Rising Debt Periodic Large Level & Interest One-Time Payments Charges
Entitlement Spending
Unemployment
Note: *denotes F2010 net income / net loss of respective programs, data per White House OMB. 1) Medicare and Social Security net loss excludes Trust Fund interest income. 2) TARP net loss includes proceeds from sale of warrants. TARP is Troubled Asset Relief Program; ARRA
KP is American Recovery & Reinvestment Act programs. (@)E) www.kpcb.com USA Inc. | Income Statement Drilldown 121
Unemployment Benefits: Long-Term Break-Even,
Though Prone to Cyclicality
Social Insurance Program — Created in 1935 as part of the Social Security Act to provide temporary financial assistance to eligible workers who are unemployed through no fault of their own (via layoffs or natural disasters).
e Funded via Taxing Employers — Employers pay federal government 0.8% of payroll (in addition to various levels of state unemployment insurance taxes) to fund the Federal Unemployment Insurance Trust Fund.
e Funding = Pro-Cyclical — Rising employment increases revenue and reduces benefit payments, generally leading to surpluses, while falling employment reduces revenue and increases benefits payments, leading to periodically large deficits during recessions.
Flexible at the State Level by Design — State governments set policies on unemployment benefit eligibility / duration / tax levels, while federal government provide financial and legal oversight.
Generally Break-Even — In 29 of the past 49 years, Federal unemployment insurance programs have had surpluses. Excluding the 2009 / 2010 loss, unemployment insurance had a cumulative surplus of $53 billion from 1962 to 2008.
KP Source: White House OMB. (@E) www.kpcb.com USA Inc. | Income Statement Drilldown 122
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