Wednesday, February 09, 2011

States too big to fail

First it was the banks: Citibank is too big to fail, so the federal government bailed it out. Then it was the automobile companies: General Motors is too big to fail, etc. And now it is the turn of the states. Michigan, for example, owes the federal government $3.7 billion it borrowed to pay unemployment benefits, and under current law must shortly start paying interest on this money. Meanwhile, unemployment taxes in the state would be ramped up. Does this sound like a very sensible system? The companies who hire people, and who lay them off when it's convenient, pay small percentage of those salaries into a fund to pay those benefits? And if the state's fund needs to borrow the money nevertheless, then it must pay interest on that borrowing? Sounds about right to me, but not to the Obama administration, which is also betting that it can carry the new Republican Congress along for another bailout of the improvident. Blue skies! -- Dan Ford

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