[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
PRESIDENT'S FISCAL YEAR 2005 BUDGET FOR THE U.S. DEPARTMENT OF LABOR
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MARCH 4, 2004
__________
Serial No. 108-41
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana JIM MCDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona EARL POMEROY, North Dakota
JERRY WELLER, Illinois MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
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C O N T E N T S
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Page
Advisory of February 26, 2004, announcing the hearing............ 2
WITNESS
U.S. Department of Labor, Hon. Elaine L. Chao, Secretary......... 7
SUBMISSION FOR THE RECORD
Economic Policy Institute, Ross Eisenbrey, statement............. 53
PRESIDENT'S FISCAL YEAR 2005 BUDGET FOR THE U.S. DEPARTMENT OF LABOR
----------
THURSDAY, MARCH 4, 2004
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 10:13 a.m., in
room 1100, Longworth House Office Building, Hon. Bill Thomas
(Chairman of the Committee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 26, 2004
FC-15
Thomas Announces Hearing on
President's Fiscal Year 2005 Budget for the
U.S. Department of Labor
Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways
and Means, today announced that the Committee will hold a hearing on
the President's fiscal year 2005 budget for the U.S. Department of
Labor. The hearing will take place on Thursday, March 4, 2004, in the
main Committee hearing room, 1100 Longworth House Office Building,
beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from the Honorable Elaine Chao,
Secretary, U.S. Department of Labor (DoL). However, any individual or
organization not scheduled for an oral appearance may submit a written
statement for consideration by the Committee and for inclusion in the
printed record of the hearing.
BACKGROUND:
On January 20, 2004, President George W. Bush delivered his State
of the Union address, in which he discussed several legislative
initiatives. The President provided further details of these proposals
on February 2, 2004, in his fiscal year 2005 budget as submitted to the
Congress. The budget for DoL included initiatives to improve the
integrity of the Nation's unemployment compensation program, create
personal reemployment accounts to help laid-off workers return to work,
and improve opportunities for worker retraining.
In announcing the hearing, Chairman Thomas stated, ``The
President's budget included proposals to strengthen the economy and
increase the number and quality of jobs for our workers. That includes
several important proposals under the U.S. Department of Labor that
fall within the jurisdiction of the Committee. I look forward to
Secretary Chao's discussion of the President's proposals to strengthen
the economy and help workers get new or better jobs.''
FOCUS OF THE HEARING:
The focus of the hearing will be on DoL proposals in the
President's fiscal year 2005 budget within the Committee's
jurisdiction.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person or organization wishing to submit written
comments for the record must send it electronically to
hearingclerks.waysandmeans@ mail.house.gov, along with a fax copy to
(202) 225-2610, by close of business Thursday, March 18, 2004. In the
immediate future, the Committee website will allow for electronic
submissions to be included in the printed record. Before submitting
your comments, check to see if this function is available. Finally, due
to the change in House mail policy, the U.S. Capitol Police will refuse
sealed-packaged deliveries to all House Office Buildings.
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Note: All Committee advisories and news releases are available on
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The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
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materials in alternative formats) may be directed to the Committee as
noted above.
Chairman THOMAS. Secretary Chao, welcome before the
Committee again. I believe the last time you were with us was
in March. Any written testimony you have will be made part of
the record, and you can address us as you see fit in the time
available. We have new microphones, so there is a little button
you have to push. Thank goodness you do not have to speak
directly into it. So, we have moved into the latter part of the
20th century.
[The opening statement of Chairman Thomas follows:]
Opening Statement of The Honorable Bill Thomas, Chairman, and a
Representative in Congress from the State of California
Today we welcome Secretary Elaine Chao of the U.S. Department of
Labor to discuss the Administration's fiscal year 2005 budget proposals
to help more Americans find new and better jobs.
Since Secretary Chao appeared before us last March, our economy has
turned a corner. Tax cuts allowed taxpayers to keep more of their own
hard-earned money and resulted in impressive economic growth. Signs of
our strengthened economy include: a surge in productivity; record-high
levels of homeownership; increased manufacturing activity; low
inflation and interest rates; reduced unemployment; and new job
creation.
When workers lost their jobs as a result of recession and the
terrorist attacks on September 11th, Congress responded with needed
help. In addition to regular unemployment benefits, 8 million
unemployed workers received $24 billion in extended benefits and States
were given $8 billion to provide additional assistance. Congress also
improved and expanded the Trade Adjustment Assistance program, which
provides generous cash, retraining, and health care benefits to
dislocated workers.
America has the best trained, most diverse, hardest-working, and
most innovative workforce in the world. But despite recent economic
gains, many workers remain uncertain about the future and their jobs.
That uncertainty is not surprising in a time of war, ongoing terror
alerts and increasing global competition. The challenge is to develop
new ways to help workers emerge stronger than before. That means tax
policy that promotes more innovation and investment here at home; trade
policy that continues our engagement with the world; and education and
training that helps American workers stay ahead of the curve in a
worldwide economy.
We also need to keep in perspective that reacting to rhetoric won't
create jobs. Isolationism won't work. Putting bureaucrats in charge of
whom American companies can hire is not the answer. Those policies
would be a step backward.
Our objective is to produce more and better jobs right here in the
U.S., and we look forward to learning more about the Administration's
proposals to accomplish this goal. Before hearing from the Secretary, I
would like to first recognize the gentleman from New York, Mr. Rangel,
for any comments he would like to make.
Mr. CARDIN. Mr. Chairman, would it be possible to make a
quick observation. I think the opening statements that have
been made so far were related to the views and estimates.
Chairman THOMAS. I would tell the gentleman that the
Chairman's statement was a relatively general one, but if the
gentleman wants to, the Chair is prepared to make additional
statements as well if we want to do that. If you were to be the
respondent for the minority, the Chair is more than willing to
recognize the gentleman from Maryland for any remarks he may
wish to make prior to the Secretary's presentation.
Mr. CARDIN. Thank you. At this point?
Chairman THOMAS. At this point.
Mr. CARDIN. Thank you. I didn't know whether Mr. Rangel
wanted to let me speak first. Therefore I yield to Mr. Rangel
for his comments.
Mr. RANGEL. Thank you. Madam Secretary, I am going to yield
to the Ranking Member of the Committee of jurisdiction, but I
do hope in your remarks that you will be able to clarify the
positions that have been taken by the Economic Report of the
President as related to the job projections, the intent of the
Administration to change the descriptions of manufacturing
jobs, for McDonald's workers, the offshore outsourcing
incentives for jobs, which Greg Mankiw indicated that it was
good for the economy, and your position on unemployment
compensation (UC) for the roughly 100,000 people who become
ineligible each week for assistance.
I yield at this time to Mr. Cardin.
Mr. CARDIN. Thank you, Mr. Rangel. Madam Secretary,
Secretary Chao, it is a pleasure to have you before the
Committee, and we certainly look forward to your testimony.
There are certainly a number of questions that many of us have
related to President Bush's policies on job creation and on
helping the unemployed workers.
The first question I would like you to answer as you make
your presentation is whether President Bush supports extending
unemployment benefits for workers who have lost their jobs
through no fault of their own. Last year, Congress allowed the
extended benefit program to expire, and the President, quite
frankly, said nothing in that regard. As a result, three-
quarters of a million workers have been denied extended
unemployment benefits in just the last 2 months.
Some of my colleagues on the other side of the aisle have
said that these workers do not deserve any additional
assistance because unemployment has been higher in the past.
That overlooks the fact that the extended benefits program has
terminated in the past only after the economy has recovered all
the jobs lost in that recession. In fact, in early 1990, the
program did not stop until nearly 3 million new jobs had been
created. Today, we have 2.4 million fewer jobs than when the
recession started in March 2001. This means, of course, that
the unemployed have limited job prospects, a fact revealed by
the data.
The number of long-term unemployed Americans, meaning those
jobless for 6 months or longer, remains nearly three times
higher than in prior recessions. As the chart shows, nearly 2
million now fall into this category.
[The chart follows:]
[GRAPHIC] [TIFF OMITTED] T9663A.001
Furthermore, the exhaustion rates for regular UC which
stops after 6 months have stayed at record levels. More than 4
out of every 10 unemployment recipients run out of benefits
without finding work. These are the people who need extended
benefits. Over the last month, a majority in both the House and
the Senate have voted to extend unemployment benefits. Yet we
have seen no action because of the silence in the White House.
We have not heard whether President Bush will support or
not support the extension of unemployment benefits, and I hope
during the course of this hearing you can clarify the
Administration's position. Thank you very much, Mr. Chairman.
[The opening statement of Mr. Cardin follows:]
Opening Statement of The Honorable Benjamin L. Cardin, a Representative
in Congress from the State of Maryland
I would like to thank Secretary Chao for joining us today. There
are certainly a number of questions that many of us have related to
President Bush's policies on job creation and on helping unemployed
workers.
The first question I would like to hear answered is whether
President Bush supports extending unemployment benefits for workers who
have lost their jobs through no fault of their own. Last year, Congress
allowed the extended benefits program to expire, and the President said
nothing.
As a result, three-quarters of a million workers have been denied
extended unemployment benefits in just the last two months.
Some of my colleagues on the other side of the aisle have said
these workers do not deserve any additional assistance because
unemployment has been higher in the past. But that overlooks the fact
that extended benefit programs have been terminated in the past only
after the economy had recovered all of the jobs lost in the recession.
In fact, in the early 1990s, the program did not stop until nearly 3
million new jobs had been created. Today, we have 2.4 million fewer
jobs than when the recession started in March of 2001.
This means, of course, that the unemployed have limited job
prospects--a fact revealed by the data. The number of long-term
unemployed Americans, meaning those jobless for six months or longer,
remains nearly three times higher than prior to the recession (nearly
two million now fall into this category).
Furthermore, exhaustion rates for regular unemployment
compensation, which stops after six months, also have stayed at record
levels. More than four out of every ten unemployment insurance
recipients run out of benefits without finding work. These are the
people who need extended benefits.
Over the last month, majorities in both the House and the Senate
have voted to extend unemployment benefits (the Senate amendment did
not pass because it required 60 votes).
And yet, we still have not heard whether President Bush supports
extending unemployment benefits for jobless workers. I hope that
silence will end today. Thank you.
Chairman THOMAS. I thank the gentleman, and the Chair would
recognize the Chairman of the Subcommittee on Human Resources,
Mr. Herger, for a brief statement as well.
