issue that Republicans, I think, need more than we need it. This is something I think will be extremely difficult for them to turn away from."

But because the spending on unemployment benefits will not be accompanied by a spending reduction, many Republicans are likely to vote against it.

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Budget Deal May Be Good News for Pentagon Boondoggles

| Thu Dec. 12, 2013 7:00 AM EST

The F-35 fighter jet.

Today, the House will likely pass a budget deal that will partially end sequestration—the across-the-board spending cuts to military and domestic programs that went into effect in March.

The deal is good news for many government agencies, such as the Department of Health and Human Services, which was forced to cut back on nutrition assistance for low-income mothers and infants, and the National Institutes of Health, which faced cuts to its medical research. It's also good news for defense hawks and top brass, who'd been complaining about the dire effects of automatic budget cuts.

Though the $22 billion in cuts to the Pentagon in 2014 were imperfect, says Ethan Rosenkranz, a national security analyst at the nonprofit Project on Government Oversight, they would have reined in unnecessary and wasteful spending. "Sequestration is a bad way of implementing spending reductions," he says. "However, it's an excellent way of forcing the Pentagon to make some tough budgetary decisions which they've been neglecting to make for the past 10 or 12 years."

Anticipating looming budget cuts, the Air Force was considering delaying the purchase of more F-35 fighter jets. That would have been a wise decision, Rosenkranz says, because the F-35 has not been fully tested yet, and the program is already billions of dollars over budget and years behind schedule. "You should make sure the jets work before you purchase [more of] them," he says. Now, with sequestration being lifted, "a lot of these hard decisions will evaporate."

The Navy was mulling cutting in half its littoral combat ship program, which has been plagued by cost overruns*. Now that the Pentagon may have less reason to make these careful budget considerations, Rosenkranz says, "My biggest fear is that the Navy will expand its fleet of littoral combat ships."

The military was also considering cutting spending by shuttering some of its domestic bases. The Department of Defense has reported two years in a row that it has 20 percent excess infrastructure. The military "was moving in the right direction," Rosenkranz says. Now, it's not clear the DOD will continue in that direction if the pressure from sequestration is lifted, he says.

"We should prioritize national security and get rid of those things that are not contributing to national security," Rosenkranz argues. "Now you're going to see this conversation fly out the window."

Correction: An earlier version of this story confused Navy cruisers with littoral combat ships.

Teachers Striking in the Town Where Mother Jones Is Buried

| Wed Dec. 11, 2013 12:18 AM EST

Mary Harris "Mother" Jones, marching for workers' rights in Trinidad, Colorado, circa 1910.

Mary Harris "Mother" Jones, after whom Mother Jones is named, was a prominent labor leader in the late 1800s and early 1900s. When her long life came to an end, Mother Jones—"grandmother of all agitators"—was buried in Mt. Olive, Illinois, alongside miners whose rights she fought for. This week, teachers in Mt. Olive are striking, too. Tuesday marked the second day of their strike for higher salaries and better benefits.

The Mt. Olive board of education offered the 39 teachers in the district a 2 percent increase in their salaries this year, as well as an increase of 2 percent per year during their last four years to help them prepare for retirement, according to the local Fox news station, KTVI. The teachers want a 4.5 percent pay hike now, and a 6 percent annual increase for their final four years. Teachers told KTVI that they agreed to forgo raises in their last contract in exchange for larger salary increases this time around, but the town didn't keep its promise. "We feel that when you make a promise you need to keep it," Marcia Schulte, a kindergarten teacher who runs the teachers’ union, told KTVI Monday. "That's what we need to teach the kids." She added that last year, the administration and support staff got a six percent raise, while teachers haven't gotten a salary bump since 2009.

The teachers are also upset that the board wants to subject new hires to a different pay raise scale that would make their salaries increase more slowly. The teachers' last contract expired in August, and ongoing union contract negotiations since then have left issues unresolved.

The school district superintendant Patrick Murphy told KTVI that reduced aid from the state and lower school enrollment means that the district has to shrink its budget.

