Idaho’s Department of Labor Director, with support of the Governor, is urging Congress to let federal unemployment benefits expire on December 31. That news broke at the beginning of November.
Now, new estimates released this week by the non-partisan Congressional Budget Office suggest increasing benefits for the unemployed could be the best policy for short-term job growth. USNews.com reports tax breaks for businesses and infrastructure spending aren’t likely to boost short-term growth.
“According to estimates released Tuesday by the CBO, increased unemployment aid could, over the course of 2012 and 2013, add 0.4 to 1.9 dollars to the GDP per dollar spent, by far the largest increase for any of the options studied by the CBO. Reducing employers’ payroll taxes could add up to 1.3 dollars. The effect for reducing business’ income taxes, meanwhile, is 0.3 dollars at most. For infrastructure spending, it’s 0.7 dollars.” – USNews.com
Emergency unemployment benefits are set to expire at the end of the year, unless Congress passes its bill to extend the federal program for another year. The Hill reports Congress is expected to pass the extension, albeit the process is uncertain.
“Advocates of reauthorizing the program feel confident that a yearlong extension will get tucked into one of several bills that could pass by year’s end — a supercommittee budget deal or a tax extenders bill that would renew the Medicare ‘doc fix’ along with other expiring program provisions.
Without hitching a ride on one of those vehicles, though, the measure might have to fly solo, likely igniting a heated battle between Democrats and Republicans and inevitably pushing the fight to the brink of expiration.” – The Hill
Unemployed Idahoans can receive a maximum 26 weeks of state unemployment benefits, they’re also currently eligible to receive an additional 73 weeks of federal extended benefits, bringing the total to 99 weeks. If the federal benefits are allowed to expire at years-end, the Idaho Department of Labor estimates 2,400 people would lose their weekly payments immediately and about 300 people would drop of the program per week through mid-June.
There are currently 12,500 Idahoans using federal unemployment benefits, another 12,400 are currently receiving state benefits. 12,200 Idahoans have exhausted all benefits since the start of the recession.
Idaho Department of Labor Director Roger Madsen doesn’t support any further extension of federal benefits. He says those extensions hurt economic growth and the very people who receive benefits. “Some have been out of the workforce so long their skills and knowledge are beginning to deteriorate and their chances of re-employment are beginning to dim,” Madsen said. “Ending extended benefits will encourage many to re-enter the workforce where they will have a better chance of finding long-term employment.”
Still, the Department of Labor reports there are 68,000 Idahoans out of work, 4,500 who have given up searching for work and 50,000 people who are working part time because it’s the only job they can get. Labor spokesman Bob Fick says Washington, D.C. based think-tank The Conference Board reports there were 19,600 jobs posted in Idaho in October. “So, that’s about 120,000 people looking for full-time work,” says Fick, and there were about 19,600 job openings according to The Conference Board.”
Despite Idaho’s high rate of unemployment, Director Madsen says 99 weeks of unemployment aid is too much. “That’s why we’re intensifying our efforts to help with re-employment,” says Madsen. “We’ve had youth fairs all over the state and we’re doing more outreach with our consultants and business services specialists to help businesses understand the value of our programs and the great work that the claimants can do for them if they’ll hire them.”
Madsen has also suggested considering reducing Idaho’s basic unemployment insurance benefit program. The Tax Foundation reports some states are doing just that.
“Many states have altered UI benefit formulas and eligibility requirements during 2010 and 2011. Six states (Arkansas, Florida, Illinois, Michigan, Missouri, and South Carolina) have reduced the maximum period of state benefits below the previously-universal 26 weeks. Three states (Florida, Rhode Island, and South Carolina) adopted significant packages of UI reforms.” – The Tax Foundation
Bob Fick at the Idaho Department of Labor says there is no formal piece of legislation in the works to change the state unemployment insurance program.
Senate Majority Leader Bart Davis, R-Idaho Falls, doubts the state would augment the current unemployment benefits, but isn’t sure if it’d go as far as other states in limiting benefits.
“There are many people who are unemployed or underemployed,” Davis says. “We want to be as sensitive as we can, but I have heard a lot of strong disappointment from small businesses owners in the state of Idaho with substantial increases to tax rates that they’re having to pay in order to service the debt associated with the unemployment benefits.”
In Idaho, there are 14 different tax rates that businesses fall into. The basic rate an employer pays per worker is 3.36 percent on the first $33,300 of income. The highest rate is currently 6.8 percent on the first $33,300. Nearly all Idaho employers pay this tax. Like the state system, the federal unemployment benefit system is also paid for through a tax on employers. The federal unemployment tax is currently six percent on the first $7,000 of an employee’s wage. But, in Idaho, employers pay just eight-tenths of a percent on the first $7,000. That’s $56 per worker. “Employers who belong to a state system that meets federal requirements, as Idaho’s does, they get a credit for 5.2 percent of the tax,” says Labor spokesman Bob Fick.
Michelle Stennett, D-Ketchum, is the Minority Caucus Leader in the state Senate. She says there will likely be some backlash from Madsen’s comments. “You’re talking about almost 13,000 unemployed people who will possibly exhaust benefits,” Stennett says. “I think the timing, in these economic times, just dropping the benefits during winter months, is just sending the wrong message.” Stennett says if the state is going to support an end to extended benefits, there should be more confidence in new jobs being created.
The Congressional Budget Office says if federal unemployment benefits are extended for another year it would help jump-start the demand for goods and services:
“Extending additional unemployment benefits would directly help those who would
otherwise exhaust their unemployment benefits during calendar year 2012. Households
receiving unemployment benefits tend to spend the additional benefits quickly,
making this option both timely and cost-effective in spurring demand for goods and
services, and thereby economic activity and employment.” – CBO
Michigan Democrat Sandy Levin is co-sponsoring the bill in Congress to extend benefits for a year. He told The Hill this:
“Never before has Congress allowed emergency unemployment benefits to expire with such a large percentage of Americans looking for work and we must not let that happen now.” – Rep. Sandy Levin
At this point, state action is heavily tied to what happens in Washington, D.C. With extended benefits set to expire in six weeks, the future of the depression-era unemployment insurance system is unclear.