Mr. HERGER. Thank you, Mr. Chairman. Today, we welcome
Elaine Chao of the U.S. Department of Labor to discuss the
Administration's fiscal year 2005 budget proposals to help more
Americans find new and better jobs.
Tax cuts allowed taxpayers to keep more of their own hard-
earned money and resulted in an impressive economic growth.
Signs of our strengthened economy include a surge in
productivity, record-high levels of homeownership, increased
manufacturing activity, low inflation and interest rates,
reduced unemployment, and new job creation.
When workers lost their jobs as a result of the recession
and the terrorist attacks of September 11th, Congress responded
with needed help. In addition to regular unemployment benefits,
8 million unemployed workers received $24 billion in extended
benefits, and States were given $8 billion to provide
additional assistance. Congress also improved and expanded the
Trade Adjustment Assistance (TAA) program which provides
generous cash, retraining, and health care benefits to
dislocated workers.
Americans have the best trained, most diverse, hardest
working, and most innovative workforce in the world, but
despite recent economic gains, many workers remain uncertain
about the future and their jobs. That uncertainty is not
surprising in a time of war, ongoing terror alerts, and
increasing global competition.
The challenge is to develop new ways to help workers emerge
stronger than before. That means tax policy that promotes more
innovation and investment here at home, trade policy that
continues our engagement with the world, and education and
training that helps American workers stay ahead of the curve in
a worldwide economy.
We also need to keep in perspective that reacting to
rhetoric won't create jobs. Isolationism won't work. Putting
bureaucrats in charge of whom American companies can hire is
not the answer. Those policies would be a step backward. Our
objective is to produce more and better jobs right here in the
United States, and we look forward to learning more about the
Administration's proposals to accomplish this goal.
I yield back the rest of my time, Mr. Chairman.
Chairman THOMAS. I thank the gentleman. Now, Madam
Secretary, if you would provide us with your understanding.
STATEMENT OF THE HONORABLE ELAINE L. CHAO, SECRETARY, U.S.
DEPARTMENT OF LABOR
Ms. CHAO. Good morning, Chairman Thomas and distinguished
Members of the Committee. Thank you for this opportunity to
testify before this esteemed Committee. I am pleased to have
the opportunity to discuss the President's fiscal year 2005
budget proposal, which includes improvements to the Federal-
State Unemployment Insurance (UI) program and the President's
proposal for the Personal Reemployment Accounts. I am also
looking forward to sharing with you the progress that we have
made in implementing the Trade Act of 2002 (P.L. 107-210).
Recent indicators indicate that the economy is turning the
corner and jobs are being created. The unemployment rate
dropped to 5.6 percent in January, even as more people entered
the job market. Approximately 112,000 new jobs, as noted by one
survey, were created in January, the largest monthly increase
since December 2000, and 366,000 jobs have been added over the
past 5 months. There is another survey which indicates a
tenfold difference between the surveys (at one point) in the
amount of jobs being created, but, nevertheless, both surveys
indicate an increased trend toward more job creation.
As the President has said many times before, we will not be
satisfied until every American who wants a job can find one. We
believe that job training is critical to help workers find new
jobs and prepare themselves for the opportunities in the 21st
century workforce.
There are growth opportunities in certain sectors, and
there are also sectors that are desperately seeking workers,
and there again, training and retraining is absolutely critical
in facing that gap.
That is why the President has also added $500 million in
new moneys on top of the $15 billion that American taxpayers
already paid for a publicly funded workforce development
system. This new initiative, Jobs for the 21st Century Growth
Sectors, has about $250 million going to community colleges,
who have proven themselves so nimble and adroit in meeting the
employment challenges of the 21st century.
The overall budget for training has, in fact, increased
$104 million over last year's enacted, and the Department will
continue to play a critical role in accomplishing the
President's agenda of ensuring that America's workers get the
training that they need to succeed and build better futures for
themselves and their families.
The UI reform is something that I want to talk about as
well. As you know, the UI program is an important element of
our Nation's social safety net. The UI is also the portal
through which workers can access a wide array of training and
employment services. The Department has examined ways to reform
the UI program so that it better serves workers. While the
Administration remains committed to UI taxes and administrative
reform, we have heard from the States that now is not the time
for comprehensive reform, and, therefore, we will defer
legislation on reforming the UI system until the States' budget
outlook improves.
One of the key elements of our current proposal is closing
a loophole in many State UI laws that permits some employers to
pay less than their fair share of State UI taxes. I want to
thank Chairman Herger and Ranking Member Cardin for introducing
legislation to close this loophole. We estimate that enactment
of this proposal would result in UI tax payments of over $200
million annually from employers who are not now playing by the
rules.
We have also requested $50 million in discretionary funding
for Personal Reemployment Accounts. This will provide up to
$3,000 to selected UI claimants who are having the most
difficulty finding work, and this year we propose to launch the
Personal Reemployment Accounts as a pilot to demonstrate the
added value of these accounts before replicating them
nationwide.
We also want to talk about the tax offsets against Federal
income tax refunds for UI overpayment. When UI claimants
receive benefits to which they are not entitled under State
law, an overpayment is established after notice and opportunity
for appeal. Although States utilize many methods to collect
overpayments, many overpayments remain outstanding. For this
reason, we want to give the States another tool to help them
recover overpayments and strengthen their trust funds.
Let me say a few words also about the TAA program. Since
passage of the Trade Act in 2002, the Department has actually
made great strides in implementing this program. As of last
month, the Department has reduced the average processing time
for certifying trade petitions from 103 days to just 26 days.
We have also eliminated the petition backlog, and this summer
we will implement an improved TAA petition process that applies
more rigorous and standardized procedures that ensure that the
Department will continue to process petitions within the 40
days required by the law.
The Trade Act also authorized an alternative TAA program
for older workers for whom the retraining benefits offered
under the regular TAA program might not be appropriate. The
Department implemented the program on August 6th of last year,
and we have certified 349 worker groups.
In partnership with the U.S. Department of Health and Human
Services and the U.S. Department of the Treasury, the
Department of Labor has also successfully implemented the
Health Coverage Tax Credit authorized by the Trade Act.
Finally, in order to encourage States to better align the
resources available with the number of workers requiring
training, we have adopted a new formula method for allocating
funds to States for trade training. This important reform
provides States with an advance estimate of the amount of
moneys they are to receive in the next fiscal year. This is the
first step in helping the States manage their training
resources more effectively so that they can help as many
workers as possible.
So, today I have shared with you a number of important
initiatives that will help make programs operate more
efficiently and effectively for the benefit of workers and
employers. I look forward to working with this Committee as we
move forward. Thank you.
[The prepared statement of Ms. Chao follows:]
Statement of The Honorable Elaine L. Chao, Secretary, U.S. Department
of Labor
Good morning. Chairman Thomas and distinguished Members of the
Committee, I thank you for inviting me to testify. I am extremely
pleased to have the opportunity to discuss the President's Fiscal Year
(FY) 2005 budget proposal, which includes improvements to the Federal-
State Unemployment Insurance (UI) program and the President's proposal
for Personal Reemployment Accounts. Our proposed reforms would
strengthen the financial integrity and fortify the solvency of the UI
program. Personal Reemployment Accounts will give UI claimants
unprecedented choice in accessing the services they need to get back to
work as quickly as possible.
I also look forward to sharing with you the progress we have made
to date on implementation of the Trade Adjustment Assistance Reform Act
of 2002.
The President's Economic Message
Recently released job figures indicate that the economy has turned
the corner and the nation's job market is getting stronger. The
unemployment rate dropped to 5.6 percent in January, even as more
people entered the job market, and is down from its recent peak of 6.3
percent in June 2003. Approximately 112,000 new jobs were created in
January--the largest monthly increase since December 2000--and 366,000
jobs have been added over the last five months.
Despite the improvement we have seen, this Administration will not
be satisfied until every American who wants a job can find one. To
sustain and expand the economic recovery, the President has outlined a
six-point plan for jobs and growth, which will create even more
opportunities for America's workers by making health care costs more
affordable and predictable, opening new markets for American products
and streamlining program regulations and reporting requirements.
The 21st century workplace demands a competitive and responsive
workforce, and in FY 2005, the Department of Labor stands ready to
deliver. With ongoing employment and training programs and new
initiatives, the Department will continue to play a critical role in
accomplishing the President's domestic agenda.
The President's FY 2005 Budget Request
Before addressing Unemployment Insurance and Trade Adjustment
Assistance programmatic issues, I would like to comment briefly on the
President's FY 2005 budget request for these two programs. The total FY
2005 budget for the Department of Labor is $57.3 billion. The budget
reflects a $2.9 billion, or 6 percent, projected decrease in mandatory
spending due mostly to an improved economic forecast, and therefore, an
anticipated reduction in unemployment-related benefits.
The budget request includes $2.7 billion in discretionary funding
for grants to States for UI administration, a $24 million increase from
the funding level enacted for FY 2004. These funds will finance the
States' efforts in processing 22.3 million initial UI claims and
collecting State payroll taxes from 7.2 million employers.
The FY 2005 budget request includes $1.1 billion for the Trade
Adjustment Assistance (TAA) and Alternative Trade Adjustment Assistance
(ATAA) programs. This funding request will allow the Department of
Labor to provide States funds for training, income support, and job
search and relocation allowances to an estimated 60,000 dislocated
workers impacted by international trade. In addition, we have
implemented a number of key management reforms that will allow us to
more effectively operate the program so workers can get the assistance
they need.
UI Reform Background
As you know, the Unemployment Insurance program is an important
element of our Nation's economic response during economic downturns by
providing temporary, partial wage replacement for workers who have been
laid off and are seeking reemployment. In addition, UI is the front
door for these workers to a wide array of training and employment
services available through the workforce investment system.
For several years we have been examining ways to reform the UI
program so that it reflects the 21st century economy and workforce. In
response to concerns of the system's major stakeholders--worker
advocates, businesses, and State officials--we developed a
comprehensive reform proposal that I discussed with you last year.
While the Administration remains committed to UI tax and administrative
reform, we have heard from the States that now is not the time for
comprehensive reform. For this reason, we will defer legislation on
reforming the UI system until the States' budget outlook improves.
In the meantime, we propose several smaller, but critical UI
reforms in the FY 2005 budget. The Administration's three-pronged
proposal will strengthen the financial integrity of the UI program by
curtailing unscrupulous employer tax avoidance; improving prevention
and quick detection of benefit overpayments; and collecting past
overpayments by offsets from Federal income tax returns. I will also
discuss initiatives to help unemployed claimants get back to work
faster.
