February 22, 1977
Page 4883
Mr. MUSKIE. I yield 5 minutes to the Senator.
Mr. JAVITS. Mr. President, there are a number of items on which I would like to comment in connection with the budget resolution.
First, I believe the committee has acted very appropriately in what it has done about public service employment. The President's objective is 725,000 jobs. My own objective, and what I believe was the objective of many members of the Budget Committee, was 1 million jobs.
We were assured last year, when the Second Concurrent Resolution was adopted, that if the pace of recovery lagged there would be an opportunity to accelerate this program, a program which is already in place, ready to be used, where persons can be enrolled within 30 days, and where experience has already demonstrated its effectiveness to provide useful training experiences, not "make work" situations or political advantage or benefit.
I am very pleased that the committee has steered an honorable middle course allowing $8.7 billion for titles II and VI, respectively, the older and newer parts of the public service job program, for fiscal year 1977 and fiscal year 1978.
I believe that under present circumstances this allowance within the third budget resolution should be adequate to deal with that phase of unemployment to which CETA programs are directed.
Those who decry the need for this program must remember that we are dealing with well over 7 million unemployed. We are talking in round figures about less than 15 percent in terms of public service employment. This is a far cry from anybody winning the debate over the Government as the employer of last resort. Indeed, on an Arthur Burns basis, that is, a lower than the lowest minimum rate, I believe it is a very good case for the U.S. Government standing for the fact that nobody should be deprived of work who wishes to work in order to eat. We should not make them go on welfare for the same purpose.
More specifically, I am pleased that the committee has recommended forward funding of the fiscal year 1978 CETA public service employment program in fiscal year 1977. By appropriating $8.7 billion for titles II and VI of the Comprehensive Employment and Training Act in the upcoming Supplemental Appropriations bill, Congress will be giving the Nation an unmistakable demonstration of its earnest commitment to expand to the extent feasible the public service employment program in fiscal years 1977 and 1978.
For some time it has been my belief that the main obstacle to an orderly expansion of enrollments under CETA titles II and VI was the uncertainty of future funding levels. Some have argued that program expansion is impeded by the new eligibility criteria which we enacted in the Emergency Jobs Programs Extension Act last October, to wit: that half of the vacancies and all of the new slots must be filled by those who either have been unemployed 15 weeks or have exhausted unemployment compensation, and who are also members of low income families. I do not agree that these criteria or the project approach we adopted restrains the buildup capacity of the public employment program. These requirements enable us to target the program more directly on the structurally unemployed and to help to keep "fiscal substitution" at a minimum.
By providing budgetary authorization of $8.7 billion at this time and permitting the Labor Department to obligate these funds in fiscal year 1977, prime sponsors may begin to hire from the enormous backlog of CETA job applicants who so desperately require employment assistance. Prime sponsors can rely upon the fact that if outlays amount to $3.2 billion in fiscal year 1977, $5.5 billion will be available in fiscal year 1978, at least to maintain the 1977 program levels.
In the past, prime sponsors could not hire individuals they might have to lay off in a few weeks because of funding uncertainties. We have just witnessed in recent weeks the way funding uncertainties can restrain prime sponsors from absorbing new slots. Although sufficient budget authority was contained in the Second Concurrent Budget Resolution to fund 500,000 public service jobs under title VI, the Continuing Appropriations Resolution provided funding for only 260,000 jobs through March 31, 1977, and the Labor Department outlayed only about $1.2 billion. Amid all of this uncertainty, prime sponsors complained that they could not even maintain their June 30, 1976 levels on their shares of the$1.2 billion allocation. Thus, in many instances, prime sponsors were forced to reduce or hold down public service job slots rather than to anticipate widespread layoffs in April or May.
Mr. President, I have long been an advocate of the public service employment program. As a matter of fact, I believe we need to establish a permanent program under which Government can be the "employer of last resort" even though at very minimal compensation for the hardcore unemployed of our country.
In March 1976, when the Committee on Labor and Public Welfare met in executive session to make its recommendations to the Budget Committee for funding the programs under its jurisdiction in fiscal year 1977, I moved that we seek budget provision for one million public service jobs. I maintained then that because of the severity of the 1974-1975 recession, unemployment which had risen to abnormally high levels, was likely to persist at those levels for several years. Our ability to drive down the unemployment rate by utilizing conventional stimulative budgetary and monetary policies was then and continues to be constrained by the danger of reigniting inflationary pressures. Nevertheless, on the basis of preliminary statistics indicating that the recovery in 1976 would be similar to the recovery phases of other postwar business cycles, reliable economic forecasts were telling us then that it was likely that the unemployment rate would decline consistently throughout 1976 and reach 7 percent by the end of the year.
However, the growth rate of real GNP declined from 9.2 percent in the first quarter to only 4.5 percent in the second and to only 3.9 and 2.4 percent respectively in the third and fourth quarters of 1976, hardly enough to make a dent in our unemployment problem. Thus, real gross national product has expanded by only 3.1 percent in the seven calendar quarters since the bottom of the recession in 1975, compared to an average of 9.9 percent over comparable periods in the five other recoveries.
Because of this disappointing performance national output did not rise rapidly enough in 1976 to generate employment of all those who had lost jobs in the recession, to say nothing of those new entrants to the labor force. The unemployment rate, which declined each month from December, 1975 to May, 1976, when it reached 7.3 percent of the labor force, began to increase again as the growth of national production paused. By November, 1976, the unemployment rate was back above 8 percent, thereby nullifying the progress that had been made from December to May. It is true that a record 4 million new jobs were added since the trough of the recession. But the nation's economic performance proved inadequate to the task of affording employment opportunities for an adequate number of job seekers.
Now, in February, 1977, we find ourselves in a position analogous to the one in February, 1976. We are being assured, on the basis of recent business statistics, that a solid and vigorous recovery is about to be underway. We are told that the economic pause has ended and that real GNP is about to accelerate to a 51/2 percent annual growth rate. If this occurs, we are assured, the unemployment rate may fall to 6% percent by the end of 1977 about where we were told last year the rate would be at the end of 1976. I hope the forecasters are correct this time.
But, Mr. President, I remind my colleagues of the fallibility of our economic forecasting techniques not so I can say "I told you so" but because I want to underscore the need for a public service employment program of 1 million jobs.
In December 1976, 21 months since the recession trough, there were 7.5 million people unemployed in our country. Of these 2.5 million were unemployed over 15 weeks and, of this number, slightly over 1 million were heads of households. I believe that a series of external and internal economic shocks since 1973 have moved our economic system into a new epoch, whose dimensions and characteristics are only now beginning to be perceived. The Arab oil embargo, double-digit inflation, soaring interest rates, the worst recession since the Great Depression, the slowest recovery in the post-World War II period, the incredible fiscal crisis that plagues our Nation's cities and other sensational economic developments both here and abroad have altered, irrevocably I am convinced, the way our system operates and responds to Federal Government actions. With specific reference to unemployment, I believe more than half our total unemployed are now out of work for noncyclical reasons. Economic recovery alone will not return us to full employment, regardless of the vigor of recovery — only structural change will do that as to them.
These 34 million persons are structurally unemployed, that is unemployed because of imbalances in the labor market itself. What is new about this endemic structural unemployment is the fact that it has become more intractable because of the out-migration of employers to other U.S. areas from our major cities, an accelerating pace of technological change in major manufacturing industries, a serious decline in productivity, the advent of State and local budget austerities and an increasingly inflation-prone national economy. These factors, and others, have created a vast pool of unemployed workers throughout our country who will remain unemployed even if the GNP grows at an optimum annual rate. In this new economic context, Government will have to become the employer of last resort.
I am willing to give the benefit of the doubt to those who maintain that the prime sponsor system cannot absorb more than 300,000 new public service jobs this fiscal year ending September 30, 1977. By the time Congress appropriates funds for titles II and VI of CETA only about 6 months will remain in fiscal year1977. Since so much uncertainty has clouded this program in recent months, the prime sponsors may not be able to absorb more than 50,000 new jobs per month. If the 50,000 per month rate is maintained we should have the 725,000 level in place by December of this year. This is why the "forward funding" approach taken by the Budget Committee is so important for guaranteeing funding in fiscal year 1978.
But the 725,000 cumulative job level is not appropriate for all of fiscal 1978. Unless a remarkable decline in the unemployment rate occurs between now and early summer, I will seek in the regular Labor-HEW appropriations bill for fiscal year 1978 whatever additional appropriation is necessary to reach the 1 million public service jobs level during fiscal 1978and to maintain that level through September 30, 1978. I believe that if need be we could reach that level no later than July 1, 1978. Had we that level in place this fiscal year, as I proposed last March, and as the National Council on Employment Policy proposed last December, the human misery endured by some of the 7.5 million unemployed persons in our country would have been relieved.
Congress missed that opportunity when we considered the first and second concurrent budget resolutions for fiscal 1977. We are about to admit that underestimate by authorizing an appropriation of $8.7 billion for fiscal 1977. It is my hope that this amount will prove to be sufficient; if it turns out that it is not, I hope we will have the courage to admit again that we have underestimated both the severity and the nature of unemployment in our country.
Mr. President, I ask unanimous consent to have printed in the RECORD of today's proceedings copies of letters I sent to Chairman MUSKIE in December 1976 and January of this year, as well as the Report of the National Council on Employment Policy, which has endorsed the call for 1 million public service jobs.
