Louisiana Governor Bobby Jindal has chosen to refuse $90 million of federal dollars that would have benefited his state’s unemployed citizens. His reason for this is that the state would have been required to change its own laws and expand unemployment eligibility. The federal money would fund the expansion for only three years, after which time the state would have to tax businesses to make up the slack. Therefore, accepting the $90 million would hurt business.
Of course, there is no earthly reason why Louisiana couldn’t plan on phasing out the expansion once the federal money ran out. We’re in an emergency mode, after all. And one would think that putting a little extra money into the pockets of Louisiana residents would be, you know, good for business. People who understand these matters better than I do say that unemployment benefits are a particularly effective stimulus, because nearly every penny is spent:
Temporary increases in unemployment insurance (UI) benefits are particularly effective as stimulus: the benefits go to workers who have lost their jobs, so the added income is likely to be spent quickly. As CBO director Orszag recently told the House Budget Committee, “research has shown that the unemployment insurance system is among the most effective dollar-for-dollar economic stabilizers that we have in terms of counterbalancing periods of economic weakness.”
Already Louisiana is a state that receives more in federal tax dollars than it pays. According to the Tax Foundation, in 2005 for every dollar paid in federal income taxes, Louisiana got $1.30 back. Louisiana got $1.37 back in 2004, so don’t blame Katrina.
On the other hand, California Governor Arnold Schwarzenegger just signed into law a $12.5 billion tax increase. Michael Finnegan writes for the Los Angeles Times,
With that, the Republican governor broke one of the few bonds left between his shrunken party and California’s mainstream voters, marring its hard-won image as a guardian against higher taxes.
Actually, California has a hard-won image of a state that lacks the sense to come in out of the rain, or back away from a mudslide, or whatever.
To be sure, none of the GOP lawmakers who demanded that the state close its $42-billion shortfall without raising taxes detailed the doomsday cuts that approach would entail, nor did the activists who lobbied against the tax increases. If the state had laid off its entire workforce of 238,000 — every prison guard, firefighter and clerk — it still would have fallen billions shy of a balanced budget.
I bet no one in the GOP still is talking about a constitutional amendment that would allow Ahnold to be president.
Anyway, these two governors have chosen their sides. Gov. Jindal chose to stay on the sinking ship that is the GOP. Gov. Schwarzenegger, whatever his many faults, at least is smart enough to know when it’s time to grab a lifeboat.
Update: From Liberal Journal –
Keeping money out of the hands of the unemployed during a severe recession is just the kind of stunt that could vault him to the top of the Republican Presidential primary field in 2012. And with potential competition from the mighty Sarah Palin, BJ can’t leave anything to chance.