SUTA Dumping
One of the key elements of our current proposal is closing a
loophole in many State UI laws that permits some employers to pay less
than their fair share of State unemployment taxes.
Most unemployment benefits are financed by employer-paid State
unemployment taxes. In order for employers to receive full credit
against Federal unemployment taxes, Federal law requires that each
employer's tax rate be related to its ``experience with respect to
unemployment.'' This is usually measured by the UI benefits paid to its
former workers. In general, when a worker collects UI benefits, the
former employer's account within the State's unemployment fund is
charged. The more charges to the account, the higher the tax rate, up
to a maximum set by State law. If the employer has a stable workforce
with few layoffs, the charges and tax rate are low. Employers with
higher turnover generally pay higher taxes. This tax determination
system is known as ``experience rating.'' A new employer who does not
yet have sufficient experience to qualify for a rate based on
experience is assigned a ``new employer'' tax rate.
Experience rating has been an important part of the Federal-State
UI system since its enactment in 1935. It helps ensure an equitable
distribution of costs among employers based on an employer's experience
with UI. It also encourages employers to stabilize their workforce and
provides an incentive for an employer to provide relevant information
to State agencies when employees quit or are fired for cause.
However, over the past several years, some employers have found
ways to manipulate their experience rating so that they pay lower State
UI taxes than they should based on their UI benefit experience. For
example, some employers create a new ``shell'' company that establishes
a lower UI tax rate, and then transfer some or all of their payroll to
the new company. This abusive practice is commonly called ``SUTA
dumping'' (``SUTA'' refers to State unemployment tax acts). It can
deprive States of the revenues they need to provide workers the
unemployment benefits to which they are entitled under State law and
shifts some benefit costs to other employers. We believe that those
most affected by cost shifting are smaller employers who have neither
the expertise nor the resources to set up such schemes and employers
with low UI costs who have no need to participate in these schemes.
As a result of these concerns, last September I transmitted the
Administration's proposal to Congress that would close this loophole,
and a bill including the proposal was introduced by Chairman Herger and
Ranking Member Cardin in the House of Representatives as H.R. 3463. We
estimate that enactment of this proposal would result in UI tax
payments of over $200 million per year from employers who would
otherwise engage in SUTA dumping.
Because of the Administration's strong commitment to eliminating
fraud and abuse, our proposal to curtail SUTA dumping is included in
the FY 2005 budget. We will continue to work with Committee staff to
refine the proposal.
National Directory of New Hires Database
Detection and prevention of improper UI payments is a high priority
for this Administration. In the UI program, we are working closely with
States to measure the extent of improper benefit payments, and set
ambitious goals to reduce them. To further assist States in their
efforts to prevent and quickly detect UI benefit overpayments, we
propose allowing States to match benefits with data in the National
Directory of New Hires. This directory is a database, created for the
Department of Health and Human Services, that is used in connection
with child support enforcement. Employers are required to swiftly
provide information on all new hires for inclusion in the database.
Many States are already using their State Directories of New Hires for
quick detection of individuals who have gone back to work. However,
they do not have access to new hires reported to other States. Our UI
reform proposal would remedy this problem by giving all States access
to the National Directory of New Hires. This access would be an
additional, important tool for helping States quickly detect fraud and
would result in savings to State unemployment trust funds.
I transmitted this proposal with the proposal to curtail SUTA
dumping last September. We appreciate the Committee's support for this
provision, which is included in the House reauthorization bill for the
Temporary Assistance for Needy Families (TANF) program, as well as in
H.R. 3463. The estimated outlay savings resulting from enactment of
this proposal is $372 million over the next ten fiscal years.
Tax Offset for UI Overpayments
When UI claimants receive benefits to which they were not entitled
under State law, an overpayment is established after notice and
opportunity for appeal. States utilize many methods to collect
overpayments including use of collection agencies and offsets of State
tax refunds, State lottery winnings, and future UI benefits. However,
many overpayments remain outstanding. This is a major concern because
erroneous benefit payments drain States' unemployment trust funds of
the resources needed to provide benefits to eligible workers. As a
result, States may have to borrow from the Federal Government to pay
benefits to eligible workers, or increase their unemployment taxes to
make up the difference.
For this reason, we want to give the States another tool to help
them recover overpayments and strengthen their trust funds. The
Treasury currently operates an offset program that matches delinquent
debts owed to various government agencies against Federal income tax
refunds and deducts these debts from the refunds paid to these
individuals. The Administration proposes allowing the States to use
this offset program, called the Treasury Offset Program (TOP), to
recover UI overpayments that they cannot collect using their normal
procedures. If States are unable to collect overpayments, they can send
a request to the Treasury to match them against any Federal income tax
refunds due. Upon establishing a match, the Treasury would deduct the
overpayment and any fees from the refund sent to the taxpayer and would
transfer the overpayments collected to the States' accounts in the
Unemployment Trust Fund. The Departments of Labor and Treasury would
jointly oversee the effort. Additionally, the Labor Department would
coordinate State offset requests and communication with the Treasury
Department.
Enactment of this proposal is estimated to result in recovery of
approximately $3 billion in UI overpayments over the next ten fiscal
years.
Eligibility Reviews
The Administration is taking concrete steps to fortify the UI
system, recognizing that it is critical to workers' security as a
safety net during economic downturns. The FY 2005 budget request
includes $20 million in discretionary funding for a new program to
allow staff in One-Stop Career Centers to conduct 50 percent more face-
to-face UI eligibility reviews. More UI eligibility reviews will reduce
the number of erroneous payments and reduce the duration of
unemployment, resulting in annual UI savings of up to $400 million.
More importantly, claimants will get connected to training and
reemployment assistance through the public workforce investment system
much more quickly.
Personal Reemployment Accounts
The Department's FY 2005 budget includes $50 million in
discretionary funding for Personal Reemployment Accounts, which would
provide up to $3,000 to selected unemployment insurance claimants who
are most likely to exhaust their benefits. This incentive-based program
would provide individuals more control over their return-to-work
efforts. The resources provided to each individual could be used for
the training and services that best benefit him/her. This year, we
propose to launch the Personal Reemployment Accounts project as a pilot
that would allow the workforce investment system to demonstrate the
value of the accounts before replicating it nationwide. Our proposal
also provides the flexibility to test varied designs and identify which
models work best.
When I testified before you last year, I mentioned that although
the Personal Reemployment Accounts are closely tied to the UI program,
they do not supplant or replace UI benefits. They are an additional
means of assisting with the reemployment of UI claimants. In that
sense, they complement both the existing UI and One-Stop Career Center
systems. Receipt of account funds would not adversely affect an
individual's UI eligibility nor make a UI exhaustee ineligible for
public assistance. The accounts also make use of UI ``profiling,'' a
Social Security Act requirement that this Committee originated in 1993.
Under this requirement, States identify those workers who are at
greatest risk of exhausting their UI benefits and most in need of
reemployment assistance and connect them with reemployment services
available through the workforce investment system. Personal
Reemployment Accounts would ensure that a wide range of reemployment
services is available to the UI beneficiaries who are identified
through this system.
Implementation of the Trade Adjustment Assistance Reform Act of 2002
Since passage of the Trade Adjustment Assistance (TAA) Reform Act
of 2002, the Department has made great strides in implementing
significant programmatic and management reforms and additions to the
TAA program. As one example, as of last month, the Department is
processing trade petitions within the required time limit, having
reduced the average processing time from 103 days to just 26 days.
Correspondingly, we have eliminated the petition backlog, which for
years often numbered in the hundreds. This means that workers are being
certified expeditiously, which allows them timely access to training
and other reemployment services, ultimately returning them to the
workforce more quickly. This summer we will implement a reengineered
TAA petition process in order to apply more rigorous and standardized
investigative procedures to the group eligibility process and to ensure
we continue to process petitions within the 40 days required by law.
The TAA Reform Act also authorized an Alternative TAA program for
older workers for whom the retraining benefits offered under the
regular TAA program might not be appropriate. Enrolled workers who
obtain new employment at annual wages of less than $50,000 within 26
weeks of their layoff receive a wage supplement of 50% of the
difference between their old and new wages, up to $10,000, payable over
the two-year eligibility period. The Department implemented the ATAA
program on August 6, 2003, as authorized under the TAA Reform Act. By
the end of 2003, we had certified 349 worker groups; by mid-January,
113 workers had applied for the program and 42 of them were employed
and had received at least one payment.
In partnership with the Departments of Treasury and Health and
Human Services, the Department of Labor has successfully implemented
the Health Coverage Tax Credit (HCTC) authorized by the TAA Reform Act.
All States have established a system to forward the names of HCTC-
eligible TAA and ATAA recipients to the HCTC program office at the
Internal Revenue Service, which has responsibility for administering
the advance payment option. The HCTC allows eligible individuals to
receive a refundable tax credit for 65% of their health coverage
premium to help them continue their coverage while participating in the
TAA or ATAA program.
Finally, in order to encourage States to balance the resources
available with the number of workers requiring training, we have
adopted a new formula method for allocating funds to States for trade
training. This important reform provides States with an advance
estimate of the amount of funds they are to receive in the next fiscal
year. The new formula distributes only 75% of available funds, which is
$220 million annually, reserving $55 million to provide funding to
those States that experience large, unexpected layoffs. This year, a
hold-harmless provision ensured that each State received at least 85%
of the amount it would have received last fiscal year had the formula
been in place at that time. The use of new planning estimates is the
initial step in helping States better manage their training resources
within the limits authorized by the TAA program. In addition, improved
assessment practices will help ensure that workers who need training
receive it and that workers who have immediate employment potential are
provided reemployment services so they can quickly transition to a new
job.
Evaluation Strategy
An important component of President Bush's Management Agenda is
budget and performance integration. As part of this effort, the
Department is embarking on a series of rigorous evaluations designed to
determine the effectiveness of our programs. This year we are beginning
a long-term evaluation of the TAA program.
The overall objective of the TAA evaluation is to provide a
quantitatively-based assessment of (1) whether the service intervention
received by TAA participants had an impact on their reemployment
outcomes as compared to individuals not receiving TAA services; and (2)
explaining the findings using a qualitative analysis that also
evaluates implementation of the reformed TAA program.
Restructuring of the Black Lung Disability Trust Fund
Recently, the Department also has submitted to this Committee a
legislative proposal to restructure and eventually retire the Black
Lung Disability Trust Fund debt, to ensure the continued availability
of funding to provide benefits to the victims of Black Lung disease.
