The Unemployment Insurance programs in many states, including Michigan’s UIA Program, could face a serious dilemma for the states’ estimated 700,000 unemployed job seekers. January 2011, a stop-gap measure which allows for states’ across the country to borrow from the Federal Government interest free to fund unemployment insurance, is set to expire.
Particularly troubling for Michigan, the state would owe up to $150 million in interest to the federal government in FY 2011, the Michigan Messenger reports.
Michigan will owe $150 million in interest to the federal government in FY 2011 unless that program is extended, something the state can hardly afford while facing a $1.8 billion deficit next year”, the Michigan Messenger Article cites.
Representative Jim McDermott (D-WA) worries about receiving an level the of bi-partisanship required to renew the Unemployment Insurance Program, even though the nation jobless rate stands within the double digits at 9.6 percent.
“I am worried,” said Rep. Jim McDermott to Politico. McDermott was able to enact some temporary unemployment fixes in the January 2010 $787 billion economic stimulus bill. “It is going to take a degree of bipartisanship … that we haven’t seen.”
If the program is not renewed, all states, including Michigan, will have to dramatically cut unemployment benefits or increase taxes. During a time when an estimated 30 million unemployed or underemployed individuals are receiving the supplemental benefits payments and, American’s not willing to accept tax increases at the present time; states’ can afford to do neither, according to Iris Lav from the Center on Budget and Policy Priorities, Politico reports.
There are three options within the Politico report that Lav suggest the Federal Government could do to extend the current state benefits levels.
- First, the federal government could forgive all, or most, of the debt for states, effectively adding that amount of money to the national debt. But Republicans and many Democrats would oppose such a bailout.
- If nothing is done, current law will require the states to either dramatically cut benefits or dramatically increase taxes, at a time when they are facing larger budget crises that are forcing huge cuts and giant tax increases already.
- The third option would be a combination of the first two, with the federal government forgiving some portion of the debt, increasing taxes and probably cutting some benefits.
Labor Secretary Robert Reich believes the program’s growing ineffectiveness and the why that current unemployment benefits are funded, by borrowing, means that something must be done.
The current system represents a “massive hole” in the government safety net, he said, and “simply extending the benefits, as we’ve been doing, isn’t enough.”
Critics say either Republicans or Democratic Congressional Leadership has done enough to avert the looming insolvency of the outmoded unemployment system. The structure of the current system, with the various states’ determinations on eligibly, reaches only less than half of the jobless and yet is shuddering under $40 billion in debt.
According to the Politico story, if a Republican-led House is elected during the upcoming November 2 elections, it is unlikely to “deal with the program’s insolvency nor consider an overhaul that would make it more effective” after the new House is instated in January 2010.
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