Strange things are afoot these days in North Carolina, where a 9.7 unemployment rate is now considered good news — at least, relative to the last three years.
Here in the Triad, our last reported rate is just a hair below 11 percent, just about double what it was throughout most of 2008.
Like most other states, we’ve been forced to borrow from the federal government to make good on the promise made by our unemployment insurance pact, but the Raleigh News & Observer reported this week that payments on the $2.7 billion North Carolina borrowed from the feds are due later this year. The state, with budget woes that transcend this particular debt, is considering an increase in the unemployment tax to cover the bill.
Unemployment tax was conceived as a sort of self-perpetuating system, wherein cash reserves could be shored up during periods of high employment, to be used as payouts when unemployment rates rise.
It’s socialism, of course, to take money from businesses for redistribution to the out of work, but the system has served the country well since it was introduced in the 1930s, another holdover from the safety net we developed the last time we got into a huge financial crunch.
But it was not designed to endure in this “new normal,” at least not in North Carolina, not anymore.
In fact business contributions to the NC fund have been steadily decreasing since the 1980s, and today some 25,000 state businesses pay nothing at all.
That is a loophole that the General Assembly could — and should — close with a single piece of legislation. But that alone will not be enough to close the gap.
Making the fund immediately solvent again would require a tax increase, a bond issue or, best-case scenario, forgiveness of the debt by the federal government.
Partial debt forgiveness is actually on the table, as the US Senate is weighing such a proposal right now. It would provide a convenient solution for state politicians, most of whom are not anxious to endorse tax rates this year.
But none of those measures address the real problem: unemployment, which cannot be taxed or forgiven out of existence.
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