Just remember, change is coming, from bad to worse...

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http://online.wsj.com/article/SB123125893419357707.html

JANUARY 7, 2009 Obama Pushes States to Cover More Unemployed 

By JONATHAN WEISMAN

WASHINGTON -- President-elect Barack Obama plans to offer states $7 
billion as incentive to permanently change their unemployment-insurance 
laws to cover part-time workers and prevent other laid-off workers from 
falling through cracks in the coverage.

The proposal, which is set to be included in the president-elect's two-
year economic-stimulus plan, will seek to use short-term aid to cash-
strapped states to force long-term changes that the Obama team believes 
are overdue, Obama aides said Tuesday.

But the proposal, along with others to subsidize health insurance for 
the laid-off and expand Medicaid to out-of-work Americans, are sparking 
bipartisan concern over the potential, long-term impact on a federal 
budget deficit that is expected to hit $1 trillion this year, even 
before the stimulus plan.

A new Congressional Budget Office forecast due out Wednesday is expected 
to put the fiscal 2009 deficit at about $1 trillion, more than double 
the $438 billion in red ink CBO foresaw in September.

Sen. Judd Gregg of New Hampshire, the ranking Republican on the Senate 
Budget Committee, said that would put this year's deficit at 7% of the 
gross domestic product, a level not seen since World War II.

Barack Obama, shown Tuesday after meeting with economic advisers, aims 
to use short-term aid to bring about long-term changes.
On Wednesday, Mr. Obama is set to speak about deficit-control measures 
he plans to include in his first budget, due next month, an Obama aide 
said. The aide stressed that the president-elect is inheriting a fiscal 
disaster not of his making.

The goal of the stimulus package, which will include tax breaks for 
businesses and individuals and is estimated to cost $775 billion, is to 
generate jobs and spending to jump-start the country's ailing economy. 
But concerns are growing over the potential, long-term cost of some of 
the policy changes being considered. Republicans and even some Democrats 
said some of the items show too little concern for the long-term impact 
on the national deficit.

"Any additional tax cuts, where there will be pressure to make them 
permanent, or spending proposals that have a permanent nature to them, 
give me pause," said Senate Budget Committee Chairman Kent Conrad (D., 
N.D.).

Amid such criticism, the president-elect huddled with his economic team 
on Tuesday to discuss ways to contain the long-term deficit. Attendants 
included budget director-designate Peter Orszag, Treasury Secretary-
nominee Timothy Geithner and National Economic Council director-
designate Lawrence Summers.

"Potentially we've got trillion-dollar deficits for years to come, even 
with the economic recovery that we are working on at this point," Mr. 
Obama said. "We're going to have to stop talking about budget reform. 
We're going to have to totally embrace it. It's an absolute necessity."

Obama aides defended the proposals that have drawn the most fire. The 
unemployment insurance program would entice states to make changes 
recommended by a bipartisan commission in 1994. Fewer than half of the 
unemployed currently receive unemployment benefits, either because they 
work part time or because outdated regulations don't define them as 
having been working recently. Many states use older wage data to 
establish work histories and exclude the most recent three to five 
months of employment when determining eligibility.

 The changes sought by Mr. Obama would ultimately be financed by 
employer contributions to the unemployment insurance system, not by 
federal taxpayers, Obama aides said.

Another Obama program would offer federal subsidies to laid-off workers 
trying to purchase continued health insurance through the COBRA system. 
Under the 22-year-old COBRA law, laid-off workers must be offered access 
to the insurance offerings of their former employers, but for many 
unemployed, such plans have been unaffordable.

For the first time, workers laid off from jobs that didn't include 
health insurance would be allowed to buy into Medicaid, the federal-
state insurance program for the poor.

Aides said these programs would expire with the two-year stimulus 
program.

Robert Bixby, executive director of the budget watchdog Concord 
Coalition, said turning off such programs will be difficult. A program 
established in 2002 to subsidize health insurance for workers displaced 
by free-trade agreements is still in existence, despite that less than 
15% of eligible workers have enrolled, said Stan Dorn, a researcher at 
the Urban Institute, who has studied the program.

"Those aren't stimulus," Rep. Paul Ryan of Wisconsin, the ranking 
Republican on the House Budget Committee, said of Mr. Obama's health and 
unemployment proposals. "Those are ideological accomplishments in the 
guise of economic stimulus."

Write to Jonathan Weisman at jonathan.weisman{at}wsj.com

CMPQwk 1.42-21 9999 
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