There being no objection, the materials were ordered to be printed in the RECORD, as follows:
U.S. SENATE,
Washington, D.C.,
December 20, 1976.
Hon. EDMUND S. MUSKIE,
U.S. Senate,
Russell Office Building,
Washington, D.C.
DEAR ED: The recent rise in the unemployment rate to 8.1% demonstrates that our economy cannot now be counted upon to provide sufficient job opportunities for the long term unemployed. There is a clear danger that sluggish economic growth throughout 1977 will not enable the unemployment rate to fall below 7%.
When the Senate Committee on Labor and Public Welfare held its markup session last March on the requests it would make to the Budget Committee for funding programs within its jurisdiction, I led the call to make provision for one million public service jobs in fiscal year 1977. I argued that only an unusual economic recovery could generate enough jobs to obviate the need for an expanded program of public service employment. Since the summer quarter it became clear that the recovery had "paused" and it now seems clear that even with some improvement the early quarters of calendar year 1977 will not show significant enough forward movement to do what we must about unemployment; the rate is highly unlikely to fall below 7 percent of the labor force even by the end of 1977.
I believe that in Title VI of the Comprehensive Employment and Training Act we have a vehicle in place that meets both essential criteria — to put Americans back to work quickly and to target job creation in those areas hardest hit by unemployment. Also, the expressed views of President-elect Carter are thereby met.
I therefore reiterate my call of last March and urge you to ask the Budget Committee to make provision in a Third Budget Resolution for one million Title VI public service jobs, an increase of 500,000 over and above the level contemplated in the Second Budget Resolution, when we had imminent expectation of less unemployment and earlier recovery.
I am quite cognizant of the budgetary implications of this request. With present estimates of the "absorption capacity" of prime sponsors, you might need to recommend an extra $3–4 billion for the remainder of fiscal year 1977, on the likelihood that prime sponsors could build up to an aggregate of 750,000 public jobs by October 1, 1977. But Congress must be willing to take action to create jobs as quickly as possible to maximize the impact of the fiscal stimulus package on the economy, even if — as I recognize — ultimately this may imply smaller total income tax reductions. I urge you to give top priority to the budget provision to allow of up to one million public service jobs.
I do hope you will be able to bring my request to the attention of the members of the Budget Committee and that you will afford to me the same consideration you have always in the past.
With warmest regards,
Sincerely,
JACOB K. JAVITS.
U.S. SENATE,
Washington, D.C.,
January 19, 1977.
Hon.. EDMUND S. MUSKIE,
U.S. Senate,
Russell Office Building,
Washington, D.C.
DEAR ED: In my letter to you of December 23, I urged the Budget Committee to consider
making provision in an emergency, third budget resolution for an additional 500,000 public service jobs under the Comprehensive Employment and Training Act. This would bring the cumulative total of CETA public service jobs allowed for in the Function 500 ceiling to the one million level.
Since then, President-elect Carter has proposed an economic stimulus package which appears to include a public service jobs component that would accord with the level contemplated in the Second Concurrent Budget Resolution enacted last September, i.e., a cumulative 500,000 jobs. This number represents a modest addition of about 200,000 jobs over the level funded in the Continuing Appropriations Act. During Senate Labor and Public Welfare Committee hearings on his nomination to be Secretary of Labor, Dr. F. Ray Marshall acknowledged that while he favors still significantly higher levels of public service employment, the decision to recommend no additions to the presently budgeted level was based upon his personal assessment of the capacity of CETA prime sponsors effectively to absorb additional funding.
There is considerable difference of opinion on this crucial question of prime sponsors' "absorptive capacity." I am certain that prime sponsors in areas of severe unemployment, for example, would have no difficulty absorbing significantly higher levels of public service employment. Given the wide regional disparities in unemployment that exist in our country, I believe it would be improvident and inequitable for Congress to restrain expansion of public service employment in our economically depressed areas on the ground that only some prime sponsors may not be able effectively to absorb new CETA job slots. Neither the inability of some
prime sponsors' manpower systems to absorb additional funding, nor the absence of severe unemployment in some labor market areas can justify limiting the expansion of the CETA public employment program in those areas which are in desperate need of more of such help.
New York City's Commissioner of Employment, Mrs. Lucille Rose, informed a member of the Senate Manpower Subcommittee staff last Friday that, in her opinion, prime sponsors could build up to 750,000 CETA jobs by the end of fiscal year 1977 and to one million by the middle of fiscal year 1978.
In testimony before the Budget Committee on January 13, Kenneth A. Gibson of Newark, who is President of the U.S. Conference of Mayors, recommended that the CETA public service jobs level provided for in the budget be raised to a cumulative total of 750,000 by October 1, 1977. This recommendation was supported by Reginald H. Jones, Chairman and Chief Executive Officer of the General Electric Company, who concluded that, "as much as $5 billion of additional Federal funds could profitably be spent this year and next on an expanded Jobs Program . . . through the established CETA channels."
The proposal significantly to expand CETA jobs funding has also been made by the National Council on Employment Policy, which recommended on December 14. 1976, that the
cumulative total of public service jobs be raised to the one million level in order to reduce unemployment to "7% or less within six months." The Council includes distinguished manpower experts such as Dr. Marshall, Charles Killingsworth, Bernard Anderson, Sar A. Levitan and Garth Mangum. Finally, and most importantly, I am informed that the staff of the Senate Budget Committee has reported to the Members of the Committee that, "It is currently believed that the Title VI program could be expanded from the presently appropriated 260,000 job level to 700,000 jobs by the end of this fiscal year and to one million by the middle of fiscal 1978." I believe this reflects estimates of the Congressional Budget Office that the public Service employment programs could be increased to one million jobs in FY 1978.
In the Comprehensive Employment and Training Act we have an effective manpower delivery system to serve the cyclically and structurally unemployed. New targeting provisions in Title VI direct hiring in public service employment projects at those most in need. Half of all vacancies and all new slots must be filled by persons who have been unemployed longer than 15 weeks and who are in low income households. These new eligibility criteria tend to generate significant savings in Federal AFDC and unemployment compensation costs.
Furthermore, the CETA public service employment program incurs low per job costs, relative to public works employment and various tax reduction plans. When the savings associated with the abovementioned eligibility criteria are taken into account, the net budget cost approximates $4,200 per job. This makes CETA by far the most efficient job creating vehicle in our arsenal of weapons to fight unemployment.
Finally, since the allocation formula in Title VI concentrates federal funds in areas of high unemployment, the program can easily be reversed if the economy improves significantly in 1977 and 1978.
On the basis of all these considerations, I urge you once again to consider raising the Function 500 ceiling to incorporate sufficient new budget authority to fund a total of 750,000 CETA public service jobs by the end of FY 1977 and a total of one million jobs by the middle of FY 1978. I understand that such provision might require additional budget authority of about $3.5 billion in FY 1977 and $3 billion in FY 1978. With unemployment so high in our cities and among minority groups, we can do no less.
With warmest wishes,
Sincerely,
JACOB K. JAVITS.
REVIVING THE RECOVERY BY DIRECT JOB CREATION
A national consensus is emerging to the effect that the economy must have some further stimulus to revive the stalled recovery. Informed discussion increasingly has been directed to the question, how, not whether, the stimulus should be applied.
The National Council on Employment Policy believes that too much of the public discussion, especially by economists, has centered on tax cuts to the exclusion of other options that are more effective for combating unemployment. We agree with President-Elect Carter, who has repeatedly emphasized that the most immediate problem facing the nation is the creation of more jobs. Recent research and experience have convinced us that direct job creation is the most effective and least expensive way to reduce unemployment.
The Congressional Budget Office recently published estimates which imply that the net cost per job created by a public employment program after 24 months is $2,600 to $3,500. The comparable cost per job created by tax cutting is $17,000 to $21,000. Thus, indirect job creation by tax cutting is far more costly than direct job creation. The latter type of program is also much superior in terms of its inflationary impact, the time needed for maximum effect, and the degree to which the areas and persons most in need of help are directly benefitted.
We recognize that reasonable arguments can be made for consideration of tax cuts on grounds other than their job creating potential. But the nation should understand how serious the current unemployment problem is. For nearly six months, according to most economic indicators, the recovery from the recent severe recession has been stalled. The national unemployment rate has remained close to the 8 percent level, and in November the rate rose to 8.1 percent. This is the highest unemployment rate in the entire postwar period after 20 months of recovery. The November rate is higher than the highest rate at the worst point of any of the earlier postwar recessions.
The reported rates for some labor force groups, industries and geographical areas are, of course, much higher than the national average. In recent months, black teenagers, for example, have had unemployment rates of 35 to 40 percent. The rates for construction workers have been 15 to 18 percent. Some large cities have had rates more than double the national average. Furthermore, hundreds of thousands of people have been out of work for so long, and have become so discouraged, that they are no longer actively seeking the jobs that they believe are nonexistent, even though they are willing and able to work.
These people are not included in the official unemployment statistics. A recent report to the Joint Economic Committee emphasizes a poorly understood relationship between increases in unemployment and increases in stress related illnesses such as strokes, heart attacks and mental illness. Crime rates also rise during periods of high unemployment. No industrialized nation is rich enough or strong enough to bear the human and material costs of extremely high unemployment rates indefinitely.