Absent legislative action, the Trust Fund's debt is estimated to exceed
$9 billion in FY 2005.
The current system for financing the Trust Fund is broken. Despite
steadily declining benefit obligations and tax revenues that
significantly exceed the cost of the benefit payments, the Trust Fund
debt continues to increase in a vicious cycle that is out of control.
Since FY 2000, interest on the debt has exceeded total tax revenue.
Without this urgently needed legislation, the Trust Fund will never be
solvent, the debt will continue to grow, and the Trust Fund will have
to continue borrowing in ever increasing amounts.
The restructuring plan will provide for the repayment of the debt
of the Black Lung Disability Trust Fund and ensure the continued
stability of the Trust Fund for future beneficiaries. Specifically, the
plan will restructure the Trust Fund debt by replacing the traditional
30-year borrowings, with an average coupon of 8.0 percent, with zero-
coupon Treasury bonds with an effective rate of 5.5 percent. This will
enable the Trust Fund to take advantage of current lower interest
rates; more closely match the program's operating surplus with debt
payments; and remove the risk of higher interest rates in the future.
The Plan also provides a one-time appropriation of $3.3 billion to the
Trust Fund to cover the loss to the Treasury as a result of converting
the existing debt to lower interest rate zero-coupon bonds, and extends
current coal excise tax rates, which are set to decrease in 2014, to
insure that the Trust Fund revenues are sufficient to cover benefit
payments and return the Trust Fund to solvency. Once the debt has been
repaid, coal excise tax rates will be substantially reduced.
Conclusion
Today I have shared with you a number of bold and important ideas
to make programs operate more efficiently and effectively for the
benefit of workers and employers. I am proud of the efforts undertaken
at the Department to implement new laws and improve the management of
existing programs. I look forward to working with this Committee as we
move forward. This concludes my remarks. I will be glad to respond to
any questions you may have. Thank you.
Mr. HERGER. [Presiding.] Thank you, Secretary Chao. With
the rapid changes going on in the workforce in the global
economy, job training is a key to making sure our workers stay
ahead of the curve and can succeed in the world economy.
Secretary Chao, could you discuss how the Department of Labor
currently supports job training and ways you want to improve on
them in this budget?
Ms. CHAO. We are a very compassionate people. The American
taxpayer funds approximately $15 billion in a public workforce
development system, and this is a wonderful network of one-stop
centers that are dispersed throughout the country. We have
about 1,900 of them throughout the country. They are very
welcoming places in which counselors are present, in which
computers are available for those that may not have access to
computers. Workers who have lost their jobs or people who may
want to change their jobs have an opportunity to go to these
One-Stop Career Centers and find assistance with finding new
jobs, finding new training, accessing UI benefits, having one-
on-one skills assessment and assistance if they so wish.
We also administer the TAA program, which offers up to 104
weeks of UI benefits, 104 weeks of training, with supportive
services, including child care expenses and transportation and
relocation expenses as permitted.
The Department also helps administer the 65 percent health
care insurance subsidy for dislocated workers, and for workers
who are over the age of 50, if they find a job that pays less,
the Department will subsidize 50 percent of the wage
differential between their old job and their new job.
We focus very much on helping people train for new job
opportunities, and we also want to make sure that workers know
about some of the opportunities in the high-growth sectors of
the economy as well.
Mr. HERGER. Thank you, Secretary Chao. Now I recognize the
Ranking Member, the gentleman from New York, Mr. Rangel, to
inquire.
Mr. RANGEL. Thank you, Madam Secretary, for sharing your
views with us. The Economic Report of the President was
delivered to the Congress last month, and the Administration
claimed 320,000 jobs will be created per month in 2004. The
press reports that the President does not support this
projection. Could you share with us what the Administration
position is in terms of jobs to be created?
Ms. CHAO. Well, the report that you are referring to is
done by the Council of Economic Advisers (CEA). There are many
reports done by many agencies and departments.
Mr. RANGEL. I am only talking, Madam Secretary, about this
report.
Ms. CHAO. Well, yes, I am pleased to answer that question
for you as well.
Mr. RANGEL. What does the President think about this
report?
Ms. CHAO. Well, may I answer, please? I am not finished
yet. The CEA report is a report that is produced by the Council
of Economic Advisers. As I mentioned, there are many other
reports that have been issued in relation to the economy as
well as to the job situation.
Mr. RANGEL. I am concerned about the President's thinking
about this specific report, because I wasn't----
Ms. CHAO. I am not finished yet.
Mr. RANGEL. Talking about all those other reports. You see,
I have a limited amount----
Ms. CHAO. Well, the President has----
Mr. RANGEL. Of time, Madam Secretary.
Ms. CHAO. The President has been asked about this, and the
President has said that that is a CEA report. It is our hope,
of course, that job creation will occur at a faster rate than
what it has been.
Mr. RANGEL. What is the President's position on this
specific report projection? Is he going to sign this report and
send it to the Congress?
Ms. CHAO. He doesn't sign this report. The CEA signs that
report, and----
Mr. RANGEL. What does he think about the projection of the
Economic Report of the President of the United States, whose
name is George Bush?
Ms. CHAO. As I mentioned, this is a report prepared by the
CEA.
Mr. RANGEL. Thank you so much, Madam Secretary.
Ms. CHAO. You are welcome.
Mr. RANGEL. If you don't want to answer, it is all right.
Ms. CHAO. I wish I could have the opportunity to do so.
Mr. RANGEL. Okay. Thank you so much. The President's chief
economist, George Mankiw, said that having American jobs go to
countries with cheaper labor, which we call outsourcing or
offshore, is a plus for the economy in the long run. Do you or
the President agree with this chief economist, the President's
chief economist?
Ms. CHAO. Outsourcing is an issue that we are all very
concerned about.
Mr. RANGEL. Do you agree with this statement made by
Mankiw? I am interested. You are interested. The President is
interested. The corporations are interested. I have a limited
amount of time. I just want to know do you agree with the
statement that it is a plus for our economy in the long run.
Ms. CHAO. I think it is--when you talk about outsourcing,
you have to also talk about insourcing.
Mr. RANGEL. Okay, thank you.
Ms. CHAO. You have to talk about----
Mr. RANGEL. No, no, no. Now, that is good. We can talk
about sideways-sourcing, outsourcing, insourcing.
Ms. CHAO. No, I think it is very----
Mr. RANGEL. You don't want to answer this one. Okay.
Ms. CHAO. Misinforming just to talk about outsourcing.
Mr. RANGEL. Let me ask you this: this economic report
suggests that maybe we can adjust the unemployment figures as
it relates to manufacturing loss of jobs. It asks, ``When a
fast-food restaurant sells a hamburger, for example, is it
providing a service or is it providing inputs to manufacture a
product?'' Have you given any thought to that observation that
maybe McDonald's should be considered as a manufacturer rather
than as a producer of service?
Ms. CHAO. It is not as if one person is making these
decisions. Part of----
Mr. RANGEL. I see. Thank you.
Ms. CHAO. Part of what we are----
Mr. RANGEL. You are terrific this morning. I can see why it
took so long for us to get you here.
Ms. CHAO. Mr. Rangel, I really would appreciate the
opportunity to answer some of the questions you----
Mr. RANGEL. I wish you would answer some of our questions.
Ms. CHAO. I would be more than delighted to, if given the
time.
Mr. RANGEL. Well----
Ms. CHAO. The issue about McDonald's and how it is
classified points to a larger issue facing our 21st century
workforce and, that is, the old classifications no longer
apply.
Mr. RANGEL. I understand.
Ms. CHAO. So, all of us as a society must look at how----
Mr. RANGEL. I have got a yellow light now, and I just want
one more question, and that is, we have lost a lot of jobs that
are not considered manufacturing jobs but service jobs due to
globalization and outsourcing. The TAA merely deals with
manufacturing jobs. Do you think that people who have lost
their employment that may have different types of service jobs
should be covered by the TAA?
Ms. CHAO. Well, we administer the TAA as it passed by
Congress.
Mr. RANGEL. You are terrific, Madam Secretary. I am telling
you, if we ever get the majority and don't want to answer any
questions, you have got a job.
Ms. CHAO. That is not----
Mr. RANGEL. You are fantastic. Honestly, you are good. You
are very good. Thank you.
Ms. CHAO. I would----
Mr. RANGEL. Thank you very much.
Ms. CHAO. Again, given the courtesy of the time to reply, I
would be more than glad to.
Mr. HERGER. I would like to remind the Members that our
witnesses are here at our invitation. I think it would be
helpful if we did allow the witness an opportunity to answer
the questions that are being asked. On my time, Secretary Chao,
would you care to answer some of the questions that were asked
of you here by our Ranking Member?
Mr. RANGEL. I would like to join with the Chair in that
request.
Mr. HERGER. Since you were not allowed the time to answer
during the gentleman's time, I would like to allow you an
opportunity to answer.
Ms. CHAO. We are all concerned about the economy,
obviously.
Mr. HERGER. On the Chairman's time.
Ms. CHAO. We are also concerned about job creation. The
President--you obviously disagree--has enacted a number of
programs which have helped to ameliorate the adverse effects of
the economy that we inherited when we took over.
Now, job creation is certainly not occurring as fast as we
would like, but the issue is of training and retraining. On the
issue of outsourcing, we are all concerned about that as well,
but when we talk about outsourcing, we need to talk about the
6.5 million jobs that might be lost if we isolate ourselves, as
others have mentioned, from the world. When we talk about
aspects of our economy that are benefiting from cheaper, less
expensive, specialization of services, we are very concerned
about all of that.
Currently, we have about 2.7 million jobs that are
unfilled, and there are high-growth opportunities. So, our
challenge is to help workers get the training that they need to
be able to transition from one area to another.
The workforce is changing dramatically, and the workplace
is changing dramatically. So, the old paradigms about how jobs
are classified and how they are to be, I guess, classified is
something that we all have to take a look at.
Mr. HERGER. I thank the Secretary. Now we will move on. The
gentlelady from Connecticut, Mrs. Johnson, to inquire.
