Statement of Administration Policy: H.R. 3040 - Unemployment Insurance Reform Act of 1991

(House Rules)
(Rostenkowski (D) IL and 13 others)

The Administration is concerned about the impact of the recession and is committed to policies that foster an early return to work among the unemployed and encourage growth in payroll employment. Enactment of H.R. 3040 would be inconsistent with such policies and would deter employment growth. If H.R. 3040 were presented to the President, his senior advisers would recommend a veto.

This Legislation Would Destroy the Bipartisan Budget Agreement

H.R. 3040, as reported by the House Ways and Means Committee, is highly objectionable because it would:

—   Provide that enactment of the bill would automatically result in the bill's spending being designated by the President as an "emergency" under the Budget Enforcement Act (BEA). This provision clearly negates the President's authority to determine independently whether enacted spending provisions should be designated as an "emergency" under the BEA, violating a fundamental structural underpinning of the bipartisan budget agreement.

—   Direct that spending in the bill not be counted under the BEA. Language in H.R. 3040 would prohibit all new budget authority, outlays, and receipts resulting from the bill from being considered for any purposes of the BEA. The bill also includes a "directed scorekeeping" provision that specifies the dollar amounts that are to be used in estimating costs under the bill. In addition, H.R. 3040 exempts benefit payments from sequestration.

—   Not provide offsets to the increases in direct spending. Without offsets, the Federal Government would have to borrow an estimated $6.3 billion to fund H.R. 3040, increasing the Federal debt and deficit by this amount.

These provisions, singly and in combination, would have a negative impact in financial markets and threaten economic recovery. The fiscal discipline of the budget agreement would be abandoned through this legislation.

The Legislation is Substantively Flawed

Even if the above provisions were stricken from the bill, the Administration still would strongly oppose H.R. 3040 because it would establish a poorly designed, expensive new Federal program that in itself could lead to slower reemployment.

—   Under H.R. 3040, the share of extended benefits paid from Federal funds would increase from 50 to 100 percent. The Administration believes the current State-Federal 50-50 funding mix is equitable and appropriate. This partnership helps to ensure that States manage the extended benefits program well. The Administration opposes any change in the Federal share.

—   H.R. 3040 uses the State's total unemployment rate (TUR) rather than the Insured Unemployment Rate (IUR) that triggers benefits under current law. It is important that the measure used to trigger benefits reflects the target group to be served — insured workers. The TUR includes groups that do not generally qualify for unemployment benefits, such as those who leave their job voluntarily and teachers on summer vacation. It is based upon econometric models, which are not seasonally adjusted, and sample surveys. In addition, the TUR is subject to revision at the end of the year. In contrast, the IUR reflects the target population and is based on claims records that can be verified and are seasonally adjusted. As such, it is a much better mechanism for responsibly distributing scarce Federal dollars.

—   The new program would create four tiers of benefits providing from 5 to 20 weeks of extended benefits. Economic analysis has shown that additional weeks of unemployment benefits will increase the unemployment rate. Moreover, experience with previous Federal Supplemental Compensation programs demonstrates that such a complex, cumbersome system would result in benefit delays, payment inaccuracies, and escalating administrative costs.

—   The bill would provide 26 weeks of benefits to members of the Armed Forces who decide to leave the service voluntarily, either for retirement or a return to civilian life. Civilians who voluntarily quit their jobs generally are disqualified from receiving benefits. Thus, H.R. 3040 would provide significantly more generous benefits to servicemembers than are available to civilians. In previous legislation, the Administration has supported additional coverage for servicemembers who involuntarily leave the service — such as those who may be affected by Defense force reduction — but not for those who voluntarily end their service.

—   The bill would pay for job search assistance vouchers out of the extended benefits account. This would be an unacceptable use of Federal unemployment tax funds heretofore exclusively designated for the payment of benefits. This would upset precedents basic to the integrity of the unemployment insurance program.

An "Emergency" Designation is Not Warranted

In addition to the objections noted above, the Administration opposes designating the spending in H.R. 3040 as an "emergency" under the BEA for the following reasons:

—   The Administration and most private forecasters believe that the recession is ending and the recovery is underway. Just-released GNP figures show an increase for the second quarter, lending weight to this view. In this context, the Administration does not believe it is appropriate to declare an "emergency" under the BEA.

—   By historical standards, the current unemployment rate is not cause for congressional action. When Congress put the current extended benefit program State triggers in place in 1982, the unemployment rate was 9.8 percent — much higher than the current rate. When Congress subsequently created the temporary Federal supplemental benefits program, the unemployment rate exceeded 10 percent — and when Congress allowed that program to expire in 1985, unemployment stood at 7.2 percent, still higher than the current rate.

Scoring of H.R. 3040

As stated above, H.R. 3040 includes a "directed scorekeeping" provision that specifies the dollar amounts that are to be used in estimating the costs under the bill. The President has stated that he would veto any bill that includes directed scorekeeping under House Rule XXI. Below is the directed scoring included in section 513 of the bill. However, the bill provides that none of the costs are counted under the BEA.

DIRECTED SCORING
(outlays in millions)