All 39 teachers went on strike Monday morning. On Monday night, union members and administrators negotiated until 1:00 a.m., but no progress was made.

The teachers will not meet again with the administration until next week, and they'll likely continue striking until then. Meanwhile, they have Mother Jones' words to keep them company. "Pray for the dead," she was known to say, "and fight like hell for the living."

Here's the Story Behind the Big Wall Street Reform Rule That Was Just Approved

| Tue Dec. 10, 2013 4:06 PM EST

On Tuesday, banking regulators finalized one of the most important provisions of the 2010 Dodd-Frank financial reform law. It's called the Volcker rule, and it's supposed to prohibit the high-risk trading by commercial banks that helped cause the financial crisis. Here's what you need to know about it.

What's the reason for the new rule? In the run-up to the financial crisis, big banks invested in low-quality mortgage-backed securities. When those over-leveraged bets turned sour, the economy collapsed, and the government had to bail out big financial institutions. The Volcker rule ensures that banks don't engage in what is called proprietary trading—that is, when a firm trades for its own benefit instead of trading on behalf of its customers. In May 2012, JPMorgan Chase lost $2 billion on a bad trade, which led to calls for a strong Volcker rule.

Why is it called the Volcker rule? The rule is named after Paul Volcker, the chairman of the Federal Reserve in the 1980s, and later an adviser to President Barack Obama. He advocated this change in financial regulation and persuaded the president to back the rule in 2010, when the Dodd-Frank bill was passed.

2010? What took so long? One reason it took three years to finish the rule is that after the legislation was passed, the actual regulation had to be crafted jointly by five banking regulators—the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC). That's a lot of coordination amongst people with different backgrounds and priorities. And during the 2012 campaign, Mitt Romney vowed to repeal Dodd-Frank. So for several months, wait-and-see regulators slowed down devising the details of the rule.

Wall Street lobbying also played a big part in delaying the unveiling of the final rule. The financial industry pushed like mad to get key loopholes into the regulation. "It's relentless, nonstop, day and night lobbying," Dennis Kelleher, the president of the financial reform advocacy group Better Markets, said a year ago. "It is absolute total nuclear war that Wall Street is engaged in here." One loophole Wall Street tried to get written into the regulation would characterize certain forms of risky trading as hedging against risk. (Yes, you read that correctly.)

So who won? Kelleher says financial reformers won; these loopholes were not included. "Today’s finalization of the Volcker rule ban on proprietary trading is a major defeat for Wall Street and a direct attack on the high-risk ‘quick-buck’ culture of Wall Street," he said in a statement. Treasury Secretary Jack Lew said the rule would have prevented JPMorgan's $2 billion trading loss last year. CFTC commissioner Bart Chilton, a fierce Wall Street critic, is happy with the rule. Former Rep. Barney Frank (D-Mass.), one of the authors of the Dodd-Frank law, told Mother Jones today, "I have been confident all along that it would be a tough rule. I'll make one prediction: all of the cries of doom that you're going to hear from the financial institutions, three years from now will come to about as much validity as the cries of doom we heard about same-sex marriage."

Obama noted, "Our financial system will be safer and the American people are more secure because we fought to include this protection in the law....I encourage Congress to give these regulators adequate funding to effectively and efficiently implement the rule, which will help protect hardworking families and business owners from future crisis, and restore everyone’s certainty and confidence in America’s dynamic financial system."

But the success of the rule depends on how it is implemented. Marcus Stanley, the policy director at Americans for Financial reform, says that he's "lukewarm" on the rule, mostly because a lot hangs on how it is interpreted by banking regulators who supervise compliance. "Whoever is the primary supervisor has enormous discretion about how this [rule] will affect trading," he says, adding that the final Volcker rule does not include transparency provisions that would allow the public to judge whether banks are complying.

So is financial reform all finished now? No. Proprietary trading contributed to the crisis, but it was not the main cause. Regulators still have  other Dodd-Frank provisions to finalize. Wall Street watchdogs have to implement plans to wind down failing banks; finish writing rules governing derivatives trading (which was largely unregulated before the financial crisis); and enforce strong requirements regarding the level of reserves banks must maintain.