Mrs. JOHNSON. Welcome, Secretary Chao. It is a pleasure to
have you. You are doing some very important work in improving
the quality of our job training programs so that people
actually will be able to have resources available to learn the
skills they need to move into the new areas. It is also true
that there are a lot of jobs of insourcing jobs that are
developing as well as outsourcing. As concerned as I am about
the outsourcing now of administrative jobs, having been part of
going through the agony of that process in manufacturing, and
having been part of policies that help insource manufacturing
jobs in America, policies like helping the machine tool
industry make the transition so we maintain manufacturing jobs,
part of forcing Toyota who in the early days only assembled
cars here but didn't buy parts here, forcing them to buy parts
here, I know that the Administration, more in another
Department than your Department, over in the U.S. Department of
Commerce, is really aggressively looking at a lot of policies,
more aggressively than at any other time under any
Administration since the Reagan Administration under Secretary
Baldrige, is really looking at how do we insource American
manufacturing jobs and prevent the continued outsourcing.
In the area of administrative reform, what are you doing to
enable companies to reduce the cost of their workforce here? I
know that part of this reclassification issue you told me one
time was because that is an area where there is the largest
amount of litigation that imposes tremendous cost on companies.
So, would you talk a little bit about how your Department is
looking at reducing the regulatory burden and making our
companies more competitive so that they can develop jobs in
America as opposed to outsourcing?
Now, maybe that is too much off your central topic here,
but you are doing a lot of very progressive things to help our
companies be effective, efficient, and compete and create the
jobs in America as opposed to outsourcing. While we can't pass
a law--and, to my knowledge, no Democrat colleague of mine has
introduced legislation to prohibit American companies from
hiring people in other countries, just a blanket prohibition--
well, maybe you have, Pete--certainly if we did that, that
would cut off markets to us at a rate that would spin our
heads. We are doing a lot of things to encourage our companies
to insource jobs, and if you would like to comment on any of
those things, I would be happy to have you do so.
Ms. CHAO. Thank you. As mentioned, the stock market peaked
in March 2000, and manufacturing went into the doldrums in
August 2000. At the beginning of 2001, the economy was already
in a recession, although it was not reported at the time.
The President's first tax cut helped to put more money in
the pockets of working Americans, and our economy was just
coming out of that recession when the devastating attacks of
September 11th occurred. The attacks of September 11th cost
this economy approximately 1.5 million jobs. If it were not for
the two subsequent tax reduction programs which the President
put forward, our economy would be in worse shape than what it
is now, and the recession would have lasted longer and been
deeper.
The President has now a six-point economic program in which
he wants to address job creation through regulatory reform, in
which he wants to decrease the regulatory burdens on
businesses, especially small businesses which create two out of
every three new jobs. The President's six-point program also
talks about energy independence and how the energy program
passed over 388,000 new jobs in construction alone that the
Teamsters would have gotten--this is their figure, would have
been created. We are also talking about litigation reform and
access to quality, affordable health care, and we are also
talking about making permanent the tax reduction program so
that more Americans would have more money in their pockets that
they can use for more purchases for their households and for
their families.
Mrs. JOHNSON. Thank you.
Mr. HERGER. I thank the gentlelady. The gentleman from
Michigan, Mr. Levin, to inquire.
Mr. LEVIN. Welcome.
Ms. CHAO. Thank you.
Mr. LEVIN. First, let me talk to you about the matter
raised by Mr. Cardin. Your testimony does not touch the
extended benefit issue. What is the position of the
Administration?
Ms. CHAO. In the past----
Mr. LEVIN. I mean now. Really, Mr. Rangel pressed you for a
specific answer on some issues, and I do not mean to interrupt
you, but, really, I do mean to interrupt you.
Ms. CHAO. That is okay.
Mr. LEVIN. In this sense: I asked you a question. The
program has expired. We have tried to extend it. Are you, is
the Administration in favor of it or not, in favor of extending
it?
Ms. CHAO. Well, the President has worked with the Congress
to extend UI three times already in the past 18 months.
Mr. LEVIN. I know, but now.
Ms. CHAO. Let me just give some background if I could----
Mr. LEVIN. Why do you need to give us background when I ask
you the question whether you want to extend the program now or
not?
Ms. CHAO. I think it is--if indeed we are going to--if
indeed you called me before this Committee for a discussion, I
think it is very important for us to discuss some of these
issues----
Mr. LEVIN. Okay, but----
Ms. CHAO. Rather than----
Mr. LEVIN. Then say yes----
Ms. CHAO. Go ahead and ask for a one-sentence sound bite.
Mr. LEVIN. No, I am not asking you for one sentence.
Ms. CHAO. I am not good at the sound bites, by the way, and
I apologize for that.
Mr. LEVIN. Say yes or no----
Ms. CHAO. That is the Administration's----
Mr. LEVIN. Then explain----
Ms. CHAO. Position.
Mr. LEVIN. Then explain your position. Are you in favor----
Ms. CHAO. Let me just say temporary extended benefits were
available during January in 11 of the past 32 years from 1973
to 2004. The average total unemployment rate for these months
was 7.1 percent, significantly higher than today. Today's
unemployment rate of 5.6 percent is lower than the unemployment
rate----
Mr. LEVIN. Okay, so----
Ms. CHAO. Of the 1970s, 1980s----
Mr. LEVIN. Okay, we know that.
Ms. CHAO. And the 1990s.
Mr. LEVIN. You are reading it----
Ms. CHAO. Again, the----
Mr. LEVIN. Are you in favor of--look, there is a vote in
the Senate, 58, I think, Senators voted in favor of extending;
here in the House we brought it up, and a majority voted--it
wasn't a direct vote on that program, but it was clear what our
message was. Can you say, are you, is the Administration in
favor of renewing that program, yes or no?
Ms. CHAO. I think the Administration is willing to work
with Congress.
Mr. LEVIN. No, no. That is what was said a few months ago
when another representative was here. Do you favor it? Yes or
no. Does the Administration----
Ms. CHAO. I am saying the Administration is willing to work
with Congress----
Mr. LEVIN. No, no, no. Are you----
Ms. CHAO. Let me also say there is also $4 billion in Reed
Act (P.L. 107-147) distribution moneys in the States. If each
State finds and States unemployment rates are different----
Mr. LEVIN. You know----
Ms. CHAO. The States want to increase UI benefits in their
individual States, they have the resources to do so. There are
$4 billion----
Mr. LEVIN. Except the Reed Act money----
Ms. CHAO. Four billion dollars there.
Mr. LEVIN. You know the Reed Act money cannot be used----
Ms. CHAO. That is not true, sir.
Mr. LEVIN. But----
Ms. CHAO. With all due respect, it can be used.
Mr. LEVIN. Let me finish. Except for those who have
exhausted their extended benefits. Now----
Ms. CHAO. Not true. It can be used for----
Mr. LEVIN. All right. So----
Ms. CHAO. Extending UI benefits.
Mr. LEVIN. So, your answer is you do not favor renewal of
this program.
Ms. CHAO. I have said, number one, the Administration is
willing to work with Congress----
Mr. LEVIN. Okay. Are you----
Ms. CHAO. Number two, the States have their own options as
well.
Mr. LEVIN. Okay. Are you willing----
Ms. CHAO. They have $4 billion in Reed Act fund
distribution----
Mr. LEVIN. Madam Secretary, are you willing to advocate,
the Administration, that this Congress renew this program? Are
you willing to advocate it? Yes or no.
Ms. CHAO. What I provide in terms of advice to my fellow
colleagues is something that remains with them.
Mr. LEVIN. All right. I just want you to know how I think
inexcusable, when we have had the largest number of people in
history exhausting their benefits, that you duck this issue and
essentially say you will work with us. I thought the President
said he was a leader. If he is a leader, he should lead on this
issue. Now, let me----
Ms. CHAO. As I mentioned----
Mr. LEVIN. Okay. Enough said. When you are ready to answer
this----
Ms. CHAO. I am more than willing to answer.
Mr. LEVIN. Yes or no, come back here.
Ms. CHAO. Sir, with all due respect, I think it is
important to talk about these issues.
Mr. LEVIN. I am all in favor of talking about them, but we
need more than talk. We need walk. We need an answer from the
Administration----
Ms. CHAO. The President has worked with this Congress to
extend UI three times.
Mr. LEVIN. You are----
Ms. CHAO. Extension of UI has occurred in the past when the
average unemployment rate is 7.1 percent----
Mr. LEVIN. I know, but we have had a higher----
Ms. CHAO. The unemployment rate now is----
Mr. LEVIN. Percentage--Madam Secretary, let me finish.
Ms. CHAO. It is 5.6 percent.
Mr. LEVIN. We have had a higher number of exhaustees than
in the history of the program, and you sit here and will not--
--
Mr. HERGER. The gentleman's time has expired.
Mr. LEVIN. Say yes or no.
Ms. CHAO. I beg to--that is not the right number, but,
nevertheless, we are all concerned about them.
Mr. HERGER. The gentleman's time has expired. The gentleman
from Illinois, Mr. Crane, to inquire.
Mr. CRANE. Madam Secretary, we are honored to have the
privilege of your presence here today and know that you hold a
unique spot in history as being the first Asian American woman
who has ever held a Cabinet position in any President's
Administration in this Nation's history. We pay tribute to you,
and I also want you to know that most of us agree with the
President's assessment that you are an individual with strong
executive talent, compassion, and commitment to helping people
build better lives, and we look forward to working with you in
that effort.
Ms. CHAO. Thank you.
Mr. CRANE. Something that I would like to raise with you
today is we are all encouraged that payroll survey data
indicate about 300,000 new jobs were created since last summer.
However, the household survey has shown stronger growth in the
number of workers over a longer period of time. According to
that survey, nearly 3 million more Americans report they are
working today compared to January 2002. The current number of
people who say they are working under this household survey is
a record high of almost 139 million.
Can you discuss some of the differences between these two
surveys and what types of new jobs, such as self-employment,
contract work, even the thousands of people who trade goods by
eBay full-time, might not be captured, at least not right away,
in the payroll survey data?
Ms. CHAO. Well, first of all, thank you for asking that
question. Let me also say that the Bureau of Labor Statistics
is independent within the Department of Labor. They are fine
professionals, but you do note a difference between two
employment surveys. One is larger than the other, and so that
could--we note that difference. It is interesting to note last
November, for example, the payroll survey showed an increase of
50,000 new jobs, yet the household survey showed a difference
of a magnitude of 10. The household survey showed a job
creation rate of about 500,000 new jobs.
The payroll employment is business based, and if you are a
small business person, you are a single proprietor, you have
your own business, that is not captured in the payroll
employment survey. If you call up, as we do, the household,
these individuals will answer the phone and will say that they
have a job.
Regardless of the difference in magnitude between these two
surveys, it is very clear that both are trending in the right
direction, meaning that more job creation is occurring.
