Financial News

[southsider2k5]

http://money.cnn.com/2011/09/29/news/econo...?source=igoogle

 

NEW YORK (CNNMoney) -- Companies have yet another reason not to boost hiring: rising unemployment taxes.

 

Employers around the nation are getting socked with higher state unemployment tax bills as states are forced to shell out more than $1 billion in interest payments this month. More than 30 states have had to borrow billions from a federal fund to cover unemployment benefits for their jobless residents in recent years.

 

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And this is only the first of two tax spikes employers are contending with, on both the state and federal level. Come January, companies in 24 states could have to shell out between $21 and $63 more per employee in federal unemployment taxes.

 

These hikes are the latest in a series of unemployment tax increases as states look to replenish their unemployment trust funds devastated by the Great Recession.

 

Last year, employers paid 27.8% more in state jobless taxes, said Doug Holmes, president, UWC Strategic Services on Unemployment & Workers' Compensation, a business trade association.

 

"Unemployment taxes, which were a relatively low bottom-line cost in 2008, are now becoming a significant cost," Holmes said. "It discourages companies from electing to hire new employees."

9 hard-to-fill jobs

 

This is the first time during this economic downturn that states have had to pay interest on their federal borrowing, which currently totals nearly $38 billion. The 2009 stimulus act waived interest payments for two years, giving both cash-strapped states and their employers some breathing room.

 

Both groups lobbied Congress last year to extend the relief for another two years, but lawmakers declined.

 

So states were forced this year to make some tough decisions on how to handle the interest charges at a time when they were struggling to balance their own budgets. Some dipped into other state funds or borrowed money, but most shifted the burden to employers.

 

New York, for instance, sent its companies a bill in mid-July requesting a lump-sum payment of up to $21.25 per employee to cover its $95.4 million interest charge due September 30.

 

Companies were not pleased, said Mike Durant, New York state director for the National Federation of Independent Business. For small employers, even a couple of hundred dollars in unexpected expenses can hurt, he said.

 

For Margery Keskin, an executive at four construction-related companies in upstate New York, the extra $2,000 her companies had to shell out means less money goes to bonuses or profit sharing for her roughly 40 employees. And she will have to think twice before she hires anyone.

 

"We try not to hire because we will be socked by a bigger tax bill for unemployment insurance," said Keskin.

 

Other states, however, have tried to spare their employers.

 

California, for instance, borrowed its $303.3 million interest payment from a disability insurance fund. Texas issued bonds at a lower interest rate to wipe out its balance before the interest came due. And Ohio dipped into tobacco settlement funds to settle a roughly $70 million interest bill.

 

"We did not want to increase the tax burden on job creators," said Ben Johnson, spokesman for Ohio's Department of Job and Family Services.

 

Even in states trying to shield companies, employers could see their taxes rise next year. That's because federal unemployment taxes are scheduled to go up for firms located in states that have been borrowing in recent years.

 

In most of these states, the 2012 federal levy will rise by $21 per worker. But that amount increases the longer the state has been borrowing. Michigan companies, for example, will have to pay $63 per employee next year.

[Balta1701]

You know what would help with that? If the Federal government were to come up with some plan whereby they chipped in an increased amount towards covering state-level unemployment benefits, maybe along with some reforms to help people move back into the work force easier if they're trapped in "Unemployed need not apply" land. Hell, we could even have the government hire people to rebuild stuff, that would even take them off the unemployment rolls and make unemployment costs cheaper for other businesses. It seems like we have plenty of bridges and stuff that still need fixed. Why hasn't anyone proposed a plan to do that?

[southsider2k5]

You know what would help with that? If the Federal government were to come up with some plan whereby they chipped in an increased amount towards covering state-level unemployment benefits, maybe along with some reforms to help people move back into the work force easier if they're trapped in "Unemployed need not apply" land. Hell, we could even have the government hire people to rebuild stuff, that would even take them off the unemployment rolls and make unemployment costs cheaper for other businesses. It seems like we have plenty of bridges and stuff that still need fixed. Why hasn't anyone proposed a plan to do that?

 

You mean like an unemployment tax? Or a shovel ready jobs program? Yeah, why weren't those things thought of.

[southsideirish71]

You know what would help with that? If the Federal government were to come up with some plan whereby they chipped in an increased amount towards covering state-level unemployment benefits, maybe along with some reforms to help people move back into the work force easier if they're trapped in "Unemployed need not apply" land. Hell, we could even have the government hire people to rebuild stuff, that would even take them off the unemployment rolls and make unemployment costs cheaper for other businesses. It seems like we have plenty of bridges and stuff that still need fixed. Why hasn't anyone proposed a plan to do that?

 

I think the government hiring the people who are out of work and putting them towards rebuilding America is a great idea. I feel however that the unions might not be on board. Well let me rephrase that, they will be on board as long as this temporary force pays union dues. I think this, plus adding tax incidentives to companies that hire unemployed people, including a sliding scale of tax incentives for hiring the 99ers.

