After Mandating Unemployment Benefit Expansions 40 States May Need $90 Billion in Bailouts

by Rob
December 22, 2009

I’ve posted before about unemployment benefits expansions mandated by the “stimulus” spending spree were depleting state coffers. Now that problem is growing more acute as the economy continues to shed jobs, and as many as 40 states may need a federal unemployment bailout.

This despite the Obama administration declaring the recession over.

The recession’s jobless toll is draining unemployment-compensation funds so fast that according to federal projections, 40 state programs will go broke within two years and need $90 billion in loans to keep issuing the benefit checks.

The shortfalls are putting pressure on governments to either raise taxes or shrink the aid payments.

More often than not, per post I’ve written on this subject earlier, local governments are opting for higher taxes. Which is ludicrous, because those taxes are on the very businesses we want to start hiring these people so that we don’t have to pay them to be unemployed any more.

Think about it for a moment, because that’s exactly what we’re doing. We’re taxing the people who create the jobs to pay the people we want to be working to stay unemployed.

Expanded unemployment benefits begets more unemployment. That’s reality. The Institute for the Study of Labor in Bonn, Germany (hardly a bastion of right-wing conservative thought) concluded in a study in 2008:

The evidence suggests that benefit generosity increases unemployment. We view this evidence as fairly robust since the estimates are similar across alternative specifications. The magnitudes involved are rather substantial and appear to be relatively high compared to estimates available elsewhere in the literature.

Maybe instead of “helping” people by making them dependent on government we should stop burdening businesses that create the jobs with taxes? Or does that make too much sense?

Comments are closed.