Another interesting phenomenon is that our economy is so
big--it is $11 trillion; we have a workforce of 146 million
people--that these two surveys may lag in recording what is
truly happening in a dynamic and vibrant workforce and economy.
So, what we are finding is that we have to revise these numbers
every month, and what happens is that most of the time these
numbers get revised upward in terms of employment. Of course,
revisions do not receive as much news as the initial release of
the numbers.
So, we are finding that the revisions have had to occur,
and the revisions are actually of great magnitude. They are not
3 or 4 percent difference, but they are quite a lot of
differences. So, the two surveys, again, I think bode well for
our economy. They are both trending upward, even though they
may differ by a magnitude of about 10.
Mr. CRANE. Thank you, Madam Secretary, and you are doing a
great job. I yield back the balance of my time.
Mr. HERGER. Thank you. The gentleman from Maryland, Mr.
Cardin, to inquire.
Mr. CARDIN. Thank you, Mr. Chairman. Madam Secretary, I
find your justifications difficult to accept here, and let me,
if I might--it was Chairman Greenspan of the Federal Reserve
System that said that the payroll survey was assuredly more
accurate, but now you are sort of giving credibility to a
different survey just because it serves your purpose. I think
we need to have a common line in order to analyze the
information that is out there.
I also find disappointing your testimony today in regards
to the 2001 tax cut. I was in Congress when we passed that tax
cut, and it was clearly aimed at the fact that we had a large
projected surplus. If we were using the fact that we were going
into a recession, then the projected surpluses would not have
been as high as the Administration presented to Congress as
justification for that tax cut.
So, let me get to the most recent numbers that we have, and
that is, in the second half of 2003 the Administration said
that we would create 1.9 million jobs, and you feel 1.8 million
short. Now, I don't remember anything extraordinary happening
in the second half of 2003, but do you have a justification as
to why we fell so short in the second half of 2003?
Ms. CHAO. Let me go back to your question about the two
surveys.
Mr. CARDIN. I didn't ask a question about the two surveys,
and I really----
Ms. CHAO. Let me make a comment anyway, then. There are two
surveys that the Bureau of Labor Statistics----
Mr. CARDIN. I am not interested in that. I am sorry, but I
really do want to stay on the subject, and that is, do you have
an explanation why you fell 1.8 million short in the second
half of 2003?
Ms. CHAO. There are two surveys, and both are produced by
the Bureau of Labor Statistics, and we have an obligation to
report both surveys.
On the issue of job creation, we agree with you, job
creation is not as strong. We have had the recession. We have
had the attacks of September 11th, which have----
Mr. CARDIN. No, this is the second half of 2003. The
recession----
Ms. CHAO. If I may be allowed----
Mr. CARDIN. Both of those issues predate those projections.
These projections were made for the second half of 2003----
Ms. CHAO. May I have----
Mr. CARDIN. Well after the recession----
Ms. CHAO. A minute to answer the question?
Mr. CARDIN. Well after the--but you are--I think I am a
rather patient person. If you don't want to answer the
question, please say so. If you want to answer it, I will be
glad to----
Ms. CHAO. I am seldom given an opportunity to do so.
Mr. CARDIN. Please.
Ms. CHAO. In 2002 and 2003, we have had the corporate
scandals. We have also had obviously some uncertainty with the
economy. Our productivity growth has been very, very high. That
productivity growth cannot continue unabated. It is going to
translate into more jobs.
Mr. CARDIN. Do you know what the numbers will be? In
January, according to your testimony, you fell--the CEA are the
President's economic advisers. If he wants to discount their
information, fine. They projected over 300,000 jobs for
January. Under your numbers, we are at 115,000, 117,000 jobs.
Tomorrow or the next day we are going to get the numbers for
February. Will we hit 300,000 new jobs in February? Do you know
that answer?
Ms. CHAO. I do not.
Mr. CARDIN. Well, we will see whether we make that
projection or not.
Let me move on to the UC issues, because one thing is
clear. We have a negative job growth during this
Administration. You are going to join the Hoover
Administration, the last Administration that had a negative job
growth during the 4-year term of this Administration, and that
is not a proud record.
On the UC, Mr. Levin asked a direct question. I am not
going to ask it again because I appreciate the fact that you
don't want to answer it and that you are under either
instructions or your personal view is that you don't want to
answer that question. Let me just challenge your assumptions
that the States have adequate money under the Reed Act. Many of
our largest States have exhausted their Reed Act funds and
don't have the dollars. California, for example, is actually
asking to borrow money in order to pay their regular benefits.
We have a U.S. General Accounting Office report that shows that
as many as 30 States would have to raise their taxes on
employers if they used their Reed Act funds.
Is the Administration suggesting that a better alternative
than using the trust funds that are here that we have
accumulated exactly for this purpose, the Federal unemployment
trust accounts, rather than using that, we would prefer the
States to raise taxes on employers in order to provide
additional benefits? Is that what you are suggesting?
Ms. CHAO. First of all, to compare this Administration's
record to the Hoover Administration is ridiculous. The Hoover
Administration had a workforce of 31 million. Our workforce now
numbers 146 million. The unemployment rate during the Hoover
Administration or during the great recession----
Mr. CARDIN. I am just, Madam Secretary----
Ms. CHAO. Was 25 percent. Our unemployment rate is 5.6
percent----
Mr. CARDIN. Quote me accurately, Madam Secretary----
Mr. HERGER. Order----
Mr. CARDIN. Mr. Chairman, I have the time. Mr. Chairman, I
have the time.
Mr. HERGER. The Members----
Mr. CARDIN. Mr. Chairman, I have the time.
Mr. CAMP. Regular order.
Mr. CARDIN. Regular order is that I have the time, not the
witness.
Mr. CAMP. Let the witness answer.
Mr. CARDIN. I will, but she misquoted me, and I have the
right to take the time.
Mr. HERGER. Order. I want to remind the Members again that
we owe the courtesy to the witness to allow her an opportunity
to answer the question. During this hearing, we have repeatedly
heard Members interrupting when the Secretary is attempting to
answer the questions. I want to once again request of the
Members to allow our witness to answer. They may not like the
answers, but we do owe our witness that courtesy.
Mr. CARDIN. Mr. Chairman? Mr. Chairman, the regular order
of this Committee is that the Member controls 5 minutes in
debate to ask questions to the witnesses. I asked a question to
this witness, and she started to characterize my question
differently than I asked it. I didn't ask the question about
the Hoover Administration versus the Bush Administration. What
I said is that both will go down in record as having negative
job growth. If she wants to counter that argument that the Bush
Administration does not have a negative job growth, I am
willing to listen to that answer. I didn't ask the question.
She then characterized my question differently.
I control the time, Mr. Chairman. I have the right to
reclaim my time.
Mr. HERGER. The gentleman from Michigan, Mr. Camp, will
inquire.
Mr. CAMP. I thank the Chairman. Madam Secretary, thank you
for being here today, and I just want to mention that there are
these two surveys--one a payroll survey and one a household
survey--in terms of jobs. The household survey, for example,
has a number of jobs that have been created. Can you tell the
Committee how many jobs were created under that survey?
Ms. CHAO. It is approximately 1.3 million over the last 5
months.
Mr. CAMP. All right. I also want to point out that States
have in some cases operated State-specific extended
unemployment benefit programs and do have the ability to do so
again if they should decide. Is that correct?
Ms. CHAO. Yes. Vermont, Connecticut, District of Columbia,
Georgia, Alabama, Maryland, Minnesota, Oklahoma, and Oregon.
Mr. CAMP. All right. Also, thank you for--also the question
I have is since mid-2003, the national unemployment rate has
fallen from 6.3 to 5.6 percent. What was the unemployment rate
the last time extended unemployment benefits were stopped in
the mid-1990s?
Ms. CHAO. I don't have that.
Mr. CAMP. I believe that it was about 6.4 percent.
Ms. CHAO. You are exactly right--6.6 percent, actually.
Mr. CAMP. All right. Since mid-2003, the U.S. national
unemployment rate has fallen from 6.3 to 5.6 percent, and last
month, as you testified, more than 100,000 jobs have been
created. The growth in the second half of 2003 was more than
twice as fast as the first half of the year. My question is
this--and I want to thank you for personally being involved on
the issue of a particular manufacturer leaving my district,
Electrolux, which announced it will be transferring jobs to
Mexico and South Carolina from Greenville, Michigan, and I
appreciate the assistance you have given.
My question is really on two areas. One is the rapid
response team that will come in. They have given us a very long
lead time. They say they may leave at the end of 2005 and
possibly not until 2006, and I realize the Governor triggers
the rapid response team coming into the State. I wondered if
there would be any opportunity that we could, given that we
have this long lead time, have something come in earlier so
that these employees can play for the future in advance of
getting the closing notice and the Governor issuing this
request to the Department of Labor. I realize there is a unique
combination of State and Federal here with the Department of
Labor.
Ms. CHAO. We would be more than glad to do that, and, in
fact, we have done that in the past.
Mr. CAMP. Thank you. I understand there are also some
emergency grant proposals that are discretionary that may be
available to communities, and I understand the Governor
actually triggers the application for those as well. I would
just ask the ability to work with you, continue to work with
you and your staff on this particular issue to find a way that,
if we meet the criteria for that program, that we would be able
to work with your office and try to establish that.
Ms. CHAO. I will be more than pleased to.
Mr. CAMP. Last, I want to thank you for the President's
budget on the TAA. In fact, if these jobs go to Mexico, there
is an increase in that category so that employees who may need
the extended job training would have that available. I know
that is in the President's budget, and I appreciate that very
much. I also appreciate your commitment to worker retraining.
As we went through this very difficult process trying to
keep this company in Michigan, we found that when we compared
our nine trading partners, there were many issues that resulted
in companies deciding to go other places. The major issue and
the major cost differential between us and our trading partners
is, frankly, taxes, closely followed by certainly wages and
benefits, especially when you compare it to Mexico and China,
which is difficult, but other issues like regulation and energy
costs. So, I certainly would appreciate all of the help that
your Department can give to the people in Michigan on this
particular issue. Thank you.
Ms. CHAO. We look forward to working with all Members of
the Committee. Thank you.
Mr. CAMP. Thank you.
Chairman THOMAS. [Presiding.] I thank the gentleman. Does
the gentleman from Washington wish to inquire? The gentleman
from Massachusetts?
Mr. NEAL. Thank you, Mr. Chairman. I do wish to inquire.
