Statement on Signing the Emergency Unemployment Compensation Act of 1991

Today I am signing H.R. 3201, the "Emergency Unemployment Compensation Act of 1991." This bill would authorize $4.5 billion primarily for a Federal program of emergency unemployment compensation that would bypass the discipline of the Bipartisan Budget Agreement. H.R. 3201 specifies that this new program and other provisions of the bill will not take effect unless I designate the associated spending as an emergency under the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. For the following reasons, I will not designate the direct spending and the appropriations authorized in H.R. 3201 as an emergency.

The Administration, the Chairman of the Board of Governors of the Federal Reserve System, and most private forecasters believe that the recession has ended and that a recovery appears to be under way. Recent official figures show that the GNP for the second quarter of this year actually increased. Last month's drop in the unemployment rate is another encouraging sign. Although the unemployment rate may continue to react with a lag, it should decline further with the economic growth that is forecast for the rest of this year.

By historical standards, the current unemployment rate would not be cause for "emergency" action to trigger additional benefits above and beyond those provided by current law. When the Congress last created a temporary Federal supplemental compensation program in 1982, the unemployment rate exceeded 10 percent -- much higher than the current rate of 6.8 percent. When that program was allowed to expire in 1985, unemployment was still higher than the current rate.

While it is not a satisfactory substitute for a job, I am gratified that the present unemployment compensation system -- including its provisions for extended benefits -- is providing $25.4 billion in payments to the unemployed this fiscal year. The present system will continue to provide benefits for those who are eligible.

Under current circumstances, an emergency designation could be counterproductive. It could signal the abandonment of the fiscal discipline of the 1990 budget agreement. This would have a negative effect on financial markets, could jeopardize the recovery, and thus might increase unemployment just when the projected recovery would otherwise have been decreasing unemployment.

In addition to the problem with the "emergency" designation, the Administration believes that the revised program of unemployment compensation authorized by H.R. 3201 is poorly designed and unnecessarily expensive, and could lead to slower reemployment. The new program would create four tiers of benefits providing from 4 to 20 weeks of compensation. Experience suggests that such a complex, cumbersome system would result in benefit delays, payment inaccuracies, and escalating administrative costs.

H.R. 3201 would expand "emergency" unemployment benefits to every State, even those with relatively low unemployment. It would abandon the measure of unemployment that has historically been used to trigger extended benefits and would substitute an overly broad measure that does not reflect the target group to be served: insured workers. Further, States could shift costs from the current Extended Benefit program, where the States pay 50 percent of the costs, to the new program, under which the Federal Government would assume 100 percent of the costs.

For all these reasons, the unemployment compensation program in H.R. 3201 is not an effective response to current economic conditions.

Of course, I am deeply concerned about those who have lost their jobs during the recession and am anxious to see them return to work at the earliest possible date.

To that end, it is essential that we take responsible actions to assure that the economic recovery and its associated job-creation continue and strengthen. With that objective in view, I urge the Congress to enact measures that will increase the Nation's competitiveness, productivity, and growth. At the same time, I am determined that we must continue to support the hard-won reforms to assure budget discipline and must avoid any measures that might threaten the prospects of continued economic recovery and job-creation.

George Bush

The White House,

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