As our leaders in Washington continue to look for ways to balance the budget and deal with our increasing deficit, politicians have considered taking aim at entitlement programs .
In President Obama’s proposed budget, he made cuts to programs like Social Security, much to the dislike of his liberal base. However, another program is also being targeted: unemployment benefits. In some states the benefits are being cut as part of sequestration, while in others more drastic measures have been taken in an effort to repay the federal government. Regardless of the reasoning, cutting unemployment benefits at a time when job creation is happening at a crawl, will push us further into a recession, rather than lifting us out.
Earlier this month in New York, the benefits of over 140,000 people were cut by almost 11% because of the budget stalemate in Washington. For some that is a drop from $405 to $361 per week. This does not impact people who are still in their first 26 weeks of unemployment, rather the emergency unemployment benefits that the federal government pays for. The maximum allowed time to obtain any benefits dropped from 99 weeks to 72 weeks. All states were forced to make cuts, but New York was one of 14 states who were ready to make these cutbacks in April. Connecticut will make their cuts in June and expect to make a cut of 19% for a weekly benefit.
In February, the governor of North Carolina signed a bill into law that will drastically change their unemployment program. In an effort to pay the federal government back faster for money received under the emergency program, North Carolina will pull out of the program all together. They are also reducing the amount of weeks benefits can be collected under the state program from 26 weeks to a sliding scale of 12–20 weeks. In addition to the cut in weeks, the maximum weekly benefit was dropped from $535 to $350 per week and eliminates all benefits for people who had to leave work for health or family reasons. About 170,000 people will lose out on around $780 million in benefits as a result of these changes.
Businesses will also feel the impact of this law with an increase in unemployment taxes paid. The federal taxes will continue to rise by $21 per employee until the debt is paid and there is also a surcharge that will stay around after the debt is paid to refill the coffers for the next crisis. A lawmaker who supported this move estimates that the unemployment tax bill for his company of 77 employees will triple to over $110,000. All these changes mean the debt will be repaid by the end of 2015; three years earlier than if no changes had been made. By the end of the decade more than $2 billion will be in reserves for future unemployment claims.
While all states are being forced to make changes, North Carolina was the first to strip the emergency benefit program from the unemployed. All the changes being made in every state are saving money, and paying off debt in the case of North Carolina but at what cost? North Carolina still has an unemployment rate of 9.2% and job creation across the country is still slow.
To help get us out of the recession people need to be able to spend money and unemployment benefits don’t get put into savings they get spent. Cutting spending, paying off debt, and refilling the reserves are all great ideas, but not at the expense of people already living on the fringe. It is a bad idea period because cutting unemployment benefits at a time when job creation is happening at a crawl if at all will only push us further into a recession rather than lifting us out.