Some time today, the Douglas Administration and the leaders of the Legislature either will or will not reach agreement on how to restore Vermont’s depleted Unemployment Insurance Trust Fund.

If they do agree, the Legislature will pass a bill that Gov. Jim Douglas will presumably sign.

If they don’t, the Legislature will pass a bill anyway, effectively daring Douglas to veto it.

According to sources privy to the negotiations that went on most of Thursday, Douglas is holding out for a compromise that cuts unemployment benefits more than the Democrats are willing to cut them.

But even without an agreement, it might be politically difficult for Douglas to veto whatever the Legislature passes. It’s the Governor, after all, who has been insisting for months that the UI Fund has to be made solvent immediately, if not sooner, to avoid fiscal catastrophe.

Actually, the state and its unemployment compensation system would survive if the Legislature went home without doing anything about the UI Fund. No matter what the lawmakers and the Governor do, the Fund will still be broke next year, and the year after that, and the year after that.

But Douglas is right when he argues that it would be better to put the Fund back on the road to solvency sooner rather than later. To pay unemployment benefits, the State is borrowing from the Federal Government. Without paying interest this year. Next year, the interest payments start. The longer the Fund is in arrears, the longer the borrowing will go on, and the more the interest payments will add up.

State officials have known this problem was pending for at least a year. As is common in the political world, they got serious about solving the problem about a month ago.

Well, what was the hurry? After all, the actual numbers involved aren’t that huge, so this seemed the kind of dilemma that could easily by worked out. It would require tiny tax increases on businesses. Or maybe, according to one proposal, even tinier – and temporary – tax increases on all workers. And perhaps some modest reductions in the benefits paid to the unemployed.

That would indeed sound like an impasse almost begging to be solved by reasonable compromise. But only for those who do not know the history of this issue, and the explanation for how Vermont got into this pickle in the first place.

Happily, the explanation can be brief: Vermonters were dumb, dumb, dumb, dumb. They were boneheaded. Or perhaps fatheaded. They erred.

And this was all of them.  Not just the Republicans or the Democrats, or business or labor, or the Administration or the Legislature. Everyone.

The financing of the Unemployment Insurance Trust Fund is very complicated, but the dumbness was very simple. The fund is financed by a small tax on employers, a percentage of only the first several thousand dollars of each workers’ pay. It’s called the Taxable Wage Base.

Last year the Legislature and Douglas agreed to raise that base from $8,000 to $10,000. That was actually not dumb. What was dumb is that until last year the Taxable Wage Base had not gone up for 25 years.

Twenty-five years of economic growth, including higher wages and higher prices. Considering that unemployment benefits are supposed to comprise a respectable percentage (roughly 40 percent) of the unemployed person’s pre-layoff wages, any fool would know that the Fund that pays those benefits would have to keep growing, too, or else it would run dry the next time unemployment rose.

Any fool but these Vermont fools.

In 1983, according to figures compiled by the National Employment Law Project (a liberal group, but its numbers are reliable) almost half of all wages were subject t UI taxes. By 2008, “the ratio of total wages to taxable wages had fallen to roughly 25 percent,” the Project found.

For this foolishness there are two explanations, one at least as old as the Tulip Panic (circa 1637), the other more recent.

The first is humankind’s incurable delusion that good times will last forever, so why plan for bad times? Businesses didn’t want to pay any more, politicians didn’t want to raise anybody’s taxes, and Organized Labor was happy enough because the jobless benefits kept rising. We could all afford it; hardly anybody was unemployed, anyway, so they could get generous benefits.

The second – more contemporary – delusion is that all tax increases, no matter how tiny, are always a mistake that will suppress economic growth. In this case, the tax amounts of 0.89 percent of total wages in 2009, according to George Wentworth, the project’s Unemployment Insurance Modernization Coordinator.

To their credit, Vermont business leaders (and the Governor who is usually allied with them) now realize that they should have agreed to small UI tax increases several years ago, and are willing to pay them now. Ironically, there is a better argument that even these tiny tax hikes will suppress economic growth during a recession, though they would have been an unnoticeable blip earlier.

Well, if the business community and Douglas are willing to accept higher UI taxes, what’s the problem?

The problem is that they also want lower unemployment insurance benefits. And they want these lower benefits to be permanent, so that unemployed workers in Vermont will continue to get less money per week forever.

Not necessarily less than they get now, but less than they would get under current law.

To labor advocates, such as Christopher Curtis of the Vermont Legal Aid Society, these proposals mean the Douglas Administration is “using the present (Trust Fund) crisis to reduce benefits far beyond the level needed to restore (the Fund).”

That’s true, not because Douglas, Labor Commissioner Patricia Moulton Powden and other officials are heartless beasts intent on starving the working class. It’s because they are convinced that some workers are gaming the Unemployment Insurance system, preferring to stay home and live off their benefits rather than trying to get another job.

“The Governor says some people work six months a year and then go to Florida,” said someone familiar with the negotiations going on between the Administration and the Legislative leaders.

Obviously, there are such people. There do not, however, appear to be very many of them, and the belief that large numbers of people would rather lie around and collect unemployment benefits than work for a living, while widespread, seems rare in, if not absent from the peer-reviewed economic literature.

In fact, a recent study by economists at the Federal Reserve Bank of San Francisco concluded that recent extension of unemployment benefits had only a “modest effect” on total unemployment. Extending benefits, to be sure, is not identical to the generosity of benefits. But Vermont’s aren’t all that generous. The average weekly benefit of $304 is 25^th in the nation, and the $425 maximum ranks seventeenth.

Besides, concluding that many people would rather earn less money than more money is something of a refutation of a basic tenet of capitalism, which rests on the premise that individuals rationally pursue their economic self-interest. Deliberately deciding to cut one’s income by more than 50 percent does not seem a rational economic pursuit.

If anything, Vermonters stay on unemployment less workers in other states. The average length of stay in the system has been 14 weeks, though Powden said it had recently ticked up to at least 15 weeks. Very few unemployed Vermonters stay on the unemployment rolls for the 26 week maximum. Most unemployed Vermonters, it seems, want to go back to work.

From one perspective, then, the Administration might be trying to solve a problem that does not exist. But Powden said that because Vermont has a high proportion of seasonal workers (ski resorts, and all that) some people are “utilizing the system to their advantage,” and “may choose unemployment” for part of the year thanks to Vermont’s “fairly generous benefits.”

She acknowledged that she was describing less than 10 percent of those who receive benefits, but said perhaps some of the seasonally unemployed “who know their job is coming back maybe should be getting a lower amount” to create “an incentive to get back to work.”

The problem seems to be that most of the formulas that will lower those benefits would also lower the benefits of many workers who don’t know their job is coming back, and are already trying as hard as they can to find work. The negotiators were seeking what one of them called “creative ways” to threat that needle.