TAX CUTS
In the belief that our most urgent need now is more jobs, we point out the weaknesses of tax cuts — in addition to excessive cost — as a means to that end.
(1) The direct benefits of tax cutting are not likely to go to the geographical regions and the labor force groups most adversely affected by unemployment and underemployment. Indeed, even the indirect benefits of tax cuts have little effect on those worst off. Because the direct benefits of tax cuts are spread widely over the entire economy, some of the increased demand which results will go to the industries, areas and occupational groups where demand is already relatively high. Thus, tax cutting as a means of stimulating the economy holds a greater danger of creating inflationary bottlenecks than do the alternative methods.
(2) There appears to be little likelihood that Congress could complete legislative action on a tax cut proposal quickly. Should the cut be temporary or permanent? What proportion should go to corporations, and what proportion to individuals? How big should a tax cut be? How should it be divided between high income and low income taxpayers? Is a rebate on 1976 tax liabilities better than a reduction of current withholding, or should there be some combination of these? Will a tax cut now decrease the possibility of tax reforms later?
All of these, and more, are questions about which reasonable persons may differ, and the resolving of differences may consume a substantial amount of time. After legislative action is completed, the Internal Revenue Service may need more time to revise regulations, print and mail forms, await returns, and write and mail checks. Given these kinds of delays, the tax cutting approach may produce few new jobs before midyear or even later.
(3) The initial benefits of tax cuts obviously go only to those who pay federal income taxes — and this is mainly those who already have jobs. Under most tax cut proposals now being discussed, the largest benefits would go to those with higher incomes. Except for the few unemployed who have had some taxable earnings or other income during the year, this group gets no direct benefits from a tax cut; generally, the unemployed are benefitted only indirectly as tax savings or rebates are spent by those who initially benefit from them.
(4) Slippages reduce the benefits of tax cutting before they reach the unemployed. The taxpayer who gets a rebate or tax reduction may save most of it. at least for a while; an estimated 80 percent of the tax rebate of 1975 was saved in the quarter it was paid . The producers of goods and services may simply lengthen the working hours of those already employed if the demand for their products increases modestly. Dealers in goods may choose to draw down inventories before adding to payrolls.
DIRECT JOB CREATION
The most obvious alternative to tax cuts as a means to increase the total number of jobs in the economy is an expansion of the existing programs for direct job creation. We believe that the advantages of this approach are substantial.
(1) A direct job creation program has its largest, most immediate impact on the unemployed. All of the money (except for a small percentage for materials and supervision) goes immediately and directly into the pockets of newly hired workers.
(2) The benefits of a direct job creation program can be sharply focused on geographical areas and labor force groups that are most severely affected by unemployment and underemployment. Such focusing was undertaken through the addition of amendments recently to Title VI of the Comprehensive Employment and Training Act. Additional legislative action on this point at this time is unnecessary, except to make clear that additional funding for direct job creation shall be governed by these rules that are already in the law.
(3) The ability to focus the impact of a direct job creation program greatly reduces the inflationary impact of this type of expenditure compared with other forms of economic stimulus. Newly hired workers under such a program tend to spend a large percentage of their pay locally, and many of them will be in depressed areas with substantial amounts of unused capacity, at least in the service producing firms. The likelihood of inflationary bottlenecks is less with a focused direct job creation program than with an unfocused income tax cut.
(4) Although the initial benefits of direct job creation occur in the public and nonprofit sector of the economy, the wages paid to those newly hired will be spent almost entirely in the private sector. This spending will create additional jobs in the private sector. A conservative estimate is that each new job in a public employment program will indirectly create one other new job on the private sector.
(5) The existing public employment program could be expanded quickly. The necessary administrative machinery is in place and functioning. Substantial numbers of workers could be hired in a few weeks, and the totality of any expansion authorized and funded could probably be carried out in less than six months. With local units of government almost everywhere cutting back on educational expenditures (in constant dollar terms) and reducing essential services, there is certainly no shortage of useful work to be done.
(6) One virtue of direct job creation is its flexibility. Jobs can be established in public schools, in nonprofit enterprises, in work experience programs tied to school systems, in public works, and in many other kinds of activities as well as the conventional jobs in government offices. The variety and usefulness of the jobs will be limited only by the ingenuity of the designers of projects.
PUBLIC WORMS
A public works program ranks somewhere between direct job creation and tax cutting on most of the points discussed above — focused effect, jobs for the dollar, direct impact on the unemployed, inflationary effects, and speed of implementation. Contrary to the commonly held view, the economic impact of public works need not be delayed. Most potential recipients of funds have projects on which the engineering work has been completed. In fact, it is reported that proposals worth about $15 billion have already been filed for the new public works program that will provide a fraction of that amount.
There is one substantial advantage of public works: Most projects have as an end result a tangible product which is a permanent addition to national wealth. The nation is still walking on sidewalks, driving on roads, and using bridges, schoolhouses and parks that were built as part of work relief projects during the Great Depression. The National Council on Employment Policy believes that a further substantial investment in public works is justified.
MANPOWER TRAINING AND OTHER SERVICES
This Council recently published a survey of the research of the past decade on the worth of manpower training programs. Our finding was that the overwhelming weight of the available evidence supports the conclusion that, with few exceptions, the manpower programs of the 1960s and 1970s will repay substantially more than their costs by their private and public returns — primarily in the form of higher earnings, steadier employment, reduced welfare payments, and increased tax payments. The real cost of training is less when the trainees would otherwise be idle than when they must pass up jobs to get training, and for this reason many other nations systematically increase their training outlays when unemployment rises. While precise figures are hard to get, it seems reasonably certain that in the U.S., manpower training outlays have not increased at all during the recession or the limping recovery.
We believe that the value of the public employment and public works programs recommended above could be considerably enhanced by including in them a significant training component, and that substantial segments of the unemployed labor force could benefit from expanded manpower training and other service programs. It seems pennywise and poundfoolish to stint on the kind of program that is likely to more than pay for itself over the long run.
CONCLUSION
(1) We repeat our recommendation of last February, that the present public employment program be expanded to provide a minimum of one million jobs (about 650,000 above the present level). The initial gross cost of this expansion would be approximately $5 billion per year. Taking account of the additional jobs indirectly created by this expansion, we estimate that this single action would reduce the national unemployment rate to 7 percent or less within six months.
(2) We further recommend that $2 billion be added to the public works program. The estimates of the Congressional Budget Office indicate that this expansion would initially create another 112,000 to 140,000 new jobs within 12 months, and the indirect effects of this expenditure would create an approximately equal number of jobs, for a total of roughly 250,000 jobs. Hence, these two program expansions together would bring us within striking distance of President-Elect Carter's stated goal of a reduction of 1.5 percent in the national unemployment rate in 1977. This assumes, of course, that the economy will continue to grow at a rate sufficient to absorb the growth in the size of the labor force.
(3) We also recommend the expansion of manpower training funds by at least $1 billion. Part of the total sum should be directed toward on-the-job training in private firms. This expansion of manpower training would increase the effectiveness of the public employment program if the two were coordinated, and it could make some contribution to the effectiveness of the public works program. In addition, more attention to manpower training would be a profitable investment for the future of the country and its labor force.
(4) We would not preclude consideration of a tax cut of modest size in addition to the foregoing increases in expenditure. The debate over the details of the tax cut should not be permitted to delay action on direct job creation through public employment and public works. Furthermore, if the recommended expenditure increases are made, then obviously any tax cut should be smaller than it would be if tax cutting were the only form of economic stimulus. And we believe that any tax cut, regardless of its size, must be justified on grounds other than its direct job creating effects. A tax cut may be structured to provide some general stimulus for private investment, for example. Expenditure increases alone may not provide all of the stimulus needed by the economy, which may be slipping into a new recession without having completely recovered from the last one. Developments in the near future will reveal the magnitude of the additional stimulus needed. But employment policy should rest on the cornerstone that more jobs can be created more quickly and at less cost by means other than tax cutting.
[Footnotes omitted]
Mr. JAVITS. The second point which deserves note is that the budget resolution provides the necessary allowance for an extension of the Federal supplemental benefits program for the unemployed. We are still experiencing an unemployment rate which is really intolerable and unacceptable. One of the great achievements of the previous administration, and which was joined in very strongly by the Congress, was that President Ford led in the feeling that a man who was unemployed, through no fault of his own, if we humanly can avoid it should not be made to resort to welfare in order to keep his family together, and, therefore, he was entitled to the best we could do for him in unemployment compensation where he had a feeling of dignity and which came to him as a right.
This program extended as long as 26 weeks, which we had in the Federal State program, plus an additional 26 weeks, which we had in the Federal programs, plus 13 weeks. By use of various triggers that has been brought down to a figure of roughly 52 weeks. I have introduced legislation to extend the program beyond March 31, 1977, when it expires by statute. The Budget Committee has accommodated the figures on that score and provided $508 million in the necessary budget authority and outlays.
I point out, Mr. President, that in the FSB program we are dealing with huge figures. There were 2,313,000 who drew benefits under that program in 1976. The Department of Labor's best estimate for 1977 is 1,690,000. These are people who have added responsibilities to themselves, who head families, or they are working women with families. Hence, it is a very significant factor in American life.
The last point I would like to refer to is very significant, Mr. President. The Budget Committee, realizing that at least half of our unemployment is structural unemployment, has accepted the proposition that we have to target unemployment relief programs to those who are the heaviest affected. There is no doubt, Mr. President, that the most heavily and adversely affected in this country are the youth.
