Developing Manpower Legislation: A Personal Chronicle (1978)

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IV. PUBLIC SERVICE JOBS— THE MANPOWER BATTLEGROUND First Session Frustration As described above, our attention in the early months of l975 was on ensuring that the unemployment insurance program continued to meet the needs of the unemployed. We were also overwhelmed by the task of implementing the major new emergency programs that the Congress had autho- rized and funded at the end of l974. But the Labor Com- mittees in the House and the Senate had not forgotten that the compromise PSE bill, Title VI of CETA, had carried an authorization of $2.5 billion for fiscal l975 and nothing for l976 and beyond. The supplemental appropriation bill enacted in December l974 had included $875 million for PSE, so there was an additional $l.625 billion that could be appropriated under the authorization. From the standpoint of the Democrats in the Congress, it was important to give early consideration to the future of the program beyond fiscal l975. The compromise on a $2.5 billion program for fiscal l975 had been considered by them as only a stopgap way of getting the program en- acted. Their basic objective continued to be a PSE pro- gram of at least one million jobs, not the 3l0,000 that were now authorized and funded. The President's budget for fiscal l976, released in late January l975, did not include a request to appropri- ate the balance of the fiscal l975 authorization of $l.625 billion because the passage of the new Title VI program had come so late in the budget cycle that we had not been able to take it into account in preparing the budget. Even if we had, however, it is doubtful if we would have in- cluded the additional funding. The state and local gov- ernment prime sponsors of PSE programs were already awash with funds, and we had felt it necessary to push them very 72

73 hard in January and February in order to get the new emer- gency PSE hiring completed rapidly. By March this problem was pretty well taken care of, but by that time the budget was public. The fact that the rest of the authorized PSE funds was not included in the budget was viewed by some Democrats in the Congress and by other supporters of PSE as another in a long chain of actions by the administra- tion that indicated serious doubts about the program. In this particular case they were wrong; a neutral set of events had produced the result. Early in February l975 Chairman Daniels in the House and Senator Javits introduced bills to authorize funds to increase Title VI to one million jobs for fiscal l976. Both bills reflected what was then believed to be the mood and will of the Congress—to go all-out on job-creating programs. This new 94th Congress reflected the heavy post- Watergate Democratic majority and was touted as being "veto-proof." Early in March the President requested the balance of the Title VI authorization for l975, at just about the same time as the House voted a l975 supplemental job creation bill totaling $5.9 billion. The House bill did include the $l.625 billion for PSE, but the bulk of the funds were for public works. By mid-April the Senate had upped the total appropriation for job creation to over $6 billion—and the bill seemed headed for a sure veto. The Congress finally settled on a bill totalling $5.3 billion and sent it to the President on May 23. By early May l975 we had reassessed the PSE program and concluded that the program should not be expanded be- yond the current 3l0,000-level. We, therefore, notified the prime sponsors that they should plan their individual PSE programs so that funds now available to them, plus the additional $l.625 billion in l975 supplemental funds that would become available, would carry their program through fiscal l976. This action on our part primarily reflected the con- tinuing doubts within the administration about PSE as a major countercyclical program. It was also occasioned by the President's very stiff policy of trying to limit fed- eral expenditures as part of his anti-inflationary program. Finally, it reflected our developing concerns within the Department about the particular brand of PSE program rep- resented by Title VI. We were well aware of the general substitution effects of PSE, but the type and size of the Title VI program seemed to have occasioned many instances of patronage, nepotism, lack of maintenance of effort, and