What's next? Wall Street is already preparing to fight the Volcker rule in the courts. The regulation could slash the combined annual profits of the eight largest banks by between $2 billion to $10 billion, according to Standard and Poor's. "Wall Street’s loophole lawyers and other hired guns will… continue to hit at the rule as if it were a piñata," Kelleher says.

Additional reporting by Patrick Caldwell.

Elizabeth Warren Fires Back at Centrist Dems on Social Security

| Mon Dec. 9, 2013 7:00 AM EST

Last week, the president and vice-president of the centrist think-tank Third Way accused Sen. Elizabeth Warren (D-Mass.) of ignoring what they call Social Security's "undebatable solvency crisis." In an interview with Mother Jones, Warren fired back, countering the charge, and elaborating on how Social Security could be expanded.

"If we made no changes at all to Social Security," Warren said, "it would continue to make payments at the current level for about 20 years," meaning there is no immediate crisis facing the program, which assists some 58 million Americans. "Modest adjustments," she added, "will make certain… we could increase benefits for those who need it most."

One way to increase monthly benefits to seniors, Warren said, would be to broaden the program's funding pool. She did not elaborate on how, but one proposal that has been floated in recent years would raise the cap on the level of earnings subject to the Social Security tax. In 2013, for example, Americans paid a Social Security tax of 6.2 percent on wages up to $113,700. Earnings over that amount were not subject to the tax. Several members of Congress have introduced legislation that would lift or eliminate this cap, including Sens. Tom Harkin (D-Iowa), Mark Begich (D-Alaska), and Bernie Sanders (I-Vt.), and Reps. Gwen Moore (D-Wisc.), Pete DeFazio (D-Ore.), and Linda Sanchez (D-Calif.). Harkin's bill would increase Social Security payments by $70 a month for low- and middle-income beneficiaries.

Another way to increase the program's funding base, tax experts say, would be to close loopholes that drain money from Social Security. Each year, for instance, employers misclassify millions of workers as independent contractors instead of employees, according to the IRS. That means employers don't pay their portion of the Social Security tax, and the $2.8 trillion Social Security trust fund is juked out of billions of dollars in revenue annually.

A less obvious, but effective way of directing more money into the Social Security pot, Warren said, would be to increase the federal minimum wage. "Raising the minimum wage means we have workers paying more in to support the Social Security system," she said. Warren backs Obama's call for a minimum wage hike from $7.25 to $9 an hour.

The average monthly Social Security payment is $1,162. Americans have become more dependent on the program in recent years because a growing portion of retirees can no longer rely on pensions through their employer. Twenty years ago, 35 percent of private sector employers offered workers a traditional pension that provided monthly payments to retirees. Today, only 18 percent of employers offer such a plan. About 44 million workers get no retirement help from their employers.

In the interview, Warren emphasized that Third Way, as well as many in Congress and the media, are framing the debate over Social Security in the wrong way. "We should stop having a conversation about cutting Social Security a little bit or a lot," she said.

President Barack Obama, along with lawmakers on both sides of the aisle, have proposed trimming the program to rein in the deficit. Each year, the Social Security Administration increases benefit payments to keep up with inflation. The president and lawmakers have suggested using a new, supposedly more accurate formula to calculate inflation, which would make monthly Social Security payments increase more slowly. In a speech on the Senate floor last month, Warren said this new formula is far from accurate, and that Congress should not balance the budget on the backs of the elderly. (Budget negotiators, who must reach an agreement by mid-January, have since decided against including Social Security cuts in the deal.) Warren's floor speech prompted the Third Way op-ed.

A coalition of liberal advocacy groups, including the Progressive Change Campaign Committee, have also lashed out against Third Way. The organizations called on their members to ask congressional Democrats affiliated with the think tank to disavow the op-ed.

Warren has said time and again that she will not run for president in 2016, but this conflict between the progressive wing and the centrist wing of the Democratic party could serve as a warning for the next Democratic presidential nominee not to stray too far towards the center.

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