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Developing Manpower Legislation: A Personal Chronicle (1978)

Chapter: ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT

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Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
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Page 1
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 2
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 3
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 4
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 5
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 6
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 7
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 8
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 9
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 10
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 11
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 12
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 13
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 14
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 15
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 16
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 17
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 18
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 19
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 20
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 21
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 22
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 23
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 24
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 25
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 26
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 27
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 28
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 29
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 30
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 31
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 32
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 33
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 34
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 35
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 36
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 37
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 38
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 39
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 40
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 41
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 42
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 43
Suggested Citation:"ACHIEVING MANPOWER REFORM--THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT." National Research Council. 1978. Developing Manpower Legislation: A Personal Chronicle. Washington, DC: The National Academies Press. doi: 10.17226/18649.
×
Page 44

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I. ACHIEVING MANPOWER REFORM—THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT Background—Four Years of Frustration and Conflict The events surrounding the passage of the Comprehensive Employment and Training Act (CETA) can be understood best when viewed in the light of the immediately preceding four years of continuous and often bitter conflict between the Congress and the administration over manpower reform. The basic manpower system of the l960s was created by the l962 Manpower Development and Training Act (MDTA) and the l964 Economic Opportunity Act (EOA). These two im- portant pieces of legislation provided the basis for a strong, new effort by the federal government to operate a variety of manpower, training, and employment programs. These programs were designed to assist unemployed and underemployed persons in obtaining and retaining unsub- sidized employment. Both pieces of legislation provided broad authority for varied programmatic approaches to alleviate structural unemployment, including classroom training, on-the-job training, work experience, supportive services, and transitional public service employment. Typically, the programs were targeted on groups in the labor force most in need—the economically disadvantaged, minorities, youth, welfare recipients, and older workers. The programs were directed by the federal government, which contracted with thousands of individual public and private entities to provide services to recipients. Dozens of different programs evolved, each with its own staff, cli- entele, and rules and regulations and, often, with little regard for coordination with other programs. By l969, the nation's developing concern over poverty and the disadvantaged had resulted in the growth of these programs from their small beginnings in the early l960s to a total size of $2.5-$3 billion. More than two dozen

separate categorical programs were being operated by the federal government, and the federal government was con- tracting directly with some l0,000 separate sponsors to carry out the programs. At the local level, there were often 30-40 separate programs with different sponsors— uncoordinated, overlapping, and intensely competitive. The people for whom the programs were intended were faced with an unintelligible maze. Although many efforts had been made to coordinate these programs, the absence of a clear legislative mandate made it impossible to effec- tively coordinate the actions of the federal officials to bring order to the chaos at the local level. By the beginning of l969, a consensus developed among manpower professionals that a new service delivery system was needed and that new national legislation was required for such a system. Early in the 9lst Congress, manpower reform bills were introduced in both the House and the Senate. The Nixon Administration followed suit by devel- oping its own manpower reform bill, submitting it to the Congress in August of l969. All of these bills had certain common features, which reflected the growing consensus. First, every bill con- solidated the existing authorities of the MDTA and EOA into one act. Second, each bill decentralized the man- power delivery system so that state and local governments were given much of the authority to plan and operate man- power programs. Third, each bill decategorized programs so that each state or local government was given a block of funds with which to plan and operate programs espe- cially designed for the needs in its community. The terms decentralization and decategorization became shorthand descriptions for key concepts in manpower re- form. The shifting definitions of these concepts have been at the center of the vigorous debates over manpower policy to this day. Decentralization involves transferring more power and authority from the federal government to the state and local governments. There was a general consensus in l969 that decentralization was desirable, but the degree to which control should be devolved and the degree to which power should be retained by the federal government would have to be defined in a set of detailed specifications. The search for this definition will be a continuing theme in this study, and it will never be finally and permanently decided. It is a crucial and continuing subject of concern to everyone because it goes to the heart of the federal system.

The term decategorization also stands for a central concept in the provision of these public manpower ser- vices: local power to decide who shall receive which publicly financed services without any prescribed cate- gories of recipients or programs being defined by the federal government. Under the system operated until l969, the federal government specified by law and regulation who would be eligible for specific training and employ- ment services. Under a decategorized system, these key public priority determinations would be decided at the state and local level. Again, specific definition of this concept is central to manpower policy today as it was in l969. The proponents of federal designation and targeting for beneficiaries argue that only by federal statutory definition can the public be assured that scarce resources are targeted to those in the population most in need of services. The proponents of state and local des- ignation of beneficiaries argue that only officials at the state and local level know the specific labor force problems in a particular area and that broad power and flexibility are needed by those officials to tailor pro- grams to meet local conditions. In addition to these two basic concepts, a third con- cept has become central to manpower reform debate—the role of public service employment. Although subsidized work experience programs in the public sector had been authorized in both the MDTA and EGA, it had always been understood that these jobs were transitional and were pro- vided so that recipients could develop a work history on the way toward private, unsubsidized employment. Begin- ning with the debate over manpower reform in l969, the proponents of public service employment began to argue that training and related services were not enough for a well-rounded, federal manpower effort and that specific legislative authority should be granted for the creation of public jobs both to provide useful on-the-job train- ing in periods of full employment and to increase the supply of jobs when there was a deficit of employment opportunities in the private job market during cyclical downturns. The debate over public job creation has always had an overstated ideological ring. The strong proponents of publicly created jobs typically argue that the government has an obligation to provide employment for all its em- ployable citizens who are unable to find jobs in the pri- vate sector. The opponents raise the specter of the WPA-type massive public job creation efforts of the l930s,

characterize it as "make-work" and unnecessary "leaf raking," point to the tremendous costs, and recite dan- gers inherent in large numbers of citizens becoming de- pendent on public jobs. These three basic concepts then, decentralization, decategorization, and public service employment, became in l969 and remain to this day the basic concepts around which the continuing debate has been waged over the shape of the nation's manpower programs and policies. During l969 and l970, the 9lst Congress struggled with these issues and finally passed and sent to the President a manpower reform bill in December of l970. The advocates of decentralization had generally been successful: the bill provided for a decentralized system with a strong federal review end oversight role, but with basic planning and operating authority devolving to state and local gov- ernments. On the issue of decategorization, the bill went a long way toward removing federally defined programs and categories of recipients. On the issue of public service employment, however, there was total disagreement. President Nixon vetoed the bill largely because of his opposition to its public ser- vice employment provisions, and he used time-honored ideo- logic terms to describe the bill: "dead end jobs in the public sector" and "WPA-type jobs are not the answer." Although the President's veto met with a barrage of crit- icism, it was sustained in the Senate. Thus, the first attempt at basic national reform of the manpower system floundered on the issue of public ser- vice employment. The issue had been cast in harshly parti- san and ideological terms by both the Democratic majority in Congress and by the Republican administration, and the first two years of manpower reform effort ended on a note of bitterness and recrimination that was to persist for years to come. Early in l97l President Nixon presented to Congress and to the country his "New Federalism" program. It emcom- passed not only a general revenue sharing program for the states and the cities but also a series of what were termed "special revenue sharing" programs, in which broad func- tional areas of federal activity, including manpower, would largely be turned over to the state and local gov- ernments through major decentralization. This new bill for manpower reform was significantly different from the administration bill submitted in l969. Under the "special revenue sharing" concept, the federal government would have a substantially diminished role in program administration,

review, and oversight, with the states and cities almost accorded carte blanche to plan and operate manpower pro- grams. This bill found few supporters in the Congress. Not only did the bill fail to satisfy the supporters of public service employment, but now the administration's ap- proach on the issues of decentralization and decategorization went much too far for most members of Congress. In short, on the three major issues of decentralization, decategori- zation, and public service employment, the Republican administration and the Democratic Congress were now dia- metrically opposed. The administration's bill failed to receive any serious consideration in Congress but was successful in planting a new concept called "revenue sharing." To the Democratic majority in the Congress, "revenue sharing" meant that, to use the colloquial expression, "the federal government would just put the money on the stump and run." Unemployment rates began to rise early in l97l and the Democratic Congress saw this rise as another opportunity to push public service employment. Instead of giving any consideration to the President's "special revenue sharing" proposal, the Congress instead passed a categorical pro- gram of public service employment—the Emergency Employ- ment Act of l97l. As unemployment reached a nine-year high of 6.2 percent, the President, faced with the pros- pects of having to veto another manpower bill and possibly not having the veto sustained, signed the bill in l97l, just six months after vetoing the much more acceptable manpower reform bill that had been sent to him in December l970. With a temporary public service jobs program now on the books and faced with the implacable opposition of the Nixon Administration on the issue of decentralization, Congress put aside any further moves for basic reform of manpower programs. Instead, the Congress passed a simple one-year extension of the MDTA in April l972; l972 was an election year and, with the Democratic Congress and a Republican administration deadlocked on basic issues, neither party stood to gain much from resuming the conflict. Thus, as l972 ended, the manpower reform picture in- cluded: (l) a basic disagreement between the administra- tion and Congress on the proper degree of federal direction of, oversight of, and control over manpower programs—the decentralization issue; (2) a basic disagreement between the administration and Congress on the usefulness and need for public service employment; and (3) a less basic but still important disagreement over the degree to which the

