Debt, more debt


Over the past two years, as the ranks of jobless Americans swelled, more than 30 states ran through the funds set aside to cover the cost of unemployment benefits, generally calculated on a contracted duration of 26 weeks.

Then, as though waving a magic wand, Congress ordered the states to keep paying the unemployed for 39 weeks ... for 52 weeks ... eventually for 99 weeks.

Tax collections set at the old rates failed to keep pace with the cost of these payments, which no longer bore any relation to the levies set aside to fund them. As a result, 30 states borrowed money from the federal government and now owe an unprecedented $42 billion.

Under federal law, the elevated debt load already has triggered unemployment tax increases in Michigan, Indiana and South Carolina. Employers in an additional 17 states are expected to see taxes rise this year.

In December, Nevada Employment Security Division administrator Cindy Jones increased the average unemployment tax rate paid by Nevada employers by 50 percent -- from 1.33 percent to 2 percent for the average employer -- starting in January.

Because of Nevada's highest-in-the-nation unemployment rate of 14.2 percent -- and because Congress kept extending jobless benefits while only "lending" the states the money needed to fund them -- Nevada had to borrow more than $579 million by the end of 2010.

Now, the Obama administration proposes a plan under which heavily indebted states could get immediate relief: Washington would temporarily suspend interest payments on those state debts. The proposal would supposedly relieve the states having to automatically raise taxes on employers to repay the loans. Then, starting in 2014, the portion of workers' wages subject to the unemployment insurance tax would more than double, from $7,000 to $15,000, aimed at raising revenue to repay the federal government.

Because Nevada already taxes wages up to $26,600 to fund its unemployment insurance trust, it's hard to see how such a proposal would help generate much more revenue here. Unless this is a step toward forgiving the debt entirely.

But all this ignores the underlying problem: payroll taxes and a swarm of other regulations (yes, including higher unemployment taxes) that make it increasingly uneconomical for American small businesses to hire new workers.

Everyone agrees that facilitating the creation of new private-sector jobs is paramount. So when is Congress going to get busy repealing some job-destroying enactments?

Sen. Orrin Hatch of Utah, senior Republican on the Finance Committee, notes "the administration dramatically expanded federal benefits to the point that neither states nor the federal government can afford them. Either employers will have less money to hire or workers will face reduced wages."

Sometimes, before the new sprouts can grow, a lot of deadwood needs to be cut away.

Where are the axes and the scythes?

 

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