74 the particularly troublesome problem of how to treat the rehiring of regular laid-off local government employees. In an appearance before Senator Nelson's Committee on June 6, l975, I had an opportunity to put in the public record our reservations about the value of Title Vl-type public service employment as a countercylical measure. I said that while public service employment may provide en- try points for the disadvantaged into the world of work, there are limits to the use of this kind of public service employment as a job-creation measure in a serious and prolonged economic downturn. The programs are costly, temporary, something of a stopgap, and can employ only a limited fraction of the large number of unemployed persons. I said that in the past we have found public service jobs to be an effective means of providing employment in the short run and in expanding needed public services, but over time, in the face of a persistent recession, the value of public service employment as a device for the creation of new jobs diminishes because of the increased likelihood of federal funds being substituted for state and local funds. There was evidence from our earlier experience with the Emergency Employment Act that substantial substitution ef- efects take place by the end of the first year. I also discussed the related issue of public sector layoffs: as many local governments have experienced de- clining tax revenues during the current recession, they are laying off regular employees; at the same time, many of these jurisdictions have CETA Title VI funds available to hire public service employees. Since maintenance-of- effort restrictions prohibit the hiring of public service employees for the jobs of those who have been laid off, and the jurisdiction may not use CETA funds to rehire the laid-off employees, the prime sponsors face enormous pres- sures. They are forced to lay off regular employees at the same time they are hiring new—public service—em- ployees, even though they are being hired for different jobs. I said that to massively increase the number of PSE jobs at this time would only exacerbate this problem and recommended no additional funds for fiscal l976. In early June Chairman Daniels introduced a new Title VI bill that completely revised his February approach of simply increasing the authorization to provide for one million PSE jobs. The new bill removed major responsibil- ity for public service employment from state and local prime sponsors and gave community groups and the federal government a much larger share in program operations. This approach apparently reflected Daniels's concern about

75 the problems of substitution, patronage, and nepotism. The growing abuses in the PSE program were beginning to give the entire concept a bad reputation, only six months after Title VI was passed. On May 28, l975, the President vetoed the $5.3 billion Emergency Employment Appropriation Act, and the House failed to override the veto. The vetoed bill had con- tained the $l.625 billion remaining for Title VI, so as of mid-June the balance of the authorized fiscal l975 funds was still in limbo. After much twisting and turning in the Congress, the funds were finally made available on July l through a continuing resolution for fiscal l976, which keeps federal programs operating when regular ap- propriation bills or authorization bills have not cleared the Congress. Following the President's successful veto, the balance of the first session of the 94th Congress was taken up in a search for a veto-proof way of increasing the PSE pro- gram. By the end of the session Chairman Daniels, under strong pressure from state and local prime sponsors, had retreated from his second version of a new Title VI and was floating a third version, which kept the program with state and local prime sponsors (as had his first version). In the Senate both Senators Nelson and Javits were con- tinuing their series of rewrites, also searching for a program that would pass and survive a veto. The session ended as it had begun—with everyone still searching for a formula by which to increase the PSE program. It had, indeed, been a frustrating first session. And as the first session of the 94th Congress drew to a close, the unemployment figures seemed to be saying that the worst was past and that the economy was gradually improving. Unemployment had peaked in May at 9.2 percent; by November it was down to 8.3 percent. The Title II Ploy As it came time in September l975 to prepare our budget request for fiscal l977, our experience had led to total disillusionment with Title VI, for several reasons: First, the problems in defining maintenance of effort and con- trolling rehires of regular employees were practically out of control; even though the percentage of rehires in the total program never was more than l0 percent, in some cities it reached 50 percent or more and had succeeded in giving the program a "rip-off" reputation. Second, program

76 participants were typically non-disadvantaged, white, middle-class, and primarily high-school graduates, with a strong percentage of people with some college education. Third, the minimum l5-day period of unemployment prior to hiring had made it possible to put almost anyone on a PSE job. Fourth, problems of patronage, nepotism, and mal- administration had cropped up in many of the big eastern cities and again had given the entire program an unsavory reputation. Fifth, because the Title VI formula spread the funds to every sponsor, even though the economy had recovered in some areas, these areas continued to receive PSE funds. In addition to our disillusionment with Title VI, the nationwide economy was improving, and we believed the need for any such program should be reconsidered. The Congress showed no signs of letting up on pushing the pro- gram to one million jobs—which we knew would cost $l0 billion annually. A comparative analysis of the incidence of Title II programs and of Title VI programs showed that there was almost complete congruence between the two programs. Even though Title II contained a 6.5-percent area trigger re- quirement, only a few areas in the country failed to meet the trigger requirement. It therefore occurred to us that seeking funds under Title II authority would cause very little dislocation in the total PSE program and would dispense with the need for Title VI. As we further con- sidered the possibility of requesting all additional PSE funds under Title II, we liked the fact that Title II did have a trigger so that as the economy improved the pro- gram would be automatically phased down without the need for specific congressional action. In addition, the funds made available at the beginning of l975 were beginning to run low, and some sponsors were already having to terminate their PSE programs. A fiscal l976 supplemental appropriation would be necessary or most sponsors would probably have to close down programs by late spring. Title II was the only live authorization that could be used to request funds, since the Congress had failed to act on Title VI. Finally, of most significance to OMB was the fact that a fiscal l976 supplemental ap- propriation would keep between $l and $2 billion out of the fiscal l977 budget. The President had set a stringent budgetary goal for the fiscal l977 budget, and appropriat- ing these PSE funds in fiscal l976 would make it easier to meet the goal. All these considerations went into our decision to propose to OMB and the President that our strategy for

