Easy math or easy money?


Democrats say we run unsustainable deficits because Republicans cut taxes for rich people. Republicans say we run unsustainable deficits because Democrats are addicted to irresponsible spending.

Both are right, but we all know that. Bipartisan awareness has not helped us solve what is a simple mathematical problem.

So perhaps our attention could be better spent if we centered on a real-life example that shows how deficit spending is effectively accelerated by the good intentions of both parties.

It also shows how politicians -- how all of us, more precisely -- defer the reality of unsustainable debt in support of admirable intentions.

We do that by clinging to the handy escape clause: Because we are borrowing so heavily already and are yet not fully down the insolvency tube, then it probably will not kill us in the short term if we borrow a little more, especially if we are only trying to help some people and businesses that we could not otherwise help.

The example is unemployment compensation. It is a system administered by the states that taxes employers to produce a fund from which to provide payments to persons losing their jobs so that those persons can continue to tend to the necessities of existence while they seek other work.

Hardly anyone opposes the concept. People must eat. The pot of money must come from somewhere. Building the costs into the employment structure seems fairer than taxing everyone.

But when unemployment soars to 10 percent or nearly there and sets in, then Democrats, mainly, want to keep extending the period of benefits because we simply cannot leave a man to wither only because our economy cannot produce a job for him.

So states start running deficits in their unemployment compensation pots. And most states are broke already on account of Medicaid and prisons, which are for people who have advanced past the unemployment stage.

What do states do? They certainly do not raise taxes on employers. Republicans lead the way in insisting that the very last thing you ought to do when the economy offers too few jobs is increase costs on people taking risks in the great American marketplace to provide the jobs we do have.

So state governments do what most anyone would do when needing money for a good purpose when no good alternative exists. They borrow from the federal government, which has a seemingly bottomless pit because it can operate at a deficit on borrowed money.

You must understand that all of this is transacted with the utmost fiscal responsibility -- on paper.

States obligate themselves to pay back the federal government by whatever political and fiscal solution they can design, most likely by tapping their employers for higher taxes and cajoling their unions to take something less in benefits.

But that is infinitely harder said than done. Republicans, mainly, resist hitting employers. Democrats, mainly, resist hitting working people, or non-working ones. Both sides cite -- compellingly -- the hardships.

Sounds untenable, does it not?

But it is not untenable at all. There always is the escape clause.

President Obama, trying to be less scary to business, just announced that his forthcoming budget will give states a two-year waiver and that the feds will carry the states' unemployment debt during that time.

The federal government levies its own unemployment compensation tax on employers. Obama does say that he wishes to raise that levy after these two years of grace.

But a tax is far easier to talk about raising in a two-year abstraction than to raise for real today. Republicans already are saying they do not like this counterproductive idea of holding up our noble employers.

The solution is easy math: You raise marginally the levy on employers and reduce marginally the benefits for the unemployed. It is called mutual sacrifice.

But easy money is always more fun than easy math.

John Brummett is an award-winning columnist for the Arkansas News Bureau in Little Rock and the author of "High Wire." His e-mail address is jbrummett@ arkansasnews.com.

 

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