Mr. President, I wish to commend the members of the Budget Committee for their foresight in including in the resolution before us provision of sufficient budget room for the startup of a youth employment title in the Comprehensive Employment and Training Act in fiscal year 1977.
Many bills have been introduced in this session of the 95th Congress — including S. 170, the Comprehensive Youth Employment Act, introduced by Senator HUMPHREY, myself, and others; S. 503, the Youth Employment Act, introduced by Senators McCLURE, DOMENICI, BELLMON, myself, and other Republicans; S. 1, introduced by Senator MATHIAS; S. 306, introduced by Senators STAFFORD, RANDOLPH, and others; S. 494 introduced bySenator JACKSON and others; S. 20, introduced by Senator CRANSTON and others; and S. 680, introduced by Senator SCHWEIKER.
Some of the authors are in the Chamber now. Some of the bills start at the age of 16, some of the bills start at the age of 18, but include youth, roughly speaking, up to 24 years of age. Half of our unemployed are under that age. The deplorable figures of 40 and 50 percent unemployed in the slums and ghettos of our large cities, not just New York but every large city, and I say that advisedly — every large city — are simply shocking, shocking socially and shocking governmentally and economically.
It would be very simple to have a race here in the Chamber as to whose youth plan should pick up all this money. This is no way to legislate, to leave that race to the swift or to those who might find an opportune moment to press their particular approach.
There is no question but that a consensus is emerging in the Senate to enact youth employment legislation in this session. In accordance with the provisions of the Congressional budgetary process, such a bill must be reported no later than May 15, if it is to receive an appropriation for the fiscal year commencing October 1.
I am convinced we can act expeditiously in the Committee on Human Resources to markup and report a bill for Senate consideration before May 15. If youth employment legislation is indeed enacted by Congress in this session, it is likely that significant start up costs would be incurred in the remaining months of fiscal year 1977. For this reason, the action of the Budget Committee in including $300 million in Function 500 for starting up a comprehensive youth employment program is so wise and so important. Provision of budgetary authorization at this time represents the needed first step toward Senate consideration of youth employment legislation promptly.
In the coming weeks, when the Human Resources Committee makes its recommendations to the Budget Committee for funding its authorizations in fiscal 1978, I will hope to move for full funding of a CETA youth title and that the Budget Committee will continue to perceive youth unemployment as the social and economic calamity it truly is and provide sufficient availability in the fiscal Year 1978 budget to build upon the foundation so wisely provided in the Resolution now before us.
The PRESIDING OFFICER. The time of the Senator has expired.
Mr. MUSKIE. Mr. President, I yield two additional minutes to the Senator.
Mr. JAVITS. I thank the Senator. Therefore, it will be my objective, Mr. President, as I am the ranking member of the. committee which deals with this problem in the Labor Committee, which is organizing at 2:30 today, to seek a set of hearings by either the committee or a subcommittee concerning these youth bills, with the objective in time — and that is the critical factor — of giving to the Senate our best advice as to what ought to be the youth bill, not so much anybody's particular bill as some set of solutions, but the most apposite to the problems which we face.
Again, it is an area in which we have had great experience and it is an area in which, I believe, Mr. President, the Senate is very well capable of designing a suitable package which will be a credit to us.
I ask the chairman of the Committee on the Budget and the ranking member whether or not they would approve of this method of proceeding as being in line with the general ideas which they had in giving us this availability in the budget so that we could move within an accepted budget figure.
Mr. MUSKIE. May I say, speaking for myself, and I think for all the Committee on the Budget, not only do I approve it, I applaud it.
The distinguished Senator from New Mexico (Mr. DOMENICI) was particularlyinsistent upon developing new approaches to the structural unemployment represented by the youth of our country and we had considerable discussion in the Committee on the Budget. As the Senator knows, we are not a program committee. It is not for us to resolve the issues posed by the different approaches that have been suggested by, I think, some seven pieces of legislation that have been introduced in this field.
There is the Senator's own bill, which he cosponsored with Senator HUMPHREY. There is a Mathias bill, there is a Cranston-Kennedy bill. There is a Jackson-Magnuson bill — two Jackson-Magnuson bills. There is a Public Works Employment Act which is before the Committee on Public Works, sponsored by Senators RANDOLPH and STAFFORD. Then there is-the McClure-Domenici-Bellmon bill. All of these pieces of legislation have elements to commend them to our attention.
I think that, in order to avoid the competition that the Senator referred to with the funds made available in the budget resolution, there ought to be a resolution of these issues in the committees which have jurisdiction over them. It seems to me that the Committee on Labor is the appropriate forum. I am most appreciative to the Senator for his interest in doing this.
I would appreciate it if my good friend from New Mexico (Mr. DOMENICI) would indicate his reaction to it.
Mr. DOMENICI. I thank my chairman.
Mr. JAVITS. He originated it.
Mr. DOMENICI. I spoke to the Senator from New York today, not here on the floor, because I understand this budget resolution is only going to accommodate a given amount — although these are only guidelines or targets — for youth unemployment, and I see three or four thrusts around, all good bills. But I certainly hope that no one tries to approach this with the notion that the bill which comes to the floor the quickest will have the only vote on it, because, to the extent that we ought to look at the total available dollars and determine which is the best approach or combination of approaches, it appears to me that leaves us all in a position, if we avoid that, to support a major thrust. Otherwise, we are going to be left with a position such that, if the first one comes here, we have to vote either yes or no or our good chairman has to say, that is all you are going to fit into the budget. Then if it passes, we have to be against youth employment.
It appears to me that the leadership here ought to take hold. That is not my prerogative. We ought to come up with a package and fit it within the target.
Mr. JAVITS. Mr. President, I believe the labor committee, in its employment subcommittee, if we cannot get a full committee hearing — and I am going to try for a full committee hearing — should be able, as we have dealt with this subject many times, to put together a suitable package. I wish to thank, because I think the Senate owes them thanks, all who have offered these bills and the Republican stimulus package if at all agreeable with the plans of President Carter, contains a tentative version of the Domenici bill, which he has with Senator BELLMON and others. So I believe we have a bipartisan approach and we shall do our best to do the job.
I think the suggestion about the leadership is excellent. I shall do my best to get Senator
WILLIAMS to go to his leadership to see that our committee is permitted to follow the matter through if it acts promptly, and I am sure it will. I shall do the same with our leadership.
Mr. MUSKIE. May I add to the Senator that the new Secretary of Labor, Mr. Marshall, is intensely interested in working on structural unemployment. I think he would welcome an opportunity to work with the committee and the leadership, if the leadership responds to the suggestion, for the purpose of resolving these issues.
Mr. JAVITS. I thank my colleague. We have his full assurance that he will work with us in whatever way we wish in order to see that whatever we do is practical in terms of the problem.
I thank my colleague.
Mr. BELLMON. Will the Senator yield?
Mr. JAVITS. I yield.
Mr. BELLMON. I compliment the distinguished senior Senator from New York for the work he has done in the area of youth unemployment. It was a great deal of his guidance that went into the Youth Employment Act, which three of us joined in cosponsoring, and which I believe offers some real hope in solving this problem.
The point I want to make is that this budget resolution now before the Senate is sufficiently flexible to allow the accommodation of programs of that kind. We do not, as has been said, mandate which programs shall finally be funded, but rather, make provisions so Congress can work its will on these programs once the programs have been proposed.
Mr. JAVITS. We think it is adequate for the purpose. Senator DOMENICI does as well, and. obviously, Senator MUSKIE does. I believe we can fashion what is needed within the parameters of what the Committee on the Budget has done. I again express my deep feeling that the Committee on the Budget has served the country unusually well in this particular matter at this particular moment. Our job will be to use the moment well.
I thank my colleagues very much for their cooperation.
The PRESIDING OFFICER (Mr. MATSUNAGA) . Who yields time?
Mr. BELLMON. Mr. President, I yield myself 3 minutes.
The PRESIDING OFFICER. The Senator from Oklahoma is recognized.
Mr. DOMENICI. Will the Senator yield for a parliamentary inquiry?
Mr. BELLMON. I yield.
Mr. DOMENICI. Mr. President, what is the time situation on the bill pending before us?
The PRESIDING OFFICER. There were 4 hours remaining when debate began today.
Mr. DOMENICI. I thank the Chair.
I thank the Senator from Oklahoma.
Mr. BELLMON. Mr. President, it is my intention to support the budget resolution, as I said in my statement yesterday.There are some points I would like to make, very briefly, in that connection.
The first is that the Committee on the Budget has, in preparing this resolution, set what I consider to be an upper limit on spending. It does not mean that those of us on that committee who voted for the budget resolution feel that we should, that Congress should spend all the money or that all this spending is even necessary. What we did was set a policy flexible enough and a figure high enough to accommodate the actions that Congress may later wish to take. I do not personally feel compelled to support all the spending initiatives which could occur under the terms of this resolution.
The Committee on the Budget has essentially recommended that efforts to stimulate the economy at this time should be primarily through tax reductions rather than through big additional Government spending programs. I think that point is important. It is one that Members should not miss. This budget does not anticipate a large increase in Federal spending; rather, it does anticipate tax reductions of one kind or another that we hope will help to stimulate the economy and get people back to work. The main hope here is that consumer purchasing will go up and business confidence will rise, and that the economy will then take on a healthier tone and maintain that tone for longer than would be the case if the level of Federal spending were to rise by any significant amount.