77 containing major increases in PSE, and working toward a reasonable and sensible phasing out of Title VI could all be accomplished through the route of a fiscal l976 sup- plemental appropriation for Title II. The strategy was agreed to, and the President's fiscal l977 budget carried a request for a $l.7 billion supplemental under the au- thority of CETA Title II that would carry the program of 3l0,000 jobs through calendar l976 and then phase out the program by the end of the third quarter of l977. In order to provide phasedown funds for the small number of spon- sors who could not qualify under the 6.5-percent trigger, we requested that the Appropriations Committees provide us some flexibility in the use of discretionary funds. No sooner had the President's l977 budget proposal reached the Congress than Chairman Daniels, on January 22, l976, introduced his fourth Title VI bill for the 94th Con- gress (HRll453). Only six days later the Committee re- ported out the bill, and on February l0 the House passed the bill, 239-l54. This version of the Title VI reauthorization emphasized many of the worst problems in the Title VI program. Dur- ing the Committee markup Secretary Dunlop dispatched a letter to the Committee stating our principal objections: (l) not only was there no targeting on the disadvantaged, but the bill gave "preferred consideration" to the re- hiring of public health and safety personnel, thus boldly sanctioning "rehires" as the highest priority; (2) even the l5-day period of unemployment prior to hiring for a PSE job had been dispensed with (there was no required period of unemployment); (3) the salary limit was $l2,000 instead of the $7,000 we had continuously proposed; and (4) the program was being expanded to 600,000. We were incredulous that such a bill was passed. It showed how far out of tune the House was with developing attitudes in the Senate, where it was becoming clear that targeting was an essential element of any new program. We were certain that the bill would not be considered in the Senate. We also took a look at the vote in the House and concluded that even if such a bill did ultimately pass in both houses, a Presidential veto could not be overridden. During February and March we continued to watch closely the funding situation on the PSE program so that we knew which sponsors were in danger of running out of funds and when. Our urgent supplemental request was before the House Appropriations Committee and as the time wore on and no action was evident, we became increasingly concerned that,

78 in fact, Congress was going to fail to take any action before tens of thousands of PSE jobs ended. Our natural allies during this period in trying to get supplemental funds should have been representatives of the prime sponsors. However, it was apparent that most spon- sors had become beguiled by the "pot at the end of the rainbow"—by the belief that Congres was going to greatly expand the Title VI program. Consequently, they and their Washington representatives were spending all their time with the House Labor Committee in trying to find a way to get a big bill launched, rather than putting any pres- sure on the House Appropriations Committee. We were aware during this period that the House Labor Committee had been trying to convince the Appropriations Committee to approve a fiscal l976 supplemental sufficient to carry the program for only a limited period. This ac- tion would allow the time needed to pass a Title VI ex- tension but would also prevent PSE layoffs. Our sources continued to tell us that the House Appropriations Com- mittee was not enthusiastic about any supplemental ap- propriation, neither the one we had proposed or the smaller one being pushed by the House Labor Committee. Toward the end of March we learned that Senator Nelson's committee would shortly meet to consider its rewrite of HRll453, the House-passed Title VI bill. We had not had a chance to be heard publicly on any of the Title VI bills, so we asked Senator Taft to insist on hearings before the markup. Senator Taft did so and Senator Nelson proceeded to schedule hearings. The Senate Committee had already radically altered the House bill by (a) restricting eligi- bility to the long-term unemployed, (b) requiring an in- come test for each participant, and (c) requiring that a project approach be applied to all new hires. On March 3l the Senate Budget Committee surprised every- one by including only $2.2 billion in the l977 Budget Reso- lution for a total PSE program, including both Titles II and VI, for only 265,000 jobs (the current total was 3l0,000). The Committee stated that the program should "concentrate on hiring low-income household heads now drawing unemploy- ment insurance and other public benefits." The impetus in the Senate toward tightening up the PSE program by targeting, income tests, and projects originated in the Senate Budget Committee. Senators Muskie, Bellman, Cranston, Mondale, and Kennedy saw well before it became apparent to others that the PSE program needed to be re- formed and focused if it was to retain public support. I was somewhat aware of this developing attitude in the

