Obama Proposal Would Temporarily Forgive Federal Interest Payments

Mike Klein
The Wall Street Journal reported Wednesday that President Barack Obama will propose to waive interest and penalty payments for two years on billions of dollars in federal loans that states have needed to write unemployment compensation benefit checks.
The Journal said Obama’s fiscal 2012 budget that will be released next week would also propose to more than double the amount of employee wages that are subject to unemployment taxes in an effort to help states rebuild their depleted unemployment insurance accounts.
These two ideas floated by the White House acknowledge states are having a terrible time paying unemployment benefits. Thirty states and the Virgin Islands have $42.3 billion in outstanding Federal Unemployment Account loans. Georgia had $634 million in outstanding loans through Monday.
The Journal said Capitol Hill Republicans reacted with “hostility” to the increased taxes proposal.
Last week federal officials reported the national unemployment rate declined by four-tenths to 9.0% in January. But another number received less attention: 9.3 million receive unemployment benefits. The number of Americans on benefits equals almost the entire population of Georgia.
“No one knew or prepared for this type of recession,” said Diana Noel, committee director for labor and economic development at the National Conference of State Legislatures (NCSL).
California, with 12.3% unemployment and its population of 37 million, has borrowed the most, $9.9 billion since January 2009. Michigan has borrowed the longest, $3.7 billion since September 2006. New York and Pennsylvania borrowed more than $3.2 billion. Five states – Florida, Illinois, Indiana, North Carolina and Ohio – borrowed between $2.0-and-$2.6 billion.
Under current regulations — meaning before the new White House proposal — states will be required to repay these federal loans, plus 4% interest. Texas sold $2.1 billion in bonds last year to repay its loan and replenish the state trust fund. Georgia is considering that same option, said new labor commissioner Mark Butler. So is Michigan. Tennessee repaid $20.7 million last June to join Texas as the only other southern state without a loan balance.
Georgia borrowing will accelerate through the first quarter and Butler predicted it could reach $820 million in April. Georgia has the 16th highest loan balance nationally and the fifth highest among southern states behind North Carolina, Florida, South Carolina and Kentucky.
Georgia Public Policy Foundation analysis matched population census data with federal outstanding loan balances to create a per capita borrowing picture. In that scenario Georgia ranks 23rd nationally and third lowest among southern states at $60 per resident.
Here is additional data from the U.S. Department of Labor and the GPPF analysis:
Largest Loan Balances & Rank
California $9.91 Billion 1
Michigan $3.73 Billion 2
Pennsylvania $3.29 Billion 3
New York $3.24 Billion 4
Illinois $2.62 Billion 5
North Carolina $2.56 Billion 6
Ohio $2.36 Billion 7
Florida $2.07 Billion 8
Indiana $2.03 Billion 9
New Jersey $1.58 Billion 10
Wisconsin $1.45 Billion 11
Source: U.S. Department of Labor
Southern State Loan Balances:
North Carolina $2.56 Billion 6
Florida $2.07 Billion 8
South Carolina $933 Million 12
Kentucky $858 Million 13
Georgia $634 Million 16
Virginia $398 Million 19
Arkansas $330 Million 20
Alabama $230 Million 22
Tennesee $0
Texas $0
Source: U.S. Department of Labor
Largest per Capita Borrowing & Rank
Michigan $378 1
Indiana $310 2
North Carolina $269 3
California $264 4
Wisconsin $258 5
Pennsylvania $251 6
Nevada $243 7
Rhode Island $214 8
Ohio $201 9
New Jersey $199 10
Source: Georgia Public Policy Foundation
Southern States per Capita Borrowing & Rank
North Carolina $269 3
South Carolina $197 12
Kentucky $192 13
Arkansas $119 19
Florida $109 20
Georgia $60 23
Virginia $48 24
Alabama $47 25
Tennessee $0
Texas $0
Source: Georgia Public Policy Foundation
Mike Klein is Editor at the Georgia Public Policy Foundation.
Like this:
Like Loading...
Related
February 9, 2011 -
Posted by mikekleinonline |
Uncategorized | Federal Unemployment Account, Georgia Public Policy Foundation, Mike Klein, National Conference of State Legislatures, President Barack Obama, Unemployment, Wall Street Journal, White House
No comments yet.
Leave a Reply