[Balta1701]

I think the government hiring the people who are out of work and putting them towards rebuilding America is a great idea. I feel however that the unions might not be on board. Well let me rephrase that, they will be on board as long as this temporary force pays union dues. I think this, plus adding tax incidentives to companies that hire unemployed people, including a sliding scale of tax incentives for hiring the 99ers.

If only someone would propose these things!!!!!

[Balta1701]

You mean like an unemployment tax? Or a shovel ready jobs program? Yeah, why weren't those things thought of.

Because if the stimulus package wasn't 60% tax cuts it couldn't pass. Tax cuts, after all, are important. Spending takes a while to get out the door, and this Southsider2k5 convinced me in early 2009 that the economy would be fine by 2011 if we front-loaded all of the stimulus money as tax cuts.

[southsider2k5]

Because if the stimulus package wasn't 60% tax cuts it couldn't pass. Tax cuts, after all, are important. Spending takes a while to get out the door, and this Southsider2k5 convinced me in early 2009 that the economy would be fine by 2011 if we front-loaded all of the stimulus money as tax cuts.

 

Then again, if Obama doesn't speak for the next two years, we are probably OK.

[NorthSideSox72]

I think the government hiring the people who are out of work and putting them towards rebuilding America is a great idea. I feel however that the unions might not be on board. Well let me rephrase that, they will be on board as long as this temporary force pays union dues. I think this, plus adding tax incidentives to companies that hire unemployed people, including a sliding scale of tax incentives for hiring the 99ers.

Like the old CCC. Not sure if the unions were involved with that or not.

 

[StrangeSox]

Then again, if Obama doesn't speak for the next two years, we are probably OK.

 

Mean old Obama, controlling businesses!

[Jenksismyhero]

I think the government hiring the people who are out of work and putting them towards rebuilding America is a great idea. I feel however that the unions might not be on board. Well let me rephrase that, they will be on board as long as this temporary force pays union dues. I think this, plus adding tax incidentives to companies that hire unemployed people, including a sliding scale of tax incentives for hiring the 99ers.

 

I'd be fine with this. Hell, most are receiving unemployment paid for by the Federal government anyway. Might as well make em work for it.

[Balta1701]

Enjoyable EPI piece summing up all of the evidence (Not just polling) for why "regulatory uncertainty" has almost nothing to do with the current employment market.

[NorthSideSox72]

Enjoyable EPI piece summing up all of the evidence (Not just polling) for why "regulatory uncertainty" has almost nothing to do with the current employment market.

First I want to point out that, as I said before, the regulatory uncertainty issue isn't broad-based... it is narrow to a few specific industries. But those industries (finance and health care for example) are big ones.

 

But this article makes some pretty ridiculous leaps. For example, one of the claims they make as to why regulatory uncertainty isn't an issue, is to point to how environmental regulations haven't had a negative effect on employment. This completely misses the point. They are using a study of overall employment effect of REGULATIONS - which is to say, ones actually written and solidified - and comparing to to a situation where the regulations are still very much up in the air. That is an important disconnect.

 

I do agree with some of it though. I agree that the primary reason for lack of hiring is demand-side weakness, plain and simple. Not enough new customers. But customers won't buy if they aren't employed. One of the ways to get out of that cycle is getting new customers overseas, which hits and the argument I've been making all along: we need to get out in front on things.

 

[Balta1701]

First I want to point out that, as I said before, the regulatory uncertainty issue isn't broad-based... it is narrow to a few specific industries. But those industries (finance and health care for example) are big ones.

 

But this article makes some pretty ridiculous leaps. For example, one of the claims they make as to why regulatory uncertainty isn't an issue, is to point to how environmental regulations haven't had a negative effect on employment. This completely misses the point. They are using a study of overall employment effect of REGULATIONS - which is to say, ones actually written and solidified - and comparing to to a situation where the regulations are still very much up in the air. That is an important disconnect.

 

I do agree with some of it though. I agree that the primary reason for lack of hiring is demand-side weakness, plain and simple. Not enough new customers. But customers won't buy if they aren't employed. One of the ways to get out of that cycle is getting new customers overseas, which hits and the argument I've been making all along: we need to get out in front on things.

But there's another leap you're missing...if business investment by these sorts of companies is happening at or above the levels that we've seen in previous recessions, then the Evil Demycrat regulation boogeyman simply isn't the problem.

 

Yes, new health care and finance regulations have been passed. The Finance regulations have of course been completely gutted and kept completely up in the air by the finance industry lobby, which makes any argument that somehow the fact that the regulations are "up in the air" is the cause of a lack of investment by that industry just seem nonsensical....because they could make things clear by stopping the lobbying efforts against them. And Health Care has continued adding jobs at the same pace its been doing since 2003.

