Why Cutting Aids to States in the Stimulus is a Terrible, Shitty Idea

So the Bureau of Labor Statistics released its January employment report today, and the news is grim:

“Nonfarm payroll employment fell sharply in January (-598,000) and the unem-
ployment rate rose from 7.2 to 7.6 percent, the Bureau of Labor Statistics of
the U.S. Department of Labor reported today.  Payroll employment has declined
by 3.6 million since the start of the recession in December 2007; about one-
half of this decline occurred in the past 3 months.  In January, job losses
were large and widespread across nearly all major industry sectors.”

What jumps out is the the accelerated pace of job loss in the recent past. More importantly, people should pay attention to the data on persons who are unemployed on a long-term basis, meaning those who are jobless for 27 weeks or more (so in essence, a year of unemployment). Although the increase in the long-term employed is not that high, the total is still pretty fucking high (about 2.65 million). That number WILL (it’s not a question of if but when and by how much) go up if nothing is done to staunch the bleeding.

This is why cutting aids to state in the stimulus is a terrible idea: the states have to shoulder the fiscal burden because they are the ones that have to dole out unemployment benefits, basic healthcare coverage, and other needed services that make up the safety net. Yet the Senate is thinking about cutting $40 billion worth of aids to state in the stimulus bill: this is just not a good idea. And this is already at a time when states are facing huge budget deficits due to revenue loss.

So yeah, cutting aids to states = TEH FAIL

UPDATE: This was hastily written (like everything on this blog) this morning when I first caught the BLS news release. But now even the Wall Street Journal is reporting on the implications:

“A growing number of states are running out of cash to pay unemployment benefits, a sign of how far social-welfare systems are being stretched by the swelling ranks of the jobless in the deteriorating U.S. economy.

Unemployment filings have soared so high in recent months that seven states have already emptied their unemployment-insurance trust funds, which were supposed to see them through recessionary periods. Another 11 states are in jeopardy of depleting reserves by year’s end, according to the National Conference of State Legislatures, which published a January report entitled “The Crisis in State Unemployment Trust Funds.” So far, states have borrowed more than $2.3 billion in emergency funds from the federal government, money they are required to pay back.”

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One Response to “Why Cutting Aids to States in the Stimulus is a Terrible, Shitty Idea”

  1. States Getting Screwed in the Stimulus, Continued « The Sympositorium Says:

    […] Screwed in the Stimulus, Continued February 7, 2009 — Michael So, on the same day that I wrote about the states’ possibly (most likely) getting screwed by the Collins-Nelson amendment to […]


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