Emergency Unemployment Compensation Sequestration – June 2013

Of all the budget decisions made over the past years in the history of the United States “Sequestration” comes as the hardest blow.

Sequestration is across the board budget cuts to many federal sponsored programs including the Emergency Unemployment Compensation (EUC) to reduce spendings of the government and channelize the funds towards other programs. These monetary reductions were made under the Budget Control Act of 2011.

Emergency Unemployment Compensation (EUC) are benefits available for eligible job-seekers who are still looking for work when their regular state unemployment insurance runs out after 26 weeks in most states. The maximum number of weeks to receive EUC benefits varies from 14 weeks to 47 weeks which is based on the state’s unemployment rate.

The cuts are to be made on the federal benefits only and the schemes sponsored by states will remain unaffected.

This sequestration is going to affect 2 million people who are currently receiving EUC. Due to this fiscal cliff the improving unemployment rate is likely to take a stroll and hit new highs.

The U.S. Department of Labor estimates that 3.8 million unemployed workers would be affected by the sequester mandated benefit cuts during the remainder of the 2013, with the average recipient losing $400.

These cuts will not only make life even harder for many long term unemployed workers already suffering from the loss of jobs and incomes, but will also take more than $2 billion in consumer spending out of an economy still struggling with weaker demand. That’s likely to hurt local businesses and jobs, particularly in states with high levels of unemployment.

Organizations and companies have begun laying off workers, while many more have decided not to staff vacant positions. Schools on military bases are contemplating four-day weekly schedules.

Sequester cuts will impact education, public health, law enforcement, defense, food safety, aviation safety and security, and the national parks programs. It cuts total $85.4 billion, including $42.7 billion being cut from the defense budget and $28.7 billion in domestic discretionary spending.

These cuts will mean an automatic 6.4 percent cut to the most programs like National Institute of Health (NIH) and the National Science Foundation (NSF), with no departmental or agency able to control how the sequester impacts individual programs.

Cuts of this level will be devastating to the public health infrastructure. It was reported that some hospitals have been turning away cancer and HIV patients as they can no longer afford to treat them with expensive procedures.

From an economic point of view this immediate and severe cuts have been broadly seen as a terrible policy measure. Sharp fiscal contraction in a weak economy is known to have negative multiplier effect on output resulting in slow growth. However the policy is expected to reap positive results in the years to come.

Similar policy of harsh government spending cuts imposed in countries like Spain, Greece, Ireland, Italy and Portugal has produced soaring and depressing rate of unemployment and deepening economic crisis.

Here is a table which contains more information on cuts being made state wise. Considering the unemployment rate and population of each state the government has divide the sequestration process into four quarters and depending on the quarter the rate and the date of implementation is different.

State EUC Sequestration Date Of Implementation
California 17.7% April 28
Illinois 16.8 % May 27
Nebraska 19.38% May 5
North Dakota 18.03% April 28
South Dakota 16.8% June 2
Pennsylvania 10.7% April 6
Maryland 22.2% July 6
Rhode Island 12.2% April 21
Massachusetts 12.8% April 28
Mississippi 12.8% April 28
Alaska 23.2% May 19
Arizona 16.8% June 2
Wyoming 23.08% May 26
Washington 21 % May 19
New Jersey 22.2% June 30
New Mexico 25% June 2
Ohio 16.36% May 5
Utah 17% April 28
Virginia 14.2% May 12
Colorado 18.22% April 28
Connecticut 19.2% June 16
Montana 19.58% May 5
New Hampshire 16.7% April 28
Alabama 12.8% April 28
Delaware 12.8% April 28
Hawaii 12.8% April 28
Massachusetts 12.8% April 28
Mississippi 12.8% April 28
Rhode Island 12.2% April 21
Texas 10.7% March 31

NOTE: Please note that each state needs to implement these changes and it will help to check the state unemployment site to know more about the amount reduced. This sequestration will only affect recepients of Emergency Unemployment Compensation. State unemployment benefit recepients remain unaffected.

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