September 14, 1978
Page 29391
INSTRUCTION OF SENATE CONFEREES ON HOUSE CONCURRENT RESOLUTION 683
Mr. ROBERT C. BYRD. Mr. President, under the order entered on yesterday I ask the Chair to lay before the Senate S. Res. 562.
The PRESIDING OFFICER. The Clerk will state the resolution by title.
The legislative clerk read as follows:
Calendar No. 1114, S. Res. 562, to instruct the conferees on the part of the Senate on H. Con. Res. 683.
The Senate proceeded to consider the resolution.
The PRESIDING OFFICER. Who yields time?
Mr. MUSKIE. Mr. President, I ask unanimous consent that the following members of the Budget Committee staff be allowed to remain on the floor during the consideration of and all votes on Senate Resolution 562:
John McEvoy, Sid Brown, Karen Williams, Van Ooms, Dan Twomey, George Merrill, Rodger Schlickeisen, Ira Tannenbaum, Liz Tankersley, Jill Scheu, Bob Sneed, Charles Flicker, Tony Carnevale, Rob Fersh, Gale Picker, Brenda Tremper. Tom Hogarty, Charles Reimenschneider, Don Campbell, Porter Wheeler, Barbara Levering, Anne Lockwood, Lewis Shuster, and Mike Shorr
Mr. MUSKIE. Mr. President, I yield myself 10 minutes.
The PRESIDING OFFICER. The Senator from Maine.
Mr. MUSKIE. Mr. President, the Senate-House conference on the second budget resolution is near agreement on almost all differences between the budget resolution passed by the two Houses, but the conference has deadlocked over House insistence that the budget be increased to make room for a huge new spending program.
This new House spending program would cost up to $9 billion annually.
No money is contained in the Senate-passed version of the budget resolution and the Senate conferees have refused to agree to this new addition to the deficit.
To help resolve this deadlock in the conference with the House, we are asking the Senate today to vote to instruct its conferees on the budget resolution to stand firm on the budget we passed last week and reject this multibillion dollar, multiyear addition to the deficit.
The program in question is the so-called soft public works spending program. But as this soft public works bill has been amended in the House and Senate, it has become unacceptably expensive, inflationary, and duplicative of existing programs.
The Senate should instruct its conferees not to increase the budget ceilings for this purpose.
I want to share with you my reasons for opposing this spending.
This "soft public works" program was originally proposed by the President as a way to provide private sector jobs for disadvantaged workers. The growing number of long-term unemployed young people in our cities is a serious problem. And for a while it looked like this "soft public works" might offer some promise of relief. That is why I was for it. That is why I supported it when the budget committee considered the first budget resolution. I had expected to support authorizations and appropriations for a program that would really address the problem of structural unemployment.
However, in the past few months, the heart of the proposal has been compromised away, and it now is certain that if any bill is approved, it will bear little resemblance to the President's original proposal and provide precious little help to the unemployed.
House amendments to the President's proposal would reserve for disadvantaged workers only one-sixth of the jobs the program might create. Senate amendments to the legislation would reserve only one-fourth of the total jobs for the disadvantaged, and would finance projects in which no employment was provided for disadvantaged workers.
Whatever jobs would be created for the long-term unemployed would be produced at staggering costs.
Under one version of this legislation, Federal taxpayers would have to spend $71,000 per year for every new job going to a disadvantaged worker.
And that is the version with the lowest cost. Senate amendments would cost $175,000 a year for every disadvantaged worker, and the House amendments would cost even more.
By contrast, the CETA employment program involves costs of only $9,200 per year for every disadvantaged worker.
Mr. President, this new multibillion dollar program would largely duplicate the existing CETA program.
Under all versions of the soft public works legislation, many of the jobs for disadvantaged workers would be created in the public sector.
The administration estimates that about 25 percent of all "soft public works" jobs will be "force account" or public payroll work. So most of the jobs for disadvantaged workers may be provided in the public sector directly duplicating and competing with the existing CETA program.
The administration's original proposal would have limited the inflationary impact of new spending by focusing spending on those who would otherwise be excluded from the work force.
The compromised, so-called soft public works proposals under consideration in the Congress would weaken that targeting on the disadvantaged and thus would be much more inflationary than the original proposal.
