Unemployment Cuts a Cruel Way to Save Money

Florida has joined a handful of states whose leaders think that, at a time of high unemployment and widespread hardship, a good way to save money is to cut benefits for unemployed workers.

The New York Times reported yesterday that Florida’s legislature voted Friday night to gradually cut the number of weeks for basic unemployment benefits, which has been a standard 26 weeks around the country, or lower. The 26 weeks would fall to a maximum of 23 – and to as low as 12 weeks when unemployment falls to 5 percent or lower.

Florida is not alone.  Last month, Missouri’s legislature approved, and Governor Jay Nixon signed, legislation to cut the standard 26 weeks to 20. Michigan’s leaders did the same thing in late March.

Yes, times are tough in the states, with the recession taking a huge bite out of state revenues while forcing states to pay more for unemployment benefits, Medicaid, and other programs that expand automatically during times of distress.

However, cuts in unemployment benefits seem a particularly cruel way to save money. Consider the context in which these cuts are coming.

Nationally, unemployment remains painfully high at 9 percent, based on Friday’s employment report from the Bureau of Labor Statistics. Even after 14 straight months of job creation, we still have seven million fewer jobs in America than when the recession began in December 2007.

Moreover, the labor force participation rate (which measures people at least 16 years of age who are working or looking for work) remains at its lowest level, 64.2 percent, since 1984. More than 40 percent of the unemployed have been looking for a job for at least 27 weeks – the highest rate for any recession over the last 60 years.

Now, here’s the kicker.

In Florida, Governor Rick Scott is pushing a plan to cut the corporate income tax to 3 percent, from 5.5 percent, and eliminate it entirely by 2018. That would only make his state’s budget situation worse, forcing lawmakers to do things like cut unemployment benefits. By the way, Florida’s unemployment rate is currently 11.5 percent.

In Michigan, Governor Rick Snyder wants to eliminate his state’s main business tax and replace it with a flat corporate income tax that would generate less revenue. The less revenue you have, the more spending you need to cut.

As for the jobless at least in Florida, Michigan, and Missouri, I guess the appropriate motto is, “let them eat cake.”

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