79 Budget Committee through several luncheon conversations with Arnold Packer, the Committee's principal staff member, and a former colleague in OMB. The action of the two Senate committees had now made clear to the House Labor Committee that the Senate was in serious disagreement with the House approach. On April 2 the House Labor Committee prepared and introduced its sixth PSE bill, "The Emergency Jobs Stopgap Extension Act" (HRl2987), which was a simple authorization of appropria- tions for the ensuing few months, without any program changes or expansion. The full House Committee reported out the bill on April 8. The report didn't try to hide the Committee's frustration with the Senate: "It is the failure of the other body to consider this measure more expeditiously that has necessitated this emergency, stop- gap legislation." On April 5, I appeared before the Senate Committee, as requested by Senator Taft. Senator Taft was the only Senator present (Senator Nelson came in just at the end of the hearing and apologized for being late—his car had broken down). I used the opportunity of my appearance and my prepared statement to send a message to all concerned that the deadlock in the Congress on both authorization and appropriations was about to have serious disruptive consequences and that we were going to lay the blame on the Congress. I stated that although phaseout of the program is our goal, premature termination of these pub- lic service jobs would be unfair and inappropriate; thus, of most urgent concern to the Department of Labor was the request for immediate appropriations of $l.7 billion to prevent imminent layoffs in Title VI programs. I re- ported that based on program and funding projections, an estimated l2,000 PSE participants had been laid off through the end of March; in April some two dozen additional prime sponsors would be forced to lay off an additional 2l,000 PSE employees; and in May, an estimated 3l additional prime sponsors would terminate an additional 63,000 workers. By mid-June we estimated a total of 80 prime sponsors will have been forced to lay off over ll5,000 PSE participants, over 37 percent of all persons employed on Title II and Title VI PSE jobs. I used most of my prepared statement to cover the fund- ing situation, and only in the last paragraph of the state- ment did I address the legislation under consideration. I stated that since we failed to find convincing arguments for any additional legislation on PSE, I did not feel it appropriate to submit formal comments at this time on the specifics of the legislation.

80 The day before the hearing Jonathan Steinberg of Senator Cranston's staff had called and asked me how I would respond if a line of questioning were undertaken at the hearing related to my views on the Senate substitute bill, particularly the targeting and income test sections of the bill. I had told Steinberg that I would welcome such questions, but that I would be free to express only my personal views. I told him that the Senate bill was a step in the right direction and that I would so state, but I would be bound by the administration's overall op- position to any new Title VI legislation. Senator Taft did pursue this line of questioning at the hearing, and I responded as I had indicated I would. Senator Taft first asked for my comments on the eligi- bility requirements; those who have been receiving unem- ployment compensation for l3 or more weeks; those who are receiving AFDC; those who have exhausted unemployment com- pensation benefits; and those who are ineligible for un- employment compensation benefits but who have been unemployed for l3 or more weeks. I responded by saying that if we were writing on a clean slate, which we were not, I thought that the Subcommittee print was in the right direction. I reminded the Senator that the bill the admin- istration presented to the Subcommittee a year and a half earlier tried to target public service employment programs on the long-term unemployed and for unemployment insurance exhaustees and similar groups, although that bill did not go as far as the Subcommittee print. I said I thought we would support the targeting of public service jobs in a much more precise way than they are now targeted under Title VI. Senator Taft asked about those who are ineligible for unemployment compensation but who have been unemployed for l3 or more weeks and I said that, personally, I would support coverage for such individuals. Later in the hearing Senator Taft turned to the ques- tion of an income test, noting that under the Committee's draft proposal an unemployed person otherwise eligible would nevertheless still be ineligible for a public ser- vice job if the income of other family members exceeded 70 percent of the lower living standard budget, which for an urban family of four persons would be $6,439. He asked if I had any comment on this provision and I replied that I believed the provision went in the right direction. I went on to say that the whole notion was to try to hold down the salary levels of these jobs, so that frankly, they were not good jobs. I noted that we were not creating

