The Shrinking Elephant (Opinion)

That elephant in the room is not quite as imposing as it once seemed.

Two weeks ago, the Arkansas State Chamber of Commerce delivered some shockingly good news: Even without issuing a bond, as recently enacted legislation would allow, the state will be able to pay off in reasonable time the $360 million debt to the federal government, which provided cash for unemployment benefits after the recession devoured the balance in Arkansas’ previously healthy unemployment insurance fund.

Last fall, we called that debt (then only $331 million) “an elephant in the room” where Arkansans were otherwise celebrating the deftness with which our state government had navigated the Great Recession that swamped most other states. It seemed almost overwhelming, and now it seems completely manageable.

A big part of the turnaround — more than $60 million a year — comes at the expense of unemployed Arkansans, and it would be heartless to pretend otherwise.

But it is true that Arkansas’ unemployment benefits have been among the most generous in the country, making up perhaps for the fact that median incomes here even for the employed are among the lowest in the country, and the cost of a program that benefits both business and labor should be shared by both.

And make no mistake: Unemployment insurance does benefit both, smoothing out the ups and downs of the economy by allowing the unemployed to continue buying necessities from businesses.

In the current case, unemployed Arkansans have had 360 million more dollars to spend during a time when the churn of money was desperately needed by most.

According to the chamber’s president and CEO, Randy Zook, the combination of benefit reductions and additional unemployment taxes being paid by employers who have been hiring at a faster clip is projected to pay off the debt by 2015. And though that will take longer than a bond issue would, it will be cheaper (the federal government only charges 0.2 percent interest and the Obama administration has suggested waiving even that), and the projected fund balance will be almost identical by 2017 either way.

“If we do nothing, we end up at $233 million by 2017,” Zook said. “If we issue the bonds, we end up at $233 million by 2017.”

The chamber will be asking members for their thoughts on whether to lobby for a bond issue to pay off the debt or to let nature take its course.

Unless we’ve missed something, the best choice seems like an obvious one. Why pay more to get to the same point?