Responding to the Recession: The Challenge for Unemployment Insurance

Read the full article as an Adobe Acrobat PDF.

By any measure, the U.S. labor market is in poor health, a condition that is not likely to immediately improve. In early February, Federal Reserve Chair Ben Bernanke cautioned that ‘‘with output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level.’’1 Ongoing high unemployment is placing an unsustainable strain on the unemployment insurance (UI) system. Many states already face insolvent UI trust funds and mounting debt. Significant tax increases will be required to shore up the UI system. To address the UI budget woes, President Obama proposes in his fiscal 2012 budget a two-year forgiveness of interest and penalties for states and employers, followed by a dramatic increase in the minimum unemployment tax base from $7,000 to $15,000 in 2014 (indexed by wage growth after 2014).2 The latter policy would have a direct effect on the 35 states that have a UI tax base less than $15,000. This article provides an overview of the UI program, a description of the impact of the recession, an assessment of state preparedness pre-recession, and a brief analysis of Obama’s proposal.

Alex Brill is a research fellow at AEI.

Photo Credit: Flick user ChiBart/Creative Commons

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Alex
Brill

What's new on AEI

Study: Piketty tax plan would boost equality by making rich less rich. But poor would be poorer, too
image Rep. McCaul’s cybersecurity information sharing center: If you build it, will they come?
image Halbig and its aftermath
image Culture of how Washington pays for medical care
AEI on Facebook
Events Calendar
  • 28
    MON
  • 29
    TUE
  • 30
    WED
  • 31
    THU
  • 01
    FRI
Tuesday, July 29, 2014 | 10:00 a.m. – 12:00 p.m.
Is Medicare's future secure? The 2014 Trustees Report

Please join AEI as the chief actuary for Medicare summarizes the report’s results, followed by a panel discussion of what those spending trends are likely to mean for seniors, taxpayers, the health industry, and federal policy.

Event Registration is Closed
Friday, August 01, 2014 | 10:30 a.m. – 12:00 p.m.
Watergate revisited: The reforms and the reality, 40 years later

Please join us as four of Washington’s most distinguished political observers will revisit the Watergate hearings and discuss reforms that followed.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.