8l permanent jobs that were going to provide adequately for the income needs of families over a long period of time; they were supposed to be countercyclical jobs and there- fore the wage levels should not be very high. I said that I preferred an overall salary of $6,000 or $6,500 because a needs test for public service jobs opens up a whole new set of public policy problems. I tried by responses in the public hearing to send a first and very tentative message that the Senate was headed in the right direction and that the Senate bill might be the basis for some later compromise. At the same time, however, we were still totally involved in getting fund- ing under Title II to continue the program. We now began to work closely with the Senate Appropri- ations Committee staff in an effort to convince them to include the needed supplemental funds in the urgent sup- plemental bill that was now before the Committee. (The President had requested urgent funds for a major national immunization program to combat the projected swine flu outbreak; thus there was an emergency appropriations ve- hicle to which the PSE funds could be added.) The House had not added PSE funds, but we began to see signs that the Senate might. On April 7 our efforts met with success. The Senate Committee reported H. J. Res. 890, which added $l.2 billion in PSE supplemental funds and also included the necessary language to authorize us to use discretionary funds to prevent layoffs in non-Title II areas. On April 8 I received a number of irate phone calls from Labor Committee staff members who were incensed that we had been successful in our efforts to get the Senate Appropria- tions Committee to add funds. They took the position that use of discretionary funds for non-Title II areas was clearly illegal and that we had pulled a fast one on Con- gress. I responded that the entire proposal had been a part of the President's budget in January, including the need for report language on the use of discretionary funds; that the solicitor of the Department of Labor had found it to be legal; and that we were delighted that we had finally gotten some action out of the Congress before massive lay- offs began. Their real concern, of course, was that the provision of funds under Title II would blunt the need for and the steam behind any Title VI renewal. During floor consideration the next day, April 9, Senator Javits took the lead in trying to make a record that the Appropriations Committee had overstepped its authority and that the action was illegal. There was an extended colloquy between Senators Magnuson, Javits, and Brooke, in which

82 Senator Magnuson essentially stood his ground and defended the action of the Appropriations Committee. Because of the emergency nature of the overall resolution, there was little opposition and the resolution passed handily. By April l2 when the House took up H. J. Res. 890, the controversy had heated up considerably. House Democrats, led by Congressman Daniels, maintained that the use of Title II money for Title VI jobs was illegal. Daniels stated that such action by the Secretary of Labor was "ab- solutely illegal and improper" and that "if the Secretary undertakes what he proposed to do, there will be a law- suit instituted against the Secretary and, in all probabil- ity, an injunction issued by the court which will tie up all the provisions under Title VI." For all the bitter denunciations and threats, however, the House passed H. J. Res. 890 by unanimous consent. On April l5, l976, the President signed the resolution and we proceeded immediately to allocate to prime sponsors all the regular funds available to them. The controversy had involved only the discretionary funds, but most of the appropriation was for regular Title II funds needed to keep the PSE program going. In view of the heated accusations and threats that had been made in both the Senate and the House, I decided to withhold allocation of the discretionary funds pending a formal legal opinion from the Department's solicitor. By this time Congress had recessed, so we had time to regroup, get the opinion, and more carefully consider our next steps. In order to completely conclude the matter we decided to try to get a letter from Senator Magnuson reiterating the Senate Committee's desire that we proceed to carry out the intent of Committee report language and use discretionary funds in non-Title II areas. By the time Congress returned from its recess, I was able to make available to all con- cerned both a written opinion from the solicitor and the letter from Senator Magnuson. With these in hand, I felt comfortable in releasing the discretionary funds on April 29. Our ploy had worked and just in time. Another month would have seen a major disruption in the PSE program. Flirtation in the Senate In January l976, Secretary Dunlop had resigned (over a controversial veto by President Ford of a situs-picketing