The House-passed budget resolution provides $2 billion per year for new local public works construction at a time when existing demand has already created intense inflationary pressures in the construction sector.
Mr. President, I believe that all relevant economic measures indicate that economic stimulus public works is simply not justified now. Back in 1976, when the Nation was in a severe recession, heavy public works spending did seem justified.
Municipal bond markets had been thrown into disarray by the threat of a New York City default and by uncertainty about municipal finances generally.
Unemployment in the construction industry was unusually high.
In response, the Budget Committee supported and Congress enacted appropriations of $6 billion for economic stimulus local public works at that time. I want to emphasize that nearly $2 billion of that appropriation is expected to spend out in fiscal year 1979.
The second budget resolution adopted by the Senate accommodates this spending, and thus already allows for a significant amount of stimulus in the public works area.
Mr. President, there is simply no justification for additional economic stimulus public works spending this year. Municipal borrowing is near record levels. The recovery is in its fourth year. Unemployment is down generally.
And unemployment in the construction industry is as low as any time since the 1973 construction boom.
Mr. President, I am a strong supporter of countercyclical programs. But if fiscal policy is to be responsible, these programs must not only turn on when they are needed, they must also turn off when the need passes.
Mr. CURTIS. Mr. President, will the Senator yield for a question?
Mr. MUSKIE. Yes, I am glad to yield.
Mr. CURTIS. I thank my distinguished friend. I concur with the distinguished chairman of the Budget Committee in his objection to this particular program, and my question is more or less procedural. I do not think this program should be enacted. I commend the position of opposing it.
I am not sure what size of tax reduction is the right figure. My question is this: Is the issue before us today, to be decided in the pending matter which we will vote on, narrowed to the issue of this spending program to which we object, or does it have any direct application to the tax legislation?
Mr. MUSKIE. This relates only to the spending program.
May I add for the information of the Senator that we are at or near agreement on virtually every other item in conference, including the revenue numbers, and my prediction is that the revenue number will protect the full-year tax cut that is in the Senate resolution.
Mr. CURTIS. In other words, the issue of what figure is to be followed in tax legislation is not involved in our opposition or support of this proposed House program to which the Senator objects?
Mr. MUSKIE. The Senator is correct.
Mr. CURTIS. I thank the Senator.
The PRESIDING OFFICER (Mr. ANDERSON) . The Senator's 10 minutes have expired.
Mr. MUSKIE. Two more minutes, Mr. President.
The PRESIDING OFFICER. The Senator from Maine.
Mr. MUSKIE. The plain fact is that these compromised "soft public works" proposals would convert the temporary local public works program enacted to deal with the recession into a permanent multibillion dollar a year fixture in the Federal budget.
I recognize that there are strong pressures to continue emergency aid even after the emergency is over.
No one likes to see a Federal money spigot turned off once it is on.
But Congress must resist those pressures and learn to turn the spigot off as well as on.
Otherwise we can never balance the budget or control inflation.
Last week, the Senate, in a series of votes, affirmed the spending totals contained in the second budget resolution.
Those totals are designed to limit Federal spending so that we can balance the budget by 1983.
Enactment of this new compromised "soft public works" program would torpedo the careful spending plan that the budget resolution contains. It will deepen the deficit by up to $2 billion a year.
I ask that Senators reaffirm their support for the Senate budget resolution and the achievement of its plan for a balanced budget at the earliest possible date.
I ask that Senators vote in favor of our resolution to instruct the Senate conferees to stand firm against this massive addition to the deficit.
Mr. President, I reserve the remainder of my time and yield the floor to my good friend the Senator from Oklahoma for such time as he may require.
Mr. BELLMON. Mr. President, I ask unanimous consent that the following members of the Budget Committee staff be allowed to remain on the floor during the consideration and votes on Senate Resolution 562: Robert Boyd, Charles McQuillen, William Stringer, Paul Carttar, Becky Davies, Carol Cox, Robert Fulton, Barry Kinsey, and Gail Shelp.
I make the same request in behalf of the following staff members of the Committee on Environment and Public Works: John Yago, Richard Harris, Richard Greer, Jackie Schafer, Phil Cummings, Bailey Guard, Hal Brayman, Rick Herod, and Jim Range.
