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III. SHORING UP OUR FIRST LINE OF DEFENSE Improving Jobless Benefits The unemployment rate for January took an even bigger jump than the December rise from 6.5 percent to 7.2 per- cent: a full percentage point to 8.2 percent. It re- mained at that rate for February but then took a heavy jump in March, to 8.7 percent. Between October and March 1975 the unemployment rate had risen from 6 percent to 8.7 percent, an increase of 2.7 million jobless workers in a 6-month period. Historically, since its inception in the l930s, the unemployment insurance program has been the nation's first line of defense against joblessness. Following the new temporary program that essentially achieved universal coverage of all experienced workers, the system became even more essentially the backbone of our efforts to cush- ion the effects of the recession. By early l975, between two-thirds and three-fourths of the 8.5 million unemployed were receiving unemployment compensation. Given this heavy reliance by millions of families on the UI system, we gave priority attention to the increas- ingly serious problem of exhaustionâworkers who had used up all their eligibility for benefits. The economy was getting worse and jobs were not available. At the same time, the additional l3 weeks of benefits (for a maximum of 52 weeks) made available as of January l, l975, for those regularly covered by UI would run out by late March. In a memorandum to the President on February 24, l975, Secretary Brennan had estimated that without a further extension of benefit duration an estimated 2.2 million workers would exhaust benefits in l975 and had recommended Presidential action within 30-60 days. 67
68 Secretary Brennan left office shortly thereafter and the President appointed Dr. John Dunlop as the new Secre- tary of Labor. Secretary Dunlop was sworn into office on March l8 and immediately began concentrating on impending problems in the UI area. A distinguished professor at Harvard for many years, Dunlop had specialized in labor management and employment problems and was already well informed about the unemployment insurance system. He immediately understood the seriousness of the impending exhaustion problem and took personal charge of our efforts to develop a legislative proposal and get the President's endorsement. Early in March Senator Javits became concerned about the exhaustion problem, particularly as it affected his state of New York. An estimated l50,000 workers in New York and an estimated additional l00,000 workers in other states would exhaust the full 52 weeks of benefits (in- cluding the additional l3 weeks authorized in December l974) without being able to find work. Realizing the time limits of the situation. Senator Javits offered an amend- ment to the Tax Reduction Act of l975 that had the effect of adding another l3 weeks of benefits for regular UI claimants (for a maximum of 65 weeks) with an expiration date of June 30. The amendment was easily adopted by the Senate and the Conference Committee. The President signed the Tax Reduction Act on March 29, l975; thus, the first exhaustion "cliff" was narrowly missed for hundreds of thousands of workers. Meanwhile, on March 20 Secretary Dunlop had dispatched a memo to the Economic Policy Board (he had been made a full member by President Ford) that essentially repeated what we had told the President in Februaryâover 2.2 million exhaustees could be expected in l975 with an estimated one million of them still in the labor force and unable to find work. The memo recommended that the programs be extended to provide an additional l3 weeks of benefits, that new "off triggers" be developed, and that the programs be extended to December 3l, l976. We estimated the additional costs of the recommendations to be $6.9 billion. We had lost about 30 days in the process of gaining Presidential approval due to the shift from Secretary Brennan to Secretary Dunlop, but we were now back on the track. Fortunately, Senator Javits had intervened at a crucial time to save many families from going without in- come protection and provided the administration and the Congress with l3 weeks to fully consider appropriate next steps.
