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financed bailout?

Our own taxpayer-
financed bailout?

RALEIGH — They won’t say it, but it’s obvious what is wanted by a portion of the business community in North Carolina and their backers at the state legislature.

It’s that most volatile of words in the political world these days, a word sure to rile up conservatives and liberals alike.

Dare I even tap out the seven letters?


There. The deed is done.

Oh, sure. They’ll deny that’s what they want.

But what else do you call a desire to make up for a $2.5 billion debt with general tax dollars — either from federal or state taxpayers — especially when that debt is largely the result of earlier financial irresponsibility?

The $2.5 billion is how much the state has borrowed from the federal government to pay out unemployment benefits since 2008.

Before 2008, those benefits had come from dedicated unemployment taxes paid by employers. Then came the economic downturn and record number of unemployed workers.

With more unemployed and fewer employers to pay into the fund, the dedicated tax stream couldn’t keep pace with benefit payments.

As for the financial recklessness part of the story, it goes back to the 1990s. At that time, the unemployment fund enjoyed an $800 million surplus. Then legislators cut the taxes, five separate times.

The bill is about to come due for those tax cuts. The tax on employers will rise automatically in January unless someone does something.

That someone is either the North Carolina legislature or the U.S. Congress.

The something can only be one of a few things: stick state taxpayers as a whole with the bill, let Congress borrow the money and foist the cost onto federal taxpayers or cut benefits to workers and devise a formula to repay the money over time based on the reduced payouts.

Legislators would like to pretend that there is some other solution. This summer, they decided to waste money by instructing the state Department of Commerce to study the issue.

Now the study doesn’t look as if it will be completed before the tax automatically rises.

Lew Ebert, the head of the North Carolina Chamber, says that he hopes that the state can avoid increasing the tax, that raising the cost of doing business in the state is problematic during these tough economic times.

He has a point, but maybe that’s something that the state’s business and political leadership should have thought about while continually cutting unemployment taxes during the good times.

Shuffling the debt onto taxpayers as a whole, or reducing unemployment benefits, is just as economically problematic. It will also mean less money moving through the economy.

For the politicians involved, the problem isn’t just economic. It’s political.

They want to find a way to please their business backers.

Do that, and they may find themselves tagged as the latest group of elected officials willing to put their constituents’ money to work bailing out someone else’s risky, unwise decisions.

Mooneyham writes about North Carolina politics for the Capitol Press Association.

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