I request the same privilege for Karyn Mandan of Senator CRANSTON's staff and Rick Brandon of Senator CHILE's staff.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BELLMON. Mr. President, as our distinguished chairman, the Senator from Maine (Mr. MUSKIE), has just indicated, the Senate and House conferees on the fiscal year 1979 second budget resolution have made substantial progress. We have already reached agreement on 13 of the 19 budget functions. Unfortunately, we are now deadlocked over the issue of public works funding. The House provides, in its fiscal year 1979 budget resolution, a total of $2 billion in budget authority and $200 million in outlays for both a third round of local public works projects and for the President's proposed "soft" or "labor intensive" public works program. The Senate
budget resolution, approved by this body just over a week ago, does not include funding for either of these programs.
Congressional action to date with respect to these programs is incomplete. A House subcommittee has approved a $6 billion measure, providing $3 billion annually for 2 years. Of that total $3 billion, $1 billion would be earmarked for labor intensive projects. Our Senate Public Works Subcommittee has not yet approved funds for either measure. The Senate subcommittee does, however, plan to continue markup on the President's "soft" public works proposal sometime next week.
It is the view of the majority of the Senate conferees that the position reflected in the Senate's version of the budget in function 450 should be maintained. We ask today that the full Senate reaffirm its position. We believe, for a number of reasons, that the Senate stands on solid ground in upholding its view.
First, there is simply no economic justification for the enactment of either of these programs at this time. The construction industry is experiencing sharp increases in activity. Private housing starts are at peak levels and business construction has increased 20 percent over last year. Public construction is 22 percent higher than last year. Additional stimulus, in this sector of the economy, is both unnecessary and unwise, since inflation is threatening.
The current pace of construction activity has already had an adverse effect on the level of inflation. The construction component of the wholesale price index rose at a 10.7 percent rate during the past year, second only to food price increases. With the construction materials industry operating at capacity, additional funding of new construction activity through a new round of local public works projects would only put upward pressure on the industry, with the price increases spreading to other sectors of the economy.
We have been fortunate, to date, that the rapid rise in materials prices has not been accompanied by wage-based inflation in the construction industry. Construction wages have risen more slowly than wages in the economy as a whole. However, to the extent that targeting of the "soft" public works program has been shifted away from the long-term unemployed, it will absorb labor in what is already a tight labor market. Higher wages and added inflationary pressures are then sure to follow.
The original targeting concept of the "soft" public works program has been significantly altered by the House. The administration originally proposed that 50 percent of the jobs created be targeted on the long-term unemployed. An administration compromise measure, however, now provides that only 25 percent of the jobs be targeted on the structurally unemployed in the first year. Not only has the administration relaxed its standards for targeting the program on the long-term unemployed, it has also relaxed the original labor intensity requirement. As first proposed, labor costs were required to be 50 to 80 percent of total project costs. Now, the total labor intensity of all projects, on average, is required to be only 40 percent. Given this watered-down version of the bill, the administration's proposal now more closely resembles classical countercyclical public works. Current economic conditions do not call for, and the Senate should not endorse, such additional spending stimulus.
There is one other point I would like to clarify. Many proponents speak of this program as a jobs program for our cities. In fact, the administration insists that the dual objectives of this program are to provide job opportunities for the long-term unemployed and to improve the physical infrastructure of localities. As I have just indicated, targeting of the program on the long-term unemployed has been substantially relaxed and I can find no provision in the bill which assures that funding is targeted on urban areas suffering from physical and economic deterioration.
Another major point, Mr. President, is that we view the "soft" or "labor intensive" public works program proposed by the President to be, at best, a high-cost option for providing the long-term or structurally unemployed with jobs. Estimates as to the cost per year of employment for each long-term unemployed worker under the "soft" public works program range from $70,000 to $175,000. This compares with an average cost of $10,000 under the CETA program.
The Senate has shown itself to be sensitive to meeting the needs of the structurally unemployed through CETA. On August 24, the Senate approved S. 2570 extending the Comprehensive Employment and Training Act (CETA) for 5 years. In that bill, the Senate authorized a substantial increase in funding for programs to combat structural unemployment — emphasizing this to be one of the Senate's high priority concerns. The Senate-passed budget resolution assumes a $5 billion a year program to serve the structurally unemployed.
