There is no such thing as a "free" government benefit. Ask small-business owners who are footing skyrocketing bills for bottomless jobless benefits. While politicians in Washington ink a deal to provide temporary payroll, income and estate tax relief to America's workers, struggling employers wonder how long they'll have to pay for the compassion of others -- and whether they can survive.
State unemployment benefits last up to 26 weeks. Bipartisan-supported Washington mandates have raised that to 99 weeks. The cost of the joint federal-state program is borne by employers who pay state and federal taxes on a portion of wages paid to each employee in a calendar year. (At the federal level, employers must pay 6.2 percent of the first $7,000 of income to keep the system afloat.)
The combined burden of these hidden state and federal payroll taxes has exploded during the recession as President Obama's economic recovery interventions backfire and the jobless rate remains stuck near double-digits. State unemployment insurance funds have gone broke in nearly half the states. As of April 2010, unemployment tax analyst Douglas Holmes testified before the Senate, 35 states and jurisdictions had unemployment fund-related debts worth $39.5 billion. Anti-fraud efforts to prevent scams and overpayments are woefully underfunded.
These bankrupt state unemployment insurance funds are now borrowing money from the feds, whose own regular unemployment benefits account and extended benefits account are both in the red. Washington is relying on transfers from the federal general revenue fund to cover loan obligations related to all these hemorrhaging accounts.
Who pays⢠Dentists, tavern owners, maid services, mom-and-pop shops -- small businesses that are the backbone of the American economy. In my home state of Colorado, small and mid-size firms have been saddled with eye-popping unemployment insurance bills that have doubled, tripled and more in the past year. The businesses that have the lowest claims histories are getting punished the most to make up the jobless benefits fund deficit.
Lon Gibson, owner of Legalpool Inc., told me how perverse unemployment insurance incentives led him to shut down his business in Philadelphia:
"We placed legal staff, especially temporary secretaries and paralegals. Part of our business was to place a secretary at a law firm for a short period of time. ... Invariably, however, the temp would apply for unemployment benefits after the assignment. The agency would make a profit of $6 to $10 an hour from the assignment. Later, the bill would come in from unemployment for the temp and thus eliminate the profit we made from the temp! Ultimately, unless the temp didn't file, the money we made on the temp was completely subtracted by required unemployment payments. It was exactly like, to use a football analogy, making a 10-yard gain and consistently having it eliminated by a holding penalty."
These unsung Obama jobs-death-toll stories are amassing across the nation. Alas, the victims of government wealth redistribution never earn as much of Washington's attention as the beneficiaries.
Michelle Malkin is the author of "Culture of Corruption: Obama and his Team of Tax Cheats, Crooks & Cronies" (Regnery 2009).
