January 31, 1977
Page 2774
By Mr. MUSKIE (for himself, Mr. LONG and Mr. HATHAWAY) :
S. 531. A bill to authorize additional appropriations under title II of the Public Works Employment Act of 1976; to the Committee on Public Works.
COUNTERCYCLICAL ASSISTANCE
Mr. MUSKIE. Mr. President, I am introducing today with Senators LONG and HATHAWAY, legislation to extend and expand the countercyclical assistance program of emergency budget aid to State and local governments hard hit by recession. I am particularly pleased that an expanded countercyclical assistance program is part of President Carter's economic package.
It was just about 2 years ago that I introduced the first countercyclical assistance proposal.
At that time, the country was rapidly sliding into the worst recession we had seen for many years.
A tax cut had already been enacted by Congress to stimulate consumer spending.
An emergency public service employment program had been enacted to put unemployed people to work.
And proposals for public works programs were being offered to stimulate activity in the construction industry, hardest hit by the recession of all.
Countercyclical assistance was a new idea. It was offered on the theory that during a recession, State and local governments are often forced to take restrictive budgetary actions — such as tax increases or job layoffs — which run counter to Federal efforts to stimulate economic recovery.
Many economists believed that with State and local government comprising such a very important sector of today's economy, we could no longer afford to ignore their responses to recession.
Countercyclical assistance was offered, in other words, as yet another tool with which to strengthen the hand of the Federal Government in the important matter of setting national economic policy.
In the spring of 1975, we held hearings on the countercyclical proposal, hearing testimony from mayors and local government officials who were just beginning to feel the pinch of recession. A survey prepared by the Joint Economic Committee projected that as recession settled in, State and local governments would be forced to take restrictive budgetary adjustments to the tune of about $8 billion, and lay off as many as 100,000 employees.
As the recession has lingered on, the impact of recession on State and local budgets has become increasingly apparent. And it is not just the New York Cities, the Newarks, and the Detroits which have been affected. Local governments, large and small, from one end of the country to another, have found themselves facing revenue shortfalls and increased recession related expenditures squeezing their budgets to the breaking point.
My Subcommittee on Intergovernmental Relations has recently conducted a survey of about 1,200 local governments concerning, among other things, the kinds of budget adjustments they have had to make over the last 2 years. Though not all the results are in, the initial responses are impressive. Of those respondents with unemployment over 8 percent between January and July of last year, over 96 percent reported they have had to make restrictive budget adjustments of one kind or another in order to make ends meet. Almost 40 percent have had to raise taxes, almost 60 percent have had to lay off employees or impose hiring freezes, and more than 20 percent had either deferred or cancelled important local capital expenditures.
Of those respondents with unemployment between 6 and 8 percent over the same period, 84 percent have had to make similar budget adjustments.
We do not know the total impact which these actions have had. But judging only from the sheer magnitude of them, we do know that the cost has been great — not only to the pace of national economic recovery, but to the quality of basic local government services as well — services which are essential to making population centers throughout the Nation agreeable places in which to live.
And we also know that these costs continue today, as national unemployment remains unacceptably high.
Two years ago, the Federal Government had no way of dealing with this particular impact of recession.
Today, we have a program which, as far as we can tell, has worked better than our highest hopes in getting help to State and local governments where the need is greatest.
Under the countercyclical assistance program — title II of the Public Works Employment Act of 1976 — three quarterly payments have gone out, to approximately 20,000 units of State and local governments. The total amount paid out as of January 5 is $868,753,000.
The most important conclusion that we can draw about the operation of the program so far is that the targeting mechanism is working, and working very well.
Fully three quarters of the funds paid out to local governments to date have gone to jurisdictions with unemployment in excess of 8 percent. Almost 40 percent of these funds have gone to jurisdictions with unemployment between 10 and 15 percent. Only 1 percent of the total has gone to local governments with unemployment below 5.5 percent.
That is what I call a successful targeting process.
In terms of per capita allocations, there is a close correlation between those with the highest allocation and those with the highest unemployment. Of the 10 highest unemployment States, all were among the 14 highest in per capita allocations. The 10 lowest unemployment States received the 10 lowest per capita allocations.
We have less precise information so far on what the impact of this budget assistance will be. The subcommittee questionnaire to which I referred above has been answered by about 375 State and local governments to date.
