Wednesday, February 3, 2010

States Unemployment Funds and Rising Unemployment

I recently came across a chart at Propublica showing how many states' unemployment funds are now insolvent. These states, of which CA is one, are borrowing money from the federal government to pay the unemployed their benefits.

Zero Hedge has posted an analysis wherein they argue that federal outlays to states for unemployment insurance suggest that the unemployment rate is actually well above the purported 10% headline number.

I do not agree with Zero Hedge that deficit spending on unemployment must be financed by selling treasuries. I've already posted an article on my agreement with Randall Wray that the sovereign does not have to finance debt by selling IOUs (i.e., treasuries).

What is more significant for me in zero hedge's article is the idea that real unemployment is actually much higher than stated. I have seen charts at shadow stats that argue that real unemployment is over 20%.

I feel that the government needs to be honest about what is happening with unemployment. Honesty will lead to a bigger push for job creation. The Obama proposal articulated in his state of the union address simply does not do enough to solve this pressing problem. The health of the nation depends upon it, however.

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