For those who do not know what we are talking about when we say structurally unemployed, we mean primarily the urban youth, in which group the unemployment is running at levels above 25 percent and a group which seems to benefit least when unemployment generally goes down. We feel, I think quite properly here in the Senate, that we need to structure programs aimed directly at these unemployed persons to get them prepared to take lasting jobs in the private sector or in such Government programs as are open to them.
In addition to this $5 billion, the resolution contemplates $1.5 billion for youth programs (an increase of $500 million over fiscal year 1978 appropriations), and a new $400 million per year private sector employment initiative. Thus, Mr. President, $7 billion is provided for structural employment programs in CETA alone.
Do we really want to add an additional $1 billion in our fiscal year 1979 budget to fund an additional and overlapping program? I think not. Improving the targeting of CETA programs, as we have done, is a far better way than a new or expanded public works program to help the long-term unemployed, welfare recipients, and others who have no jobs for structural reasons.
Using CETA, rather than an "untested" program of "soft" public works, as our primary weapon in the attack on structural unemployment is a more effective and far less expensive way of accomplishing the goal we all desire: To help people who cannot get jobs to become employable.
In addition, this strategy avoids the problem of creating yet another redundant Federal program which will absorb scarce resources for activities which overlap those of CETA.
This debate with the House highlights the whole issue of federally sponsored employment. Do we want to provide permanent, publicly funded employment (income maintenance with an employment requirement), or do we want to provide the unemployed with the skills necessary to become employed in the private sector? If we want to provide a means for the difficult-to-employ to enter the active labor force, "labor intensive" public works — in fact, construction jobs in general, including local or "hard" public works — are not the answer.
In addition, the construction industry historically is plagued by a chronic over-supply of labor. Why add additional participants to the construction trades, training them for construction jobs, and simply exchanging one category of employment for another?
During the past 3 years, the private sector has exhibited an unprecedented capacity for job creation. We have added 3.6 million new jobs in the past year; 3.2 million have been in the private sector.
Mr. President, let me repeat that. We have added 3.6 million new jobs in the past year; 3.2 million have been in the private sector. Is it not preferable to rely primarily on the private sector to employ our labor force, while relying on the CETA mechanism we have established to prepare the structurally unemployed — those with chronic unemployment problems — for permanent employment in the private sector.
Lastly, Mr. President, our efforts to limit Federal spending so as to achieve a balanced budget in the near future are relevant here. When OMB Director James McIntyre testified before the Senate Budget Committee at the end of July, he called on Congress to cut $5 billion from its final fiscal year 1979 spending target. This call from the administration however, came without direction as to specific areas for possible reduction. In the second budget resolution passed by the Senate, we have cut total budget authority $11.15 billion and total outlays $9.3 billion below the first budget resolution. $5.2 billion of this spending reduction can be attributed to spending reestimates, while $4.1 billion can be attributed to actual programmatic changes from the first budget resolution.
To include money in this resolution for the startup of a new program which is duplicative of existing Federal efforts, less effective, and less efficient — to include money for a "soft" public works program — would be inconsistent with the administration's call for a spending reduction. It would be equally inconsistent to provide a new round of funding for the local public works program — a program under which we will spend roughly $2 billion from prior year authority in fiscal year 1979, and a program initiated in 1976 to provide periodic support in a time of general economic downturn. Programs of a temporary or countercyclical nature such as this were intended to and should terminate as the economy improves.
The decision we make on these programs today will have impact on spending in future years. Even including a minimal amount for the "soft" public works program is dangerous, for then we establish a new Federal program which will generate its own constituency and momentum and ultimately become a new and potent competitor for our limited future resources.
As I indicated in my statement when the resolution was introduced last night, the Senate Budget Committee estimates the cumulative budget margin in the next 5 years for tax reductions or spending increases to be $54 billion. Are we willing to commit billions of these limited future resources to programs such as these whose economic impacts and consequences will first be felt in an economic environment not known at this time? Or, do we wish to be more prudent, keeping these programs in reserve for such time when they are needed? I hope we will make the latter choice, the one reflected in the second budget resolution we passed last week.
I strongly urge that the Senate approve the resolution now before it.