Are states fixing jobless programs?

Application for unemployment benefits

TEXT OF INTERVIEW

Tess Vigeland: We heard earlier about how unemployment numbers are giving mixed signals about an economic recovery. Well Marketplace's Mitchell Hartman reported this week about a slew of issues facing state unemployment benefits.

Many are running out of money -- some are already billions in debt. And that could spell disaster down the road for businesses, in the form of higher taxes. The unemployed could see their benefits cut as well. Mitchell joins us now to take a forward look at unemployment programs across the country.

Hey Mitchell.

Mitchell Hartman: Hi, Tess.

Vigeland: Let's start with unemployment benefits and the stimulus package. Explain how the two are related and what it means for the economy, if all these benefits are cut.

Hartman: First of all, keep in mind $64 billion will go to states from the federal government to help them pay unemployment benefits this year. That is not normal. The federal government usually steps in a recession and extends benefits, gives people another 26 weeks, sometimes as long as another year. That's what's happened now. But in addition, the stimulus package had a lot of extra money for states to extend their benefits to pay extra benefits.

You know, I hear a lot of people say, "Where's my stimulus? I've heard about the stimulus, where's my stimulus?" Well, this is one of those examples, where it's going directly into the economy. People who get unemployment checks boosted by the federal government, they're going to spend that money right away on rent, on food, on keeping their car. So you see that impact of that money going from the federal government right into local economies. Economists think twice as much impact from that as tax cuts.

Vigeland: You explained in your piece on Wednesday, that states developed these unemployment systems back in the 1930s and of course, as we know, a lot has changed since then. How are states working to address some of these issues that must be coming up now, when you use this ancient system to try to address what's going on with modern families?

Hartman: In the New Deal, it was meant mainly to address single-wage earners -- mostly men, mostly worked in the same factory year after year and then suddenly, the factory shut its doors. Nowadays, so many workers are part-time, they are temporary, they are seasonal. A lot of those people don't qualify for benefits. The rules are set up so that if you don't make a certain amount of money in the last 12 months, you don't qualify. And so states are being pushed, largely by the federal government, to try to modernize their systems and basically add people to the rolls, who are losing their jobs now and finding that they don't get unemployment benefits.

Vigeland: Well, so with all those factors, are there signs out there that states will be able to bring these programs around, before we have a major crisis on our hands?

Hartman: Well, in the long run, the states that are in deep trouble -- and almost all the big states are, you know, California, New York, Indiana -- they're going to either have to raise their business taxes or they're going to have to cut benefits. And in a lot of places, cutting benefits is just politically undoable.

But right now, nobody wants to do anything. They'll keep borrowing from the federal government to pay their benefits for at least another year or two. Nobody wants to raise taxes right now and nobody wants to hit the unemployed with any kind of cut in their benefits.

Vigeland:All right. Thanks Mitchell for the series and for talking with us today.

Hartman: You're welcome Tess.

Vigeland: Marketplace's Mitchell Hartman reported his series on unemployment benefits with ProPublica's Olga Pierce.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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