The NYT reports that "President Obama is proposing to ride to the rescue of states that have borrowed billions of dollars from the federal government to continue paying unemployment benefits during the economic downturn. His plan would give the states a two-year breather before automatic tax increases would hit employers, and before states would have to start paying interest on the loans." But where are the details you may ask? Patience grasshopper: they will be included in the latest budget proposal which has been delayed for nearly half a year now as the printer ran out of zeroes. "The proposal, which administration officials said would be included in the 2012 budget that the president is scheduled to unveil next week, was greeted coolly by Republicans on Capitol Hill, who warned that the plan would ultimately force many states to raise their unemployment taxes in the years to come." Ah yes, the Republicans - those paragons of sound financial judgment and sounder virtue. After all who can forget whole "Tea Party thing" which did so much to prevent the incurrence of a few hundred billion in additional debt over the next decade to pay for the latest Russell 2000 at 36,000 hairbrained ponzi scheme concocted by Rudolph von Bernankestein.
More from the NYT on why QE3.1 - the Muni Edition (not to be confused with QE3.7 the MBS edition, or the QE3.495 the ICE gold margin requirement edition, and most certainly not with QE3.495,440,559 the "Kill the David Einhorn shorts" edition) is just around the corner:
Administration officials will make the case that the plan helps the economy and states in the short run, while bringing overdue changes to the unemployment insurance system in the long run. And Republican lawmakers could find themselves under pressure from Republican governors, whose states owe the federal government billions of dollars.
The administration is also betting that employers will back the proposal, especially in states where their taxes would otherwise go up. Michigan, for instance, owes the federal government $3.7 billion it borrowed to pay unemployment benefits. Under current law the state would be forced to pay $117 million in interest to the federal government this fall, and the federal tax on employers would automatically step up each year to repay the debt.
The state’s newly elected Republican governor, Rick Snyder, has been lobbying for relief; his press secretary, Sara Wurfel, said that while they would need to see the details of the plan, they would “very likely welcome the much-needed relief.”
Robert Gibbs, the White House press secretary, said, “We are giving help to some states who have had to borrow and not been able yet to pay back.”
The states are in a tough spot. Many entered the recession with too little money in their unemployment trust funds, and they quickly ran through what little they had as unemployment rose and remained stubbornly high month after month.