The Coronavirus Aid, Relief, and Economic Security (CARES) Act included a number of provisions aimed at helping people cope with the financial impacts of COVID-19. Expanded unemployment benefits were among the most important.
Under the CARES Act, laid-off workers were entitled to an extra $600 per week in unemployment benefits through July 31, 2020. In many cases, this more than doubled the amount workers were allowed to collect under their state's rules. It also meant that as many as 67% of laid-off workers actually got more money on unemployment than they made when they were working.
These expanded unemployment benefits were a lifeline, and most people want them to continue beyond the end of this month when they're set to expire. In fact, a recent Pew Poll revealed as many as six in 10 Americans believe lawmakers should take action to allow the unemployed to keep getting this money for longer.
Unfortunately, just because an extension of expanded unemployment benefits is popular, there's no guarantee it will happen. And if it doesn't, everyone could face consequences -- not just those workers without jobs who suddenly find themselves with their income slashed.
Why expanded unemployment benefits may not be extended despite majority support by the public
Although most of the public wants unemployment benefits to be expanded, there's no guarantee that will happen. One big problem is that lawmakers on the right are worried the extra $600 per week serves as a disincentive to get back to work. Both Republican leadership and rank-and-file members have expressed concern that extending the benefits could even slow economic recovery if companies can't find enough workers to rehire.
It's also unlikely that a stand-alone bill would pass that only extends unemployment benefits and doesn't include any other provisions such as a second stimulus check, a payroll tax cut, or protection for businesses from liability if people catch COVID-19 -- all of which have been mentioned as priorities by different legislatures who will be negotiating on the terms of the next coronavirus relief bill.
Unfortunately, as is so often the case in Washington, many of the provisions viewed as must-haves on one side of the aisle are an anathema to those on the other. That means for a bill to pass, lawmakers would have to compromise -- which is something they aren't very good at unless the country is in a crisis. And with the unemployment rate falling for two consecutive months and businesses opening up in many parts of the country, there may not be enough of a sense of urgency to force consensus.
How the end of expanded unemployment benefits could affect everyone
If lawmakers don't act to expand unemployment benefits, it's not just those who will see their checks fall who could be hurt. Without the extra $600 a week, those who are out of work will get an average benefit equaling about 1/3 of their pre-pandemic income.
With workers receiving so little money, they may not be able to make rent or pay their mortgages, much less spend money to keep the economy going. If evictions and foreclosures start to rise, this could have a ripple affect, impacting landlords and sending property values plummeting. Consumer demand will likely also fall when people have less money, so businesses could find themselves with too few customers, and the stock market could crash again.
In short, the recession could deepen, more families could fall into poverty, and stocks could plummet -- creating economic chaos and possibly resulting in the greatest economic depression in most of our lifetimes.
What can you do to be prepared?
Whether you're receiving expanded unemployment benefits or not, you should contact your representative and let them know if you want them to be extended.
If you're currently getting these benefits and worried about them ending, you should be taking steps now to prepare for a cut to income during the 2020 recession. This should include saving as much as you can now, looking for budget cuts you can make, considering the possibility of a side gig if you can't get back to work right away, or exploring affordable options to borrow if you need extra money to see you through.
If you aren't getting expanded unemployment benefits but are worried about how the end of them could affect the economy and your investments, your best option is to make sure you have a solid long-term investing strategy. If you don't have money invested that you'll need soon, you're confident in the investments you have, you've taken on the right level of risk based on your age, and your portfolio is diversified, you should be able to hold tight if the market crashes due to economic turbulence. You may even want to consider increasing your investing during troubled times so you can maximize your potential returns.