Lee defends federal unemployment cut despite potential loss of $486M

Sen. Heidi Campbell, D-Nashville, has called Gov. Bill Lee's cancellation of unemployment benefits while giving money to businesses an
Sen. Heidi Campbell, D-Nashville. (Photo: John Partipilo)

Citing a Memphis restaurateur’s troubles with finding workers, Gov. Bill Lee defended his decision Tuesday to end federal unemployment benefits to people still hobbled by the COVID-19 pandemic, despite a report showing the state economy could take a $486 million hit.

Questioned about the expected loss by Tennessee’s economy detailed in a congressional report, in addition to $301.7 million in lost money to individuals, Lee said he was at a family-owned, minority restaurant in Memphis recently that was open only three days a week.

Gov. Bill Lee. (Photo: John Partipilo)
Gov. Bill Lee. (Photo: John Partipilo)

The governor said when he asked the owner why she wasn’t open seven days a week, she responded she couldn’t find workers. When he asked about the employees who worked there before the pandemic, he said the owner told him they were “sitting at home getting a check.”

The federal benefit of $300 a week – which supplements $275 weekly from the state – is to end July 3 under the governor’s order, two months earlier than under federal law. Twenty-three other states are taking similar steps within the next two to six weeks, costing their economies about $12.3 billion, according to the study by the U.S. Congress Joint Economic Committee.

“It reminded me of exactly what the problem is in this country and specifically in Tennessee. When we have 250,000 job openings in the state, and we are paying people to stay home, that needs to change. So, economically, while the state might lose economic dollars associated with that benefit, the businesses across this state are losing massive numbers of economic activity. The businesses are more important to me than the government money and that’s why we made the decision,” Lee said.

 Financial giant JP Morgan Chase & Co. recently stated that early cancellation of the enhanced unemployment benefits is “tied to politics, not economics,” while a federal study reported statements by Lee and other governors are being made “without sufficient evidence.”

Democrats have challenged Lee’s assertion that Tennessee has 250,000 job openings, contending in mid-May that the large majority of those job listings are six months old while only 54,000 new job openings had been posted during the first two weeks of May.

Tennessee still has more than 164,000 on unemployment, while more than 2.5 million people in the 24 states dropping federal jobless dollars are without work, according to the report.

Sen. Heidi Campbell, a Nashville Democrat, recently called Lee’s plans an “immoral double standard,” considering his administration will give businesses $44 million more in federal funds to shore up their books, on top of $75 million they received last year at the height of the pandemic.

The federal study contends the enhanced unemployment insurance helped the economy during the economic shutdown by “stabilizing consumption” and making sure workers could pay for basic needs such as rent and food while hunting for a job matching their skills, experience and family needs.

“By ending these programs early, states are refusing billions of already appropriated federal dollars that could be spent in local groceries, restaurants and retail shops. Cutting benefits early in order to push people into jobs that don’t work for them (e.g. pay too little, endanger their health, are not geographically proximate, etc.) risks reducing demand in local economies, foregoing the potential for future better earnings, and ultimately constricting the economic recovery from the coronavirus recession,” the study states.

All told, individuals will lose $7.6 billion in federal funds approved for pandemic recovery in the 24 states ending the emergency benefits.

  Claims of worker scarcity are largely anecdotal and not supported by national data. If a widespread labor shortage were holding back job recovery, employment data would show large payroll gains and accelerating wage growth. This pattern is not showing up across sectors.   – Report by U.S. Congress Joint Economic Committee

Asked how he will replace the loss to Tennessee’s unemployed residents and the economy, Lee responded that businesses are unable to generate revenue when they can’t hire enough workers. He argued that the economy is being “held back” because of a government policy and contended eliminating the federal benefit will “enhance our economic recovery.”

The federal study, however, said those types of statements by Lee and other governors are being made “without sufficient evidence.”

“Claims of worker scarcity are largely anecdotal and not supported by national data. If a widespread labor shortage were holding back job recovery, employment data would show large payroll gains and accelerating wage growth. This pattern is not showing up across sectors,” the report states.

It notes that JP Morgan Chase & Co. recently stated that early cancellation of the enhanced unemployment benefits is “tied to politics, not economics.”

Under the CARES Act approved in 2020 during the Trump Administration, the Federal Pandemic Unemployment Compensation program, Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation, which were designed to help people in different situations, are not slated to end until Sept. 6.