83 bill) and in February, President Ford appointed W. J. (Bill) Usery as Secretary of Labor. In my first meeting with Senator Usery, and on many oc- casions thereafter, he stressed to me the prime importance of finding a way to create more jobs. He continually stressed to all of us that he had made the President aware of his strong views on the matter and wanted us to help him prepare jobs programs that would be sensible and salable. He emphasized that he was willing to fight in the Economic Policy Board for his beliefs and that it was up to us to provide him with jobs proposals that would be acceptable. We, of course, briefed him on what we believed to be the folly that particularly the House had been engaged in in the past year in attempts to expand Title VI and of our various strategies to contain the Congress. As February, March, and April wore on we made him aware that the Senate began to look like the place where we might be able to make some sensible compromises on Title VI. While we were feeling particularly elated at the end of April because we had finally succeeded in obtaining the supplemental funds under Title II and had at least won the first round, the House on April 30 took up the "stopgap" bill (HRl2987) providing for a simple extension of Title VI. We did not take this event very seriously because we thought we had the battle won; however, we asked Congress- man Quie to take the position on the House floor that the bill was now unnecessary since funds had been made avail- able under Title II. We thought surely that this would sway enough votes so that the vote for passage (which was cer- tain) would show that there were not enough votes to over- ride a veto. Through a series of oversights, however, even the Republicans were not told which way to vote, so the final vote was an overwhelming 287-42. Although, in the longer run, the vote was not that significant, it served that day to give renewed hope to those in the House who still believed in the ultimate passage of Title VI. We had been keeping in close touch with the Senate Committee staff during April because the original Committee print had looked promising (as I had testified on April 5). On May 6 the Senate Subcommittee reported out its version of the House Title VI bill. The Senate bill was one we could clearly work with; it contained the targeting pro- visions, the income tests, and the one-year project pro- visions—all of which we thought were crucial to any desirable program. On the same day the House and Senate Budget Committees reported out the Budget Resolution for fiscal l977. While

84 the Senate Budget Resolution had held the PSE program to 250,000 jobs, the Joint Budget Resolution now provided for 500,000 PSE jobs. It looked like the Congress was gearing up for a major election year expansion of the PSE program. That evening and the next morning, May 7, I mulled over the situation in the Senate. I weighed the following fac- tors: (l) the Senate Committee action on Title VI exten- sion was absolutely our last chance to shape any PSE legislation in Congress, since May l5 was the deadline under the congressional budget rules for any basic new authorizations to be reported out of a committee; (2) this was a Presidential election year, and another veto of a jobs bill should be avoided at all costs; (3) the Senate bill held out a possibility of achieving some major and necessary reforms in PSE; (4) Secretary Usery had given me strong instructions to get a "good" jobs bill, if that was possible; (5) the unemployment rate had leveled out at 7.5 percent so that we could no longer credibly argue that things were improving and that PSE was, therefore, no longer needed. I called Secretary Usery early Friday morning, May 7, and by Friday noon I had his pledge to go to the Economic Policy Board to seek approval to work with the Senate Com- mittee in fashioning a bill that we could support. I met with Deputy Undersecretary Perritt that afternoon to brief him on the situation. By that time he had made contact with the Board, and the matter had been placed on the agenda for early Monday morning. I called Bill Langbehn, chief of our legislative staff, and we discussed the substance of the points that should be put before the Board. I asked him to draft a paper over the weekend and to have it in the hands of the Secretary by 7:00 a.m. Monday. We were in constant communication over the two days as the paper took shape. In the paper, we stated that Senate committee staff had indicated that the goal is a bill that can be accepted by the President and to avoid confrontation. We then listed the key concepts toward which we would negotiate: • Targeting all jobs and funds above current program levels exclusively to long-term unemployed individuals. • Targeting all jobs and funds above current program levels exclusively to projects-type PSE. • Reaffirming the one-year time limit on CETA title VI projects and activities. • Legislating, as a requirement rather than a goal, an average PSE of $7,800 (or less) while retaining the maximum federal contribution at $l0,000.