Madam Secretary, I have been doing a random survey of the
Administration. Do you think that Tyco is an American company
or do you think that it is a Bermuda company? I really don't
think we need more than a yes or no to that question.
Ms. CHAO. Why do you ask? I don't----
Mr. NEAL. Well, they employ thousands of people in America,
and I would think that you and the staff would have substantial
opportunity to conclude where the company is based.
Ms. CHAO. It depends on where it is incorporated.
Mr. NEAL. So, you believe that it is a Bermuda-based
company?
Ms. CHAO. I want to know why the question is----
Mr. NEAL. Mr. Chairman, would you ask the witness to answer
the question?
Ms. CHAO. I don't understand the purpose of the question.
Chairman THOMAS. Would the gentleman repeat the question?
Ms. CHAO. What is the point----
Mr. NEAL. I asked the Secretary, very politely, in fact,
whether or not she believed that Tyco was an American company
or a Bermuda company.
Ms. CHAO. I believe it is incorporated in Bermuda.
Mr. NEAL. Do you believe that it is an American company or
a Bermuda company?
Ms. CHAO. It is incorporated in Bermuda, if I am correct.
Chairman THOMAS. Would the gentleman yield?
Mr. NEAL. Yes, I would, Mr. Chairman.
Chairman THOMAS. The way you ask the question, the answer
was absolutely correct. It is incorporated in Bermuda.
Mr. NEAL. Mr. Chairman----
Chairman THOMAS. The interesting thing about U.S. law is
that the physical presence of the company----
Mr. NEAL. Mr. Chairman?
Chairman THOMAS. The workers, the plants, and the
management are in the United States.
Mr. NEAL. Mr. Chairman, could I redirect my time to the
witness?
Chairman THOMAS. You certainly can.
Mr. NEAL. Would you care to venture a guess, Madam
Secretary, as to whether or not it is a Bermuda company or an
American company?
Ms. CHAO. Tyco is just one example, and there are other
companies----
Mr. NEAL. There sure are. There sure are.
Ms. CHAO. Like Heinz.
Mr. NEAL. That is fine. I am entirely consistent on this.
Ms. CHAO. Of the 79 companies, 22 are in the United States,
57 are overseas.
Mr. NEAL. So, what is the answer? Do you think that it is
an American company or a Bermuda company?
Ms. CHAO. I am not a lawyer. It is incorporated----
Mr. NEAL. Oh, Madam Secretary, let me go to the next
question. That is a terrible answer, and you know what? The
members of the staff there----
Ms. CHAO. I don't understand the purpose of the question.
Mr. NEAL. The members of the staff there, Madam Secretary,
they should be doing their job. That is a terrible answer. I
think everybody would agree with that on this Committee. ``I am
not a lawyer,'' to answer that question.
Ms. CHAO. It is----
Mr. NEAL. Madam Secretary, let me ask you one more question
on another topic.
Ms. CHAO. Of course.
Mr. NEAL. Under the overtime rules that you have proposed,
is it your position, based upon those rules, that there are
some firefighters, nurses, and police that could be exempted
from the rules as proposed?
Ms. CHAO. The final rule is not out yet, so we don't have a
final, but that is not the case.
Mr. NEAL. You believe that they will not be included? They
will be able to still garner overtime?
Ms. CHAO. This rule does not impact them because this is a
white-collar regulation.
Mr. NEAL. Okay. So, there are in some fire service
operations white-collar employees. Do you believe that they
will be, again, exempt from the rule based on overtime
requirements?
Ms. CHAO. What is the question?
Mr. NEAL. Well, there are members of some fire service
operations where technically some employees----
Ms. CHAO. No, firefighters, first responders, police,
nurses, union members covered by collective bargaining
agreements are not covered.
Mr. NEAL. Thank you, Madam Secretary. Thank you, Mr.
Chairman.
Chairman THOMAS. Does the gentlewoman from Washington wish
to inquire?
Ms. DUNN. Thank you very much, Mr. Chairman, and I want to
thank the Secretary for being with us today, and a special
thanks too for coming to Washington State a few weeks ago. I
think it is important for folks to see that we do have a high
unemployment rate in Washington State. The last monthly number
was 7.3 percent, and it is something that concerns us all. We
appreciate very much your help in so many ways. For example, a
couple of years ago you secured for us a $15 million national
emergency grant. We have just received the final $5 million out
of that grant, and we have used this for very important support
for those who are looking for jobs, and I want to thank you.
As you know, Washington State was more severely impacted by
9/11 than most States. We lost over 20,000 aerospace workers in
the State of Washington, out of the 35,000 to 40,000 Boeing
folks who were let off, and a lot of it had to do with the
industry decline because of 9/11 and because of airlines not
flying as much, and therefore not ordering additional aircraft.
What I would like to hear, Madam Secretary, is your
thoughts on how the Department's 2005 fiscal year budget is
going to help States like my State, Washington State, as we
address the economic problems that we are involved in?
Ms. CHAO. Our budget as proposed and submitted to the
Congress, we are at about $104 million on top of existing
dollars for increased training and retraining. We also have
proposed $50 million for what are called Personal Reemployment
Accounts that will really empower workers to decide what
courses they want to access themselves and what training they
need. We have also added $500 million, as I mentioned, for the
President's new initiative on a 21st century workforce, $250
million of that goes to community colleges, who have proven so
nimble at responding to the needs of the marketplace in terms
of skills. We also have a $15 billion publicly funded workforce
development system in which people who need jobs, need
training, need advice, can access it. Of course, on top of that
we have UI benefits. We have income support programs as well,
and we also administer the TAA program, which helps people with
income support, training, transportation, relocation, and
expenses of health insurance, as well as wage insurance.
Ms. DUNN. I think that is a pretty good story to tell, and
we appreciate all the work you are doing, specifically for
folks like the ones in Washington State, who want to have jobs,
but because of the state of the economy in an area that is
recovering more slowly are not able to find those.
You mentioned a couple of things that are near and dear to
my heart, the community colleges. I think that the work that is
going on out of that $500 million proposal, of which 20 percent
will go to community colleges because of their ability to adapt
and to include people who need retraining is very important.
I'm also particularly interested in TAA. I remember a
couple of years ago in my Joint Economic Committee hearing,
Alan Greenspan talk about TAA maybe going to be eventually a
large part of the answer to some of the things that we call
outsourcing now, but job loss and manufacturing in other ways,
and through TAA many of the unemployment benefits, the job
training, being extended to workers who have been adversely
affected as a result of trade and foreign competition.
In the last several years the Department of Labor has
certified thousands of workers in my area of the country to be
eligible for TAA. I have heard recently talk among some folks
who are interested in expanding TAA eligibility to other
sectors like the software sector and the Information Technology
(IT) sector, and I am wondering if you have a position on this
suggestion, if this is something that would be of interest to
the Administration, and if it is something that we could work
toward, if there is an official Administration position or just
generally what your thoughts are on including IT and high-tech
workers in TAA assistance programs?
Ms. CHAO. Currently TAA does not envision service workers,
and when we administer the program we administer it as Congress
had intended. Obviously, if Congress has additional thoughts on
this, we will be more than glad to work with all of you and
consider what some of your thoughts are. We would have to take
a look at the eligibility requirements and perhaps some of the
resource allocation issues as well.
Chairman THOMAS. Thank the gentlewoman. Does the gentleman
from Washington wish to inquire?
Mr. MCDERMOTT. I want to thank you, Madam Secretary, for
taking that cheerleading trip out to the Northwest, and I have
a couple questions about it. In light of the fact that this
report that has just come out on the 26th of February called
``Job Openings and Labor Turnover'' from December, you have
lost jobs in the economy every single month since June. When
you got out to Washington State and Oregon, I would like to
know what did the unemployed workers say to you about the lack
of an extension of the benefits? Did they say that was fine
with them, that they were hopeful, or what did they say to you
when you met with them?
Ms. CHAO. We talked about job opportunities and where there
are sectors of the economy in which hiring is going on, and we
also talked about sectors of the economy which are desperately
seeking workers.
Mr. MCDERMOTT. So, where did you tell the people in the
State of Washington to move to? Where did you tell them to go
get a job?
Ms. CHAO. In Washington State there is a tremendous need
for health care workers, for biotechnology workers or----
Mr. MCDERMOTT. So, if you were a computer programmer, you
should now go work in a hospital? Is that what you told them?
Ms. CHAO. We don't tell them anything. It is their choice,
and we have----
Mr. MCDERMOTT. That leads us to the second question, this
whole business about whether you believe in training or not.
The 2003 budget, if you take that and go to the 2005 budget,
this Administration has cut training funds by $750 million, so
anybody who says there is more money in for training is simply
playing with the numbers because if you adjust it for
inflation, that is what you have done.
You evaded Mr. Rangel, and you essentially filibustered Ms.
Dunn, but I am going to ask you again. Does the Administration
believe that service jobs should be covered under the TAA? You
have the economist for the country saying that outsourcing is a
good thing. Now, that means people are going to be left without
jobs in this country, and I want to know if the Administration
thinks they ought to be eligible for their TAA?
Ms. CHAO. I believe I answered the question, but I will--we
administer the law as passed by Congress.
Mr. MCDERMOTT. Can it be a yes or a no?
Ms. CHAO. We administer laws as passed by Congress.
Mr. MCDERMOTT. You have no interest in what we do.
Ms. CHAO. Oh, of course, of course.
Mr. MCDERMOTT. You just sit down there and wait for us to
make a decision? The President of the United States is so
passive----
Ms. CHAO. It requires an act of Congress.
Mr. MCDERMOTT. Wait a minute. You are presenting the
President of the United States as being a passive man who sits
down at 1600----
Ms. CHAO. That is your----
Mr. MCDERMOTT. Pennsylvania and says, ``I wonder what the
Congress is going to do for us today.'' He has no interest in
whether or not we give that?
Ms. CHAO. That is certainly not true.
Mr. MCDERMOTT. Nothing that he has told you, I can tell. I
will tell you why it is important. Because the Boeing Company
has decided to outsource all of their computer programming. I
have a personal interest. I have a brother who is 60 years old
and is going to be out of work with no health care benefits and
60 years old and no training money. He is not alone. I am not
pleading the case of my brother. I am saying there are
thousands of individuals in this country when your economist
says that outsourcing is a good thing, and then you come
through and talk about jobs in the Northwest, and you don't
talk to any unemployed workers about why you don't extend the
benefits. My brother won't even be eligible for extended
benefits because this Administration doesn't care about him or
all of his confreres at the Boeing Company who are getting laid
off. For anybody to say you put more training money in but you
will not give it to the people that you in fact know you are
making unemployed, is in my view misleading this Committee and
trying to mislead the public. You can go on all those trips you
want and go all over the country and wave the flag, but the
workers know that it is a sham.
