Lessons on Deficits for Dummies: State Unemployment Version
I am truly glad to know I have audience with TPTB and sincerely hope that if they learn one lesson from our side of the line, it is the one I am about to show them.
You know who you are.
Anyway. Panzner must have read my mind or maybe it's just an appropriate time to revisit the issue of state insolvency. As you may or may not remember, Financial Armageddon picked up my February tale of pending state collapse across the country and we're back for more. Hope you enjoyed Q1 and Q2 2009 but the accounting magic has dried up and we are back to reality. Deal. Don't miss Coming Up Short...er for an exhaustive look at where we are at all these months later.
ProPublica continues the theme in terms of unemployment benefits:
As part of our investigation into unemployment insurance, here's a look at how individual state systems compare. Thanks to a historical compromise, each state has its own unemployment insurance system, and they come in 51 different flavors -- one for each state and Washington, D.C. (Puerto Rice and the Virgin Islands technically make it 53.)
How does your state's unemployment insurance system stack up? Is it about to go bankrupt? Is it bankrupt already? States with negative balances are in red. Pink states may have to borrow soon. Read about the states' policies that fed the current crisis.
Are your benefits below average?
Go to the article to click through that little beauty.
Nathan's Economic Edge covers the chart in more detail if you like numbers (or getting the living shit scared out of you). And he goes further on the drag of unemployment. Next time OMG Obama tries to tell you we may have a "jobless recovery," I implore you to keep the following in mind. :
Now, perhaps I'm getting a tad ahead of myself here but I believe we can safely postulate that despite the chatter, we will not be getting out of this by the end of the year. Just saying, numbers don't lie and creative accounting only works for so long.
Now, let’s look directly at the Treasury’s own website. There we cannot find a direct listing of the TOTAL amount of their trust fund, but we can find and validate the numbers for each state. We can also find a Quarterly Trust Fund Portfolio listing to find out how much money the Treasury has invested on behalf of the Unemployment Trust Fund.
Note that these instruments are NOT marketable securities, they are “special obligations” of the Federal Government to the Trust Fund. In other words, the government “owes” money to the trust fund, but the trust fund has been drawing it down. The difference in what the Treasury owes the fund and what the states have borrowed from the fund is roughly $16.5 billion, or approximately the same amount as the trust fund is currently worth.
$16.9 Billion divided by a burn rate of $4.08 billion per month means that the fund has only 4.14 months to live at the current rate, or it will dry approximately the first week of January of next year.
That puts the go broke range between January and April of next year, IF the rate does not accelerate.
We’re now hearing talk from the economic geniuses at the White House, and elsewhere, that they are considering an emergency extension of benefits. Of course that would have to include money that must come from somewhere, any bets on where?
Not to worry, in the knuckleheaded world of fantasy land politicians and economists, deficits on the national level don’t matter.
Some people close to the matter may need a reminder of this, as their thinking appears to be incredibly bent.