With TEF, the federal government offered to reimburse states for 80 percent of the cost of job-subsidy or certain public assistance programs. Thirty-seven states took the government up on it, leading to the hiring of 240,000 previously unemployed workers nationwide.

The House voted twice to extend the funding. The Senate failed to pass either extension. That means that when the fund expires on Sept. 30, the subsidy will go away and tens of thousands of workers will lose their jobs and move onto the unemployment rolls.

The Center on Budget and Policy Priorities summarized some of the Emergency Fund’s achievements. One county in Tennessee used TEF funding to bring its unemployment rate from 27.3 to 18.6 percent in eight months. North Dakota used it to provide jobs for jobless parents without the means to pay their child support. South Carolina used it to give jobs to parents who would otherwise collect welfare. Illinois provided 20,000 jobs, 67 percent more than its goal. Alabama used it to gin up rural jobs.

Today, Sen. Bob Casey (D-Pa.) held a hearing to urge the TEF’s reauthorization. (Pennsylvania’s program, called Way to Work, led 4,200 businesses to hire 12,000 people. 3,000 will lose their jobs on Sept. 30, absent Congressional action.) Employers and employees who benefited from the program, scholars at think tanks, union leaders and Philadelphia Mayor Michael Nutter all argued for it. Casey is looking for a vehicle for the funding, but the chances seem dim.

Under normal circumstances, states would have to pay Washington back for the borrowed cash, plus interest. Recognizing the uniquely severe nature of the recent downturn, however, Democrats waived the interest requirement as part of last year’s economic stimulus bill. Trouble is, that waiver runs out at the end of 2010, leaving struggling states with several options, and none of them good for their unemployed residents.

In one scenario, states will simply cut back on their UI benefits — a dubious strategy in a downturn, considering that unemployed folks tend to spend the money quickly, providing an immediate boost to the the economy.

In another scenario, states will borrow from their general funds to make the additional payments to Washington. But the recession has squeezed general funds severely, forcing states to trim a number of safety net benefits already. Dipping into the general account to pay interest on borrowed UI funds would only exacerbate the funding problems of those other state programs.

In yet another scenario, states will hike the unemployment tax on employers to cover the interest. (Indeed, in many states, this tax hike is mandatory). And while a number of experts say that such a tax hike is probably necessary during periods of economic growth, they’re also worried that the additional cost would discourage employers from hiring new workers at the same time that the nation’s underemployment rate has topped 17 percent.

For all these reasons, a number of consumer advocates and policy shops are already urging Congress to extend the moratorium on states paying back UI interest beyond the end-of-the-year deadline. The burdens of the recession are enough, the Center for Budget and Policy Priorities, a liberal policy shop, argued this week, that Washington shouldn’t impose additional costs while the economy remains fragile.

“The budget cuts and tax increases that states will have to impose to close [existing] shortfalls,” CBPP warned in a report issued yesterday, “will significantly reduce demand in the economy and create a drag that slows economic recovery.”

Conveniently, they will ignore these new numbers from the Tax Policy Center, a joint project of the nonpartisan Urban Institute and Brookings Institution, which found that, however you slice them, federal taxes on the median middle-class family are just about at five-decade lows. The Center on Budget and Policy Priorities, a liberal policy group, explains:

This year, the Making Work Pay tax credit, which President Obama and Congress enacted as part of the 2009 American Recovery and Reinvestment Act, is providing a credit of $800 to married joint filers ($400 to single filers). A median-income family with two children thus will receive an $800 tax cut in the return it files this year.

With the new tax cut, the median family’s federal income taxes will equal just 4.6 percent of its income in 2009. That is lower than in any year since 1955 (the first year for which these data are available) except for 2008, when another stimulus-related tax cut was in effect.

You think those numbers would be cheered by the Tea Party crowd. They haven’t been. Instead, you’ve got Rep. Mike Pence (R-Ind.) taking to the chamber floor and condemning Democrats for “a budget with record taxes and spending that will add a trillion dollars to the national debt in the next ten years.”

They passed a national energy tax called cap and trade that will cause utility rates to go up on small businesses and family farms and businesses across this country by hundreds of billions of dollars.  And we just passed ObamaCare with $600 billion of tax increases.

And it isn’t even noon yet.

Many states face fundamental legal barriers to accepting such loans. The constitutions of a number of states explicitly bar the state from borrowing funds to cover operating expenses. Other state constitutions or statutes strictly limit the amount of debt that the state may incur, and in some states, such loans would exceed the limit. In addition, most states have balanced-budget requirements that may bar them from accepting operating-budget loans. As a result, most states likely would not be able to accept federal loans.

Some help that would be.

Because most states are legally required to balance their budgets each year (ie, they can’t borrow their way through a recession like Washington can), the holes can be plugged only a handful of ways: By reducing spending through program cuts and employee firings; increasing revenues with tax hikes; tapping into rainy-day funds; or calling on the federal government for a cash infusion.

President-elect Barack Obama has vowed to make help for states the first priority of his White House tenure. For the nation’s governors, Jan. 20 can’t come quickly enough.