Michigan Governor Rick Snyder
With the official jobless rate still hovering around 9 percent and the real damage a good deal higher than that, states have been spending a lot of money—borrowed federal money to the tune of $45.9 billion—on unemployment compensation benefits. Having implied or stated outright that these government payments make laid-off workers lazy, several Republican governors and Republican-led legislatures want to avoid or at least reduce their obligations to pay such benefits. Michigan leads the pack. Governor Rick Snyder signed into law Monday a cut in future benefits from the nationwide standard of 26 weeks to 20 weeks beginning in January 2012.
It was a tricky bit of business. The proposal originally was billed as a means of reducing unemployment fraud and ensuring that some 35,000 out-of-work Michiganders would continue to receive extended benefits up to 99 weeks that otherwise would be cut off under the federal formula for such payments. And the new law does, in fact, do that. But the cut in future benefits was slipped in quietly. Indeed, the headline of the governor's press release announcing the signing stated: "Snyder signs bill to protect unemployed." No mention anywhere of the cuts.
Representative Sander M. Levin (MI-12) called the law a reckless move that could harm hundreds of thousands of workers. “It turns the clock back 50 years at a time when unemployment is at historic highs since the Depression," he said. "I think that Michigan should not be to unemployment insurance what Wisconsin has become to collective bargaining.”
Snyder claims he wants to focus on jobs instead of joblessness. A clever bit of propaganda that will no doubt have a lot of tax-cutting involved. In fact, besides putting the screws to those alleged bon bon-eating, cable-watching layabouts, the key impetus behind the new law is that it would reduce in the future how much employers pay into the state's unemployment fund.
Republicans and business groups said that cutting benefits was necessary, because the unemployment trust fund, which was ill-prepared to cope with the recession, is insolvent. The state owes the federal government $4 billion that it borrowed to keep its program afloat, and unemployment taxes on businesses have already been raised, and will need to be raised more, to repay the money. The Michigan Chamber of Commerce called the new law “a huge win for job providers,” and said it could save up to $300 million a year. ...
Advocates for the unemployed called it a bad trade. “We have a temporary change to help some jobless workers that is imposing an indefinite or permanent cost on future jobless workers,” said Rick McHugh, a staff lawyer for the National Employment Law Project, which opposed the law. “And that does seem doubly unfair when the temporary help for current jobless workers is almost totally paid for by the federal government.”
But business groups saw the state’s need to change its unemployment law as an opportunity to make the cuts to benefits that they have long sought.
Cuts they had long sought. One more round in the class war. There's a reason why Michigan has been paying unemployment checks in such large numbers. The jobless rate there is still 10.4 percent, and it's been considerably higher than that over the past two years. Florida, another state with Republican leadership and a higher than average jobless rate, 11.5 percent, is also in the process of trying to cut future benefits to 20 weeks. As is Arkansas.
The idea that jobless benefits are some kind of undeserved welfare giveaway that drains the pockets of hard-working Americans for the benefit of ne'er-do-wells may play to the audiences of Rush Limbaugh and Michael Savage, but it's BS. Money paid out in benefits is immediately spent. These interim paychecks don't just keep food on the table and a roof over people's heads, they keep businesses from folding and boost the economy better than any other stimulus except for food stamps. The Department of Labor estimates that for every $1 spent on jobless benefits, $2 is added to the gross domestic product. Mediocre as they are in some states, the benefits help stabilize an economy that otherwise would be a good deal worse.
Reforms are no doubt needed. But, as Heather Boushey, Senior Economist at the Center for American Progress Action Fund, has written, this isn't the way to go. The center has developed a comprehensive plan for fixing the unemployment compensation program:
The criteria for inclusion in the proposal are:
• Ensure that the system provides benefits with a reasonable wage replacement to those who have lost their jobs through no fault of their own and who continue to seek employment without success
• Ensure that the system is flexible enough to extend the weeks of benefits as unemployment rises and job searches become longer
• Ensure that the system is adequately funded within a financing system that works
The Center for Budget and Policy Priorities also has a reform plan.
These would make for good starts. But what's really needed—dare I say it?—is a more European system, something along the lines of the Danish model that not only provides a money bridge for those who are out of work but training for jobs that the economy is actually producing. That approach should be combined with a permanent government jobs program whose numbers fluctuate depending on the health of the private-sector economy. Not only could this program provide new skills and a paycheck during downturns, it could also set standards for similar jobs in the private sector. That, of course, would just about be the ultimate nightmare for the Rick Snyders and Rick Scotts of the nation, not to mention the rest of the Chamber of Commerce cabal.