federal government should specify the classes of recipients for specific manpower services—the decategorization issue. While the basic issues remained unresolved, all partici- pants in the continuing debate were well aware that both pieces of basic authorizing legislation, MDTA and EOA, were due to expire during the 93rd Congress. Therefore, the debate was only temporarily suspended, to be resumed again after the Presidential election of l972. The events of the four years had destroyed the bipartisan spirit and ap- proach that had existed from l962 to l969; manpower reform had become harshly partisan and ideological, and feelings of distrust, betrayal, and anger had become common. Despite the feelings and attitudes among the bruised combatants in the executive branch and Congress, there was a developing consensus among professionals in manpower, both within and outside the government, that basic reform could no longer be postponed and that a common ground would have to be found. The manpower system was too cru- cial to be left for long in a deadlocked position. The President Sets the Stage It had become clear to the Nixon White House by early summer l972 that the "New Federalism" program, particu- larly the "special revenue sharing" bills, were going no- where in the Congress. At a special meeting at Camp David in June l972, the President and his top White House advisers met to develop new strategy for achieving their goals. Ex- pecting a resounding reelection victory, the President and his advisers decided to pursue the goals of revenue sharing through whatever means were available short of legislative action. The strategy would be to go as far as current law allowed in decentralizing the control of government pro- grams to the states and localities. This was to be a gen- eral strategy, to cover not only the manpower programs but also housing programs, education programs, and other major areas of federal activity in which the President had hoped to devolve power to the states and localities. The leadership in the Department of Labor and the White House had been at odds over the concept of special revenue sharing for some time, and the new general strategy de- cision on the part of the White House was not conveyed to the Labor Department. Assistant Secretary Lovell, sup- ported by Secretary Hodgson, had argued for some months (and continued to argue into fall l972) that the revenue sharing concept went too far and a better balance should

be struck between the powers of the federal government and those of the states and localities. Without knowledge of Presidential strategy, the Department continued to prepare and present to the White House a new manpower reform bill that might have some chance of passage. Then, soon after his landslide reelection for a second term, President Nixon asked for the resignation of most of the top Presi- dential appointees, including the Secretary of Labor and his top assistants. The President's legislative and budgetary policies for the ensuing year are always decided in December and Jan- uary before the President sends his state of the union and budget messages to Congress late in January. In most "normal" years the development of the President's program is an amalgam of White House and departmental policy posi- tions, but in fall l972, with departmental leaders leaving the government at the request of the President, the entire policy and strategy leadership for budgetary and legis- lative matters passed to the White House. The President had signaled his intentions during the campaign to make substantial cuts in domestic programs, and the Office of Management and Budget proceeded to carry out this policy in shaping the budget for fiscal l973. Manpower programs were to be no exception to this cut- back. The efficacy of manpower programs had been under attack in the administration during l972, and doubts about the programs were shared by certain top officials of the Labor Department. The record is clear that both the legislative strategy— to achieve manpower reform without legislation—and the budgetary strategy—to make a substantial cut in manpower program resources—were devised and directed by the White House. Both actions were part of an overall Presidential second-term strategy: to proceed with a major decentral- ization of the federal government's domestic programs and to make major cuts in those programs. The Department of Labor had only minimal involvement in these decisions. The President's budget message for fiscal l974 stated the intention of the administration to accomplish manpower reform by administrative action. The President stated that "during the next sixteen months, administrative mea- sures will be taken to institute this needed reform of the manpower system within the present legal framework." The President, therefore, proposed a simple extension of the MDTA and opposed a continuation of the Emergency Em- ployment Act, both due to expire on June 30, l973. In addition, the budget called for an overall cut of l0

8 percent in the manpower programs, largely by phasing out the public employment program in fiscal l974, but also by cutting other categorical programs, such as the Job Corps. The President's decision to move gradually to a new manpower system through adapting the current legislative authorities was not inconsistent with actions that were already under way in the Manpower Administration of the Department of Labor. For some years, the Department had been experimenting with various mechanisms for devolving planning and operating authority to the local level. The Concentrated Employment Program of the late l960s was the first attempt to place program authority in local hands. In addition, starting in l969 the Manpower Administration had been giving grants to governors and to mayors of major cities for manpower planning activities. It should be emphasized that, starting in l969 and con- tinuing through the passage of CETA in l973, the strategy of the Manpower Administration was to develop a clientele of state and local officials who would support the goal of decentralizing manpower programs. This constituency was of some importance in the congressional consideration of the manpower reform legislation of l969 and l970 and became a major force in l97l and l972. The Emergency Em- ployment Act, which for the first time specified that state and local governments would be "prime sponsors" and de- liverers of the public employment programs, served to cement this developing constituency. Beginning in l972, the Manpower Administration had be- gun a number of experiments in the delivery of manpower services, called the Community Manpower Programs. The Manpower Administration made block grants of funds di- rectly available to seven state and local governments— Albuquerque, Omaha, Seattle-King County, Miami-Cade County, Lucerne County (Pennsylvania), and the states of Utah and South Carolina—for their use in planning and carrying out a full range of manpower services. It was the inten- tion of the Manpower Administration to use these prototype experiments as one avenue in implementing the President's policy to proceed with manpower reform within the current legislative structure. The Manpower Administration began in February and March to carry out the President's policy by preparing detailed plans for effecting what was then called manpower revenue sharing (MRS) through administrative actions under MDTA and EOA. By mid-March, the regional offices of the Man- power Administration had held preliminary meetings with state and local "prime sponsors" to explain the plans.

The specific plan for effecting manpower revenue sharing administratively was transmitted to the White House for review and clearance late in March l973. Early in l973 President Nixon named Peter Brennan to succeed James Hodgson as Secretary of Labor. In March, President Nixon nominated me to be Assistant Secretary of Labor in charge of the Manpower Administration. I was confirmed by the Senate and sworn into office on April l3, l973. My first action upon taking office in early April was to take charge of the planning for achieving manpower re- form through administrative means. The President's policy was clear and unequivocal—to move as far and as fast as possible toward manpower reform within current legislative authority—and that policy was fully consistent with my own personal view that we should move directly to devolve a measure of power to state and local control. The ac- tions that had already been taken to set up the Community Manpower Programs seemed very sensible and important, and we decided to move ahead on that front as rapidly as we possibly could. In addition, we needed an overall frame- work within which all our actions and developing policies could be spelled out. For this reason we began developing an overall set of administrative regulations to detail the way we intended to move in gradually shifting manpower authority to the local level. On April 6, l973, I dis- patched my first memo to Paul O'Neill, Associate Director of the Office of Management and Budget (OMB), setting forth options for final decisions on five basic issues that needed to be decided before the regulations could be put into final form. As Associate Director of OMB for human resources pro- grams, Paul O'Neill was in charge of the budgetary and legislative decisions affecting the Department of Health, Education, and Welfare, the Department of Labor, and the Department of Housing and Urban Development.1 O'Neill's name appears many times in this chronicle because over the four-year period covered by this story, he was consistently the single most powerful and influential adviser to both He and I had worked together on several projects even be- fore I went to OMB as Assistant Director; we were colleagues and worked closely together during the two years I spent at OMB. He later became the Deputy Director of OMB under President Ford.

l0 Presidents Nixon and Ford on employment and training issues as well as in many other areas covered by his portfolio. The memorandum and the options paper that were given to O'Neill on April 6, l973, began by stating specifi- cally that the plan for moving to manpower reform under current legislation had been developed to approximate as closely as possible the administration's proposed manpower revenue sharing act of l97l. However, the memorandum also stated our belief that we were limited in how far we could go administratively and that "ultimately new legislative authority will be required." Thus, we introduced the question of legislative strategy early in the adoption of plans to install a form of manpower revenue sharing under existing statutory authority. We stated our belief that in both Houses of Congress, but particularly in the Sen- ate , there seemed to be considerable receptivity to the salient features of the administration's l97l bill. Sim- ilarly, we expressed the belief that mayors and elected county officials were also highly supportive of the gen- eral approach, while governors might have some reserva- tions. Let me emphasize again that, even in these earliest conversations with OMB, it was clear to us and made clear to the White House that, although we could go some dis- tance toward effecting manpower reform through adminis- trative action, there were real and specific limits beyond which we could not move and, therefore, we should keep open the option of moving to legislation at some future date. During the months of April and May, Paul O'Neill and I and our respective staffs were engaged in a series of discussions revolving around the five basic issues that had to be settled before the regulations could be put into final form. The most crucial issue related to the extent of federal direction over state and local operations. It was clear from our review of MDTA and EOA that those laws pre- cluded our moving to the full concept of revenue sharing with its minimal federal direction and accountability, but we did believe that a form of limited federal ac- countability would be possible. We believed that this limited federal responsibility would allow state and local sponsors to plan and design manpower programs and, therefore, would achieve the basic purposes of decentral- ization and decategorization, and yet would maintain the legal requirements of the basic legislation regarding the

ll accountability of the Secretary of Labor. We described this limited federal accountability approach as implying some form of sanction and remedy as a last resort to en- sure satisfactory performance by state and local operators. Our approach on this issue was for a limited but bal- anced federal role, which would preserve for the federal government the ultimate accountability for total perform- ance of the system and would ensure that the Secretary of Labor had the tools to perform necessary review, over- sight, and evaluation functions of the actions of state and local prime sponsors. OMB, on the other hand, was constantly wary that we were "backsliding" on this issue toward a stronger federal role than was consistent with the theory of revenue sharing. We arrived at a compromise on this issue in drafting the regulations that could be characterized as a "limited federal role," but the basic issue and its ramifications reappeared constantly through- out the entire process of developing and passing CETA. The second issue concerned the size of local political jurisdictions that should be eligible to be "prime spon- sors" and, thus, manage their own manpower programs. A population cutoff of l00,000 for cities and counties had received wide acceptance in Congress. The Emergency Em- ployment Act had provided, however, that jurisdictions of 75,000 population could qualify as program agents to operate public employment programs. This had resulted in building some pressure to cut the size criterion of eligible prime sponsors. Of course, as the size of prime sponsors is cut, the role of the governor in operating what is called the "balance of state" share of the man- power program becomes increasingly smaller. So this issue was also very much bound up in the role of the states. This issue also relates to the desirability of plan- ning and operating manpower programs on the basis of the labor market area. Job locations know no political bound- aries, and most jobs are filled by individuals from a wide commuting area. Consequently, public job training and job creation programs should also be planned and operated on the basis of the way labor markets operate. In line with the principle, the administration's bill of l969 had proposed that central cities be the prime sponsors for entire metropolitan areas. While that seemed to make eminently good economic sense, it did not make political sense and was unacceptable to suburban city and county governments. By l973, it was abundantly clear to us that political realities dictated that prime sponsorship size should be