85 • Giving the Secretary additional discretionary authority to modify allocations in order to target funds to areas with the greatest incidences of long-term unem- ployed and, assuming successful negotiations on our first two points, with the largest number of projects-type PSE. • Requiring that at least 50 percent of projects PSE funds go to project applicants other than the prime spon- sors (such as community-based organizations, local education agencies, special purpose political subdivisions, etc.) We noted that in order to successfully negotiate and get a bill that could be signed, immediate action would be es- sential and clear signals of intent—and of limits—would have to be given to the Senate. The paper concluded by stating the bill would be reported out of the Senate Com- mittee on Labor and Public Welfare on Wednesday, May l2— with or without our negotiations and that the bill would pass the Senate with ease. I got a call from Secretary Usery late on Monday morning indicating that the Board had granted us a "hunting license" to work with the Senate Committee. I immediately dispatched Bill Hewitt and Bill Langbehn to work with the Senate Com- mittee staff and by the next day. May ll, a revised bill had been drafted. On May l2 the Committee marked up the bill and approved it as presented by the staff. The bill as reported out by the Committee was very close to the gen- eral concepts we had outlined. I now felt it was time to begin to talk publicly about the elements of a reasonable PSE program. I attended a conference of many leading manpower specialists at Arden House in New York May 20-23, and I tried to plant some seeds along the lines of the Senate bill—even though I knew it was high-risk behavior since the President had not decided to support the Senate bill. On May 27 Secretary Usery sent a memo to the Economic Policy Board that explored all the various options for the President; he recommended that we continue quiet negotia- tions on the bill and not publicly oppose it. On June 4 Secretary Usery met with the President to try to convince him that the Senate bill was a responsible one and we should give it quiet support, but on June 9 OMB let it be known by letter to the minority leadership in both houses that the President had not changed his position and remained opposed to any extension of Title VI. This action by the President disappointed but certainly did not surprise us. By that time the President was in a tight race for the Republican Presidential nomination with

86 Ronald Reagan and certainly didn't need the risk of support- ing something as "liberal" as a public jobs bill. There was general consensus in Congress that the President's unwill- ingness to support the Senate bill reflected his "move to the right" to win the nomination. The strategy then became to slow down the bill so that the President wouldn't be finally asked to make up his mind on the bill until after the Republican convention in late August. Although we hadn't made it all the way, our "flirtation" had achieved what we had initially desired: the Senate bill gave the basis for a PSE program that was a major improve- ment over the one currently in operation. Post-Convention Success On August l0 the Senate took up the Committee bill and passed it by a vote of 67-ll with very little change. The stage was now set for the conference, and the agreed-upon strategy was to schedule the conference after both the Re- publican Convention and the Labor Day recess. We in the Department were taking the same attitude toward the Senate bill as those on the Hill. We realized that the program we were now operating under Title VI needed much improvement and that the Senate bill gave us the vehicle for obtaining such improvement. We continued to believe that there were enough votes in Congress to override a veto on a public jobs bill, particularly just before election. We also felt that the veto strategy was a politically dangerous course for the President. Finally, I knew from experience that in the legislative process there is no permanent and everlasting "yes" or "no"—outside events shape a great deal of the attitudes of the legislative actors. I felt sure that the President, as the Republican candidate for Presi- dent, would change his mind. Given these attitudes and beliefs, we set about immedi- ately after the President's nomination to have his decision reconsidered first by the Economic Policy Board and then by him. On August 30 the Secretary received a confidential memorandum from L. William Seidman, the director of the Economic Policy Board, stating: "The President has ap- proved expressing support for an extension of Title VI... at current levels as long as new employees are limited to the long-term unemployed." The President requested that the Secretary of Labor inform the Republican Congress- men participating in the conference "...that he will sign a bill extending Title VI at current levels as long as new

