The unemployment system was designed to provide temporary, limited benefits to unemployed Americans who lost their jobs through no fault of their own as they searched for new work. But in the midst of passing COVID-19 response packages, federal policymakers fundamentally changed the nature of unemployment insurance.
By implementing a $600 weekly UI bonus in the CARES Act, Congress discouraged work and opened the floodgates to fraud by paying people more to stay home than to return to work. Although the original unemployment bonus in the CARES Act expired, Congress resurrected and extended additional bonuses—including in President Biden’s so-called “American Rescue Plan”—which have continued the harmful impact caused by the original boost.
To make matters worse, Congress extended unemployment eligibility to more than a year and suspended work search requirements for those collecting benefits. They also relaxed eligibility rules for welfare programs like food stamps and Medicaid, created an unprecedented new child tax credit scheme, and more.
As a result, many unemployed Americans can now collect far more in unemployment and other welfare benefits by staying at home than they can by working. This phenomenon threatens not only individuals’ personal wellbeing, but also the entire economic recovery.