The resolution before us will accommodate a wide range of alternatives, although clearly not everything that everyone may want to do can be accommodated. There is room in this budget resolution for the proposals of the new Carter administration although, in my mind, many of those will not finally become law. If that is the case, then perhaps some of this spending authority that we make room for will not be needed.
There is an increasing amount of reservation being expressed through Congress about parts of the Carter package, and even though this resolution makes room for it, it is my judgment that entire package will never become law.
The stimulus proposal the Republicans had worked out on the Senate side would also fit under the terms of the resolution and, if the Congress decides that is the better package, that can be accommodated.
Mr. President, on my own part, I favor strongly the permanent tax reduction, rather than the temporary tax reduction, because I feel it has a far more lasting effect on the economy, and while we would not have quite the same quick kick we would get from the tax rebates, I believe the economy is better off having the permanent tax reduction than from getting a $50 rebate that Mr. Carter has proposed.
Mr. President, the experience of the Congress in dealing with the new budget process I believe has been excellent to this time. It is my intention to support this resolution primarily because I believe the budget process does deserve the support of the Congress.
Those of us who work in the budget process I believe need the support on the conclusions of the committee there.
I am going to support this resolution even though there are parts of it which give me concern.
The PRESIDING OFFICER. Who yields time?
Mr. MUSKIE. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The second assistant legislative clerk proceeded to call the roll.
Mr. MUSKIE. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, I ask for the yeas and nays on final passage.
The PRESIDING OFFICER. Is there a sufficient second? There is a sufficient second.
The yeas and nays were ordered.
Mr. DOMENICI. Mr. President, I wish to have some time before we vote. Is there some time left?
Mr. MUSKIE. Yes; how much time does the Senator wish?
Mr. DOMENICI. Ten minutes.
Mr. BELLMON. Mr. President, I yield 10 minutes to the Senator from New Mexico.
Mr. DOMENICI. Mr. President, I am not sure I will take the full 10 minutes.
I did not support the third concurrent resolution when it was voted out of the Budget Committee. I think our chairman and the ranking Republican know I have always been a part of the debate and discussion and I have generally found myself on the side of supporting the resolutions that we bring forth, be they first or second. Generally, I understand that I cannot expect to get exactly what I want and neither do the other members of the Budget Committee.
In fact, I think it is commendable that a number of Senators, including our chairman and our ranking member, have ended up supporting our resolutions when, as a matter of fact, throughout the markup and debate they have not always gotten their way — in that respect, specifically, I believe I should say, such is the case of our chairman. I think on a number of occasions he would have preferred other target figures, especially in some of the social programs, but when they did not come out that way he has been a staunch supporter.
This particular resolution finds me in a little different position because we are being asked under a new system, the Budget Reform Act and our resolution approach to it, to address the issue of a lingering recession and to pass judgment on how much we ought to change our budget limits in order to accommodate a stimulus. So it is kind of a midstream adjustment.
I said yesterday in dicussing this with our chairman that I do not argue about the need for a stimulus package. But in this particular instance I am going to again vote "no" on the floor as I voted "no" in a committee vote on the resolution itself. I wish to explain to Senators and for the record why.
First of all, it has been said that this particular resolution and the changes in the figures by function and in the revenue estimates are not programmatic — and they are not — and that there merely is a flexibility here for a number of different courses and solutions.
I am not going to go into the figures that address the specific functions because I think basically there are probably just different programs that I might have in mind versus what we come up with or what people might think this particular resolution is going to accommodate.
But as one reason for not supporting it, let me just address the total revenue figure.
I think it has already been said that most of this stimulus package for fiscal year 1977 is going to be accomplished by adjusting the revenue figures. I say right now that I do not support the proposal to rebate to Americans $50 each.
I may end up supporting it for older Americans and for fixed income Americans, but we do not find that in the revenue figures. That is found in a functional area because that is included as a payment rather than a reduction in taxes.
But within the reduction in revenues estimate, my recollections are these: The second budget resolution had a revenue figure of $362.5 billion and as we looked at this in preparation for a third concurrent resolution we found that we have underestimated there and we have had to reduce that by $6 billion. So we went into these hearings with a revenue estimate of $356.5 billion. It is from that figure that I will just give my example.
What we have basically done is to reduce that figure of revenue expectation from $356.5 billion by $12 billion. Then we have estimated that there would be a reflow back through of $2.3 billion, meaning that whatever we do with that reduction by leaving it out there among Americans, some way or another, we follow pretty good economic modeling and yet we will bring back $2.3 billion. That is what I mean by reflow. So that the net revenue figure we are settingin this resolution is $346.8 billion.
Mr. President, I believe that the reduction of revenues by $12 billion is too much flexibility for what we need for economic adjustment. It is basically used up by the $50 rebate approach to most Americans, other than those on social security and SSI who are taken care of on the spending side of the budget.
I am firmly convinced that we need not provide that much flexibility because that would permit, on the one hand, more stimulus than we need and, on the other hand, it probably is going to be construed to accommodate the $50 rebate package. I am convinced we could get by and do a better job with a permanent tax cut.
Yes, I would say even if we made that permanent tax cut retroactive to January 1, we would basically cut the deficit by about $2 billion because we could get by with a reduction of revenues of at least $2 billion less than what we will do in this third concurrent resolution.
So by way of making my views felt, I must vote "no", because I am convinced that we do not need the package with the outside limits that will fit this resolution.The only way I have of saying that I do not think the outside limit on revenues is anywhere near the best, anywhere near the most effective, is by voting no and in the RECORD explaining as I have that we could get by and do a better job with a smaller deficit. I would like to set the parameters at less so that we do not accommodate that package, which I think is far from the best.
Having said that, I also wish to make one other observation.
This Senator understands this resolution and the report to indicate that most of the things we have changed in this third concurrent resolution have been changed in response to the need for a stimulus package. I hope that, to the extent that we do not, programmatically and by changes in our law, use up the added amounts in the functions or use up the reductions in revenues, we will all understand that they were not intended to be there to float around in the event we do not use them in a stimulus package to be taken up by other programs that we might dream up or add to, because clearly that was not the purposeof the third concurrent resolution.
We principally began this discussion weeks ago and bring it to the floor now to accommodate a stimulus package, not as a way of finding money for programs that we already have passed upon, or casual modification of our second concurrent resolution. I, for one, will be watching that, as I know the other members of the committee will be doing. I hope that we do not think we have given ourselves a great deal of latitude to add things we have heretofore said we could not afford, under the guise of stimulus, because that was not our intention.
Mr. President, I yield back the remainder of my time.
The PRESIDING OFFICER. Who yields time?
Mr. MUSKIE. Mr. President, I should like to make a few observations, and thenI will yield to the distinguished Senator from California.
The Senator from New Mexico and I discussed at some length yesterday the issues he has raised today to underscore his decision to vote against the concurrent resolution. I certainly am not going to depart from the attitude I expressed yesterday.
I understand, of course, that Members often have difficult balancing judgments to make in deciding whether or not to support the budget resolution, whatever their reservations, or to oppose it because of their reservations. Often, it is a very close question. But when one considers this budget resolution, one should consider these basic questions:
First, how much stimulus do we need? The answer to that question is not scientific. It is pretty difficult to come up with an answer with precision.
The President's stimulus package was roughly $31 billion divided between fiscal years 1977 and 1978. The Republican package, as I recall it, was something like $26 billion. I think the Senator from New Mexico yesterday said that his quarrel was not really so much with the total amounts of the stimulus package as it was as to its makeup.
So I suspect that we are talking not about the differences in the amount of stimulus, but, rather, the details of the program that make it up.
The second question that one needs to answer is: How much of this stimulus should take the form of tax cuts or rebates or reductions of one kind or another, and how much should take the form of direct spending programs to deal with unemployment?
On the tax feature, this bill provides for $12 billion of reductions in fiscal 1977, without specifying — I emphasize this — the kind of tax policy that should be accepted by Congress when the tax writing committees are finished doing their job. So we are talking about $12 billion as stimulus by way of the tax code, leaving the details to be decided later by each House of Congress when the tax writing committees have made their recommendations.
Do we need $12 billion of stimulation through the tax code in fiscal 1977? I happen to think we do. I happen to believe that the people of the country are looking for some indication now that we think the economic conditions which have created problems for them require action now.
No specific proposal is offered to the Budget Committee as to any other way of getting that amount of stimulus through the tax code now. If one concludes that that much stimulus through the tax code now is unnecessary or that it is counterbalanced by a longer term need for the kind of response from the economy that a permanent tax reduction would produce, then you come down with the answer of the distinguished Senator from New Mexico with respect to the budget resolution.
I certainly would not quarrel with the committees. There are arguments on both sides. But I happen to believe that we need the stimulus now. We need the continuity of a 2 year program, and this is the rationale of the Carter administration.
So, beginning with that stimulus now, the administration package follows with a permanent tax reduction package at a $4 billion annual rate, in the form of an increase in the standard deduction, and a smaller optional business tax reduction feature relating to taxes on wages and the investment credit.
Finally, of course, one has to ask this question: Do we, in addition to the stimulus provided through the Tax Code, require some action by way of direct spending programs to create public sector jobs when in the private sector we are facing unemployment on the order of 7 to 8 million people, or 7.5 percent, roughly? I think that both sides of this issue which has been raised by the distinguished Senator from New Mexico agree that we do need some direct spending programs.