87 employees are limited to long-term unemployed." Our work was certainly cut out for us. The House bill had no tar- geting provisions whatsoever, and the House conferees were very much opposed to targeting—particularly going all the way so that all new PSE enrollees would be long-term unemployed. The Conference Committee first met on August 31 and succeeded in resolving only a few minor differences in the two bills. The Committee then adjourned abruptly for the Labor Day recess as a direct result of a memorandum cir- culated by the American Federation of State, County, and Municipal Employees (AFSCME) that expressed "extreme dis- may" about the hold-harmless provisions of the Senate bill. The issue was whether the hold-harmless provision applied to the l976 job-slot level or to the persons employed under the current Title VI program. "AFSCME strongly opposes a policy requiring that as people presently employed under Title VI leave or are laid off, their job slots would shift over to the projects program and be filled only by persons meeting the individual eligibility requirements under that section." The AFSCME memorandum portrayed well what was to be the major sticking point in conference. The Conference Com- mittee met again on September 7 and immediately ran into a continuation of the heated disagreement on the targeting issue. The House conferees could accept the concept that any new PSE positions above the current level should be targeted and should be involved in one-year projects but they were absolutely adamant against changing the ground rules governing the current program. After extended and heated discussion, Senator Javits offered a compromise that called for 50 percent of the attrition in existing PSE jobs to go to the long-term unemployed and 50 percent to remain under the current Title VI requirements. We were distressed by this compromise because we had our marching orders from the President that all new employees should be from the long-term unemployed. The conference broke up without reaching agreement, and we went to work to try to rescue the bill from what we believed had been an un- desirable compromise that had been offered too early. On September 8 Undersecretary Michael Moscow, Deputy Undersecretary Kenneth Duberstein, and I met first with Chairman Daniels to try and sell him on getting closer to l00-percent targeting; then with Congressman Quie to try to get him to hold firm on the need for l00-percent tar- geting; and finally with Senator Javits to try to get him to withdraw his compromise bid and hold tight for the Senate approach.

88 During the day I also put in a call to Ken Young of the AFL-CIO, and that evening he called back from home and we had a long conversation. I wanted to sound him out on the conference situation and to try to sell him on supporting l00-percent targeting. I argued the social desirability of using PSE only for the most disadvantaged; I also argued that the state and local governments were now receiving new countercyclical revenue sharing funds that should go a long way toward providing adequate funds so that regular gov- ernment employees would no longer need to be transferred over to Title VI PSE programs. Although Young generally agreed with the conceptual points I made, his position was that the countercyclical grant program was too new to be able to predict whether it would obviate the rehire ques- tion, and, until more experience had been gained, the AFL- CIO was not going to support giving up entirely reliance on the looser eligibility requirements of the current Title VI program. I was convinced from the conversation that Javits's 50-percent compromise was acceptable to the AFL-CIO, but that we were not likely to get any further concessions. On September 9 the Conference Committee met again and agreed on the 50-percent compromise and all other points. On September l0 Secretary Usery sent a memo to the Eco- nomic Policy Board reporting on the conference action and giving the pros and cons on the President's signing the bill. Although the new targeting provisions covered all new job slots coming from any program expansion, only 50 percent of the existing slots were covered, instead of all new employees as the President wanted. In any case, we argued that the Congress would surely override a veto, so it became—as it was bound to—a political question to be decided in the light of a Presidential campaign. On September l7 the House approved the conference re- port by an overwhelming 295-9 vote, and on September 22 the Senate approved it by a voice vote and sent it to the President. The President had given no indication of what his action would be, but we felt confident that he would sign the bill. We proceeded to prepare a draft signing statement and urged that the President have a signing ceremony. Our draft sign- ing statement was indicative of our feelings on how far we had come toward what we regarded as a sensible PSE program: "I am particularly pleased because this act contains many of the features that this Administration proposed to the Congress nearly two years ago. In early October l974, I proposed the National Unemployment Assistance Act as a

89 counter-inflationary and counter-recessionary measure to assist the long-term unemployed worker. Like today's legislation, it targeted the program and called for the development of short-term jobs geared to specific com- munity projects. While we failed to get that legislation two years ago, I am heartened that we have achieved those objectives today." The President never issued that statement or any other statement on the bill, and certainly no signing ceremony was held—but the President did quietly sign the bill on October l. Also in relative silence, the Congress passed a continuing resolution for fiscal l977 that kept the pro- gram at its current size. Thus the two-year'battle over Title VI ended with neither the administration nor the Congress feeling that enough of a victory had been won to do any public crowing. In retrospect, this major overhaul of the public ser- vice employment program probably "saved" the program. The final vote in the House, 295-9, showed that targeting, in- come eligibility criteria, and a project approach changed the character of the program enough so that even most conservatives could support it. Having this revised PSE program on the books made it possible for the new adminis- tration, in February l977, to quickly convince the Congress to double this Title VI PSE program, as the cornerstone of President Carter's "Economic Recovery Package."