Understanding Government

According to a study by the Michigan Chamber of Commerce, there is about $350-$500 million annually in waste, fraud and abuse in Michigan’s unemployment insurance program. Normally, even Understanding Government bloggers don’t stop what they’re doing to read a Chamber of Commerce report about a Michigan state government program. But the study comes as Michigan took the very controversial step of reducing state unemployment benefits from 26 to 20 weeks (Missouri then followed suit). Michigan reduced benefits largely because the state borrowed $4 billion from Washington for its unemployment insurance fund. So the Chamber of Commerce study raises the question whether better stewardship of the unemployment program could have prevented this cut in the time that unemployed people get help from the state.

Illinois has borrowed $2.2. billion from the federal government to replenish its unemployment insurance trust fund and the state could soon have to repay the loan with interest. (more…)

The Chicago Tribune’s Tara Malone reports that the Illinois State Board of Education announced almost $300 million of budget cuts yesterday — or a fraction of the education cuts Illinois has to make in order to balance the state’s budget. Illinois has a $13 billion deficit and the state has been unable to assist school districts with their own budget holes. For example, the Chicago Public Schools have a $600 million deficit.

The cuts coincide with a strong indication that no meaningful help will come from Washington. (more…)

The New York Times’ Carl Hulse reports:

The Senate ended a politically charged impasse over unemployment pay on Tuesday night, voting to allow jobless Americans in danger of exhausting their benefits another month of aid.

The bipartisan 78 to 19 vote in favor of the extended compensation came after Senator Jim Bunning, Republican of Kentucky, dropped his objection to extending unemployment compensation in exchange for a largely symbolic vote on paying for the aid.

The measure, which now goes to President Obama, should also allow 2,000 federal workers furloughed from the Department of Transportation to return to work as early as Wednesday and construction to resume on dozens of highway projects. Senators now will begin debating in earnest a much broader bill that would extend the safety net programs through the end of the year.

Bunning’s toying with the lives of more than one million unemployed workers shows the hypocrisy of members of Congress that invoke the national deficit. (more…)

The news Friday of the highest unemployment rate in 26 years fueled a lot of stories and columns about the need for a 2nd economic stimulus package or the more politically realistic idea of extending some parts of the 1st stimulus. For example, The Wall Street Journal’s Jonathan Weisman and John D. McKinnon reported Saturday:

White House officials and Democratic leaders in Congress on Friday said they were weighing extending key elements of the economic-stimulus program as the nation grapples with a deteriorating job market.

Obama administration economists said they would like the enhanced unemployment-insurance program to extend beyond its Dec. 31 expiration date. They also want to maintain a program that offers tax credits to pay 65% of the cost of health insurance policies under the COBRA program, which allows laid-off workers to purchase the health plans they had through their previous employer.

White House officials said they also are examining whether to extend a soon-to-expire tax credit for first-time homebuyers, but that provision faces a stiffer headwind.

I’m unabashedly in agreement with basically every economist in the world that the stimulus does more good (retaining and creating jobs, spurring consumer spending, cutting taxes) than bad (running up the national debt) and that there needs to be more stimulus.  But unless the U.S. Senate suddenly starts to writes legislation that prioritizes the national interest, we’re not going to get a 2nd stimulus. So Barack Obama and pro-stimulus Democrats need to prioritize what’s worth fighting for: Extending unemployment benefits and COBRA are worth a fight — they help people most impacted by the recession, i.e. those that lost their jobs.

Extending tax credits to new homeowners, though, is another animal. It continues the questionable practice of the federal government actively encouraging people to jump into home ownership. And the New York Times reported two weeks ago that the program often helps the already well off, who have the good fortune of buying a home when the government has an $8,000 line of home buyer credit.  Lobbyists at the National Association of Realtors are the most enthusiastic backers of the home buyers tax credit. That doesn’t mean necessarily mean it’s bad. But the focus should be on programs that most directly respond to the recession’s impact.