The late, great car salesman, Ernie Boch, used to say that his prices were lowest because his costs were lowest. In Massachusetts, when it comes to unemployment insurance, it is just the opposite: Our taxes are highest because our costs are highest.
In a rare example of unanimity, the Legislature this week fast-tracked a $150 million freeze in unemployment insurance taxes, a kind of Valentine's gift to the business community, which had been clamoring loudly for a rate freeze. The House and the Senate on Wednesday both approved the rate freeze, saying the unemployment trust fund has a balance of $1.2 billion. The governor is on board, too.
If history is any guide, though, the business community could find itself returning the $150 million gift, sooner rather than later, if in fact a recession materializes as is widely advertised. It was just a few years ago the unemployment fund was broke - again.
In 2001, Massachusetts had a hefty $2.1 billion in the unemployment trust fund; two years later the recession had drained it. In 2003 the state collected $808 million in unemployment insurance taxes and paid out a staggering $1.7 billion in benefits - meaning that in just 12 months the state blew through $869 million more than what it had collected in taxes. The fund ended up in the red in both 2003 and 2004, forcing the state to borrow from the federal government. The Legislature responded by doubling the rates.
Since then Massachusetts' already high benefits have increased considerably - from a maximum of about $526 a week (plus $25 per child) to a maximum of $600 (plus $25 per child) - meaning the state could go through its billion-dollar cushion in a hurry if a recession hits hard. Northeastern University economist Paul Harrington, an opponent of freezing the insurance rates, notes that Massachusetts led the nation in relative job losses the last two recessions, and the fund went broke both times. He estimates the fund's current balance could be expended in less than six months if we get into a nasty recession.
The rates simply reflect the system's costs. And the Legislature, cowed by labor, has shown no appetite about doing anything about the underlying costs.
In a report last month, the Pioneer Institute spelled out in detail those problems and the fixes. The state has some of the most generous benefits in the nation and the easiest eligibility criteria. Some industries - construction in particular - use unemployment as a regular wage supplement, requiring other sectors to subsidize those workers. The self-employed game the system by laying themselves off and collecting during down periods. And too many of the same people turn up on the rolls year after year.
Freezing the rate is a little like skipping a credit card payment - eventually the bill comes due. As with your credit card, the way to cut your bill is to cut your spending.
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Neighborhood news:
For a dozen years the Boston Harbor Hotel has been more than another client for PR guru George Regan. It has been a second home: He started every workday in the hotel gym and finished every night in the bar. But now he is out at the hotel. Worse yet, he has been replaced by his archrival, Tommy O'Neill. In a statement, Regan Communications said it resigned the Boston Harbor account because it plans to represent other hotels, including the new Regent Hotel on Battery Wharf, and that the Boston Harbor saw that as a conflict. Regan, in an interview, seemed less than pleased: "Tommy O'Neill and the used car lot he runs can only makes us look good."
Who is on top in Boston's drive-time talk radio world? Nothing says it so directly as the rate card for a 60-second ad. In the morning: WEEI's Dennis & Callahan, $1,500; WBZ, $1,300; WRKO's Tom Finneran, $400 (whose show I appear on every morning); and WTKK's Don Imus, $250. In the afternoon: WEEI's Glenn Ordway show, $1,500; WBZ, $625; WRKO's Howie Carr, $600; and WTKK's Jay Severin, $350.
Steve Bailey is a Globe columnist. He can be reached at bailey@globe.com or at 617-929-2902.
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