At this moment, 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 lined up for every open job.
In depressed towns and cities, the holidays have been tough for the long-term unemployed. And their situation is about to get much worse.
About 1.3 million Americans received their last extended unemployment check before New Year’s Eve. Later this year, another 3.6 million long-term unemployed workers will lose support unless Congress renews this lifeline.
The unemployed receiving 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 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. This equals the amount of money provided to support 906,280 unemployed Americans for an entire year.
Unlike most upper-income professionals (like doctors, lawyers, accountants and dentists) who pay up to 39.6% of their earnings in income taxes, Tepper and his pals paid just the 20% capital gains tax on their fortunes, thanks to the ‘carried interest loophole.’ This hedge fund loophole saved Mr. Tepper alone 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 same rate as lawyers, dentists, doctors and the rest of us salaried employees), we would have another $13 billion a year in revenue. That would be enough to cover the cost of extended emergency unemployment benefits through the end of 2015.
Earlier this month, President Obama said reducing inequality was “the defining challenge of our time.” In fact, it is the challenge of the moment. For 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 it allows them contribute to neighborhood businesses and the local economy while it’s trying to recover. Unemployment benefits keep millions of the neighbors of the unemployed working – in grocery stores, gas stations, utility companies and banks. Allowing federal unemployment assistance to expire sucks money out of local economies already suffering from sluggish job growth, resulting in more local job loss and deeper pockets of depression.
But reducing inequality isn’t just about helping those struggling at the lower ends of the 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 is just ensuring everyone plays by the same rules.
Congress has a choice to make: will we help five 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.)