In theory, the depression-vintage, federal-state unemployment insurance program was supposed to build reserves in good years so those reserves could be paid out in years of high unemployment. Like other federal government programs it doesn’t work that way.

Randy York called our attention this morning to a Reno Gazette Journal item announcing a 50% increase in the unemployment insurance rates paid by Nevada employers for each employee, $180 on average. On top of that the federal tax will increase by $21 to $77 per average employee; this to cover interest on Nevada’s debt to the federal government with the current balance at $579 million but growing by $300 million in 2011! So Cindy Jones the administrator of the Nevada Employment Security Division argues the necessity, though strangely she is supported by people in the Chamber of Commerce.

Randy analogizes this to “spending our way out of debt,” arguing that the new mantra is that “we can tax our way back to a healthy business environment and lower unemployment.” What are they thinking! Jerry O’Driscoll says the “unemployment benefits have turned into long-term welfare.” Joe Morabito points out that even Denmark cut the benefit duration down to two years and only then did people find work! Indeed, there is a significant amount of economic thought that maintains the unemployment benefits have the unintended effect of extending the duration of unemployment.

The consequences, unintended or otherwise, here in Nevada will be to increase unemployment, close businesses, and frighten California businesses that would have otherwise settled here upon their left coast exits. Note too, this is at a time when Nevada has the highest unemployment rate in the nation.

Now this is only one federal-state tie. There are others in education, medicaid, environment, highways, airports, federal land management, energy, you name it. The relationships involve grants with strings, funding with local tax requirements, joint funding, and unfunded mandates. The major state budget deficits center on medicaid and education both involve federal programs.

I wonder how well off the states would be without all this federal “help?” Missouri, my home state, for instance, has no illegal immigration problem to speak of because the voters designated English as the official language and in another action required law enforcement officers to verify immigration status. Illegals have no mandated access to welfare like food stamps or healthcare. State action. Problem avoided or solved! Now I don’t want to seem flippant, but I wonder how the economy would improve if states took over unemployment insurance and severely limited its scope and duration?

Now consider the federal-state partnership in this downward spiral. That lopsided, unconstitutionally intended relationship is at the heart of the problems. The states have ceded control of problems that they should more appropriately handle. And the federal government has too much control of things it has no business being in in the first place. Our federal system is upside-down and likely to remain so until we restore some sense in the citizenry that we are a republic composed of sovereign state and the citizens thereof, from whence all political power and responsibility derive.

So my take: return election of the senators to the states, preclude federal bailout of spendthrift states, and provide a bankruptcy mechanism for states to legally and politically extricate themselves from their prior unsustainable excesses. Some of them in fact owed to the federal government!

Just a thought!