l2 left at l00,000, thereby qualifying many suburban counties. The best we could hope for in promoting area-wide planning and operations was to provide an incentive bonus for sep- arate prime sponsors to come together in a shared power arrangement. The third issue concerned the role of governors and state governments. The original administration's l969 bill had carved out a major role for governors; it had provided that all manpower grant funds would flow through state government to local prime sponsors and that state governments would have an overall coordinating, reviewing, and approving role over local prime sponsor plans and pro- grams. During the debate over the l969 manpower reform legislation, the governors took little interest and played a very weak role, whereas local governments, particularly the major cities, played a very strong role. The result- ing legislation, which was ultimately vetoed by President Nixon, had given the states a relatively weak role of gen- eral coordination and some minimal statewide planning but had provided direct funding to local prime sponsors and gave them maximum latitude in planning and carrying out their own programs and dealing directly with the federal government. That pattern had been continued in the ad- ministration' s proposed l97l special revenue sharing bill. In addition, by l973 the counties had become a much stronger force on the manpower scene, thereby further strengthening the influence of local governments vis-a-vis the states. Consequently, our position, conveyed in the memorandum to OMB, was to promote the governors' role as set forth in the administration's l97l bill as the most workable com- promise. The fourth issue had to do with the apportionment for- mula that would be used to distribute manpower funds. This issue is always one of the most hotly contested because, of course, it spells out specifically how a sponsor's "fair share" is going to be calculated from the total funds avail- able. One of the major criticisms of the manpower programs of the l960s was that funds were allocated on a project- by-project basis without an apportionment formula. Con- sequently, program resources had become concentrated in large urban areas that had the most sophisticated ability to prepare and push through project proposals—the art of grantsmanship. Any formula approach tied to objective measures of unemployment or poverty would result in the relative movement of resources from the central cities to the suburban counties and the rural areas. We settled on a needs-based formula that was subject to a "hold harmless"

l3 provision at current funding levels so that there would be no drastic and immediate changes in the amount of funds available to current sponsors. The fifth issue dealt with the role of the Employment Service. The state employment service agencies had tra- ditionally served as a labor exchange to all and had been involved to a greater or lesser degree in most of the man- power programs starting in the l960s. The manpower rev- enue sharing plan of l97l, however, had contemplated that local prime sponsors would not be required to use the em- ployment service in the delivery of even the traditional services of client screening, counseling, selection, referral, and placement. This approach left it up to state and local prime sponsors whether or not to use the employment service. In the April l973 memorandum to OMB, we argued the other side of this case, that it is clearly not a desir- able management posture for the same agency to support both a public employment service under state aegis and a competitive public employment service under local govern- ment aegis. Instead, we proposed a purchase-of-service requirement that would call upon state and local govern- ments to use the employment service for client service and placement activities absent a showing by substantial fact that the employment service could not fulfill the required program performance. If a local government could show nonperformance, it could then contract with an alter- nate supplier for these services or provide them directly. If this occurred, however, the Labor Department would be compelled to take action to remedy those demonstrated defects in employment service performance. On this issue, OMB and the White House were adamant, and they ultimately prevailed in leaving an open choice for prime sponsors. Though conceding that, by failing to deal with the issue, we were likely borrowing much trouble in future periods, they nevertheless held to the view that it would be inconsistent for us to be devolving control of manpower programs to local prime sponsors and at the same time compel them to use the employment service for many critical manpower services. While conversations on the memorandum and options were under way during April and May, we were preparing succeed- ing drafts of the regulations. By the end of May, we had achieved tentative agreement with the White House, and the plans had been converted into detailed regulations that were now ready to be shown to people outside the executive branch.

l4 Our original timetable for implementing the regulations called for us to consult with all interested parties early in May, publish the proposed regulations in the Federal Register on May l5 with a 30-day comment period, use the period June l5 to July l to revise the final regulations, and then publish the final regulations about July l, the beginning of the fiscal year. The first public and official airing of our administra- tive approach to revenue sharing came in my appearance before the Subcommittee on Employment, Poverty, and Migra- tory Labor of the Senate Committee on Labor and Public Welfare on May 3, l973. Going Public in the Senate Washington in May l973 was an almost hopeless environ- ment within which to conduct government business. The President and his key White House staff were enmeshed in Watergate, his domestic program was stalled in the Con- gress, and the administration was thus trying to move toward the President's objectives without seeking legis- lative authorization. The President's budget had imposed major cuts and deletions in important domestic programs that had grown out of President Johnson's "Great Society." The President had ordered the impoundment of funds on many major domestic programs that he either wished to slow up or phase out, and alarmed citizen groups with the support of the Congress flooded the courts with suits charging that the impoundments were illegal. Although the President did not have the votes in Con- gress to enact his legislative proposals, he retained enough votes so that the veto weapon was credible and had been used successfully a number of times. In this dead- locked situation, the Democratic Congress assumed a par- tisan attitude and approached the administration's pro- posals and many administration officials with distrust. As I prepared for my first appearance as Assistant Secretary before a congressional committee, I took stock of my assets and liabilities. On the asset side, I be- lieved that I was viewed as a professional, first and foremost, with a long career background in Washington and standing in the manpower community. In addition, I thought I could and would project an attitude of pragmatism and compromise. On the liability side, I had already seen indications that as a recent Nixon administration appointee I was

l5 viewed with suspicion by some members of the Congress and that this suspicion would only be allayed after some period of time—and only through deeds, not words. Through my long experience in Washington I had learned that political appointees in the executive branch can only be successful if they learn how to position themselves "somewhere in the middle of Pennsylvania Avenue." In other words, a key responsibility of a political executive is to maintain open and productive relationships with both the White House at one end of Pennsylvania Avenue and the Con- gress at the other end. The loss of credibility at either end of the avenue destroys the effectiveness of a political appointee in getting the work of the government done. This maxim applied to my own personal situation: I knew I must continue to maintain my credentials and credibility as an official of the Nixon Administration by carrying out the President's policies to the best of my ability; on the other hand, I knew I must also establish an open, honest, and constructive relationship with the leaders of the Demo- cratic Congress responsible for manpower legislation. If I failed either of these tasks, my effectiveness would be destroyed. Given the general negative environment, I could not have faced a more knowledgeable or constructive congres- sional committee than the Subcommittee on Employment, Poverty, and Migratory Labor of the Senate. The Subcom- mittee was chaired by Senator Gaylor Nelson, Democrat of Wisconsin; the ranking minority member was Senator Jacob Javits, Republican of New York. Both Senators had held these respective positions for some years and had been through the ups and downs of the manpower debates over the first four years of the Nixon Administration. Senator Nelson had the reputation of being moderate, constructive, and desirous of avoiding unnecessary polit- ical confrontation. He was basically in sympathy with decentralizing federal programs to state and local govern- ments and was generally in favor of decategorizing manpower programs. Like most liberal Democrats, he was a strong supporter of public service employment, but he was open f\ Another possible liability was the impression that I had made during my confirmation hearings before this same Senate Committee. I knew that I had come off badly; I had been unnecessarily combative and defensive. To make amends, I had subsequently gone to then-Senator Mondale's office to offer my personal apologies.

l6 to compromise. Although I was not aware of it at the time, three of the bills that Senator Nelson had handled had been vetoed by President Nixon over the preceding four years, and, in each case, the vetoes were sustained. He saw no point in legislation that was sure to be vetoed and reflected this attitude in a willingness to consider reasonable compromise with the Republican administration. Senator Javits was the ranking minority member of the full Senate Committee on Labor and Public Welfare as well as the most powerful minority member of the Subcommittee and one of the most influential and respected members of the Senate. His background on manpower matters and his general policy stance on manpower was very similar to that of Senator Nelson. (If anything, Senator Javits was a stronger believer in public service employment than was Senator Nelson.) As the senior Republican on the Commit- tee, Senator Javits was the key to maintaining open lines of communication with both the minority and majority mem- bers of the Committee. As this story unfolds, it will become clear that in a number of crucial instances Senator Javits played this role in a most skillful manner. These two key Senators worked very closely and confidentially together and expected their staffs to do likewise. The importance of congressional staff cannot be over- emphasized. As the work of Congress has become more voluminous and complex, the amount of time that a member of Congress, particularly a Senator, can give to a spe- cific piece of legislation is decidedly limited. In order for members to cope with their overwhelming workload, they have turned increasingly to professional staff members to carry out the day-to-day work of committees. William Spring and Richard Johnson for Senator Nelson and John Scales for Senator Javits had served the Subcommittee for some years and were as expert in manpower matters as anyone in the country. Like the two Senators, they had been active participants in all manpower legislative mat- ters going back into the late l960s. All three individuals were effective legislative craftsmen, worked together easily (as did their two bosses), and avoided unnecessary partisanship. Beginning in February l973, this Subcommittee had held 20 days of hearings in Washington and in the field in order to develop a consensus on manpower reform legisla- tion. On April l2, Senators Nelson and Javits jointly introduced Sl559 and Sl560: Sl559 authorized a flexible block grant manpower program that was similar to the one that had been embodied in the vetoed l970 bill; Sl560

l7 authorized the continuation of the Emergency Employment Act for two years. The Committee's purpose in separating these into two bills was obvious. The l970 bill had been vetoed on the public service employment issue, and the Committee had decided not to mix this issue in with the more basic structural reform of the manpower system. My testimony on May 3, l973, presented the administra- tion's views of Sl559 only; the Committee knew that the administration was totally opposed to continuation of public service employment and apparently had no need or desire to highlight this basic difference. In preparing my testimony for the Committee, I realized that there were two basic missions to accomplish: first, to put be- fore the Committee in a comprehensive and positive fashion our plans for moving ahead with manpower reform through administrative means, our reasons for those plans, and why we believed this approach was a positive action and not an act of confrontation. Second, to convey to the Committee that, although there were some elements of Sl559 that we could not accept, it was basically a constructive, useful, and professionally drafted piece of legislation that could serve as a vehicle for compromise if such seemed possible at a later date. I began my statement before the Committee by summariz- ing, for the first time publicly, the general character- istics of manpower revenue sharing we planned to implement administratively: • Approximately 70 percent of the available funds in the combined MDTA and EOA accounts would be distributed to states and localities by formula; • Eligible prime sponsors would be states, cities and counties, or similar units of population of l00,000 or more; • Governors would receive separate funds to provide for coordination of statewide planning and priority proj- ects; • State and local officials would have maximum discre- tion to plan and operate programs in their areas, within the existing provisions of the MDTA and EOA; • There would be no presumptive deliverers of service, although we would expect nearly all state and local of- ficials to choose to use the services of the established and experienced agencies, such as the employment service and the vocational education system, when their local plans include activities traditionally associated with those agencies;

