Special Message to the Congress Proposing Economic Adjustment Assistance Legislation

To the Congress of the United States:

The industrialization of America is essentially a story of change and progress. For most communities, that change is usually beneficial, enhancing general prosperity. But for some, adjustment to change can be difficult. As new developments unfold in energy, defense needs, technology, and international trade, some areas of the country will inevitably suffer transitional pains even as the Nation as a whole is benefiting.

There are now over 400 areas in the country which have experienced chronic unemployment and low income levels, despite a general increase in national prosperity. In these depressed areas it is also not unusual to find inadequate educational and health arrangements as well as substandard housing.

For nearly a decade, the programs of the Economic Development Administration and the Regional Action Planning Commissions have been attempting to alleviate economic distress and restore economic viability to these chronically distressed areas. Last year I proposed to terminate the programs of EDA, and remove the Federal role in the decisionmaking process of the Title V Regional Commissions, because those programs had not been effective. Subsequently I agreed with the Congress to continue those programs for one more year while we reexamined the problems and the ability of current and proposed Federal programs to deal with the problems.

The study, conducted over the last several months by the Department of Commerce and the Office of Management and Budget, was completed and transmitted to the Congress on February 1, 1974. It concludes that:

--Current economic development programs fail to provide adequate assistance for economic change before the changes have done serious damage to the viability of recipient communities;

--The project-by-project allocation of Federal assistance results in dispersion of available resources in amounts too small to do much lasting good, and it also fails to encourage a comprehensive and planned multi-level government and private response to the problems of economic adjustment;

--There is a need for a more effective form of Federal assistance to permit States and communities to develop comprehensive and targetted adjustment efforts.

If new economic opportunities can be developed in an area before labor, capital, and hope are dispersed, the normal rhythm of economic life can be maintained. We can then avoid the enormous outlays for economic assistance that are required to help distressed areas, and we can prevent the irretrievable loss of resources that occurs in spite of this assistance.

THE ECONOMIC ADJUSTMENT ASSISTANCE PROGRAM

Based upon our experiences with current programs and the conclusions of the recent Government study, I believe it is time to revamp our approach to adjustment assistance.

I am, therefore, sending to Congress today my proposal for an Economic Adjustment Act. This measure is designed to help States and communities provide smoother and more orderly adjustment to economic changes and limit the number of new distressed areas. It will also permit more effective long-range areas to overcome the problems of areas now suffering from economic distress.

By granting State and local officials greater flexibility in the way they spend Federal funds within distressed areas, it is our hope that they will have greater success in reducing unemployment and raising general income levels in those areas.

Although this act is not intended as an emergency measure just to deal with dislocations caused by the energy crisis, it could serve as an extremely important tool for States and communities in responding to energy problems. This proposal, along with my recent proposal for extending unemployment insurance benefits for individuals in areas heavily impacted by energy problems would help reduce hardships while adjustment efforts are pursued.

RETURNING DECISIONMAKING TO THE STATES AND COMMUNITIES

A primary goal of the proposed act is to return to States and communities the principal responsibility for deciding how to use the proposed Federal assistance to achieve program objectives. If this assistance is to be used to maximum advantage, the decisions must rest with State and local officials who are in the best position to understand their needs.

In order to return this responsibility to the States and communities, a minimum of 80 percent of the funds available under the act would be automatically allocated to States on the basis of a formula that would recognize the needs of the States and communities for assistance. The formula would take into account unemployment levels, population dispersal, income levels, and other factors. The remaining funds would be allocated to States on a discretionary basis to meet special needs arising from State, regional or local problems, or from Federal actions such as closing of large Federal installations. The funds allocated to a State would automatically be made available to the State upon preparation and approval of a general State plan which specifies the target areas selected for economic adjustment and the general objectives planned for each area.

Because the money would be given to the States as a block grant, the States could apply it to only one or a few problem areas, with each project getting enough money to make a difference. By contrast, much of the EDA funding has been dispersed in smaller amounts for many different projects, thereby making it difficult to develop a comprehensive effort to overcome the problems of any area. Furthermore, under the new program, States should be able to apply funds to areas before economic distress becomes acute.

This approach would also maximize State and local responsibility for planning and carrying out economic adjustment efforts, while providing assurance that the funds are being used to pursue national objectives. It would permit States, and adjustment areas within States, to develop and put into effect their economic adjustment plans in conjunction with related programs such as those under the recently enacted Comprehensive Employment and Training Act, the Rural Development Act, and the proposed Better Communities Act. States and communities could also conduct more rational planning for economic adjustment because they would have a better understanding of the amount of Federal resources which would be available to them for that purpose. And they would no longer design programs on the basis of what States and local governments think Washington wants, rather than what they themselves need.

STRENGTHENING REGIONAL PLANNING

AND COORDINATION

The Economic Adjustment Act would authorize interstate compacts to permit States to work together on common adjustment efforts. States which participate in multi-State economic adjustment organizations could use funds allocated under the act for joint adjustment efforts, including administrative costs and planning activities of the regional organization. Regional organizations could participate in the development of the plans of the member States to assure that the State plans reflect any regional adjustment needs.

The principal Federal authority and responsibility under the act would be given to ten Federal Regional Administrators, one in each Standard Federal Region. The Federal Regional Administrators would have responsibility for reviewing State plans, obligating funds to the States, and evaluating performance by the States in using the funds.

The Federal Regional Administrators have the responsibility of working closely with the Federal Regional Councils in each Federal region to help assure improved coordination among the many Federal programs which affect economic activities in an area or region. I plan to request the Secretary of Commerce to carry out the central Federal administrative and policy responsibilities under the act.

TRANSITION PERIOD PROPOSED

The Economic Adjustment Assistance Program would replace the programs now conducted by the Economic Development Administration and the Regional Action Planning Commissions. Although current authority for those programs is now due to expire at the end of this fiscal year, I am prepared to accept legislation to extend that authority for the purpose of providing for an orderly transition to the new Economic Adjustment Assistance Program.

With the expectation that the Congress will provide the required legislation for the new program and will extend the programs of EDA and the Regional Commissions, my budget for fiscal year 1975 includes funding for EDA and the Title V Commissions at a level of $205 million. The budget also includes an additional $ 100 million as initial funding for the new act. This will provide a total of $305 million for these programs in fiscal year 1975, an increase of nearly $50 million over the 1974 levels.

The concerns and suggestions of Members of Congress have played a major role in shaping this legislative proposal. I hope that the dialogue between the Congress and the executive branch will continue as the Congress considers this proposal.

The Economic Adjustment Act can provide the basis for an important improvement in the ability of our States and communities to adjust to economic changes and prevent unnecessary distress and hardship. By helping to raise employment and income levels for some Americans, it can improve the quality of life for all Americans.

RICHARD NIXON

The White House,

February 19, 1974.