Unemployment Insurance

Back in early December, I supported the House bill to fix the Unemployment Insurance mess now moving through the General Assembly. But after Congress changed the game, I believe it is time for a new look:

North Carolina has a train wreck on its hands: The state fund that pays unemployment benefits is ‘empty’ and has been empty for years. In fact, since the recession began, the state has had to borrow $2.5 billion from Washington to pay its unemployment benefits.

Now Washington wants its money back and it’s going to get it back by raising federal unemployment taxes on businesses in North Carolina – and that new tax is a job killer.

To protect jobs the General Assembly came up with a plan to reduce state unemployment benefits on July 1. The logic was straightforward: Cutting benefits will save $1.7 billion and that savings can be used to reduce our debt to Washington – so North Carolina businesses would pay $800 million in new federal taxes instead of $2.5 billion.

But, then, when Congress passed the ‘Fiscal Cliff’ bill it threw a monkey wrench into the works.

Congress doesn’t want states – like North Carolina – to cut unemployment benefits. So it said if we cut ourstate benefits this year it will stop all federal emergency unemployment benefits to North Carolina workers (those federal benefits go to people who have been out of work more than 26 weeks).

I asked the legislative staff, How much money is that? Their answer was: $600 million.

Then I asked, What happens if we delay the cut in state benefits until next year?

Their answer was: We’d keep the $600 million this year but add $200 million in additional debt (to the state’s insurance fund) which businesses would have to pay back sometime after 2015.

So, that’s the question: Do we want our economy to lose $600 million this year or $200 million sometime after.

We can pass this bill but, if we do, Washington will take $600 million out of our economy which families would have spent in retail stores and grocery stores – which can hurt a lot more people than just unemployed workers.

Or we can delay the state benefits cuts until January 1st of next year and keep the $600 million – but then, three years from now, businesses will be faced with paying $200 million more in taxes.

What Washington is doing to our economy is wrong and it would be satisfying to dig our heels in and say to Congress: We’re going to cut our state benefits on July 1st – and we don’t care whether you like it or not.

But two wrongs don’t make a right and we’d be wrong to compound our economic problems – especially in Hickory where unemployment is higher than in most parts of the state.

To rebuild our economy, we’d be wiser to delay the state benefits cuts for six months, keep the $600 million, strengthen our economy, and then, over the next three years, find a way to lift that 2015 tax increase off businesses to protect jobs.

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