l8 • The Department of Labor would establish national target group priorities, but local officials would be able to adapt these to their unique local population and prob- lems ; • There would be an application and approval process through which state and local officials would establish their performance objectives and make public their plans and progress; • Coordination with other separately legislated man- power activities, such as the Work Incentive Program (WIN) and the employment service, would be encouraged. I indicated to the Committee that these basic principles were now being embodied in proposed regulations and guide- lines, that they were entirely consistent with the legal requirements of the MDTA and the EOA, and that we intended to move in a controlled and phased fashion to implement this program, working through state and local officials. My testimony praised Sl559 in general but outlined some of the specific problems that we saw in the legislation, such as the continuation of a number of categorical pro- grams and the inclusion of specific funding for community action agencies. In the ensuing questioning by the Committee, Senators Nelson and Javits stated their positions on several im- portant issues that, in retrospect, were important portents of their actions over the coming months. In responding to my criticism of the Committee bill for being overly cate- gorized, Senator Nelson first emphasized his l5-year com- mitment to returning responsibility for manpower programs to state governments: ...we ought to return to the state and local gov- ernments every single function performed by the federal government that can, in fact, be performed effectively at the local level. It is an administrative bureaucratic monstrosity down here in Washington and we just do more damage to the country through the bureaucracy than you would have as a consequence of the various vari- eties of incompetence or corruption that you will, from time to time, find in the state and cities. and then stated his view of categorization: that the bill already named a category, "poor people," so all the Com- mittee was asking for was a program that also took into

l9 consideration meeting the problems of the middle-aged, elderly citizens, and non-English-speaking people. He stressed that the Committee was not saying that any area had to spend so much money on any particular program: if something was not a problem in the area represented by the prime sponsor, then that area would not include a program for it. At a later point in the hearing. Senator Javits ex- pressed his concern about the proper degree of federal responsibility and supervision over state and local opera- tions in a decentralized system, in particular, concern about the possibility that a state or local government might fall down on the job—fail to deliver needed ser- vices. He asked whether the federal government should step in and provide services, either directly or by agree- ment with others, perhaps even using voluntary organiza- tions like community action agencies, so that the purpose of the law would not be frustrated because of failure by a local or state government. I responded that I believed we were dealing with a matter of relative degree. If a local or state sponsor was guilty of "gross malpractice" in carrying out its responsibilities under the law, clearly the federal gov- ernment would need to step in and take some remedial action—either to change the sponsorship, to give tech- nical assistance or guidance, or to use a variety of other methods to correct the situation. I stated that while I thought there needed to be some way of preventing gross malpractice, I worried about the many strings now attached to program operations. In response to a question from Senator Javits as to whether the federal government, under current laws, would take the ultimate underwriting responsibility for de- livering services, I said, "categorically yes," that we certainly would have to do that under the current laws. After some further colloquy, Senator Javits expressed his fear that under a special revenue sharing approach, the government might not underwrite the continuation of the manpower programs. He noted that he considered the term "special revenue sharing" a misnomer, that the ad- ministration's proposals were really block grants of assistance. He stated emphatically his position that Congress was appropriating money for manpower training and must absolutely insist that the executive branch en- sure that the money would be actually used for the purpose for which it was appropriated. Senator Javits then said that the term "gross malpractice" was a way of avoiding

20 the issue and that he did not want to become embroiled in legal definitions of gross malpractice, gross negli- gence, gross misapplication—none of them was an under- writing. "...I do not believe that in your department that is clear, and, when it is, then we will get together on a bill, and until it is, we will not get together." Senator Nelson suggested that the key question was how extensive a bureaucracy is necessary to guarantee that the law is implemented as authorized and directed by the Congress. He stated his agreement with Senator Javits that Congress authorizes legislation for some purpose and has to ensure that it is spent for that purpose. After some further discussion with Senator Nelson in which we explored the details of field monitoring and oversight and the role of the regional offices, Senator Javits returned to the subject of federal responsibility. He stated his agreement with everything that Senator Nelson and I had discussed—if I would add one other point: that any bill give residual power to the Secretary of Labor to make some other contract, no matter with whom, to see that the job got done. I said that I would buy that point, and Senator Javits said: "Then we are to- gether and I think we can write a bill." The following day, I reported to Secretary Brennan on the Senate hearing. I told him I believed that the ob- jective of trying to project a constructive and coopera- tive attitude on our part and, at the same time, preserve the administration's position had been achieved and that we should be moving ahead on manpower revenue sharing under current law. I said that the session generally came off as a serious discussion of alternative approaches to manpower legislation with a minimum of posturing for posi- tion and name calling. I noted that Senator Javits had pushed very hard on a strong federal role to ensure that manpower funds would be spent on the clientele groups needing the most help and that prime sponsors would con- duct an effective manpower program. I said I had attempted to assure Senator Javits that the federal government would certainly not tolerate "gross malpractice" but that under manpower revenue sharing we would be removing as many of the federal strings, reports, oversight visits, and mon- itoring as we reasonably could. I reported that I thought the exchange with the Senator was useful and continued to highlight this most crucial and troublesome area of rev- enue sharing and that Congress would not pass a piece of manpower legislation that would go as far in removing the federal oversight role as the administration wanted.

2l The Regulations and Hard Bargaining During the months of February, March, and April l973, while the administration was engaged in preparing its plans for proceeding to revenue sharing by administrative action and the Senate Committee was engaged in developing a manpower reform bill and an extension of the Emergency Employment ACT (EEA), the House Select Labor Subcommittee of the House Committee on Labor and Education had pro- ceeded with its own plans to extend the EEA for two years. The Subcommittee had held hearings on the two-year ex- tension on February 26 and 27, l973. The administration, represented by Acting Assistant Secretary for Manpower Paul Fasser, had vigorously opposed the continuation of the public employment program on the grounds that unem- ployment had declined since the enactment of EEA and that the longer the program continued the more it would be- come merely a substitution for local funds. Not surpris- ingly, there had been strong backing for continuation of the EEA, particularly from the prime sponsors and the AFL-CIO and its affiliates. On April l6 the Committee reported HR4204, which continued EEA for two years and increased the authorization from $l.7 billion for l972- l973 to $4.5 billion for l974-l975. On April l8, the Speaker of the House decided to take it up to the full House. In a most dramatic and surprising move, the House killed the bill by supporting a motion by Congressman Marvin Esch (R-Michigan) to reject the rule under which the bill could be brought to the floor. This rejection of the rule was almost without precedent and it greatly surprised and embarrassed the Democrats handling the bill and, parti- cularly, their major supporters in the AFL-CIO. Congressman Dominick Daniels (D-New Jersey), the Chair- men of the House Select Labor Subcommittee and the manager of the bill, has since stated in a June l975 article in the Labor Law Journal: "The bill failed on the House floor not on its own merits but rather on a dispute over the rule for its consideration. The issue centering on the rule had more to do with intraparty disputes than with the lan- guage of EEA." The general feeling at that time, however, was that a coalition of Republicans and Southern Democrats had served to make it clear that there was hardly a major- ity in favor of continuing a major public service employ- ment program, let alone the two-thirds that would be necessary to override a certain Presidential veto.

22 The House action was certainly a key event in providing the conditions under which a compromise manpower reform bill could be worked out. As Congressman Daniels has written: "This defeat for extension efforts, coupled with a simultaneous weakening of the administration's political position for matters also unrelated to EEA, set the stage for a cooperative spirit among Democrats and Republicans, led by Congressman Marvin Esch, the Subcommittee's ranking minority member. It was this bipartisan effort which ul- timately led to the drafting of CETA." On May 4, l973, the day after my appearance before the Senate Committee, I received a call from Congressman Daniels asking me to meet with his Select Labor Subcom- mittee on May 8 in an informal, off-the-record discussion of manpower legislation. Before finally agreeing to this appearance, I checked it out with the Republican members of the Subcommittee, Congressmen Quie, Esch, and Steiger. They all agreed that such a meeting would be a useful next step in a dialogue between the administration and the Congress. I then sent a copy of my Senate testimony to each member of the Subcommittee and suggested that we might use it as a take-off point for our discussion. Although this story primarily deals with events con- nected with legislative actions, the operational steps needed to put new policies and programs into effect are at least as important. The next day, May 5, I met in Kansas City with the top staff of the Manpower Adminis- tration to discuss the status of our plans for implement- ing manpower reform through administrative means as well as the status of legislative actions in the Congress. The discussions covered the latest drafts of the regula- tions and a number of documents that spelled out our plans and our timetable for effecting the manpower reform actions over the coming months. It was crucial that the entire ex- ecutive staff of the Manpower Administration understand that we were proceeding carefully but surely to carry out the President's order to implement the manpower reform program through administrative means. At the same time, it was important for them to understand that we were ex- ploring every possible means to work out with Congress reform legislation that would be acceptable to the admin- istration. This meeting in Kansas City was the first of what be- came regular monthly meetings with the ten Regional Ad- ministrators and the top staff in Washington to develop together specific policies and actions. At this crucial early stage in our developing strategy, it was important