So that what we are talking about, really, are questions that cannot be and are not finally resolved in the budget resolution. What we are talking about are questions the resolution of which can be accommodated by the budget resolution. The amount of dollars that would shift, depending upon which way the issues raised by the distinguished Senator from New Mexico are resolved, is not all that much in terms of the totals with which we are dealing.
So I think that, as in the past, this budget resolution accommodates a wide range of views as to what needs to be done and, as such, is an appropriate vehicle for the Senate and the House to begin the debate and the dialog on precisely what tax programs and what job creating programs we will put in place.
That is all a budget resolution can ever be. No budget resolution we have ever adopted can resolve finally all of the programmatic decisions the Congress makes in the course of a session, and this one does not. It does not presume to do so, and it should not.
It is for that reason that I think really the view of the Senator from New Mexico and the view of the Senator from Maine are equally accommodated under this budget resolution. His might involve somewhat less by way of dollars on the revenue side, and that is significant to him, and it should be significant to him because he believes it.
But I thought it would be helpful to put in the RECORD, following his observations, this analysis of the committee position, at least the position of a majorityof the committee, and I am happy to yield to my friend from New Mexico.
Mr. DOMENICI. I thank the Senator from Maine.
Let me say I do not disagree with most of what the Senator said except that I would like to make sure what I have been talking about is not categorized as beinga future stimulus and that the Senator from Maine has been talking about a more present stimulus. I think the Senator from Maine knows I have been saying a permanent tax cut plus even a retroactive tax cut, and I think all of that could be accommodated and still be more effective and less costly than the rebate proposition.
What I am arguing about is I do not think we need $11.4 billion of the $12 billion revenue reduction by way of rebates.I just do not think that much is needed. I think we can have a present stimulus which will be just as effective, with more confidence building and more longevity built into it, less potential for a spurt and more potential for some strong, durable thrust, less opportunity for people to put this money in the bank and more opportunity for them to spend it on things they need if it is permanent and comes with everyone's check rather than a $50 rebate.
I have tried to put that philosophical difference into the record by way of justifying a serious difference, although it is only about $2 billion in the amount of revenue reduction that we ought to try to accommodate in the revenue reduction aspect of the third concurrent resolution.
I thank the Senator from Maine.
Mr. MUSKIE. Mr. President, I ask unanimous consent to have printed in the RECORD a table which shows the revenue effects of the tax reductions which Congress produced in 1975-76.
There being no objection, the table wasordered to be printed in the RECORD, as follows:
[Table omitted]
Mr. MUSKIE. The Tax Reduction Act of 1975, for example, included a refund of 1974 income taxes which reduced revenues $8.2 billion. That compares to the present proposed rebate of 1976 income taxes of $9.6 billion. So the tax program of 1975 was comparable to the one proposed here to that extent.
It was just as temporary as the temporary one we are considering now. It had no effect beyond fiscal 1976.
I have put the whole table in and I would like to refer to other items. There was an increase in the standard deduction in that program of $500 million for fiscal year 1975, and $2 billion in fiscal 1976; there were no fiscal 1977 effects, so, as enacted in March 1975, it was temporary.
There was a general tax credit of $1 billion net in fiscal 1975, which had a $4.3 billion fiscal effect in fiscal 1976, and, as enacted in March 1975, no effect in fiscal 1977.
There was an earned income credit which, as enacted in early 1975, had a fiscal effect in 1976 of $1.2 billion, an effect of $100 million in the transition quarter, and no fiscal effect in 1977. So all those items were temporary tax reductions.
Then there were others which will appear in the table. I will not go through all of them in this oral presentation.
These are the tax policies we relied on in Congress over the last 2 years to stimulate the recovery which has taken place since the spring of 1975, largely in response to that tax policy, and which many people on this floor think is proceeding so well you have heard at least one speech to that point today that additional stimulus is not needed, and there are some outside Congress who believe that additional stimulus is not needed.
So on the question of whether or not temporary tax cuts, including tax rebates, do have a stimulative effect, and a healthy stimulative effect, on the economy, this record, of course, speaks to that point. It is for that reason I have asked that this table be included in the RECORD, and I appreciate the opportunity to do so.
Mr. President, I am happy to yield to the distinguished Senator from California for 7 minutes.
The PRESIDING OFFICER. The Senator from California is recognized for 7 minutes.
Mr. CRANSTON. Mr. President, I want to thank the good chairman of this committee once again for his excellent work in guiding the committee on the budget resolution; also the distinguished Senator from Oklahoma (Mr. BELLMON), and the other members of this committee.
We are here once again testing for the first time one more part of the congressional budget process.
We are faced with new and mounting evidence that recovery from the throes of deep recession is well behind the schedule we set in adopting the second budget resolution for fiscal year 1977 last September.
The newest data shows that the economy grew by less than 3 percent during the final quarter of calendar 1977 even before the full impact of this terrible winter has been recorded and the effect of the drought out in the West, in California, and elsewhere.
Mr. President, that growth is not enough.
It is not enough to achieve our modest goal of reducing the unemployment rate to 6 percent by the end of 1977.
It is not enough to reduce unemployment at all.
It is not even enough to sustain the slight reduction of unemployment we had previously accomplished.
Our target in adopting the second budget resolution was to maintain an economic growth rate of 6 percent during 1977 — that is the key to reducing unemployment.
Obviously, we are far from hitting that target.
Even at the time that we adopted the second budget resolution, we recognized grounds for concern:
The recovery was slowing down. Unemployment had risen for 3 consecutive months.
And we recognized that our economic projections might prove overly optimistic and require stronger Federal action to alleviate the problems of extended unemployment.
Now the time has come to take that action through the corrective mechanism of a third budget resolution, designed to stimulate the economy and get recovery moving forward again.
Mr. President, the Budget Committee, under the able leadership of the Senator from Maine (Mr. MUSKIE) and with the outstanding cooperation of the Senator from Oklahoma (Mr. BELLMON), has produced just such a resolution.
I am happy to rise in its support.
The committee has come forth with adjustments in the budget resolution that will permit the adoption of the entire stimulus package recommended by the Carter administration:
This resolution would lower the revenue floor sufficiently to permit the adoption of the $12 billion tax reduction proposed by President Carter in addition to accounting for the lowered revenue estimates resulting from higher than expected unemployment.
The committee proposal also makes adequate provision for all of the $1.7 billion in Carter administration proposals for outlay increases to stimulate the economy.
But the actions of the Budget committee faced for the first time with recommendations from a Democratic President — do not permit the interpretation that the committee has become a rubberstamp for the White House.
That would defeat one purpose for which the congressional budget process was established.
Instead — after hearing a consensus of witnesses that the economy required and could stand, without adverse consequences, slightly more stimulus than the administration request provided, the committee added $1.7 billion in outlays to the package.
In fairness to President Carter, it should be noted that some of these additional funds are expected to be supported by the new administration even though its requests have not yet reached the Congress.
The additional expenditures permitted under this resolution will be targeted into those programs where they will have the maximum positive effect on job creation and on alleviating the suffering of those most adversely affected by our current economic distress:
It will permit the increase of public service employment from the current level of 310,000 jobs to 600,000 jobs — 50,000 more than the 550,000 jobs contemplated by the Second Concurrent
Resolution, with the vast majority of the new jobs targeted on long term unemployed heads of needy households, under legislation I authored last year.
It provides room — for the first time — for forward funding of both the CETA programs and the Older Americans Act, so that the major uncertainties of funding which have greatly handicapped the planning process in these programs can be alleviated.
It provides $1.5 billion in new budget authority and $600 million in new outlays for expansion of programs to deal with youth unemployment problems.
Let me say that those of us who have traditionally worked at finding legislative solutions to the problem of structural unemployment among young people — particularly those in minority communities — certainly welcome the expansion of attention this problem has received in recent weeks.
No fewer than seven new bills on this subject — one of them, S. 20, my own — have already been introduced in the Senate this year.
The Carter administration proposes to use these supplemental fiscal year 1977 funds for youth programs under the existing CETA authority utilizing the prime sponsor delivery mechanism — an approach I support. It is a low cost-per-job approach that can begin to be implemented as soon as appropriations are made available.
This approach eliminates the need to create and make operative a new delivery mechanism — in place of CETA prime sponsors — at this time. In this way we can put the greatest number of youth to work in the least possible time and maximize the impact of the expenditure for the balance of this fiscal year.
This administration initiative should lead to the approach, program expansion, and local decision making responsibilities proposed in S. 20, which, if enacted, will be effective in fiscal year 1978.
I believe that S. 20's flexibility and decentralization offer the most promisingway of combating the enormous social and economic consequences of the Nation's grave youth unemployment problem.
When the second budget resolution was adopted, the committee recognized that extension of the emergency unemployment Federal supplemental benefits program might become necessary. That necessity has now arisen, and the third budget resolution proposed by the committee takes it into account.
This resolution has provided additional funds for local public works, countercyclical revenue sharing, EPA construction grants, railroad and highway construction, and improvement in recreational facilities as part of a mixed economic stimulus package approach.
Finally, the committee made provision for the President's request of $1.8 billion for direct payment to social security recipients, and other retirees and for Federal assistance to low and moderate income families to help them meet the greatly increased fuel costs resulting from the winter emergency.
