Statement of Administration Policy: S. 1722 - Emergency Unemployment Compensation Act

(Senate)
(Bentsen (D) Texas and 30 others)

As a general matter, the Administration favors legislation that is consistent with the Budget Enforcement Act (BEA) and that promotes job-creating growth. It opposes legislation that violates the BEA or threatens to be counter productive economically.

In his August 17, 1991, statement on H.R. 3201, the "Emergency Unemployment Compensation Act of 1991," the President stated that "it is essential that we take responsible actions to assure that the economic recovery and its associated job-creation continue and strengthen." The President noted that the abandonment of the 1990 budget agreement in H.R. 3201 could have had a negative impact on financial markets, threatened economic recovery, and thus might have increased unemployment. Accordingly, the President did not designate the direct spending and the appropriations authorized in H.R. 3201 as an emergency, and the legislation by its terms did not take effect.

In his statement on H.R. 3201, the President urged Congress to enact measures that would increase the Nation's competitiveness, productivity, and growth. The Administration will support efforts to amend this legislation with pro-growth amendments that will stimulate the economy, create jobs, and put more Americans back to work. Unfortunately, S. 1722 is virtually identical to H.R. 3201 and therefore fails to meet these criteria. For all the reasons detailed below, the Administration opposes passage of S. 1722. If the bill were amended in any way to limit the President's ability to independently determine whether the spending in this — or any other bill — constitutes an emergency for purposes of the Budget Enforcement Act (BEA), the President's senior advisers would recommend a veto.

The Legislation does not Include Offsets and is Substantively Flawed

—  S. 1722 does not include offsets for the increased direct spending in the bill, and therefore violates the pay-as-you-go requirements of the BEA. Instead, the bill language specifies that S. 1722 would go into effect only if the President designates all spending under the bill as an emergency for the purposes of the BEA.

—  Under an emergency designation, the Federal Government would have to borrow $4.4 billion to fund S. 1722, increasing the Federal debt and deficit by this amount.

—  S. 1722 would create an expensive, poorly designed Federal program that would slow the return to work of those it intends to serve. The program would provide from 4 to 20 weeks of additional benefits through a complex and cumbersome four-tier system. Previous experience demonstrates that such a system would result in benefit delays, payment inaccuracies, and escalating administrative costs.

—  S. 1722 uses the State's total unemployment rate (TUR) rather than the insured unemployment rate (IUR) that triggers benefits under current law. The measure used to trigger benefits should reflect the target group to be served — insured workers. The TUR includes groups that do not — and under S. 1722 would not — qualify for unemployment benefits, such as those who leave their jobs voluntarily or are first-time entrants into the labor market. By contrast, the IUR reflects the target population.

—  The TUR is based in some States upon econometric models, which are not seasonally adjusted, and on sample surveys in others. In addition, the TUR is subject to revision at the end of the year. The IUR can be seasonally adjusted and is based on claims records that can be verified. As such, it is a much better mechanism for responsibly distributing scarce Federal dollars.

—  S. 1722 would provide 26 weeks of benefits to members of the Armed Forces who decide to leave the service voluntarily, either for retirement or a return to civilian life. Civilians who voluntarily quit their jobs are generally disqualified from receiving benefits. Thus, S. 1722 would provide significantly more generous benefits to servicemembers than are available to civilians. In previous legislation, the Administration has supported additional coverage for servicemembers who involuntarily leave the service — such as those who may be affected by Defense force reductions — but not for those who voluntarily end their service.

An "Emergency" Designation is Not Warranted

—  The Administration and most private forecasters believe that the recession is ending and the recovery is underway. Recently released figures indicate an apparent leveling off of the unemployment rate and an increase of 34,000 payroll jobs, lending further weight to this view. In this context, the Administration does not believe it is appropriate to declare an "emergency" under the BEA.

—  By historical standards, the current unemployment rate would not be cause for congressional action. When Congress put the current extended benefit program State triggers in place in 1982, the unemployment rate was 9.8 percent — much higher than the current rate of 6.8 percent. When Congress subsequently created the temporary Federal supplemental benefits program, the unemployment rate exceeded 10 percent — and Congress allowed that program to expire in 1985, when unemployment was still higher than the current rate.

Dole Amendment

The Administration understands that Senator Dole will propose a comprehensive substitute that includes offsets for the additional benefits provided under his proposal. The Dole substitute would provide a minimum of six additional weeks of benefits in all States and ten additional weeks in States where the insured unemployment rate exceeds 5 percent. The IUR would be adjusted to take into account the number of people who have exhausted their regular unemployment benefits. The Administration supports the Dole substitute as an alternative to S. 1722, which does not contain offsets.

Costs of S. 1722

S. 1722 would increase direct spending and the budget deficit. OMB's preliminary scoring estimates for this bill are presented in the table below.

Preliminary Cost Estimates
Fiscal Years
($ in millions)