Abstract
A common proposition in welfare state research is that programs financed through dedicated payroll taxes tend to be more durable. This article examines American unemployment insurance (UI) as an exception to this proposition. UI is a self-financed social insurance program whose benefits have been dismantled over time because of an inability to maintain a constant revenue base. The study first examines the long-run decline in UI finances and concludes that changes in UI taxes are associated with the largest declines in state finances. It then examines why more states have not pursued reforms to strengthen UI finances and finds that opponents of more generous UI benefits have generally succeeded in preventing such measures, thus constricting UI finances and gradually retrenching benefits. These findings have implications for those seeking to improve UI solvency, as well as for the study of welfare state retrenchment more generally.
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