The committee now believes that with the adoption of this resolution — followed by further supportive action in fiscal year1978 — we can reach 6 percent unemployment by the end of 1978 — 1 year later than originally planned, by sustaining the growth of the economy at a rate of 51/2 to 6 percent during the next 2 years.
We must do at least this much. Frankly, I will be looking for ways of doing more, without overheating the economy, for we certainly must remain vigilant about inflation as we consider expenditures for fiscal year 1978.
So, for all these reasons and many more, I urge the adoption of this resolution, as a prudent beginning toward economic recovery.
Once again, I thank the chairman and the ranking minority member for their very fine work on this matter.
Mr. MUSKIE. Mr. President, I thank my good friend from California.
May I express a note of personal regret that the distinguished Senator, because of new duties elsewhere in the Senate establishment, has chosen to relinquish his seat on the Committee on the Budget. I use the word "chosen" because I suspect he would have preferred to stay, but he has to divide his time in accordance with the role of priorities.
I appreciate the work and dedication that he has given to this committee, and I do deeply regret the fact that he is soon going to leave all of that education, painfully acquired, to lie fallow.
Mr. CRANSTON. I thank the chairman very much. It has been great to work with him. It has been a very rewarding and rich experience. I regretted terribly the choice I had to make, and I am glad that I have not had to leave the committee yet.
Mr. MUSKIE. I thank the Senator.
Mr. BELLMON. Mr. President, I yield 5 minutes to the Senator from New Mexico.
Mr. SCHMITT. I thank the Senator.
Mr. President, I simply wish to very briefly associate myself with the remarks of the distinguished Senator from Oklahoma which he made yesterday and also referred to again today.
I think it is important to continue to ask ourselves the question, as we discuss this resolution and discuss specific legislative packages over the course of this session of Congress, as to whether or not a stimulus is actually needed. I think there is still considerable question about that. It is not that there are not specific activities required in order to help groups of individuals with specific problems in this country. But whether or not the economy truly needs a stimulus is a question I hope that we will continue to ask ourselves.
I also think that the budget resolution should have, as it does, left open the option for economic stimulus and other activities related to it. But I would much have preferred to see the resolution adjusted to the more historically realistic package that has been sponsored by this side of the aisle and has been made known to most Senators.
In particular, the emphasis in that package on a permanent tax cut rather than a rebate certainly is more historically relevant, and I think as we consider the specific pieces of the President's economic package, as modified, we should make sure that we keep history in mind.
It would be a disservice, I think, to the American people not to remember that we have tried most, if not all, of these things in the past, and we have a fairly clear record of what works and what does not work.
But one thing that does not seem to work in terms of total permanent stimulus to the economy is a tax rebate. On the other hand, a permanent tax cut is very clearly effective, not only in permitting individuals and businesses to look ahead into the future and plan for greater expenditures and, therefore, greater stimulus in the economy and in employment, but also a permanent tax cut historically produces far more revenues over the long run than it does deplete revenues in the short term.
I am planning to vote against the resolution not because I think the Senate should be left without the flexibility of working legislation that relates to the economy and to stimulus, if indeed that is required, but because I think we have picked the wrong levels. We have given the wrong signal to the American people about our understanding of the history of economic activity in this country.
I hope that, as we proceed to look at each piece of the President's package andof alternatives that are proposed by individuals in this body, we will evaluate each very carefully and make sure that not only history is considered but that the best interests of all Americans are considered as we do so.
I thank the Senator, and I yield back the remainder of my time.
The PRESIDING OFFICER. The Senator has yielded back his time. The Senator from Oklahoma.
Mr. BELLMON. Mr. President, I yield myself 2 minutes.
The PRESIDING OFFICER. The Senator from Oklahoma is recognized for 2 minutes.
Mr. BELLMON. Mr. President, I have before me a budget summary which has been prepared by the staff of the Committee on the Budget. It compares the third budget resolution with President Carter's proposal, and I believe it will be helpful to Members of the Senate to have this information as we complete our action on the budget resolution and prepare for consideration of the various bills that this resolution will make possible.
Mr. President, I ask unanimous consent that this budget summary be printed in the RECORD.
There being no objection, the summary was ordered to be printed in the RECORD, as follows:
[Budget Summary omitted]
Mr. LONG. Mr. President, when the Committee on the Budget of the House of Representatives issued its report on the third budget resolution for fiscal year1977, it incorporated in the report a significant and undesirable change in the congressional budget process. This change affects the treatment of refundable tax credits. Up to now, Congress has always treated the total impact of a tax credit as a reduction in revenues. Under the change proposed by the House Committee on the Budget, any part of a tax credit which is refundable — in other words, the extent to which the credit exceeds the taxpayer's liability — would be treated as an expenditure.
I am pleased to note that the Senate Committee on the Budget has not gone along with this change made by the House and has continued to account refundable tax credits as revenue reductions. I strongly urge that this Senate position be maintained in conference.
The change proposed by the House Committee on the Budget is an unnecessary one. It accomplishes nothing substantively. It does not enhance the intelligibility of the budget process. On the contrary, it makes the budget process somewhat more difficult to follow. It accounts for refundable tax credits for budget purposes in a way quite different from the way in which Congress deals with these credits legislatively. Beyond this, the treatment of the refundable portion of such tax credits as outlays would involve significant problems of an administrative and procedural nature.
The earned income credit is a refundable tax credit for low income families with children. It is equal to 10 percent of earned income up to a maximum credit of $400. This credit is available to offset any tax liability or, to the extent that the individual's tax liability is less than $400, it is paid as a refund. This provision was first enacted in 1975 and has been extended twice — each time as part of a major tax bill. The credit is authorized by a provision in the Internal Revenue Code. It is quite clear that the Congress has wanted to treat this provision as a part of the revenue system.
Changing the accounting for this type of provision in the budget process to treat the refundable part of the credit as an outlay would be inconsistent with the way Congress has actually dealt with it.
Nor can it be argued that this change would better illustrate the impact of such refundable tax credits. The congressional budget process addresses revenues as well as expenditures, and also the deficit or surplus which results from their interaction. A refundable tax credit costs exactly the same and has exactly the same impact on the deficit or surplus whether it is considered an outlay increase or a revenue reduction. If anything, the total budgetary impact of a refundable tax credit would be obscured by treating the refundable part as an outlay and the non-refundable part as a revenue reduction.
While the change to accounting for refundable credits as outlays rather than as revenue reductions would not substantively affect the merits of such proposals, it would present significant procedural and administrative problems. It would increase the accounting task since a single provision would have to be carried in two separate accounts — a revenue account for the non-refundable part of the credit and an outlay account for the refundable part. This could have substantial practical implications for the Treasury Department in administering the credit, since it would have to be able to determine which portion of a given individual's credit was chargeable to which account. For example, if an individual had a tax liability of $200 and an earned income credit of $300, two-thirds of his credit would be accounted as a revenue reduction and one-third as an outlay.
Even more important is the impact of such an accounting change on the budget process itself. Since refundable tax credits are legislatively treated as tax provisions by the Congress, they have been most appropriately included within the revenue totals in the budget resolution.
A good example is the situation in which we now find ourselves, where Congress is considering a tax cut package for economic stimulus purposes. The revenue level which the Congress will adopt in this third budget resolution for 1977 will set the limits of what the Finance Committee and the Senate can do in the way of immediate tax reductions.
When we get down to actually considering the legislation, however, we will want to consider not only the overall total of the tax reduction package, but also how it benefits different categories
of individuals. The use of refundable tax credits makes it possible to provide more relief to certain categories of low income individuals than would be possible if we were limited to only non-refundable credits. By accounting for these refundable credits against the budget resolution's revenue totals we get a valid picture of the total impact of the tax cuts. If we count refundable credits as outlays, however, the budgetary view of what we are trying to accomplish is distorted.
It is possible, however, that treating refundable credits as outlays rather than as revenues could create a procedural barrier to considering credits for low income persons as part of a tax package. If a budget resolution allowed for a tax reduction, but contained no allowance for increased outlays, it would be out of order to consider a refundable tax credit — even if the Congress should decide that some portion of the total tax cut ought to go to low income workers who bear the heaviest weight of payroll and sales taxes, though they have no income tax liability.
Even tax legislation not dealing with refundable credits directly could become subject to a point of order in similar circumstances. For example, suppose the Senate wants to increase the minimum standard deduction. For many low income taxpayers, tax liability would be decreased by a certain amount while the refundable portion of their earned income credit would be increased by exactly the same amount. As long as the budget process treats tax cuts and refundable credits as revenues, there is no problem. But if refundable credits were to be considered outlays, the Congress might find itself in the position of having to avoid any tax relief to low income individuals in order not to run afoul of the budget process.
I really think that, in such circumstances, Congress would find a way to work its will. But I do not see any reason why we should set up this sort of procedural barrier to Congress' ability to provide the type of balanced tax relief which it determines best meets the country's needs.
When the Congressional Budget Act was passed in 1974, there were some who questioned whether Congress, with its already tight schedule, would be able to meet the various deadlines and other procedural requirements necessary to implement a legislative budget process. I think those fears have been substantially allayed by the general smoothness with which the process has operated over the past 2 fiscal years.