69 Secretary Dunlop succeeded in convincing the Economic Policy Board and the President of the necessity to move ahead with our recommendations. In an April 4 speech to the San Francisco Bay Area Council, President Ford an- nounced that he would recommend to Congress: (l) that maximum benefits for covered workers be extended to 65 weeks; (2) that maximum benefits for the l2 million who had not previously been covered be extended from 26 to 39 weeks; (3) that both programs be continued until the end of l976; and "in the expectation that the economy will show improvement before the year is out," (4) that the extended programs have a built-in procedure to reduce or terminate when the unemployment rate subsides to a speci- fied level. For the next several weeks we worked with OMB and the Economic Policy Board primarily on the ques- tion of how to design that "built-in procedure": again we faced the question of triggers. This was the third time around for us on the question of triggers relating to unemployment benefits. We had first proposed area triggers based on Standard Metropol- itan Statistical Areas of 250,000 population or more as a part of our alternative to the Jackson amendment. We had next included the concept in our anti-recession PSE and UI proposals. Congress had not adopted the concept of area triggers in either case, but, on examining again the alternatives of using either national triggers or state-based triggers, we again settled on the area trig- ger concept and determined once again to try to sell it to Congress. Although our administration bill was not yet quite ready for submission to Congress, Secretary Dunlop, on April 22, l975, appeared before the Unemploy- ment Insurance Subcommittee of the Ways and Means Com- mittee to discuss our proposals in general. On April 30 I appeared before the Subcommittee to discuss in detail the administration's bill (HR6504), which had been in- troduced by Congressmen Steiger, Frenzel, and Conable. The bulk of my testimony and the Committee's questions centered on the triggering concepts that we were proposing. (It is interesting to note in passing that between December l974 and April l975 the House had worked out the jurisdictional question over UI so that the Ways and Means Committee again handled the entire package even though the benefits for those not a regular part of the UI system were paid for out of general funds of the Treasury. This was not true in the Senate. The Senate Labor Committee tenaciously hung on to jurisdiction over the program financed out of general revenues.)
70 On May l5 the Ways and Means Committee reported out a bill that included the extensions we had recommended but, not surprisingly, rejected the notion of any triggering- off of the program based on unemployment rates. Instead the Committee made the entire 65 weeks of the program for regularly covered workers available nationwide until June 30, l976, and then cut the program to 52 weeks for the remaining six months. For the non-covered workers the program would remain at 39 weeks until June 30, l976, and then drop to 26 weeks. The House, on May 2l, passed the bill (HR6900) by a vote of 38l-8. On June l6 Secretary Dunlop appeared before the Senate Finance Committee to press for passage of the administra- tion bill and stressed the need for the automatic area triggering-off concept embodied in the administration bill. On June l8 the Finance Committee reported out a bill that included the basic program extensions and also included a triggering concept, though one based on state triggers rather than labor market areas as we had recommended. Un- der the Committee bill people in states with a 6-percent unemployment rate or more would remain eligible for the full 65 weeks of benefits; people in states with less than 6 percent but more than 5 percent unemployment would be eligible for 52 weeks; and people in states with less than 5 percent unemployment would be eligible for only the regu- lar 39 weeks. The full Senate approved the bill by a 70- 3 vote on June 20. During Conference sessions on June 25 and 26 the con- ferees agreed to the Senate's trigger concept and the Senate and House both adopted the Conference report and cleared the bill for the President on June 26. The Pres- ident signed the bill into law on June 30, l975, the day that the temporary extension expired. Once again, the administration and the Congress had succeeded in meeting an emergency situation, even though it took every day of the 13 weeks that were available. The Eighteen Billion Dollar Year A story about unemployment insurance benefits may seem out of place in a study that is primarily concerned with the nation's manpower programs and the role of those pro- grams in meeting the needs of the victims of the recession. Yet I do not believe that the story of the federal response to the recession of the l970s can be understood without treating both the manpower and the unemployment insurance
7l programs together as parts of a total response. By any measure, the unemployment insurance programs played a vital role in assisting the victims of recession, while the man- power programs, particularly PSE, played an important but a decidedly secondary role. It is important to stress this point because of the view one might get from the media's general treatment of this subject; PSE is a sub- ject of intense interest, while the unemployment insurance system is only the subject of attention when blatant in- dividual abuses are discovered. From July l975 to July l976 the unemployment compensa- tion system paid $l8.2 billion in benefits. These benefits were paid by means of an estimated 225 million checks to about l4 million individuals, compared with an estimated $3 billion for PSE for 3l0,000 individuals.
