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Twice as Many Blue States as Red States Face Unemployment Insolvency

‘We have a multibillion surplus for times like this…’

Twice as Many Red-States Have Solvent Unemployment Trust Funds
People wait in line to file unemployment at a Labor bureau in Hawaii. / IMAGE: KHON2 via Youtube

(Michael Barnes, Liberty Headlines) As the coronavirus pandemic sweeps through America, customers are staying home leading businesses to shut down and lay off workers.

As of Wednesday morning, according to virus trackers at Johns Hopkins University, there were more than 6,500 confirmed cases of coronavirus in the United States, occurring in all 50 states and Washington, D.C. There have been 115 confirmed coronavirus-related deaths in the U.S.

While that puts the U.S. mortality rate at just 1.7 percent, many fear the spread of the disease will cause it to climb. Globally, it stands at around 4 percent.

Consequently, amid the nationwide effort to stop the virus from spreading, states now face a looming unemployment crisis that many won’t be able to afford.

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According to the U.S. Department of Labor Office of Unemployment Insurance, 22 states and jurisdictions’ unemployment trust funds are below the solvency level needed to pay out unemployment benefits if the economy slides into a recession. That means they’ll look to the federal government for a bailout.

California, New York and the U.S. Virgin Islands are the most underfunded unemployment trust funds in the nation, while Illinois, Massachusetts and, surprisingly, Texas round out the top five woefully unprepared states.

On the other hand, twice as many so-called red-states, or those where a majority voted for President Donald Trump in 2016, have saved enough to cover jobless benefits in the event the economy crashes due to mass social distancing, media-induced hysteria and an actual public health disaster.

Fiscally responsible states have generally taken two types of approaches to funding their unemployment reserves: the blue-state approach of raising taxes or the red-state approach of keeping unemployment taxes low and creating business-friendly conditions to increase the number of taxpayers paying into the system.

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According to the Department of Labor, the latter approach seems to have been much more effective.

Overall, 20 Trump-backing red states and 11 blue states and jurisdictions proved fiscally responsible. Nine red states and 13 blue states and jurisdictions failed to adequately fund their unemployment obligations, according to the Labor Department’s most recent State Unemployment Insurance Trust Fund Solvency Report, released last month.

North Carolina is among the most solvent. State Sen. Phil Berger, R-Rockingham, reassured his fellow North Carolinians this week that unemployment assistance is already in place for those impacted by the “economic fallout from efforts to contain the virus.”

“At $3.8 billion, North Carolina has one of the largest unemployment reserves in the country. Reforms put in place years ago helped build that large balance to allow the state to adjust its benefits program in response to an economic downturn,” Berger said.

“What adjustments to the state program might be necessary will become clearer once we have more finality on what the federal program will look like. But we have a multibillion surplus for times like this,” he added.

A federal economic program is currently being negotiated in Washington, D.C. On Tuesday, U.S. Treasury Secretary Steve Mnuchin floated an emergency stimulus of more than $1 trillion to stave off a crushing economic downturn.

Mnuchin met privately with Senate Republicans on Capitol Hill to discuss financial aid to airlines, hotels, casinos and small- to medium-size businesses, reported Politico. He said the unemployment rate could skyrocket to 20 percent without immediate action.

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