[NorthSideSox72]

But there's another leap you're missing...if business investment by these sorts of companies is happening at or above the levels that we've seen in previous recessions, then the Evil Demycrat regulation boogeyman simply isn't the problem.

 

Yes, new health care and finance regulations have been passed. The Finance regulations have of course been completely gutted and kept completely up in the air by the finance industry lobby, which makes any argument that somehow the fact that the regulations are "up in the air" is the cause of a lack of investment by that industry just seem nonsensical....because they could make things clear by stopping the lobbying efforts against them. And Health Care has continued adding jobs at the same pace its been doing since 2003.

Health care is later, when more of the big bill kicks in. But at least they KNOW what will kick in.

 

And the business investment argument doesn't say anything either way about regulations. In fact, firms are likely to buy software instead of people, especially software specializing in regulatory work, because then they can not worry about the changes that will take place (as much).

 

And the rules are not just up in the air because of lobbyists - the federal agencies are fighting internally and with each other, Congress is bullying the agencies on things they know nothing about, the industry is hemming and hawing on various individual pieces of the legislation and pending rules... it is all the above, not just one part of it. And this is where Obama can absolutely decide to be an actual executive, and make things happen.

 

[Balta1701]

And the rules are not just up in the air because of lobbyists - the federal agencies are fighting internally and with each other, Congress is bullying the agencies on things they know nothing about, the industry is hemming and hawing on various individual pieces of the legislation and pending rules... it is all the above, not just one part of it. And this is where Obama can absolutely decide to be an actual executive, and make things happen.

And none of those things are happening because of intense lobbying efforts. Why I'm sure that the Congress knows exactly what its doing in slowing down things it knows nothing about, and is not just listening to the guy with the checkbook.

[NorthSideSox72]

And none of those things are happening because of intense lobbying efforts. Why I'm sure that the Congress knows exactly what its doing in slowing down things it knows nothing about, and is not just listening to the guy with the checkbook.

All the more reason for Obama to step up to the plate and start acting like an executive. He has every ability to set deadlines and expectations for finalization of rules, etc. He can cut off discussion with the other parties. He has a golden opportunity that he is Bill Buckner-ing.

 

[Balta1701]

All the more reason for Obama to step up to the plate and start acting like an executive. He has every ability to set deadlines and expectations for finalization of rules, etc. He can cut off discussion with the other parties. He has a golden opportunity that he is Bill Buckner-ing.

The overbearing socialist is trying to destroy Wall Street!

[southsider2k5]

The overbearing socialist is trying to destroy Wall Street!

 

#occupywallstreet

[Balta1701]

Different topic...Emphasis mine.

When you're one of 10 people who gets to vote on U.S. monetary policy, your words get dissected as if you were the manager of the division-winning Philadelphia Phillies.

 

Federal Reserve Bank of Philadelphia president Charles I. Plosser is no Charlie Manuel. But listen to enough of their post-game or post-Fed-meeting interviews and you can see that they are similar in one respect: Both managers like to keep things simple.

 

In Manuel's case, it's expecting his hitters to hit, his pitchers to pitch, and his fielders to field.

As for Plosser, it's warning the Federal Reserve against straying from what he sees as the central bank's main mission: fighting inflation. To him, keeping prices stable makes it possible for the Fed to fulfill its other mandates: promoting maximum employment and moderate interest rates.

Well, at least the people on the Federal Reserve Board think things are spectacular right now.

[NorthSideSox72]

Different topic...Emphasis mine.

Well, at least the people on the Federal Reserve Board think things are spectacular right now.

Yeah, 'cause that's exactly what he is saying.

 

[Balta1701]

Yeah, 'cause that's exactly what he is saying.

Inflation has been running below the Fed's 2-3% long term goal for at least a year now and has been below that goal on average since 2008. It has done wonders for job growth.

[southsider2k5]

Inflation has been running below the Fed's 2-3% long term goal for at least a year now and has been below that goal on average since 2008. It has done wonders for job growth.

 

Except that data is highly manipulated by housing prices...

[StrangeSox]

#occupywallstreet

#smashcapital

[NorthSideSox72]

Inflation has been running below the Fed's 2-3% long term goal for at least a year now and has been below that goal on average since 2008. It has done wonders for job growth.

Missing his point though. For one, he never said anything was great about the economy. Didn't even hint at it. That was entirely made up by you. For another thing, what he is really getting at is, what is the Fed's role in this? Should they be narrowly focused on monetary policy (inflation, currency balance risk, etc.), or should they also use monetary policy as a tool to shape the broader economy?

 

And I know, that you know, that is what he meant. You are being intentionally obtuse.

 

[Balta1701]

Except that data is highly manipulated by housing prices...

And when you exclude those, the numbers still remain well below trend.