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

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

In his August 17, 1991, statement on H.R. 3201, the "Emergency Unemployment Compensation Act of 1991," the President stated that "it is essential that we take responsible actions to assure that the economic recovery and its associated job-creation continue and strengthen." The President noted that the abandonment of the 1990 budget agreement in H.R. 3201 could have had a negative impact in financial markets, threatened economic recovery, and thus might have increased unemployment. Accordingly, the President did not designate the direct spending and the appropriations authorized in H.R. 3201 as an emergency, and the legislation by its terms did not take effect.

In his statement on H.R. 3201, the President urged Congress to enact measures that would increase the Nation's competitiveness, productivity, and growth. Unfortunately, H.R. 3040, as reported by the House Ways and Means Committee, fails to do so. Instead, H.R. 3040 would threaten the prospects of continued economic recovery and job-creation. Therefore, if H.R. 3040 were presented to the President, his senior advisers would recommend that he veto it.

This Legislation Would Destroy the Bipartisan Budget Agreement

H.R. 3040 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 and outlays resulting from the bill from being considered for any purposes of the BEA. This language is directly contrary to the BEA because it purports to take "off-budget" all spending resulting from the bill. The bill also includes a "directed scorekeeping" provision that specifies the dollar amounts that are to be used in estimating the spending in 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.

—   The Rostenkowski amendment includes unacceptable and insufficient offsets. The Administration has not opposed temporary, short-term unemployment benefit extensions with acceptable offsets which are consistent with the BEA. The Administration strongly opposes this amendment because it would raise Federal unemployment taxes. In addition, the Administration strongly opposes the Rostenkowski amendment because it violates the pay-as-you-go requirement of the BEA; the tax increase is delayed until FY 1993 while the $5.5 billion of the increased unemployment benefits go into effect in FY 1992. The amendment is also unacceptable because it 1) includes directed scorekeeping; 2) exempts benefit payments from sequestration; j) prohibits budget authority, outlays, and receipts resulting from the bill from being considered for any purposes of the BEA.

The Legislation is Substantively Flawed

Even if the above provisions were stricken from the bill, H.R. 3040 would still be unacceptable because the legislation is poorly designed, would be difficult to administer, and 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 — add would not — qualify for unemployment benefits under H.R. 3040, such as those who leave their job voluntarily. The TUR is based in some States upon econometric models, which are not seasonally adjusted, and on sample surveys in others. In addition, the TUR is subject to revision at the end of the year. By contrast, the IUR reflects the target population. The IUR can be seasonally adjusted and is based on claims records that can be verified. 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 figures indicate an apparent leveling off of the unemployment rate and an increase of 34,000 payroll jobs, lending further 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 of 6.8  percent. When Congress subsequently created the temporary Federal supplemental benefits program, the unemployment rate exceeded 10 percent — and Congress allowed that program to expire in 1985, when unemployment was 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)