23 to have a set of clear operational moves that would signal to the hundreds of state and local sponsors that we were serious in our intensions and were moving ahead to put in place what we believed to be an improved manpower system. In turn, of course, the state and local sponsors conveyed back through their network to Congress the actions that were under way and the portent of those actions with re- spect to the deadlock on legislation. Congressman Dominick Daniels was a veteran Congressman from an essentially safe Democratic district where his most important support came from organized labor. He had headed the Select Labor Subcommittee since l969 and had, therefore, been deeply involved with all the manpower legislative problems through the preceding four years. (I had come to know Chairman Daniels in l969 when I trav- elled with the Subcommittee to the West Coast where the Subcommittee had held hearings on manpower reform legis- lation.) Chairman Daniels was highly respected by his colleagues and was a competent and trusted legislator. His Republican colleagues on the Subcommittee described him to me as, above all, a man of integrity, and a man who understood the legislative heart of compromise. The senior minority member of the Subcommittee was Congressman Marvin Esch who represented a political swing district encompassing the city of Ann Arbor and surround- ing areas: Ann Arbor, as a major university community, was very liberal and the surrounding areas, like Livonia, were basically more conservative blue-collar, working- class areas. Consequently, as the Congressman would ex- plain, no matter what stand he took on most issues, about half his district would support him and the other half would oppose him. Congressman Esch had been on the Sub- committee for the preceding four years, but had only recently become the ranking minority member. I had not known Congressman Esch prior to my assuming office but was immediately impressed by his grasp of the issues in manpower reform and his confidence that compromises could be worked out that would result in an acceptable bill. By the time of our first meeting, he had already developed a productive and trusting relationship with Chairman Daniels, and they were quietly working together to try to write compromise legislation. The other important Congressman who played a key part in achieving manpower reform was Albert Quie of Minnesota, who had been in the House for almost 20 years. As the ranking minority member on the full Committee, he was an ex officio member on all subcommittees. Congressman Quie

24 served as the major liaison and communication link between the Republican administration and the House Labor and Education Committee. As such, he was highly influential and very effective. In the negotiations on CETA and in succeeding negotiations on other pieces of legislation, he was always the balance wheel that kept things on a steady course. The staff of the House Committee, like those of the Senate Committee, were highly knowledgeable on manpower matters. Austin Sullivan, the chief legislative strate- gist for the Committee Chairman (Carl Perkins of Kentucky), Daniel Krivitt for Congressman Daniels's Subcommittee, and Charles Radcliffe serving the minority on the Subcommittee had all been involved in manpower matters since the late l960s and also had gone through the trial and trauma of the preceding four years. As Mr. Daniels had indicated, the meeting with the Sub- committee on May 8 was informal; it was attended by the Subcommittee members and by Chairman Perkins, Congressman Quie, and the majority and minority staff. It was clear from the questioning that the Committee was interested in testing our resolve on moving ahead with manpower reform through administrative means as well as in exploring the legal basis for doing so. I stood my ground on our serious intentions and what I believed to be our legal basis for proceeding; the Committee members and the staff were in- credulous and disbelieving that we would follow through on our announced course. Chairman Perkins, particularly, denounced our actions as constituting an open confronta- tion with Congress and its properly constituted commit- tees—we were arrogating to ourselves legislative pre- rogatives that only Congress possessed. It was at this meeting that I first fully realized the impact that our plans and regulations were having on Con- gress. I decided that the threat of the regulations could be an important bargaining tool to influence Congress in making compromises so that mutually acceptable legisla- tion would be passed. Following this appearance before Daniels's Subcommittee, we moved immediately to begin to consult with all the in- terested parties on the regulations, which were now in acceptable draft form. Between May 8 and June l4, l973, we met with community groups, labor groups, and representa- tives of the governors, mayors, and county officials. This process of consultation was carried out publicly, exten- sively, and with much fanfare. It was my intention to use this consultative process to alert Congress and the many

25 interested groups in the manpower community that either legislative or administrative action was absolutely necessary. Now that I understood the value of the regu- lations as a bargaining tool with the Congress, there was not the same hurry to get the regulations into final form and officially published in the Federal Register. On June l, just prior to the annual Governors Conference to be held at Lake Tahoe, Nevada, Secretary Brennan wrote to each governor to report on the status of our work on the regulations and indicated that we planned to publish pro- posed regulations soon in the Federal Register and provide a 30-day period for review and comment. The letter trans- mitted an attachment that summarized the basic elements of our plan and characterized the plan as providing a "sig- nificant role for the Governor's office in the state man- power planning process." At an earlier point in this narrative, I described the role of governors and the state government that had been included in the l97l manpower revenue sharing legislation. That role was markedly diminished from the role originally included in the manpower reform bill of l969 and was far from the powerful role that state governments played in many of the older federal grant-in-aid programs. Although we described the role as a "significant" one in the Secre- tary's letter to the governors, we were well aware of the fact that the governors had belatedly come to understand that their prospective role, both under our regulations and in the legislation now developing in Congress, was a markedly circumscribed one. On June 3, I journeyed to Lake Tahoe to meet with the Conference Human Resources Committee, which had been chaired by Governor Rockefeller of New York for many years. The meeting was being held in one of the large gambling hotels and I had difficulty in locating the meeting room. When I finally found it, it turned out to be the most bizarre setting that one could imagine for a serious business session with some of the major governors of the states. The Committee was to meet in a small hideaway bar just off the gambling casino. The bar was lit by garish red ceil- ing lamps that made it look like what it was—a den. As I walked in it was clear that no preparations had been made for the meeting—the bar was still a bar. Presently, staff members scurried around and rearranged tables and chairs and bar stools to try to lend as much dignity and efficiency to the proceedings as was possible in such an unlikely place.

26 Governor Rockefeller soon arrived and took his place as chairman. Seated to his right and left were the governors of Idaho, Texas, and Arkansas. He began by asking me to make an opening statement, which I did by passing out the outline of our regulations and giving a short description of the regulations. For the ensuing hour, I was barraged by all the gov- ernors and, particularly, by Governor Rockefeller. They were incensed that we would propose giving grants directly to major cities and counties—despite the fact that the l970 bill vetoed by President Nixon and the l97l revenue sharing bill had done exactly that, and that the bill that was about to pass the Senate had done the same. In es- sence. Governor Rockefeller and his colleagues were argu- ing for returning to a classic state formula grant program, where all funds were granted to and managed by the state government. But they were arguing four years too late. Governor Rockefeller courteously thanked me for coming and moved the Committee on to other business, but I knew that the Committee would propose a strong resolution for the full Governors Conference in opposition to our plans. I also was reasonably sure that, although I shared some of the views that the governors had expressed, they had come on the scene with too little and much too late. During May and June l973, changes took place in the White House that were to have a major impact on this story. John Ehrlichman, who had been the leading White House do- mestic policy adviser and spokesman, was asked by the President to resign because of Watergate. Whether cor- rectly or not, Ehrlichman had received much of the blame for the confrontation and negative stance the White House had taken with the Congress on domestic policies. That stance had created a legislative and policy deadlock that Congress had come to believe had to be broken in order for the government to resume some semblance of normal functioning. After Ehrlichman"s resignation, President Nixon named Melvin Laird as his principal domestic adviser and strage- gist. As a longtime Republican Congressman from Wiscon- sin and the Secretary of Defense during President Nixon's first term, Mr. Laird had developed the reputation of a Washington insider who knew how to get things done in both Congress and the executive branch. He was one of the most powerful insiders in the Republican party and also enjoyed wide respect among leading Democrats in the Congress. It is now know that Mr. Laird took this White House job not only at the request of the President and the

27 Republican party, but also at the urging of top Democratic Congressional leaders, including then Senate majority leader Mike Mansfield. I knew that Mr. Laird had close relationships with the key Republicans, Congressmen Quie, Esch, and Steiger, who were concerned with manpower reform legislation. Laird's appointment to the White House position encouraged these key Congressional leaders in manpower reform and, as they told me, signaled that compromise and accommodation might again become acceptable concepts in the White House. What I did not know then was that Melvin Laird and Senator Nelson were longtime friends. Melvin Laird had been majority leader of the house in Wisconsin when Gay- lord Nelson was the minority leader, and they had stayed in close touch since that time. Laird and Nelson had many conversations on the subject of manpower reform in the ensuing months, and these conversations were another chance but important factor in moving manpower reform out of a deadlocked position. While Melvin Laird assumed the top White House domestic post, the post under him as director of the Domestic Coun- cil was filled by Kenneth Cole. I had come to know Ken Cole well during my two years in OMB and had always found him to be reasonable and effective. I was particularly pleased upon learning that Ken Cole had been given the top responsibility for dealing with the governors, mayors, and county officials, because I believed he would be ef- fective in winning the confidence of those clientele groups with which we would have to work closely in order to ef- fect manpower reform. I was also certain that he was, by nature, not a hard-liner in dealings with the Democratic Congress but would be open to reasonable accommodation and compromise if that became possible. Ken Cole assigned one of his most effective senior staff men, James Cavanaugh, to work directly with us and with OMB on manpower reform. Although Cavanaugh had had no background in the issues involved in manpower reform, he became quickly conversant with the territory. He and Paul O'Neill became the White House team with which I worked. On June l4, l973, I met at the White House with Ken Cole to go over the status of our regulations. It came as no surprise that Cole had run into a hornet's nest on the subject at the Governors Conference and, as a result, had agreed to consult further with the governors before formally publishing the regulations. At this time, I was still convinced that we should appear to be moving to publish the regulations in the Federal Register and to

28 move ahead in implementing them. I believed that our credibility could be damaged by extended delay, but Cole had committed himself to withholding formal publication, and we were bound to honor that commitment. The federal government has had, for many years, a for- malized process for consulting with state and local gov- ernments on matters of direct concern to them; this process is embodied in OMB Circular A-85. We had not used the A-85 process on our regulations because we had had so many other avenues for consultation. After much discussion, we hit on the idea of using the formal A-85 process as a way of continuing to show our serious intention of moving ahead, while honoring Cole's commitment to the governors by stop- ping short of formal publication in the Federal Register. The A-85 process allows state and local governments 30 days for returning comments on proposed regulations, so we bought another 30 days, to July l9, l973, before being expected to take any further action in publishing the regulations. As the end of the fiscal year (June 30) approached, it became clear that Congress would be unable to complete action on extending either the MDTA or the EEA. On June l8, the House Education and Labor Committee reported a simple one-year extension of the MDTA, but it was clear that the bill could not be acted on by the time the MDTA expired by July l. Of more significance to the process of developing reform legislation, however, was the inclusion in the one-year MDTA extension bill of an express prohibition against im- plementation of manpower revenue sharing through administra- tive means during fiscal l974. Chairman Daniels indicated that the purpose of the amendment was to prevent the De- partment of Labor from implementing manpower reform through "executive fiat" and stated that I had said that we were determined to proceed and that "he [Kolberg] had his orders and Congressional action or inaction was immaterial to him." The Republicans, led by Congressmen Quie and Esch, took the position that the one-year extension bill was unnecessary— the Congress should instead proceed to draft comprehensive manpower reform legislation. This action of the House Committee showed us that the threat of the regulations was now being taken so seriously by the House Committee Democrats that they found it nec- essary to try to prohibit such action by legislation. It was another important step in fostering a climate for com- promise between Congress and the administration.