I think much of the credit for this success is due to the fact that the Senate Committee on the Budget has demonstrated its awareness that the true purpose of the budget process is not to place procedural and technical roadblocks in the way of spending and revenue legislation. Rather, the congressional budget process is intended to enable Congress to develop an overall budgetary framework which will enhance its ability to deal responsibly with legislation and appropriations.
There have been some difficult procedural problems, and some debate as to what does or does not properly fall within the realm of the budget process. But I think the Committee on the Budget in its role of overseeing the budget process, has done an admirable job of keeping things in perspective so that the process does not overshadow the goals. Consequently, the budget process, in the Senate at least, has operated well and with a minimum amount of limitation on the ability of the Senate to work its will on legislation.
I think the change in accounting procedures proposed by the House Committee on the Budget for the refundable part of tax credits is a step in exactly the wrong direction. It may be a more pleasing methodology for some theoreticians, but it makes no improvement in the operations or intelligibility of the congressional budget process, and it places an unnecessary procedural constraint on the flexibility of the Congress in considering revenue measures benefitting low income persons.
Mr. MUSKIE. Mr. President, will the Senator yield?
Mr. LONG. I yield.
Mr. MUSKIE. Mr. President, I express my appreciation to the distinguished chairman of the Committee on Finance for making the record on this point. The Senator had submitted a letter to the Committee on the Budget on this same point. We found ourselves in agreement with the distinguished chairman, and I think that any matter on which the Committee on the Budget and the Committee on Finance agree ought to be given a very visible published record. It is for that reason that I stand to express my appreciation to my good friend from Louisiana and to welcome this addition to the Record.
As the Senator knows, the Carter administration has taken a different approach. The House Committee on the Budget has taken a different approach, so we are going to need some assistance in the conference. I am most grateful to my good friend for making this RECORD.
Mr. LONG. I thank the distinguished chairman.
I agree with him that any time the Finance Committee can agree wholeheartedly with the Budget committee, there is no doubt about it, they are necessarily right.
I thank the distinguished Senator.
ADDITIONAL STATEMENTS SUBMITTED ON SENATE CONCURRENT RESOLUTION 10
Mr. ANDERSON. Mr. President, the third concurrent resolution on the budget was fashioned to accommodate a vitally needed stimulus to an economy that has failed to grow at a rate anticipated when the Congressional budget was adopted last Fall. The levels of unemployment have been unacceptably high and the economic forecasts unacceptably dismal. Congress must take action to assure that the goal of recovery envisioned upon the adoption of the second resolution on the budget is reached. The adoption of the third budget resolution will assure the Congress the flexibility it needs to enact legislation designed to stimulate the economy and prevent the hardships of the winter of 1977 from undermining any gains made.
The Committee on the Budget, in the third budget resolution, considered both the general requirement for a prompt and sufficient economic stimulus and the need to offset increased consumer fuel and food costs attributable to the exceptionally harsh winter. By adopting the levels in the Resolution, the Congress would permit enactment of up to $12 billion in tax relief and the enactment of up to $5.2 billion in spending designed to produce jobs and assistance to those hardest hit by the harsh winter.
It is my belief, Mr. President, that there has been ample evidence that such a stimulus package is badly needed and that Congress must respond judiciously but adequately to the pressing demands being made on the Nation. To fail to adopt budget ceilings and a revenue floor that would be responsive to obvious needs would be rigid and foolhardy on our parts.
It is important to assure effective congressional control of the budget, and I believe that adoption of the third budget resolution will demonstrate an exercise of that control.
Mr. CRANSTON. Will the Senator yield to help me clarify a point?
Mr. MUSKIE. Certainly.
Mr. CRANSTON. As the distinguished chairman of the Committee on the Budget knows, I was unable to attend much of the session of the Committee on the Budget, during which actions were taken on some of the budget functions. I wonder if the Senator from Maine will help me clarify the meaning of the third budget resolution, with respect to one function in which I have a particular interest.
Mr. MUSKIE. I would be happy to.
Mr. CRANSTON. In function 250 — general science, space, and technology — the second concurrent budget resolution for fiscal year 1977 provided budget authority of $4.6 billion and outlays of $4.5 billion; is that not correct?
Mr. MUSKIE. The Senator from California is correct.
Mr. CRANSTON. And that ceiling was sufficient to permit funding of the pending earthquake research and development program, as well as the full level of congressionally approved funding for the civilian space program, and some other items; is that not correct?
Mr. MUSKIE. Again, the Senator is correct. Those two programs were mentioned in the committee report.
Mr. CRANSTON. Now, I believe that while the Committee on the Budget reduced the amount assumed in the third budget resolution for function 250 by $100 million in budget authority and outlays, the committee assumed that no policy changes were being made from the second budget resolution — am I correct?
Mr. MUSKIE. Yes; the committee acted on the basis of the markup documents prepared by the staff and CBO that indicated that $4.468 billion in budget authority had been appropriated to date, which would result in outlays during the fiscal year of $4.406 billion. When these amounts in functions 250 are rounded to the nearest hundred million, which is our usual practice, the results are $4.5 billion in budget authority and $4.4 billion in outlays. The committee also acted on the basis that no new major supplemental appropriations were likely to be enacted in function 250.
Mr. CRANSTON. The Senator from Maine will recall that the earthquake hazard reduction program passed the Senate by voice vote on May 24, 1976. It would authorize $40 million in fiscal 1977 expenditures, of which $15 million for the National Science Foundation affects function 250. The bill failed to achieve a suspension of the rules in the closing hours of the House session last year. Since that time, earthquake research has received administration support. I have reintroduced the bill this session, but we now do not anticipate appropriations for it prior to fiscal year 1978. Does the third budget resolution assume the enactment of this program?
Mr. MUSKIE. The ceiling set for function 250 in the third budget resolution could accommodate funding for this program, if a fiscal year 1977 appropriation were approximately $15 million and no other unanticipated supplemental intervened. As the Senator knows, the reduction in the functional ceiling was due to a technical reclassification of ERDA research funds, from function 250 to 300.The third budget resolution thus continues to be consistent with the assumption made in the second resolution that there is room for a $15 million expenditure in function 250 for the earthquake program, assuming no new unanticipated items threaten the functional ceiling.
Mr. CRANSTON. As I understand the functional allocations of the budget, the Committee on the Budget assumptions as to particular line items are not attempts to bind the authorizing and appropriating committees or the Senate, provided the budget total and the distribution of priorities are maintained.
Mr. MUSKIE. That is correct. Reallocation among line items which does not violate the budget ceiling is an appropriate exercise of the jurisdiction of the authorizing and appropriating committees of the Senate, or of the Senate itself.
Mr. CRANSTON. I am pleased to hear the Senator confirm my understanding, because I am going to suggest just such a reallocation, which I believe conforms with the intent of the Committee on the Budget, both with respect to this particular function and with the overall economic policy intended by the third budget resolution. Will the Senator yield to me a moment longer, so that I can get his advice as to whether my proposal would be appropriate with respect to this third budget resolution?
Mr. MUSKIE. Certainly.
Mr. CRANSTON. It has come to my attention that the work force currently employed in the research, development, testing, and evaluation phase of the Space Shuttle will be cut back by 9,000 jobs during fiscal year 1977. Some of these jobs are a result of a planned phase down as the project nears its end. But about 2,800 of these lost jobs are a result of a lack of funds for the fiscal year. The layoffs will occur beginning in February and March. Then in October, after next year's funds become available, the program would rehire 2,800 people, to continue work on this phase of the Space Shuttle program. With the continuing influence of inflation, the costs involved for both labor and materials will be substantially higher after the delay.
In addition, the Federal Government will be required to pay a substantial amount of unemployment compensation to tide over these highly skilled workers, most of whom would then be rehired in October. The California unemployment rate has continually exceeded the national average. At a time when we are trying to stimulate the economy, this state of events has me seriously concerned — it seems to make no sense. I understand that a $50 million supplemental appropriation could be constructively and efficiently used to keep these 2,800 people scheduled for layoffs in this program. I would ask the distinguished chairman of the Budget Committee whether such an appropriation, all within function 250 could be accommodated within the third budget resolution, as reported by the committee?
Mr. MUSKIE. An addition of $50 million in budget authority to function 250 would appear not to breach the functional ceiling, provided, of course, that no other supplemental appropriation affecting this function is adopted. $50 million in budget authority would bring the function 250 budget authority totals to $4.518 billion, an amount, due to rounding, that appears to be consistent with the resolution.
With respect to outlays, it is reasonable to assume that the outlay effect would be somewhat less than $50 million because of the potential enactment date. In addition, the outlay effect presumably would to a slight degree be offset by reducing the need for unemployment compensation. While this amount would certainly use up any room remaining under the outlay ceiling in this function, it would not appear to exceed the outlay ceiling for this function, although we would need to have the specific supplemental before us and, of course, we would need to check the specific outlay effect with the Congressional Budget Office.
Mr. CRANSTON. I remind the chairman that the committee in my absence reduced both budget authority and outlays in this function on the assumption that no further appropriations would be forthcoming. Clearly, the amount we are talking about would have been within the function 250 totals of the second budget resolution, which are now $100 million lower.
Mr. MUSKIE. Yes, that is so.
Mr. CRANSTON. And, I hope the Senator from Maine would agree with me that it makes no budgetary sense to lay off these private sector workers unnecessarily, while we are adding in more money to create jobs to put other people to work. I thank the Senator. I expect to try to make the necessary funds available to prevent these layoffs.