Unemployed Are Not the Reason Unemployment Funds Are Broke

OK. I guess technically the title is not true. If folks hadn't been laid off and collected Unemployment Compensation, the funds would just be sitting in the various state coffers, unused. But the unemployed are not the reason the economy tanked; the unemployed are not the ones sending jobs overseas; the unemployed are not the ultimate root cause of the problem.

Michigan started things back in March but has since been followed by Missouri and now Florida. (Other states may have done so as well, these three are the ones I know for sure have done this.) Florida's new law actually goes beyond Michigan and Missouri, as bad as their laws are. Where MI and MO cut the maximum period for collecting state level unemployment compensation from 26 weeks to 20 weeks, Florida ties the benefits to the overall state unemployment rate. Via the Tampa Tribune article linked above:

TALLAHASSEE — Out-of-work Floridians would receive fewer state benefits while businesses pay less tax under a controversial proposal approved Friday by a divided Legislature.

The deal, which Gov. Rick Scott is expected to sign into law, immediately cuts unemployment benefits by 11.5 percent.

Jobless Floridians would continue to receive a maximum payment of $275 per week, among the lowest of any state in the country. But they would be paid for no more than 23 weeks, instead of 26.

...snip...

The bill also creates a sliding scale that cuts and adds weeks of benefits based on the unemployment rate. Unemployment compensation would drop to as low as 12 weeks if the average unemployment rate drops to 5 percent or lower. A week would be added for every 0.5 percent the jobless rate climbs.

I can guarantee you that the newly unemployed person is not going to give two shits to know that the overall state unemployment rate is X percent so the number of weeks of benefits are limited accordingly. All that newly unemployed person is going to see is s/he is out of work and the state supplied safety net is full of gaping holes. Annie Lowrey at Slate on Friday offered this analysis:

In March, Michigan became the first state to take an axe to its standard unemployment benefits, even though the state boasts one of the worst labor markets in the nation. The Republican government cut the number of state-sponsored, initial weeks from 26 to 20, effective in January. It said the state simply could not afford them: It owes the federal government $3.9 billion, borrowed to pay past unemployment benefits, and just cannot go further into the red. (Michigan and 48 other states have mandatory balanced-budget rules.)

For all the other states cutting back, the issue is inaction, rather than fiscal pressure. Some states needed to make a certain simple legislative fix to ensure that the federal government kept on kicking in its share of weeks of benefits—weeks of benefits already budgeted and paid for in Washington. A number of states failed to do so. So, on April 16, North Carolina, Tennessee, and Wisconsin all lost 20 weeks of federal benefits, effective immediately. Missouri did on April 2 as well.

On top of that, this week, House Republicans introduced a bill that effectively encourages states to whittle back their unemployment insurance systems. The legislation—written by Rep. Dave Camp (Mich.), the head of the Ways and Means Committee—gives states the option of using federal unemployment-benefit dollars for other job creation programs. ("Job creation" is defined broadly, so that repaying federal loans or providing tax breaks to businesses counts.) If some states, perhaps following Michigan's example, cut benefits and use federal dollars to repay loans rather than provide weeks of aid, it could take billions from jobless Americans' pockets.

The first time I was ever laid off from a job, the HR manager explained that the last thing a business wants to do is lay people off. The more layoffs there are, the higher taxes the business has to pay in the future. At least, that's the way it once was. I guess nowadays, all the businesses have to do is whine to the politicians about how they can't afford to pay any taxes (even as the corporations are booking record profits) and the politicians cut the taxes. Legalized bribery.

Reuters of course has a report that the so-called Gang of Six may yet have a budget deal at a time when the economy is not remotely close to strong. From the Reuters article:

The Obama administration and Congress are desperately searching for a bipartisan deficit-reduction deal. Getting one would clear the way for critical legislation to increase the government's borrowing authority.

Washington's failure to increase the $14.3 trillion U.S. debt limit would put the government on the cataclysmic path to a first-ever default on its debt obligations in early August.

...snip...

Without reform, entitlements -- the huge federal retirement and healthcare benefit programs, including Social Security, Medicare and Medicaid -- are on track to escalate government debt inexorably as the U.S. population ages.

I wonder how many times people need to be told that the "entitlement" programs are not the actual root cause of the problem? There's a chart at Pew Charitable Trusts shows that things like billions of dollars in tax cuts, unfunded wars, and long term un and underemployment just might be more of a root problem in the economy than the 'entitlement programs."

But I guess we shouldn't worry. New DNC chair Debbie Wasserman-Schultz says:

"We've been pretty laser-focused on the economy," she said. "The president and the Democrats in Congress have been talking about creating jobs and turning the economy around. and that's where we have been in terms of our agenda. We've been focused in a laser-like way in getting the economy turned around and at the same time going after the most significant priority that we've had in terms of going after terrorism, and that's been bringing Osama bin Laden finally to justice."

Democrats and Republicans have been sparring on a host of economic issues, including the federal budget deficit and raising the debt ceiling. Democrats have called for ending tax subsidies for oil companies, and while GOP leaders have said they are open to discussing the issue, they also oppose tax increases.

It might be nice if they'd all quit talking about creating jobs and turning the economy around and actually do something. Note to Rep Wasserman-Schultz: continue talking about the federal deficit if you must but doing something now would be at the expense of doing something for the un and underemployed. And creating decent jobs for the long term un and underemployed just might help that "deficit problem" more than the "Gang of Six" ever could.

And because I can: