Feinstein plan would preserve unemployment benefits for hardest-hit states

As negotiations continue over President Obama’s payroll tax holiday, Democratic Sen. Dianne Feinstein is floating a proposal to preserve long-term unemployment benefits for residents of California and other hard-hit states that are being targeted for reductions by Republicans.

Republicans want to end the guarantee of up to 99 weeks of jobless benefits that have been in place since Congress passed the stimulus package as the recession sent the unemployment rate climbing. The jobless rate dipped recently to 8.6%.

Feinstein of California is leading a group of Democrats who say those long-term unemployment benefits should be preserved at a time when the Labor Department calculates there are four people out of work for every job opening – or five to one in California, the senator said.

“We must not scale back assistance that supports out-of-work families,” Feinstein wrote in a letter this week to party leaders as they negotiate with the GOP.

The Republican-led House passed a package this week that extends Obama’s payroll tax break and also continues unemployment benefits that run out at the end of the year for many workers.

Under the Republican proposal, jobless benefits would immediately be cut back to a maximum of 79 weeks, with a phase out to 59 weeks in mid-2012 for most states.

Feinstein is proposing to preserve 99 weeks of benefits in states where the unemployment rate is beyond 10%. At least 10 states still have jobless rates in the double-digits, according to the Labor Department.

Resolving the unemployment insurance standoff has been a sticking point in the negotiations over extending Obama’s payroll tax holiday, which expires Dec. 31 and puts an average $1,000 in workers’ pockets. Talks continue behind closed doors as Congress is scrambling to finish its work before the holidays.

Mainstream economists have said that the two proposals combined are expected to help boost the nation’s growth in gross domestic product in 2012, and without them GDP growth could be reduced by almost half.