29 It was also a signal that we should be wary of over- playing our hand on the regulations. The regulations were having the hoped-for effect, but I was glad that the A-85 process gave us until late July to face up again to whether or not further steps were needed. Some legislative com- promise now began to seem possible. The Senate and the Olive Branch On June l4, l973, by unanimous vote, the Senate Com- mittee on Labor and Public Welfare voted out favorably both Sl559 (manpower reform), and Sl560 (extension of EEA). The Committee bills were little changed from those that had been introduced by Senators Nelson and Javits, and the unanimous vote of the Committee on Sl559 illus- trated the strong support in the Senate for manpower re- form through legislative action. Even the conservative Republicans, Senators Dominick and Taft, endorsed the basic principles embodied in the bill, and Senator Taft characterized the bill as a "responsible approach." On July 24, l973, the Senate passed Sl559 by an 85-5 vote, and on July 3l, l973, the Senate passed Sl560 by a 74-2l vote. These actions by the Senate made two things very clear. First, there was almost unanimous support for manpower reform legislation, and even though Sl559 had some un- acceptable features, it was basically consistent with what the administration had been supporting. Second, however, the extension of the EEA, also passed by an overwhelming vote, again served as a reminder that the Congress would insist on some public service employment as a part of man- power reform. On the morning of July 25, the day after the Senate vote on Sl559, Senator Javits placed a telephone call to Secretary Brennan that constituted a key turning point in the political infighting over manpower reform. Senator Javits proposed and Secretary Brennan agreed to meet that afternoon at Javits's Capitol office to discuss ways of moving ahead with compromise manpower legislation. Present at the meeting were Senators Javits, Nelson, Taft, and their principal staff and Secretary Brennan, me, and our princi- pal staff. Senator Javits chaired the meeting but deferred at all points to Senator Nelson. It was clear that they were in agreement and were holding a joint discussion with us. As they had during the hearings, they took a conciliatory and constructive approach. They pointed out that the Senate

30 bill represented major progress toward manpower reform, but stressed that some form of public service employment would be a necessary part of any final congressional action. They also emphasized that our regulations were seen on Cap- itol Hill as a serious confrontation between the adminis- tration and Congress and that our continuing actions on the regulations was taken as a indication of the unwilling- ness of the administration to work with Congress. Both Secretary Brennan and I pointed out that we believed that the regulations were legal and that we were moving re- sponsibly toward manpower reform. We pointed out that the regulations were being developed on orders of the President and that we were under strong pressure from the White House to continue to achieve manpower reform without legislation. At the same time, however, Secretary Brennan continually expressed his desire and willingness to work with Congress in seeking an acceptable compromise legislative solution. Following an extended and cordial discussion. Secretary Brennan concluded the meeting by pledging to withhold pub- lication of the regulations pending the outcome of the necessary compromises that would have to be worked out in the House. He expressed our strong willingness to work toward a legislative solution and pledged our full coopera- tion with the Senate and the House toward that end. I was somewhat surprised but certainly gratified by the outcome of the meeting. The White House had been exerting pressure to move on the regulations, and I was then not aware of any conversations that Secretary Brennan might have had on the subject. He has subsequently told me that he had had conversations with President Nixon indicating his desire to seek a legislative solution and had been given the go-ahead by the President. He had also had similar conversations with Melvin Laird. It was helpful in this situation that Secretary Brennan and Senator Javits had known each other well for many years in New York City and that they enjoyed an easy and trust- ing relationship. As is now clear in this story, as in most legislative stories, the chance accidents of personal relationships, personalities, and trust play an unseen but ofttimes crucial role in major policy events. Compromise in the House On the morning of July 26, l973, the day after the eventful meeting in Senator Javits's office, I met at the White House with Jim Cavanaugh, Paul O'Neill, and others to brief them on the results of the meeting and to inform

3l them, first, of the Secretary's decision to work with the House to develop a compromise bill and, second, his pledge to withhold publication of the regulations pending the outcome of this activity with the House. Both Cavanaugh and O'Neill continued to have serious doubts about the success of this venture. They based these doubts on what they perceived to be a number of instances in the past when the Congress had "gamed" the administra- tion. O'Neill said that he thought we were "being had." Nevertheless, given the Secretary's pledge, there was no alternative at that point but to go ahead. Cavanaugh warned me, however, that, if there was no serious indica- tion of progress before Congress went home for recess in August, we would go ahead without Congress and publish the regulations. That afternoon I met with Congressmen Quie, Esch, and Steiger to relay the results of both the meeting with Senator Javits and the meeting with the White House staff and to indicate our intention and good faith in trying to work out a compromise. I stated that I was under heavy pressure from the White House to publish the regulations and that I would need some concrete and specific signs of movement toward compromise, preferably the introduction of a bill before Congress recessed in August. The Congress- men expressed a strong desire to proceed with negotiations with Chairman Daniels. Congressman Esch said specifically that much progress already had been made in developing a compromise bill with the Democrats. Time was short, how- ever, as the Congress was scheduled for its August recess in ten days. In response to the President's request at a meeting on July 3l, the Secretary on August l, l973, sent a memorandum to the President outlining our plans for manpower programs over the coming year. As a result of conversations on the Hill during the preceding week, we were able to speculate in the memorandum for the first time about the possible shape of a compromise on manpower reform and public ser- vice employment. The memorandum stated that discussions with key Senators and Representatives indicated their acceptance of modifying the Senate manpower reform bill, through preparation of a bill in the House and agreement in conference, in three major ways: l. Removing some of the discretionary authority pro- vided to the Secretary, which is incompatible with the concept of local reponsibility;

32 2. Reviewing the remaining vestiges of categorical program language to work out even more flexible pro- visions; and 3. Reducing the extent of prescriptiveness in both program standards and administrative arrangements for state and local governments administering manpower programs. It was also agreed that the extraneous title funding "community action activities" would be deleted. The Secretary's memorandum also stated that the man- power bill would incorporate a compromise public service employment component, the general nature of which had been agreed to: l. A separate title in the bill would authorize a public service employment program only in areas of very heavy unemployment, with the precise unemployment criteria to be worked out. 2. The employment in these jobs would be transitional in nature, that is, jobless persons employed in them would move through these subsidized jobs to permanent, unsub- sidized employment. 3. Enrollees would be limited substantially to the disadvantaged, long-term unemployed. 4. State and local governments operating the main man- power program in areas of high unemployment would receive a formula share of a separate appropriation to support public service employment or, at their option, to be used for manpower services authorized elsewhere in the act. 5. Appropriations authorized would be "such sums as necessary" with the understanding that a fiscal l974 level of $250 million would be acceptable. (This amount would represent a net increase of that amount in the fiscal l974 manpower program budget.) 6. In addition, transitional public service employment, largely limited to the disadvantaged, would be an authorized activity for regular manpower programs and funds for this purpose would be distributed among all state and local gov- ernment recipients. The possible compromise on public service employment illustrates the role of quiet behind-the-scenes discussions among staff professionals. William B. Hewitt, Administra- tor of the Office of Planning, Evaluation and Research in the Manpower Administration, played perhaps the single most important role in the events that produced CETA. In this particular instance, he and his able associate, William

33 Langbehn, had been holding quiet, off-the-record conversa- tions with Richard Johnson of Senator Nelson's staff. The resulting compromise proposals were an amalgam of their ideas. For example, it was Dick Johnson's idea to set a level of $250 million for the separate public service authorization for fiscal l974. Those quiet negotiations allowed us not only to say with confidence to the President that compromise was possible but also to describe to him the shape of that compromise with some precision. On the House side, Bill Hewitt and Bill Langbehn carried on daily discussions with majority and minority staff dur- ing the week following our meeting with the Congressmen, but it was evident that a complete compromise bill would be difficult to produce on such short notice. As a backup position, an agreement began to emerge in the staff meet- ings: Chairman Daniels and Congressman Esch would issue a joint press release before the August recess; it would state the progress in negotiations and would express a firm intention to develop a compromise bill and to introduce it immediately after the congressional recess. Without this or some other concrete show of success in negotia- tion, the White House pressure to publish the regulations could not be held off. The House recessed on August 3 without the press release having been issued. By the time I realized what had hap- pened. Congressman Esch was on a foreign trip and Congress- man Daniels was home in New Jersey. Their respective staffs were not empowered to proceed with the press release and, consequently, we seemed to be hung up on high center again. On August 7, I told Jim Cavanaugh and Paul O'Neill that a press release would not be issued. Cavanaugh asked me to reach Congressman Quie immediately and inform him of the situation. Pursuant to an agreement he had made with Quie, I was to inform Quie that, without some show of progress in the House, we would be forced to publish our manpower revenue sharing regulations. Congressman Quie's office told me that he was travelling on vacation in Minnesota but that he might be calling in. Should he do so, they would give him my urgent message. Within an hour, Congressman Quie called me—from a phone booth outside a gas station in the little town of Ely, Minnesota, en route with his family to a canoeing vacation. After I explained the situation, he told me that he would try to reach Congressman Daniels at his district office in New Jersey and try to convince him that a public statement at this time was very important. Congressman Quie shortly called me back, still from the phone booth. He had reached

