Unemployment

It's pretty obvious that the system is going to hell in a hand basket but some of the reports going around really make you wonder just how broken our system really is.

The linked article among other things says that 16 states have used up all of their unemployment funds already, and another 16 could run out by year's end.  These states are now borrowing funds that will have to be repaid in the future by higher taxes...  higher taxes on those employed since roughly 10% of people in the country are unemployed and getting benefits.  And maybe when some of these people who were unemployed finally get a job, they'll step into an environment where they take home less of what they've earned.

But how can these systems get like this?  How can so many promises of funding be assured and guaranteed with no actual knowledge of where the money will come from?  Let's consider unemployment in California.  At the most, each employed person will pay about $700 into the unemployment fund each year.  We obviously are in a tough economic time but assuming 10% unemployment means 9 employed for every 1 unemployed then that's $6,300/yr.  Even if you assume half the unemployment you'd have 9.5 employed for every .5 employed, you have about $13,300/yr.  Whatever the benefits actually are, someone should be able to arrive at a formula for a safe cushion of cash or not promise anything at all and encourage good planning.

Same goes for retirement, where the 401k has taken over because private company pensions lacked certainty.  But government still happily offers pensions 1) because government employees wouldn't give them up and 2) because the government has to pay for the pension guarantees no matter what, which means more taxes at some point to make up the difference.  State governments don't even have the flexibility of the social security system to say you may only get 75% of your promised benefits.  Taxing is their only recourse, but they happily continue to make promises that may be difficult to impossible to honor.

All around us, from every economic angle, it appears that all decisions are being made to break even and to have an immediate satisfaction without looking towards a long term consequence.  And even in big business, our banks were frivolous with their money, leveraging their investments 30:1 and paying big bonuses with the great payout and sticking their hand out when the bet didn't pay off.  One year later, things are looking better and banks are paying higher salaries than they were two years ago.  There's no sense of retaining money to capitalize the bank and avoid overleveraging... why should there be?  There's no consequence!