Cutbacks to Unemployment Insurance Came Long Before the Great Recession

[xchrom]

http://www.thenation.com/blog/169245/cutbacks-unemployment-insurance-came-long-great-recession

You may have heard that we’re in the middle of an unemployment crisis. It’s little wonder that an average of 365,500 people per week made new claims for unemployment benefits over the past month. These high numbers have been straining unemployment insurance programs at the federal and state level, and many states have run out of reserves to pay for them, triggering a reduction in benefits. But this crisis wasn’t inevitable. The pull back in unemployment benefits is just another result of state-level choices to cut taxes at the expense of state spending, spending that could be cushioning the blow of the Great Recession.

States are unable to adequately finance their unemployment insurance programs just when they are most needed not because they were unexpectedly overwhelmed. As a new report from the National Employment Law Project shows, it was because they failed to finance them during the good times like they’re supposed to. Here’s the way it works: federal law requires each state to collect unemployment insurance contributions from employers and deposit them into a state trust fund held in the treasury. During good times, the trust funds accumulate reserves so that claims can be paid out during downturns. This makes the program countercyclical, helping to pump money into workers’ pockets and therefore businesses (via their spending) when times are tough.

The problem is that employer contribution rates vary among and even within states. Not shockingly, business groups turn on political pressure to reduce employer contributions and taxes during good times before the coffers are adequately full. And too many states gave in to this temptation before the recession. As the report notes, “Thirty‐one states reduced UI taxes by at least 20 percent between 1995 and 2005.” Meanwhile, from 2000–09 the average UI contribution rate was .65 percent of total wages, “the lowest in the life of our federal‐state UI program.” That left many of the reserves underfunded, especially when they were called upon to respond to the financial crisis.

And now, of course, the demand for these benefits is at a historically high levels. So what have states done to address the fact that they don’t have the funds to pay them out? The solutions “have tended to focus more on curtailing and reducing benefit payments than on the revenue side of the equation,” the report says. That is, rather than looking at ways to hike taxes or employer contributions to make up the shortfall, most states have cut back on benefits for the unemployed.



***making decisions that mean government is unresponsive to the needs of the people -- it isn't an accident -- it isn't lack of fore sight. it is -- however -- done on purpose.

[snot]

1. K&R'd!

[corazonroto]

2. you have no idea how bad the "cutbacks are"

Mr. President, there is a serious problem with the EUC08 program:

The federal state unemployment insurance program began all the way back in 1935. It was started to help people who lost their jobs by giving them a safety net while they looked for new work. This also helps keep dollars flowing into the economy when times get tough. Additional Extended Benefits were first made available in the 1970s. Emergency Unemployment Compensation was added in the early 1990's recession.

When our 21st century economy turned sour, the Emergency Unemployment Compensation Program (EUC08), started up once more in 2008 under Public Law 110-252. As the downturn worsened, EUC08 was added into the American Re-investment and Recovery Act of 2009. The ARRA states that "Each amount in this Act is designated as an emergency requirement and necessary to meet emergency needs". At its peak, through much of early 2010, nearly 6 million Americans were collecting just these benefits. According to the BLS, since 2008 there have been 29,748,954 EUC08 Claims (for all tiers) that have paid a combined 663,688,610 weeks of benefits. The amount spent so far = $97,433,246,688 for EUC08 benefits to present day.

What do you think would happen if something went terribly wrong with this system? What if the federal government made an implementation error at the start of this program and let that error go for four years+?

The rest of the story is here:
http://www.dailykos.com/story/2012/08/09/1118321/-Mr-President-there-is-a-serious-problem-with-the-EUC08-program