Obviously, the final verdict is not in. But judging from these early responses, it is clear that in the vast majority of cases, the money is being used as we had hoped — to put some breathing room into tight local budgets so that future layoffs and tax increases can be averted.
Over 70 percent of those responding so far said that earlier implementation of countercyclical assistance would have reduced the need for budget adjustments they have had to take over the last 2 years.
The only group where a majority responded that their countercyclical payments have little budget impact was those places with unemployment between 4.5 and 6 percent — either because they have had to make no budget adjustments so far, or because the amount of money received is too small to count.
Mr. President, it is not too often our experience that a new Federal program serves its intended purpose as well as this one seems to be doing.
I am delighted, therefore, that President Carter has included this program in his economic message. It is one well deserving of our continued support.
The proposal the President has recommended and which I am introducing today both extends the life of the countercyclical program and expands the authorization level.
The bill we enacted last year provided for an authorization of $1.25 billion for five quarters, or through the end of fiscal year 1977. However, because unemployment has been higher than our original projections, funding for the program will run out at the end of the third quarter of this fiscal year.
Therefore, the bill I introduce today calls for a new authorization, beginning with the fourth quarter of fiscal year 1977 and continuing through 20 additional quarters, or through fiscal year 1982.
The authorization level of the new proposal has also been expanded over that of the current title II program. Under that program, $125 million is authorized when national unemployment reaches 6 percent, with an additional $62.5 authorized for every half percentage point by which the national average exceeds 6 percent. Under the new proposal, the basic authorization remains the same. However, the authorization would be increased for each tenth of a percentage point increase in unemployment, with roughly $30 million authorized at each tenth of a point increment above 6 percent. Thus, at a level of 8 percent national unemployment, the quarterly authorization level would be approximately $725 million.
Although the new proposal extends the life of countercyclical assistance for 4 more years, the self-terminating nature of the program remains. Should national unemployment drop below 6 percent before the authorization expires, countercyclical assistance would automatically go out of business.
Mr. President, when I first introduced the countercyclical assistance proposal, I described it as meeting all the basic requirements of a sound anti-recessionary tool — one which puts money into the economy in a hurry, which targets the greatest amount of aid in places where it is needed most, and which shuts itself off when the need no longer exists.
After watching the program in operation for less than 6 months, I am more convinced than ever that this is a sound and sensible idea — one which ought to become a permanent fixture of Federal anti-recession policy now and in the years to come.
Mr. President, I ask unanimous consent that the text of the bill be included in the RECORD at this point.
There being no objection, the bill wasordered to be printed in the RECORD, as follows:
S. 531
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Intergovernmental Anti-Recession Assistance Act of 1977".
Sec. 2. (a) Section 202(b) of the Public Works Employment Act of 1976 is amended to read as follows:
"(b) Authorization of Appropriations.
"(1) Subject to the provisions of subsection (c), there are authorized to be appropriated for the calendar quarter which begins on April 1, 1977, for the purposes of payments under this title
"(A) $125,000,000 plus
"(B) $62,500,000 multiplied by the number of one-half percentage points by which the rate of seasonally adjusted national unemployment for the calendar quarter which ended December 31, 1976 exceeded 6 percent.
"(2) Subject to the provisions of subsection (c), there are authorized to be appropriated for each of the 21 succeeding calendar quarters (beginning with the calendar quarter which begins on July 1, 1977) for the purpose of payments under this title
"(A) $125,000,000 plus
"(B) $30,000,000 multiplied by the number of one-tenth percentage points by which the rate of seasonally adjusted national unemployment for the most recent calendar quarter which ended three months before the beginning of such calendar quarter exceeded 6 percent.".
(b) Section 202 of such Act is amended by striking out subsection (c) and by redesignating subsection (d) as (c).
Sec. 3. (a) Section 203(b) (3) (D) of such Act is amended by striking out "for the one year period beginning on July 1, 1975." and inserting in lieu thereof "for the most recent entitlement period."
(b) Section 203(c) (4) (C) of such Act is amended by striking out "for the one year period beginning on July 1, 1975" and inserting in lieu thereof "for the most recent entitlement period.".
(c) Section 203(c) (4) (E) (i) is amended by striking out "Social and Economic Statistics Administration" and inserting in lieu thereof "Bureau of the Census".
Sec. 4. Section 204 of such Act is amended by striking out "and for construction unless such supplies and materials or construction are to maintain basic services." and inserting in lieu thereof, "or construction, except for normal supplies or repairs necessary to maintain basic services.".