34 Daniels, and Daniels was willing to proceed with the joint statement in return for a guaranteed quid-pro-quo arrange- ment: withholding of publication of the regulations. I told Quie that I could not personally guarantee such an arrangement and could not speak for the White House, but that I would try to get some acceptable assurance if I had the draft release. Congressman Quie later told me that these phone calls were the last ones that he made for the week of his family trip. Congressman Daniels gave the go-ahead to his staff to get the press release ready, and by the time we obtained a copy of it from the Committee's minority staff, any prob- lems had been taken care of. On the morning of August 8 the joint press release from Congressmen Daniels and Esch was issued, and I forwarded copies to the Secretary and to the White House. Although I had made no firm commitments as to our actions on the regulations, I was certain that the various Congressmen who were involved, and Congress- man Quie particularly, felt that they had acted in good faith and were expecting us to withhold publication of the regulations. During the week of August l0, I began to receive very strong pressure from Cavanaugh and O'Neill to publish the regulations. Comments from the A-85 process had been re- ceived July l9, and we again had revised the regulations preparatory to final publication in the Federal Register. But I now had become firmly convinced that legislation could be obtained and so dug in my heels against publica- tion. With all the conversations that had gone on, pub- lication of the regulations now would be seen even more as an act of bad faith on the part of the administration in general, and of the Manpower Administration in particular. Following a particularly acrimonious meeting with O'Neill and Cavanaugh on Saturday morning of that week, I sent off a detailed memorandum summarizing my position that formally publishing the regulations at that time was a bad strategic move. I noted that a tentative bipartisan coalition had been put together in both the House and the Senate, which brought a real possibility for achieving meaningful man- power revenue sharing reform by way of legislation within the next several months. I further stressed that having been strongly advised by the key Republican member of the House Committee, Congressman Quie, that formal publication of the regulations would be unwise, we believed that we should follow that advice. Finally, I said that we be- lieved we were reading signals on the Hill correctly and that the administration should make every attempt to

35 accommodate what seemed to be honest and sincere bipartisan efforts to arrive at an accomodation on this matter and to produce a bill during this session of Congress. Paul O'Neill felt that we would be "hoodwinked" in this matter. He was very concerned about postponing publication of the regulations, a move that could be perceived as a relaxation of our strong position on the need for continued progress to legislation. With the strong support of Sec- retary Brennan and Under Secretary Schubert, however, my views prevailed. For the next month the regulations re- mained in limbo. Although on August l we had informed the President of what we believed possible in the way of a compromise bill, the President had not yet taken a position on the various options. In particular, the President had not decided whether to accept a separate public service employment program as a specific element of the overall legislation. In mid-August we began to work with Cavanaugh and O'Neill to detail the various legislative options for a Presidential decision. A joint memorandum dated September l2, l973, from OMB and DOL to the President posed the key question: "If an otherwise acceptable manpower revenue sharing bill can be negotiated with the Congress, would you be willing to accept a limited public service employment program as a separate component?" The possible shape of the limited public service employment (PSE) program was the same as the one outlined to the President on August l, and we recommended that the President accept it for four reasons: l. There was significant political support for an extension of PSE, and many congressional leaders were so publicly committed they could not possibly retreat com- pletely. 2. It was defensible on the grounds of program needs. 3. It would avoid the need for vetoing a large EEA extension bill. 4. It would secure enactment of an acceptable man- power revenue sharing bill so long sought by the adminis- tration. One little-known and little-used provision in what is now Title II of CETA served to allay the fears of some in the administration, particularly Paul O'Neill, over a separate categorical title for PSE. Title II can be used at the discretion of the prime sponsor either for public service employment or for any other training or employment

36 activity authorized in Title I. Thus Titles I and II were to be a single totally flexible block grant for the full range of manpower programs. Up to this point in the legislative developments lead- ing to CETA, President Nixon had had little direct involve- ment. As the history of this period now makes clear, the Watergate situation had by this time become so all-consuming that apparently little of his time and energy was left for matters of this kind. On the particular issue of public service employment, Melvin Laird remembers personally car- rying the September l2 OMB-DOL memorandum to President Nixon, discussing it with him, and obtaining his initials of concurrence on the memorandum. In mid-September, the President sent a message on human resources to Congress that included further indication that the administration was softening and was now willing to accept a legislative solution. "In the face of Congres- sional rejection of my proposals in this area (manpower), I directed the Secretary of Labor last January to implement administratively the principles of manpower revenue shar- ing, insofar as possible under existing law. That effort is now going forward, but I am certainly prepared to work with the Congress to achieve this same goal through legis- lation. " On September 25, Cavanaugh, O'Neill, and I met with Congressmen Quie, Esch, and Daniels and their staffs to convey to them the President's decision on public service employment: that he would accept a separate title in a bill for PSE and would transmit a supplemental budget re- quest of $250 million for l974 to get the program under way as soon as the legislation was passed. By this time, most of the other problems in the compromise legislation had been cleared up and it seemed to us that the President's agreement cleared away the last major obstacle and that we could now proceed to final drafting of a bill that would be acceptable to all parties. On September 27, O'Neill and I were again invited to another meeting in Quie's office with Daniels and Esch. Although Daniels had clearly agreed that the $250 million for PSE for fiscal l974 was sufficient and had given his word to proceed with legislation, he now informed us that he could not proceed any further without an additional pledge from the administration for $500 million for PSE for fiscal l975. This escalating of the price on PSE threw the entire meeting into a turmoil—there had never been any discussion of funds for fiscal l975 since the fiscal l975 budget had not even begun to be prepared—and

37 we had gone to the President with a request for commitment of funds for fiscal l974 on what we believed to be the firm understanding that that was all that was required to seal the compromise. Although Congressman Daniels protested that we had just misunderstood the agreement of two days ago, it was apparent to all of us that the terms of the agreement had shifted in the last two days. The meeting broke up in a tense atmosphere with the feeling on our side that there had been bad faith on the side of Daniels and the Democrats. We had gone as far in compromising as we believed we could possibly go. We were certain that the President would not accept any commitment on the fiscal l975 budget, and none of us was willing to raise the issue with him again. It looked like O'Neill and Cavanaugh had been right: as we had come close to compromise, the price of compromise had been raised— perhaps we had been "had." Negotiations on the bill were now completely stalled with charges and countercharges of bad faith. I had out-of-town business scheduled for the next week, September 30 to October 8, and decided that a week of "cooling off" was desirable. A week away did serve to give a little perspective to the situation and to realize that, at this crucial final stage of compromise, the en- tire effort was stalled over this one single point. Con- gressmen Quie and Esch both told me that Daniels could not budge because the AFL-CIO was holding firm against any further compromise until a funding commitment was made for PSE for fiscal l975. I then decided to go to the source of the deadlock, the AFL-CIO, and meet with Ken Young, the principal legislative strategist for the AFL-CIO on this bill. Ken Young had been very much involved in manpower is- sues for years and was a leader in the informal coalition between the unions and the public interest groups that had been so effective in getting the EEA through Congress. I had met with Ken Young, whom I had known for some years, on May l6, when we were just beginning the process of developing our regulations. From that early meeting, I knew that the AFL-CIO was first and foremost interested in obtaining a PSE program and was less interested, and even hostile, to the idea of decentralizing manpower opera- tions and decategorizing programs. As it turned out, the October ll meeting with Ken Young covered three subjects. First, he wanted to explore again our intentions in carrying out the strong federal role that was now written into the draft compromise bill. He knew,

38 as I did, that despite the legislative definition of that role, the real definition of the role would come about in practice—in the way the federal machinery actually con- ducted the policy setting, review, oversight, and evalua- tion responsibilities set forth in the legislation. After much discussion, I believed that I succeeded in convincing him that I was not and had never been sympathetic with the straight revenue sharing approach, that I was very sympathetic to the stronger federal role now mandated in the proposed compromise legislation, and that I would energetically carry out the federal role as now defined. Second, Young was concerned with our intentions over "decentralizing" the many training programs that the con- stituent unions of the AFL-CIO now carried out under con- tract with the federal government. We had successfully directed that many of our program contractors, such as the Urban League, the OICs, etc., seek their funding be- ginning in l973 from local prime sponsors. Young was concerned that we might do the same with the major train- ing programs carried out by unions. I assured him that we had no intention of taking this action with respect to union training programs and that as long as I was Assistant Secretary no such decentralization would take place. After getting these preliminary concerns out of the way, we turned, third, to the major issue at hand—Congressman Daniels's position that we could move no further on the com- promise manpower reform bill until the administration gave assurances that $500 million would be made available in fiscal l975 for PSE. It quickly became clear that the rea- son that the AFL-CIO and, therefore, Congressman Daniels were holding out for this provision was their fear that the administration would agree to the program, would fund it at a beginning level for fiscal l974, and would then not pro- vide any funds for the program, thus effectively killing PSE. As Young correctly pointed out, the administration had acted in precisely this way on certain programs in the past—either by impounding funds already appropriated or by failing to provide funds in the budget for programs that the administration wanted to kill. On our side, I pointed out to Young that, as a practical matter, the fiscal l975 budget had not even been prepared yet, and that the assur- ances he desired were therefore premature and unnecessary. I also told him that we were entering into the proposed Title II PSE program in completely good faith, and although I could not guarantee at what level the program would be funded in fiscal l975, I could guarantee that the program would be funded and that we would carry out our commitments.

