WITH UNEMPLOYMENT near its post-Depression high and the economy still sagging, few would contest the important stabilizing influence of unemployment benefits. The unemployment insurance program, however, is not currently providing adequate protection to many hard-hit areas, and its financial future is shaky--two situations requiring prompt congressional attention.
The administration has already had to seek an additional $2.3 billion to cover program obligations this year. Even with a prompt and strong economic recovery, however, it is estimated that the unemployment program--which is supposed to be self-financed from a combined federal-state tax on employers--will fall more deeply into debt over the next few years. By 1984, the program will owe the general taxpayer almost $22 billion.
During last year's budget reconciliation, Congress tightened up federal law to discourage states from the bad habit of borrowing from the Treasury that they had fallen into during the 1970s. Part of the accumulated debt was due to the deep and frequent recessions of recent years, but a substantial part came from state failure to raise unemployment taxes to keep pace with wage--and hence benefit-- increases over the decade.
There is no justification for encouraging state delinquency, so the new federal requirements for interest assessments on past debt and other incentives for state reform were generally sensible. So was repeal of the provision for an additional 13 weeks of unemployment benefits--half at federal expense-- in all states, no matter how low their unemployment rate, whenever unemployment in other states rose high enough to push up the national average.
In enacting these changes last summer, however, Congress operated on the assumption that good times were just around the corner. That hasn't proved to be the case, and technical revisions in the law have actually had the absurd effect of cutting off extended benefits in Michigan--where jobless rates are near Depression levels--while 23 other less hard-hit states qualify. Further restrictions scheduled for next September will limit the program to a handful of states even if unemployment remains at or returns to its current level. Severely depressed states will also need to raise taxes to pay stiff interest charges on accumulated debts just as they are struggling to recover.
There is a national obligation to help out states with a disproportionate share of the unemployment burden. But safeguards are also needed to make sure that states do not take advantage of federal aid to avoid their own taxing obligations. With federal and state money in short supply, there is also a good case for targeting additional benefits to localities and individuals most in need of help and tying aid for the long-term unemployed to training and other kinds of job-finding help. The congressional agenda is crowded, but, with the prospect of huge deficits in the offing, unemployment insurance needs more than a quick fix.