Fewer weeks unemployment paid better for LA

Taking the first steps to challenge Governor Nyet’s agenda of bloated, redistributionist government, Louisiana’s legislative Republican supermajorities look primed to start the party a year early in right-sizing state government.

This week, on nearly party-line votes, each chamber in the Legislature passed bills that could leave more money in the hands of the people. In the Senate, bills by GOP state Sen. Bret Allain have moved out of committee which collectively would phase out corporate income and franchise taxes and get rid of the inventory tax credit that would keep over $600 million in the people’s wallets over the next five years. Four years after that, during which annual net revenue decreases in the dozens of millions of dollars will occur, the lasting annual impact thenceforth is predicted as a $324 million reduction.

Democrat Gov. John Bel Edwards can’t veto the phase-out of the inventory tax as it must take the form of a constitutional amendment, but he could try to attenuate savings elsewhere with vetoes of the other two measures. If all Republicans in both chambers stick together in voting for any veto attempt, they will frustrate him.

In the House, a panel passed out HB 340 by Republican state Rep. Troy Romero that starting in 2025 would reduce the number of weeks someone could draw unemployment insurance from 26 to 20, but that could go even lower depending upon the state’s unemployment rate, where anything below five percent would allow for only 13 weeks. Sliding scales commonly are used by states in this fashion; Louisiana presently is only one of ten that don’t, although only one with a sliding scale has a maximum of fewer than 26 weeks, the maximum of most states.

Pursuing this strategy would have salutary impacts. First, econometric literature, spanning both U.S. and European systems, unanimously determines that the longer benefits duration lasts, the more unemployment and less labor force participation is encouraged, disputing only how large the effect. With fewer weeks paid out, Louisiana’s workforce and economy in aggregate would increase in size. In particular, the state currently has one of the lowest participation rates in the country – meaning one of the highest proportions of able-bodied non-elderly adults not working nor looking for work – and, except for the Wuhan coronavirus pandemic period, the highest such rate in almost a half-century.

Also, smaller payouts would increase the size of the state’s unemployment trust fund, meaning less chance of having to borrow from the federal government and paying for that. Alternatively, the state could reduce its employer contribution levels to the fund, meaning employers would have more earnings available to lower prices, pay workers more, and/or retain, or some or all of the above. Regardless of their destination, more dollars would end up in the hands of people and fewer banked by government.

Finally, under federal legislation in periods of relatively high unemployment, states can provide an extra 13 weeks of benefits matching federal dollars one-for-one. Thus, under the new law in extreme circumstances Louisiana could have made available 33 weeks of benefits – and, historically, in these periods the federal government often adds on to that.

That law and precedent also allays concerns that the bill could lock in people at shorter durations when unemployment rapidly increases. In any event, an extreme spike is unlikely to recur absent a mistake such as the policy-caused pandemic recession.

Edwards also likely would veto this bill if it crosses his desk, but a far-sighted and determined supermajority can overturn that. Even as after this year’s elections that impediment will disappear, almost certainly replaced by a much wiser chief executive who gladly would sign such helpful legislation, why wait to enjoy the overall positive effects HB 340 and Allain’s bills will have on a state that has hemorrhaged people, lost jobs, and fallen economically further behind during Edwards’ time in office?