39 In making our positions on this issue clear, it also became clear that neither Young nor I would change those positions. After some further discussion, we agreed to disagree on this issue: Why not prepare identical bills to be introduced by Chairman Daniels and Congressman Esch except for this one issue and leave this issue to be de- cided in the legislative process? In this fashion we could get the legislative process going again in the House. We ended the meeting by agreeing to go back to our respec- tive principals in the House and urge them to accept this means for moving on with the process of obtaining legis- lation. After the meeting with Young, I met with John Gunther, executive director of the Conference of Mayors, Allen Beals, executive director of the League of Cities, Bernard Hillenbrand, executive director of the National Association of Counties, and a representative from the Governors Con- ference. I discussed the tremendous progress that had been made toward legislation, my belief that we could recharge the legislative process through the tentative agreement that I had just made with Ken Young, and urged them to move quickly through their legislative liaison people to see if the deadlock could be broken. These individuals, and the groups they represented, had been in the fore- front of the efforts to achieve manpower reform and we had held many such meetings to go over positions and map strategy. We once again easily reached agreement and broke up believing that we were now in sight of a goal that we had all sought for five years. The October ll agreement between Ken Young and me was acceptable to all, and on October l8 Congressmen Daniels and Esch introduced and cosponsored bills on manpower reform that were identical except that Congressman Daniels's bill mandated the expenditure of $500 million in fiscal l975 for PSE and Congressman Esch's did not. In their press releases introducing the bipartisan bill, Chairman Daniels and Congressman Esch continued the semantic debate over manpower revenue sharing. The Daniels release stated: "...the bill does not establish manpower revenue sharing which the Nixon administration has advocated. While these bills decentralize planning and operations of manpower programs to state and local governments, the federal government will retain the re- sponsibility to assure that federal dollars are spent consistently with federal policy objectives." Esch's release said the bill intended to "reform federal job training programs and replace categorical grants with a

40 localized system aimed at reducing unemployment." Even in agreement and compromise, both sides had to point to different ends of the elephant or donkey, as the case may be. Hearings were quickly scheduled on the bills, and on October 29 I appeared before the House Subcommittee to present the administration's views. I pointed to a number of minor problems that we had with the bill, but the major problems centered on the bill's definition of the federal role, and the continuing disagreement over the level of funding for public service employment in fiscal l975. The compromise bill still contained the strong federal role that the Democrats had insisted upon. While the White House was more concerned about the specifics of this role than we in the DOL were, we nevertheless con- tinued to believe that some relaxation in the specific prescriptions should and could be obtained. We were cer- tain, however, that the type of federal role that the White House desired was just not in the cards, the Demo- crats would never accept that kind of revenue sharing. In the hearings I stated that we found too many instances in which heavy burdens of fact finding and determination are required to be made by the Secretary of Labor, which would lead inevitably to the intrusion of federal staff into the local decision-making process. By taking a strong stand on this issue once again, we thought we would succeed in toning down the federal involvement. With respect to the major disagreement over funding for public service employment for fiscal l975, I repeated our well-known arguments against such a proposal, but agreed that we would leave it to the will of the Congress to re- solve that issue. Overall, after making a number of other suggestions for improvement, I said that my comments were intended to be constructive and that if those points were accommodated, I felt we were then within easy reach of full agreement on a comprehensive manpower bill. During the next week, we did succeed in obtaining a number of modifications in the bill that made it more acceptable. On November 8, the Subcommittee sent the bill to the full Committee and on November 2l the full committee reported out the bill. The bill was brought up for debate on the floor of the House on November 28. In the course of the debate, Chairman Perkins provided perhaps the most succinct de- scription of CETA, a description that remains valid today: "The compromise was to decentralize the planning and ad- ministration of manpower programs to state and local

4l governments, but to require a careful federal review and approval of the local plans to place squarely with the Secretary of Labor the responsibility for seeing that the conditions and special requirements of the law, as well as its general purpose, are in fact carried out." The outcome in the House was never in doubt, and the bill, including $500 million for public service employment in fiscal l975, passed by a vote of 369-3l. On the evening of November 29, Bill Hewitt and I in- vited Chairman Daniels and Congressman Esch to join us at the Madison Hotel for cocktails, to celebrate what had been accomplished. Final Passage and Signature The Conference Committee had to resolve nearly l00 dif- ferences between the Senate and House bills, but most of the basic compromises had been agreed upon in shaping the House bill. The major unresolved issue going into the Conference was the funding for PSE in fiscal l975. The House bill contained a provision for $500 million, and the Senate bill was silent. We in the administration were con- fident that we had obtained informal agreement from all that the fiscal l975 figure would be held to the fiscal l974 level of $250 million. The big surprise in the Conference was the proposal by Senator Javits and the agreement by the Conference to increase the agreed-upon $250 million to $350 million. (I have subsequently learned that there was much behind the scenes jockeying on this point. The AFL-CIO and its supporters were convinced that the adminis- tration was already so committed to the whole bill that the President would not veto the bill over the full $500 million. The Senate conferees, particularly Senators Nelson and Javits, believed that the $500 million was too risky. Consequently, the split-the-difference compromise of $350 million.) It fell to my lot to inform the White House of the last- minute development. My news was met with rage and dis- belief. Jim Cavanaugh threatened, in his anger, to rec- ommend that the bill be vetoed: "We have been had for the last time!" "How dare they toy with the administra- tion in this fashion!" The $350 million figure was skating uncomfortably close to the limits of tolerance in an already suspicious and edgy White House. Although I was temporarily concerned that we might have lost the entire effort, I could not

42 believe that it would be credible for the President to now veto this bill after working so hard and achieving this long-sought compromise. The Conference Committee reported on December l8, and on December 20 both House and Senate adopted the Conference report and cleared the bill for the President. By December l7, I was confident enough that the Presi- dent would sign the bill to send a memo to Jim Cavanaugh recommending that the President hold a ceremony as he signed the bill. I suggested that the signing of the man- power bill be used as an occasion to call attention to the President's "new federalism" initiative and to further achievement of the objectives of revenue sharing. I noted that this first "special revenue sharing" bill can be pointed to as a model of a decentralized social services delivery system and that the votes in both the House and the Senate can be pointed to as indications that decentral- izing federal power to state and local government was a sensible and popular concept whose time has come. I also suggested that the signing ceremony could be used by the President to emphasize the positive results of a close and cooperative relationship between Congress and the executive branch, since the manpower bill was the product of such a relationship. On December 28, l973, the President signed the Compre- hensive Employment and Training Act into law, saying that he did so "with great pleasure, as it is one of the finest pieces of legislation to come to my desk this year." He went on to remark that this was the "first legislation to incorporate the essential principles of Special Revenue Sharing" and that "this long-overdue shift in intergovern- mental responsibilities is now a reality in one key area of government domestic programs—manpower." That day, Melvin Laird, Secretary Brennan, and I met with the press in the White House pressroom to explain and comment on the bill and answer questions. Secretary Bren- nan' s prepared comments paid specific tribute "to those in the Congress who worked so actively and constructively to bring forth this important piece of legislation": Senators Nelson and Javits, Congressmen Daniels, Esch, and Quie, and Chairman Perkins. He noted that the large bipartisan support usually ac- corded manpower legislation had eroded over the past sev- eral years, and that he was particularly pleased that the events of the past few months had apparently restored the spirit of constructive bipartisanship that had long char- acterized that area of public policy.

43 The Secretary then went on to comment on two specific concerns. First, he stated that the Comprehensive Employ- ment and Training Act continued the strong emphasis of the last decade on serving the most economically disadvantaged and that the legislation should lay to rest any fears that the federal government was abandoning its commitment to serve the poor and disadvantaged. He stated that the Labor Department, in administering this legislation, would do all in its power to meet that commitment. The Secretary next commented on the role of the federal government under this legislation. "Throughout the devel- opment of this law, fears had been expressed that in turn- ing over responsibilities to state and local governments we, in the federal government, wished to "put the money on the stump and run.' Such has never been our intent. How- ever, we have continued to emphasize that decentralization must mean that, along with the responsibility must go a large grant of authority to the state and local govern- ments for the planning and operation of the programs. We have continued to stress that this would call for the de- velopment of new methods by which the federal government carried out its responsibilities for oversight to insure that the intent of the law was being carried out. "We in the administration believe that the Comprehensive Employment and Training Act strikes the appropriate balance between a new major role for states and cities and a nec- essary federal role in oversight and national administra- tion." Finally, he said: "Viewed from the context of a re- definition of the intergovernmental roles of the federal, state and local governments, I believe this legislation is indeed historic." So the Comprehensive Employment and Training Act became law. The credit for coining the title, Comprehensive Employ- ment and Training Act—CETA—goes to Dick Johnson of Senator Nelson's staff. The Senate bill had been titled, "Job Training and Community Services Act," and the House bill had been titled "The Comprehensive Manpower Act." Dick Johnson correctly concluded that the term "manpower" was destined to have some negative connotations and, there- fore, changed the title of the bill to what I believe is a more descriptive set of words. (In fact, I subsequently convinced Secretary John Dunlop to change the name of the Manpower Administration to the Employment and Training Administration.) What was the outcome on the crucial public policy issues that were involved in this reform effort?

44 First, on the issue of decentralization: a major de- centralization was accomplished, but a strong federal role was also preserved. A major compromise was reached between the revenue sharing purists and the supporters of a total federal role, a compromise that Secretary Brennan char- acterized as "the appropriate balance." Second, on the issue of decategorization: Title I of CETA (which sets up the basic manpower system) authorized a totally decategorized program; Title III added new cate- gories for Indians and migrants and retained an emphasis on youth; and Title IV continued the Job Corps as a sep- arate federal categorical responsibility. Again, a balance was struck between freeing state and local sponsors from rigidly defined categories and, at the same time, retain- ing program emphases for particularly disadvantaged groups. Third, on the issue of public service employment: the strong proponents of public service employment succeeded, for the first time, in having a separate, identifiable program for public service employment included in a com- prehensive bill. However, those wishing to provide curbs on public service employment succeeded in targeting the program to areas of high unemployment, in lowering the average wage cost, and in other ways trying to ensure that the program remained a transitional employment effort with the ultimate purpose of moving individuals toward private unsubsidized jobs. As I stated at the beginning of this book, the legis- lative "game" has no inflexible criteria by which to judge the "winners" and the "losers." CETA is no exception. All the people intimately involved in the birth of CETA now believe that they were among the "winners"—and I am no exception. What a delight to play a "game" with all winners! Such is the art of legislative compromise.

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