April 13, 1976
Page 10724
Mr. MUSKIE. We did the very same thing the Public Works Committee did on the public works bill. They undertook to change it, to cut it in half, so that it would accommodate the President.
We tried to broaden this amendment to meet some of the objections raised on the floor last summer. As the Senator knows, we did not go all the way in the direction of those who raised objections, but it has been a long, hard, frustrating business, trying to get together a formula to accommodate those objections and still retain the essence of the countercyclical idea.
We think we have done it. I have a two-page explanation of differences. I ask unanimous consent that it be printed in the RECORD.
There being no objection, the memorandum was ordered to be printed in the RECORD, as follows :
MEMORANDUM
Subject: Differences Between New Countercyclical Amendment and Title II of H.R. 5247 (Vetoed Bill)
I. Changes in Formula
The old countercyclical formula has been changed in two ways:
(1) Whereas the original version used adjusted taxes as the measure of the size of a jurisdiction, the new version uses revenue sharing entitlements. The effect of this change is to spread the money around somewhat more, taking away funds from jurisdictions with relatively high tax efforts and giving more to those with relatively low tax efforts.
(2) The original version defined excess unemployment for the States as current unemployment minus a base period (1967-1969) unemployment figure. The new version now treats the States the same as the identifiable local governments in this regard — i.e., excess unemployment is defined as current unemployment minus 4.5%. What this change does is again level out the targeting mechanism for State governments somewhat, by treating those States with chronically higher unemployment the same as those States which have had more dramatic and recession-related unemployment increases.
II. Contingency Fund
The original version of countercyclical provided for a contingency fund for assistance to places in critical fiscal condition and for the trust territories, Puerto Rico, etc. The contingency fund was funded out of allocations for those jurisdictions with unemployment between 4.5% and 6%, since allocations were determined for all jurisdictions with unemployment over 4.5%, but no government with unemployment less than 6% actually received its allocation.
Under the new version the 6% cutoff has been dropped (NOTE — the 6% national trigger remains). Thus, any government with unemployment in excess of 4.5% will receive its allocation, and there will be no money set aside.
III. Graduated Authorization
Under the original version of countercyclical, the authorization level increased by $250 million for every increase of one-half a percentage point in the national unemployment rate.
Under the new version, the authorization level would increase by $50 million for every increase of one-tenth of a percentage point in national unemployment.
IV. Balance of State
Under the old version, balance of State funds were allocated in one of two ways: Either a State came up with a plan for distributing the money as much as possible in accordance with the formula for the identifiable governments; or (2) the Secretary was to draw up a plan using the best available unemployment data. If unemployment data was not available for a particular jurisdiction, the legislation allowed for data for the next highest unit of government to be used.
Under the new proposal, these options have been modified somewhat. The States would still have the option of coming up with a plan within 30 days, and the plan would have to be in accordance as much as possible with the formula used for the identifiable governments. Should the State not come up with such a plan, the money would be allocated to individual jurisdictions in the balance of State using individual revenue sharing entitlements and the unemployment figure for the balance of State as a whole — unless better unemployment data was available and certified by the Secretary of Labor. This exception (italicized) allows distribution of the funds in a manner similar to that in the original bill but does not mandate it.
Mr. MUSKIE. But that is the simple, pragmatic fact, one I think the Senator will understand.
Mr. JAVITS. I certainly do. But I also understand that in a tradeoff later, the Senator runs the risk of losing more than he gains.
Mr. MUSKIE. That is true.
Mr. JAVITS. If people like myself, who have been his staunchest supporters, and I was one of the conferees, should feel that their communities are being so very seriously downgraded they might as well fight for more money in the general revenue package than here, then the purpose would be defeated.
I am not saying I feel that way, but I am questioning the Senator because I want to get some understanding of why he did what was done.
Mr. MUSKIE. I do not object to discussing the nature of the negotiations that have gone on. But we came so close to an override that there were those in the other body who felt it was worth trying to reconstitute the bill as close to this vetoed form as possible in the hope of being able to override, and the process took longer than I thought.
It broke down in many places along the way. It may be that now the change in the economic situation has put it beyond reach. I do not know.
But we kept working and, frankly, we just wanted to do it.
This was the last position that I was ready to accept that could overcome the opposition. If it were not for that, we would not be here at all.
Mr. JAVITS. Is a key element then this 4½ percent figure, because that seems to me to be what has changed the focus?
In other words, is a key element in what the Senator has decided he must do notwithstanding, as I say, the danger of more loss than gain, the 4½ percent figure, because that is what changes the focus from a countercyclical program to a general revenue sharing?
Mr. MUSKIE. Let me describe the two changes that have been made in the countercyclical formula.
First, the original version used adjusted taxes as the measure of the size of jurisdiction. The new version uses revenue sharing entitlement as a measure of size of jurisdiction. The effect of this change is, of course, to spread the money around somewhat more, taking away funds from jurisdictions with relatively high tax efforts — and New York City is one of those — and giving more to those with relatively low taxes.
We have computer printouts the Senator may have seen which will show that picture in more detail.
The second is this: The original version defined excess unemployment in the States as current unemployment minus a base period, 1967-69, unemployment figure.
The new version treats the States the same as the identifiable local governments in this regard.
That is, excess unemployment is defined as current unemployment minus 4% percent.
What this change does is, again, to level somewhat the targeting mechanism for State governments by treating those States with chronically high unemployment the same as those with dramatic recession-related unemployment increases. But unemployment is still the trigger.
The effect of the two changes is to level the impact, and bring more jurisdictions into eligibility, which broadens its political support, but tends to dilute the pure impact of the countercyclical idea, which I would prefer, and which I offered originally.
So those are the two principal changes which would concern the Senator.
I think he is quite right in raising the questions.
Mr. JAVITS. The Senator is very kind.
I look with considerable dismay on what has happened to this countercyclical program. I wish the emphasis had not abandoned, as I think it has, the whole concept of excessive unemployment. I think that would have saved it.
The Senator might be able to adjust in some other respect.
The Senator has been very frank in his explanations as to the whys and wherefores. People like myself will simply have to decide on the de minimus basis whether or not it is still worth backing, even though it costs my State one-third of its total allowability which would have occurred under the original bill.
I thank the Senator.
Mr. MUSKIE. If I may add, the Senator is, I think, aware that Senator LONG raised especially serious objections to the use of the 1967 to 1969 base period. So there was no way of avoiding dealing with that problem if we were to get the political support we needed. I wish we had not had to.
Mr. JAVITS. I would not have minded that so much as I did the very low figure to determine excess unemployment.
I understand the Senator's position and his explanation. I thank him.