Weekly Briefing

An unprecedented assault on struggling families

Lawmakers advance a radical overhaul of unemployment insurance

It’s hard to know what was more disturbing in yesterday’s meeting of the General Assembly’s Revenue Laws Study Committee: the substance of the remarkable evisceration of the state’s unemployment insurance system that the Committee endorsed or the way in which the Committee members carried out their dirty deed.

Those observing the proceedings without some level of foreknowledge (you can watch the whole thing yourself by clicking here), must have thought they were watching the group consider some package of minor, technical corrections to some obscure tax law. The meeting lasted just 20-plus minutes and featured only a wonkish explanation from legislative staff, a modest and mild-mannered try at raising at least a few questions by Senator Floyd McKissick, a handful more or less random questions/comments from a couple of other committee members, a technical amendment and a quick “vote” that could only be described as a unanimous yawn.

That was it: No other debate, no testimony from the public, no nothing.

The measure will now be formally introduced as a bill in the 2013 session that commences today and, barring some unforeseen development, placed on the fast track for consideration and rapid passage into law after legislators return to Raleigh to begin their work in earnest three weeks from now.

An unprecedented cut in benefits

It is a testament to just how rapidly and completely the North Carolina General Assembly has fallen under the control of the Art Pope-Tea Party-market fundamentalist wing of the conservative movement that the measure proceeded as it did, because by any fair assessment, it is one of the most radical attacks on the unemployed in modern American history.

As Chris Fitzsimon explained yesterday:

George Wentworth with the National Employment Law Project says the changes would take North Carolina’s unemployment compensation program from one that’s roughly average compared to other states to a program that would be near the bottom in how workers are treated.

Wentworth told an N.C. Policy Watch Crucial Conversation luncheon Monday that the proposal would undermine the two primary goals of the unemployment system, to provide partial income replacement for jobless workers and to stabilize state and local economies.

Wentworth pointed out that the North Carolina businesses paid the lowest tax rate in the country from 1993-2002 leaving the state with just $10 million after the 2001-2002 recession. That should have been a clue that the system was headed for trouble.

Proponents of the Chamber’s plan point out that North Carolina’s maximum benefit for unemployed workers in the highest in the Southeast, but they rarely mention that the state’s average monthly benefit, a far more illustrative number, is slightly below the national average.

The plan that emerged from the backroom dealing would slash the maximum weekly benefit by a startling one-third, dropping North Carolina’s to 40th in the nation in how much unemployed workers can receive and the already low average benefit would be reduced further, taking more than $100 million out of the state’s economy.

Wentworth reports that no state has ever cut the maximum benefits so severely.”

You can watch a video of Monday’s luncheon at which Wentworth offered his analysis by clicking here.

Why this is so important

For the large proportion of North Carolinians who have remained employed and generally insulated from the impact of the Great Recession and its aftermath, unemployment insurance may seem like a rather obscure and bureaucratic program of little relevance to anyone other than those on the margins of society. In fact, however, it is quite arguably our state’s most important middle class preservation and anti-poverty program.

Not only does unemployment insurance keep thousands upon thousands of North Carolina families above water while they search for the opportunity to get back on their feet after losing a job through no fault of their own; it supports the economy as a whole—especially in harder hit communities—by allowing families to continue to pay their bills (rent, food, utilities car payments, etc…) and thereby preventing huge numbers of unnecessary foreclosures, evictions, repossessions and retail closures.

When North Carolina slashes unemployment benefits and eligibility, it is not just hurting the UI recipients and their families; it is hurting the myriad businesses and individual with whom those recipients and families interact. An excellent December 2012 report analyzing the proposal by the N.C. Budget Tax Center said the following:

Data available on the impact of just the reduction from 26 to 20 weeks on total benefits paid out finds that there would be $166 million less circulating in the economy by the time the system reached solvency in 2016. The economic impact of this loss as measured by economic multipliers could range from the Congressional Budget Office’s conservative estimate of $183 million to the estimate of $257 million by Mark Zandi of Moody’s Analytics.”

Trying to understand the motives

The explanation advanced by conservative lawmakers for this radical and unprecedented attack is twofold. First, lawmakers claim, the cuts are necessary because the unemployment insurance fund is in a big fiscal hole as a result of shortfalls that have plagued it for more than a decade. What this argument ignores, of course, is that the deficit was brought about in large measure by a long series of repeated tax cuts that were bestowed upon employers in recent decades by supposedly “liberal” Democratic state lawmakers and governors eager to curry favor with the business lobby. Had these cuts not been enacted, the fund would be running a healthy surplus.

The second explanation (and one that seems pretty clearly to reside more closely to the hearts of hard right lawmakers like Senator Bob Rucho, the Mecklenburg County dentist who co-chairs the Revenue Laws Committee) is that unemployment insurance is simply a slacker’s refuge. These lawmakers seem to genuinely believe that North Carolina’s high unemployment rate is not the result of overseas outsourcing or other macroeconomic forces, but rather of lazy North Carolinians who would simply rather milk the “welfare” system than go out and find work. It is for this reason that they are willing to advance a bill that would reduce the average weekly unemployment benefit to around $240 a week and cut the maximum weeks from 26 to 20. Indeed, as Chris Fitzsimon noted in his column, some new conservative legislators have even said that the unemployment insurance system should have never been established in the first place!

A portent of things to come

So, what does all of this mean for the weeks and months ahead? At this point, it’s hard to find many silver linings. Right after the close of yesterday’s a meeting a cadre of business lobbyists immediately flocked to the podium at which Senator Rucho had been presiding over the meeting to crowd in, slap his back and exchange hearty yucks and congratulations. This seems likely to be a scene with which we will become all too familiar.

Indeed, in all likelihood, it was just the first act in what promises to be long and dreary play that will drag on for the next six months. It will be a production in which the people running North Carolina state government will enact a long series of fundamental policy changes slashing essential programs and lining the pockets of the corporations and well-off individuals who put them in office.

And, at this point, it doesn’t look as if there will even be much drama about the whole thing.