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Klinger: A stark choice for the jobless in new year

Scott Klinger

Scott Klinger

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Updated: February 20, 2014 6:45AM



Today, four out of every 10 unemployed workers in the U.S. have been looking for a job for more than six months, the highest level of long-term joblessness since the Great Depression.

While more people are buying goods and services now than four years ago, businesses are only beginning to hire back laid-off workers, and there are still three workers applying for every open job.

In depressed towns and cities, the holidays were tough for the long-term unemployed. And their situation is about to get worse.

About 1.3 million Americans received their last extended unemployment check before New Year’s Eve. Later this year, another 3.6 million of the long-term unemployed will lose this support unless Congress renews the financial lifeline.

The unemployed who receive assistance get about $300 a week on average. That’s hardly enough to cover rent or a mortgage and pay for heat, electricity and a phone — so they can continue to search for work instead of worrying about where the family will be sleeping that night.

The unemployed were left in the cold by the recent budget deal. Congress left town without figuring out how to pay for extended unemployment benefits, leaving the long-term jobless to wonder how they’ll make their mortgage payments in 2014.

But some Americans are much more fortunate. In 2012, the top hedge fund manager in the U.S., David Tepper, of Appaloosa Management, took home $2.6 billion in compensation. That’s $50 million a week, or $824 for every second of the year.

We can only wonder how the holidays were celebrated in his home.

Tepper is not alone in his largesse. The 25 top hedge fund managers together took home $14.4 billion in earnings in 2012. That equals the amount of money provided to support 906,280 unemployed Americans for an entire year.

Most upper-income professionals such as doctors, lawyers, accountants and dentists, pay up to 39.6 percent of their earnings in income tax. But Tepper and his hedge fund honchos paid just the 20 percent capital gains tax on their fortunes, thanks to something called the “carried interest loophole.” This hedge fund loophole saved Tepper more than $400 million on his 2012 tax bill.

If this loophole were eliminated and hedge fund, private equity and real estate investment managers were taxed at the highest income tax rate, Uncle Sam would collect about $13 billion more a year in revenue. That would be enough to cover the cost of extended unemployment benefits through 2015.

Earlier this month, President Barack Obama said reducing America’s rising financial inequality was the “defining challenge of our time.” It is the challenge of the moment. And for about 1.3 million Americans, the challenge is immediate.

Providing assistance to the unemployed helps people get back on their feet after losing a job and allows them to support the local economy while it’s trying to recover. Jobless benefits keep millions of the neighbors of the unemployed working — in grocery stores, gas stations, utility companies, banks, etc.

Allowing federal unemployment assistance to expire sucks money out of local economies that are already suffering from sluggish job growth and creates deeper pockets of economic depression.

But reducing inequality isn’t just about helping those struggling at the lower ends of income distribution. It also requires reining in excessive compensation at the top. Changing the tax code to ask a few thousand of our wealthiest citizens to pay taxes like the rest of us ensures that everyone plays by the same rules.

Congress has a choice to make — will we help roughly 5 million families soldier through tough economic times or will we continue to allow those who have prospered the most to live by a different set of rules, apart from the rest of us?

Scott Klinger is the director of revenue and spending policies at the Center for Effective Government, a Washington, D.C.-based nonprofit group that promotes government transparency and accountability as well as equitable regulatory and budgetary processes.



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