Statement of Administration Policy: H.R. 3575 - Federal Supplemental Compensation Act

(House Rules)
(Rostenkowski (D) Illinois and Downey (D) New York)

The Administration favors legislation that is consistent with the Budget Enforcement Act (BEA) and promotes competitiveness, productivity, and growth. The President has stated that he would sign responsible unemployment benefit legislation, such as the Michel bill, that does not threaten economic recovery and its associated job creation.

Unfortunately, H.R. 3575 is not responsible legislation. This bill would increase taxes, destroy the BEA, and establish a poorly designed program. If H.R. 3575 were presented to the President, his senior advisors would recommend a veto.

H.R. 3575 Would Increase Taxes

—   H.R. 3575 would increase the taxable wage base under the Federal Unemployment Tax Act (FUTA) through 1996. This tax increase, and the precedent that it could be seen as setting, would have an adverse effect on job creation.

—   Particularly at this critical point in the economic recovery; when employers may be considering recalling. or expanding their workforce, Federal action to increase the costs associated with each employee could seriously delay or deter additional employment.

The Legislation Would Undermine the BEA

—   Even with the tax increase, H.R. 3575 does not approach deficit neutrality in each year, as required under the BEA. The legislation would increase the Federal deficit substantially in FY 1992.

—   H.R. 3575 directs that spending in the bill not be counted under the BEA. Language in H.R. 3575 would prohibit all new budget authority, outlays, and receipts resulting from the bill from being considered for any purposes of the BEA. In addition, H.R. 3575 exempts benefit payments from sequestration. These provisions are a clear and unacceptable abandonment of the BEA.

— The bill includes a "directed scorekeeping" provision that specifies the dollar amounts that are to be used in estimating costs under the bill. The President has stated previously that he would veto any legislation that contained such a provision.

The Legislation is Substantively Flawed

Although the structure of the Federal supplemental compensation program in H.R. 3575 is an improvement over previous bills, the bill still includes a number of substantively objectionable provisions.

—   H.R. 3575 uses the State's total unemployment rate (TUR) rather than the insured unemployment rate (IUR) that triggers benefits under current law. The measure used to trigger benefits should reflect the target group to be served — insured Workers. The TUR includes groups that do not — and under H.R. 3575 would not — qualify for unemployment benefits, such as those who leave their jobs voluntarily or are first time entrants into the labor market. By contrast, the IUR reflects the target population.

—   The TUR is based in some States upon econometric models and on sample surveys in others. In addition, the TUR is subject to revision at the end of the year. The IUR is based on claims records that can be verified. As such, it is a much better mechanism for responsibly distributing scarce Federal dollars for the purposes of unemployment insurance programs.

—   H.R. 3575 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 are generally disqualified from receiving benefits. Thus, H.R. 3575 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 reductions — 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 is an unacceptable use of Federal unemployment tax funds heretofore exclusively designated for the payment of unemployment benefits.

The Michel Bill

Representative Michel has introduced a bill, H.R. 3600, that would temporarily extend unemployment benefits and is consistent with the BEA. Increased costs in each year would be fully offset. H.R. 3600 would provide a minimum of six additional weeks of benefits in all States and ten additional weeks in States where the insured unemployment rate equals or exceeds 5 percent. The IUR would be adjusted to take into account the number of people who have exhausted their regular unemployment benefits. The Administration supports H.R. 3600 and urges the House pass it instead of H.R. 3575.

Scoring of H.R. 3575

As stated above, H.R. 3575 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 we understand is included in the bill. However, the bill provides that none of the costs are counted under the BEA.

Directed Scoring
($ in millions)