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Unemployment Is Taking the Rest of Us Down With It


At the very least, a huge tax increase is looming.

Fifteen states have collectively borrowed more than $15 billion and another nine states are in the red over unemployment benefits. Please consider Jobless claims put state in debt.

North Carolina's high unemployment rate has stuck the state with $1.4 billion in debt -- money that officials don't know how they'll pay back.

It gets worse. The debt is still rising. The problem is that with about 500,000 people out of work, the state has more unemployment claims than it can pay. So it has been borrowing from the federal government since February, sometimes as much as $20 million a day.

The tally will rise to at least $2 billion by the end of the year, said David Clegg, deputy chairman and chief operating officer of the NC Employment Security Commission. Next year, depending on the economy, could add another $2 billion to the tab, he said.

For purposes of comparison, the state budget for the current fiscal year is $19 billion.

Let's do the math. The state budget is $19 billion. Potentially $4 billion will be borrowed to pay unemployment benefits. In other words the state is borrowing an amount equal to 21% of its total budget just to pay unemployment benefits. Wow.

Only five states have borrowed more than North Carolina. Altogether, seven states have borrowed more than $1 billion each -- more than $15 billion collectively -- to shore up their unemployment insurance systems, according to the US Department of Labor. A total of 24 states plus the Virgin Islands have borrowed money from the federal government.

Many states "are in pretty dire straits right now," said Ingrid Evans, unemployment insurance director at the National Association of State Workforce Agencies.

The best hope for North Carolina, said Clegg, is for Congress to forgive a portion of the debt, if not all of it.

Another solution would be to raise the tax on employers that funds jobless benefits. Indiana, which owes about as much as North Carolina, recently took that move, but North Carolina officials worry it would increase financial pressure on businesses when they can least afford it.

"I would love to hear some US Department of Labor official explain how they expect the states to pay billions of dollars from an employee base which is, at best, 20% smaller than it was before the recession started," Clegg said.

I guess Clegg didn't hear Obama's plan to create or save 3.5 million jobs. Then again, the economy has lost about nine million jobs. Of course the economy needs 100,000 jobs per month just to keep up with demographics (birth rate and immigration).

Moreover, the jobs Obama claims to create comes at a very steep price. Please see Obama creates 640,329 jobs at a cost of $323,739.83 per job for details.

Finally, it's beyond preposterous to take credit for "jobs saved" when there's no way to measure it, or to take credit for jobs created when many of them were temporary (like all the road projects everywhere).
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