Saturday, October 3, 2009

Legitimate beneficiary, or tax sucker?

I graduated from high school during the late 70's, when the country was in a blue funk from losing the Vietnam War, there were periodic shortages of the strange things like toilet paper and paper clips, inflation and interest rates were in the double digits, and unemployment was higher than at any time since the Great Depression. Prospects seemed dim.

Neverthelessw, my parents instilled in me and my brothers that there was no excuse for being on the dole, and they would sometimes speak in hushed tones of someone they knew who had succumbed to taking unemployment insurance. Their tone and delivery made it clear that unemployment was a moral failure, and taking unemployment insurance was a scandal.

When I attended the University of Michigan, I hooked up with the local Ann Arbor Libertarian League. I found in that rag tag group of students, grad students, former students, assistant professors, and various adult leftovers from the 60's, kindred spirits and fellow travelers. We partied together, ran petition drives to get Roger McBride on the presidential ballot, and hung out at the office. These were my kind of people: fiercely independent, intellectual, and principled.
Imagine my dismay when I found that the reason some of these people, especially the adults, were able to spend extraordinary amounts of time being politically active was they were unemployed and living on unemployment insurance payments. The argument was that unemployment insurance was a tax on their wages, so they in effect paid premiums and were now due the benefits.

I didn't buy it. In fact, I felt it was a major cop-out for a libertarian to succumb to taking government money of any kind (which was one of the reasons I quit U of M).

Thirty years later I am watching the company I work for go through a major downsizing during the deepest recession since the 70's, maybe even the 30's. We have had to let many good people go and some of them seemed to have had extraordinary problems getting back on their feet. During that time, most of those let go have taken unemployment insurance. One of the managers who will lose her job soon has flat-out stated that she is done working, and she has every intention of taking unemployment payments for as long as they are offered, but she has no intention of looking for or taking work.

She and I argue about politics and policy on a regular basis. When we took up the subject of unemployment insurance, she made her position clear that if I argued with her over it "we'd come to blows." She said it with total conviction in her always intimidating deep south drawl. If we ever "came to blows" I would not bet on the winner.

She is a conservative Republican, yet she believes with all her being that the money paid by the company for unemployment insurance is no different than the money paid for health insurance. No one is expected to live with discomfort, pain, or chronic disease...that's what the insurance is for. Even non-life-threatening medical events are considered good reason to take advantage of the insurance offered. Could unemployment insurance be any different? They're that's what the insurance was paid for.

As I grapple with this issue, I note that there is a difference in intent and use of unemployment insurance versus health insurance. Health insurance restores you to health after an outside event (disease, accident, etc.) that made you unhealthy. Presumably you cannot simply wait-out the disease/injury (unlike a cold or a flu) but instead require some kind of medical intervention to restore your health. That restoration requires doctors and hospitals, and paying for all that is the purpose of insurance. On the other hand, unemployment may also be an outside event (you are not considered "unemployed" if you quit your job voluntarily), but its' continuance is very subject to personal actions. You can, as the "patient" of unemployment insurance, frustrate attempts to make you whole again by simply refusing to take work that is offered. The insurance pays you to be unemployed, unlike health insurance which pays to make you healthy.

The next question is: does any of this matter? Insurance can be structured to cover anything you like, including bets at the blackjack table. That is true, so maybe the difference is more cosmetic than substantial.

The premiums for unemployment insurance, unlike health insurance, often do not cover the real expense of the payouts. During difficult economic times, like now, the unemployment funds often run dry and require an infusion of tax money to keep them afloat. Anyone accepting unemployment checks once the fund has been depleted is, for all practical purposes, living at the expense of someone else. Is it reasonable for a beneficiary to worry about what the source of the money that pays the benefits? Didn't they, after all, pay premiums in good faith? Maybe it was the OTHER guy who got the tax money.

If libertarians adhere to the non-aggression principle, then unemployment insurance is tricky ground. Yes, it is a form of insurance that is at least partly paid for by the worker in the form of premiums (taxes) that are specifically earmarked for paying the benefits. However, the morality of taking the insurance payments once the fund is depleted seems clear: the fund is bankrupt and you are just plain SOL.

My parents were correct, at least in part. The extent to which we have paid for a service, we deserve the benefits, but once the money is gone, even if we did not get any, we no longer have a legitimate claim. Forcing someone else to pay the benefits is aggression. Unemployment insurance benefits, when the fund is dry, is nothing more than the dole. It behooves a good libertarian to avoid it.

With my mind now made up, I can prepare for my beating from my good friend in Texas. It won't be fun, and it won't be pretty, but it will be right. Let the abuse begin.

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