Trump suggested Republicans could reduce unemployment benefits to an estimated $175 each week. That would cause 30 million jobless Americans to lose up to half their income.

  • Trump said on Tuesday at a coronavirus press conference that the GOP could scale back the weekly unemployment benefits from $600 to a level that's roughly 70% of a jobless person's lost wages.
  • That would lower the unemployment-insurance boost into the $175-to-$200 range, according to an estimate from Ernie Tedeschi, who was economist in the Treasury Department under the Obama administration.
  • Such a reduction would cause millions of families to face an income drop of 30% to 50%, according to Tedeschi.
  • "That's a pretty devastating cut for families that already lean low-income to begin with," Tedeschi told Business Insider.
  • Visit Business Insider's homepage for more stories.

President Donald Trump on Tuesday signaled that Republicans could reduce the enhanced unemployment benefits from $600 to a level that's roughly 70% of a jobless person's lost wages.

That would push additional unemployment payouts down into the $175-to-$200 range, according to an estimate from Ernie Tedeschi, who was economist in the Treasury Department under the Obama administration.

It could also cause a substantial income loss for over 30 million Americans collecting unemployment checks, Tedeschi warned.

He said the step would lead to a sharp income drop ranging from 30% to 50% for millions of unemployed people, depending on how large their state unemployment payouts are. 

"That's a pretty devastating cut for families that already lean low-income to begin with," Tedeschi told Business Insider. "They would have to make tough choices about what family spending they're going to cut and what necessities they're going to cut."

A weekly unemployment boost from the government ranging from $175 to $200 "would be better than full expiration under current law, but it would still represent a significant hit to the US economy this summer and this fall," he said.

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In March, Congress and Trump authorized a $600 federal supplement to state unemployment checks to keep people afloat as the economy cratered due to the pandemic. Many economists credit the beefed-payments with prompting quicker rebounds in consumer spending than if there hadn't been anything in place — particularly among low-income families that suffered disproportionately from the economic fallout of the pandemic.

Democrats are seeking to extend $600 weekly unemployment payments into January. But Republicans are pushing to lower the amount being paid to jobless Americans, saying it disincentivizes people from returning to work. Around two-thirds of workers can earn more from the government than they did at their previous jobs.

Trump's suggestion appears to be a nonstarter among Democrats driving to keep the enhanced payments in place. Sen. Ron Wyden of Oregon told Business Insider in a statement that drastically scaling back unemployment benefits as would hurt the ability of families to make ends meet as coronavirus cases are surging anew.

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"Now is not the time to reduce unemployed workers' income by even one penny," Wyden, the ranking Democrat on the Senate Finance Committee said. "Supercharged unemployment benefits have allowed families to pay rent and buy groceries and kept the broader economy afloat."

He continued: "Slashing benefits to 70 percent of wages would cause families tremendous financial pain and the loss of about 3.4 million jobs."

Republicans haven't yet proposed what should replace it, though the federal unemployment boost is set to phase out within five days. It's expected to be a fierce area of debate with Democrats.

But as the GOP struggles to determine which priorities to pursue in a $1 trillion coronavirus relief package, some Republican lawmakers are proposing a separate piece of legislation to temporarily extend the federal unemployment payments — though at a lower amount than $600.

"If we can't get it done we have to deal with unemployment insurance," Sen. Rob Portman of Ohio said on Wednesday. "We don't want to have a cliff. " 

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