When you won't sit up here and say that the President cares
about them and wants the Congress to act on a bill putting
service workers in to either a Republican or a Democrat, says
to me the President doesn't care. All he wants to do is extend
the tax benefits permanently. That is his plan, and his plan
has led to a reduction in jobs every month since June.
I yield back the balance of my time.
Chairman THOMAS. Thank the gentleman. The Chair would be
happy to provide any Member who wishes to consult family
members about the Consolidated Omnibus Budget Reconciliation
Act of 1985 (COBRA) (P.L. 99-272) programs or other programs
which make health care available to those who, through no fault
of their own, are unemployed.
The gentleman from Pennsylvania wish to inquire?
Mr. ENGLISH. I do indeed, Mr. Chairman. Secretary Chao, I
would also like to pursue a couple of these lines of
questioning, but first I would like to apologize for the fact
that, in a way very atypical for this Committee, you haven't
been given an opportunity to fully offer your reply, whether
Members of the Committee may agree with them or not, on a
couple of these points, so I hope I can give you an adequate
opportunity to express the views of the Administration if you
choose to. I believe that there is a concern in some parts of
the country, a very legitimate one, for the continuing levels
of unemployment, and I think there is the potential for dealing
with it through a rifle shot rather than a blunderbuss
approach, a much more targeted approach.
I have introduced the Neighbors in Need Act (H.R. 3295),
which among other things would provide extended benefits in
those communities which continue to have high unemployment,
assistance for those who have already exhausted their
eligibility on a limited basis, phase in some long-term
solvency reforms for the UC system, and also an issue that the
Chairman knows is dear to my heart, provides a moratorium on
the taxation of unemployment benefits, a concept which has
attracted very little support from some of those in this
institution that choose to view all tax cuts as tax cuts for
the rich.
I believe there is an opportunity here to maybe target
those communities where there is continuing high unemployment
and try to strengthen the safety net for them. You have also
laid out an agenda I believe of reforms for the UC system.
Would you care to comment, first of all, on those reforms, and
second of all, if the Congress were to move forward a much more
targeted approach to extending unemployment benefits or fixing
the extended benefits trigger, something that Congress has
never really had the will to do in the off years, how the
Administration might react to that?
Ms. CHAO. We have talked about UI reform on previous
occasions. I think the overall major UI reform, tax and
administrative reform program, because of discussions with the
State, and until the States' budget improve, we are going to
hold that in abeyance. Nevertheless, we are still very
concerned about State Unemployment Tax Avoidance dumping and
the tax offset for UI overpayments, and we want to work with
the States on ensuring that the UI system remains robust.
Mr. ENGLISH. As a former State staffer for our Labor and
Industry Committee, I agree with you that State fiscal
conditions right now would make it very difficult to
immediately phase in some of the changes you have contemplated
in the past for the UC system. Nevertheless, I would like to
see some of these ideas, many of which have been out there
since the UC Advisory Commission was in existence, explored
adequately. Also, under TAA, the issue of the scope of this
program has been raised. One of the things that has troubled me
over the years is that we target different classifications of
TAA benefits to different workers based on the criteria of why
their job is occurring based on trade and potential competition
with even different jurisdictions. There is a different TAA
program for the North American Free Trade Agreement (NAFTA)
than there is for a TAA that is the result of competition from,
say, Europe or even China.
I wonder if you can suggest how you think this system in
the long term might be better rationalized?
Ms. CHAO. We are working with the States on better
management of the TAA program. It is an entitlement program,
but it has a particular kind of standing within the budget. So,
we want to make sure that the resources are available to
workers who truly need them, and we want to make sure also that
there are some guidelines to the States and how best to utilize
that fund because right now there are practically no guidelines
at all. So, we are working with the States on that.
Mr. ENGLISH. Finally, as the light changes, I would like to
thank you. I understand the Department of Labor is today
announcing a new tranche of funding for Pennsylvania, which has
had great difficulty with its TAA program, but thanks to the
work of your administration and your Department, and frankly,
you personally, a lot of the problems that were facing
Pennsylvania workers are now being addressed I think in a way
that gives them great confidence that those programs are going
to be there when they need them.
So, I want to thank you, and yield back the balance of my
time.
Ms. CHAO. Thank you.
Chairman THOMAS. Thank the gentleman. The gentleman from
California, Mr. Becerra, wish to inquire?
Mr. BECERRA. Thank you, Mr. Chairman. Madam Secretary,
thank you for being here with us. Perhaps we could start off by
first agreeing that you and the thousands of people that are
employed by your Department are working on every one of the
important issues that we have discussed that are important to
the American workers, and that we can agree right off the bat
that the President and his Administration are interested in
working with Congress on these issues. I do not think there is
a need to go any further than that. I think everyone agrees
that we are all trying to work here, hopefully together.
I believe in the early part of your testimony you said
something to the effect that--and I tried to write it down--
``The President said we will not be satisfied until every
American who wants a job can find a job.'' More or less
correct?
Ms. CHAO. Yes.
Mr. BECERRA. My understanding is the official number of
unemployed Americans stands at about 8.3 million men and women,
and my understanding is that that also does not include nearly
5 million American men and women who are no longer counted by
those official estimates, principally because their efforts to
find a job were frustrated or they hit a dead end. So, then we
have about, what, some 13 million Americans who are not
employed. If you add to those 13 million Americans the, what,
4.5 million or so Americans who are under-employed, working
part time, who are having to subsist on part-time wages
throughout the year, you have some 17.5 million Americans who
are either fully unemployed, seeking work, or working part time
and hoping to get full-time jobs for the most part.
My question then will be--and I will try to be specific so
I can see if I can get an answer from you on this--you just
said that you and the President will not be satisfied until
every American who wants a job can find a job. Would you tell
the American workers, would it be your statement that you could
tell the American workers that the President and his Secretary
of Labor define full employment as every American who wants to
work, working?
Ms. CHAO. Our employment under----
Mr. BECERRA. Madam Secretary, we are going to start going
to----
Ms. CHAO. If I may just answer the question, please.
Mr. BECERRA. I know we don't want to try to interrupt you,
Madam Secretary----
Ms. CHAO. Unemployment is usually defined as 6 percent----
Mr. BECERRA. Madam Secretary, the reason we are trying to
be so specific is because we have a precious 5 minutes to try
to get answers to any number of questions. I would like to ask
you about your trade policy, where you believe we should be on
trade policy. I would love to ask you about the whole issue of
manufacturing job credits to try to keep--but I will not have
time, and I am going to have time to perhaps ask you one, if
I'm lucky, two questions. So, I want to try to be specific.
Ms. CHAO. Yes.
Mr. BECERRA. My question to you was--you mentioned, and you
said this was the President's statement, not just yours--that
we will not be satisfied until every American who wants a job
can find a job. My question to you is, which I know that
workers in my district will ask me, does that mean that the
President believes that full employment means every American
working, your definition of full employment? If it is not, that
is fine, and we can move on. If it is, great, and I will move
on to my next question. I just want to know, is your definition
of full employment that every American who wants to work will
have a job?
Ms. CHAO. Mr. Chairman, how much time do I have to answer
this question?
Chairman THOMAS. I tell the gentlewoman that she has--the
Secretary, that she has an opportunity to respond directly to
his question, and his question is of course a hypothetical, and
that the Secretary could respond that it is the goal of
everyone to have every individual employed.
Mr. BECERRA. Mr. Chairman, before I run out of my time----
Chairman THOMAS. This is not coming out of the gentleman's
time.
Mr. BECERRA. Thank you.
Chairman THOMAS. It was an inquiry by the Secretary of the
Chair. The Secretary could respond by talking about legislative
history of what full employment was under legislation that
became law called Humphrey-Hawkins Act (P.L. 95-523). It was
determined to be 6 percent. However, everyone believes that the
world has changed, and that what was full employment at one
time may not be full employment now. So, as a goal, every
individual who wants a job should be able to get one.
Mr. BECERRA. Mr. Chairman, if I could just be----
Chairman THOMAS. I am responding on my time. As a practice
matter, given the millions of jobs in this country and the fact
that every day thousands if not tens of thousands of people
lose their job, and thousands if not tens of thousands of
people gain a job, the question of should everyone have a job
would have to be determined at the exact moment that all of
those people who lose a job are exactly offset by all those
people who find a job, which obviously makes it very difficult
for the Secretary to respond.
So, the Secretary has an opportunity to respond in the
manner that she believes is responsive to the question. That is
the Chair's response to the Secretary's inquiry.
Now, responding to the gentleman from California----
Mr. RANGEL. Parliamentary inquiry, Mr. Chairman.
Chairman THOMAS. The gentleman from New York will state his
parliamentary inquiry.
Mr. RANGEL. My parliamentary inquiry directs itself to the
discretion of the Chair. Since I aspire to become a Chairman I
want to be as liberal as I can be, but we had some discussions
as to the time allotted to the minority and the majority. So,
when the Secretary asks you how much time that she has, and you
give a speech on Thomas on unemployment, and say that this is
being given on your time, how do you allocate the Chairman's
time as opposed to the Ranking Member's time?
Chairman THOMAS. I have only been on this Committee since
1983, but in my years on the Committee, for which there has
been no change since the Republicans became the majority, nor
since I became a Chairman, is that the Chair's time is
determined by the Chair.
[Laughter.]
Mr. RANGEL. I would assume that would mean that the Ranking
Member's time is----
Chairman THOMAS. The gentleman from New York is recognized.
Mr. RANGEL. My question was, is the Ranking Member's time
also determined by the Chair? This is a parliamentary inquiry,
because if the Chair recalls--and I apologize to the Secretary,
but this was something that we had discussed in the past--there
was a time that some of the Members of the minority thought
that the Chair could respond to every question that the
minority may have, and we wanted to know whether you thought
that was in your discretion to just give your little remarks on
everything? You were kind enough to really be considerate
enough to know that you wanted to have some balance, and I
thanked you privately, and now I thank you publicly. It wasn't
that I wanted to be recognized to tell the Secretary how much
time she had because that was something I thought could be
determined by the clock. As a matter of fact, I withdraw my
question since you recognized me, and any time you feel like
you want to give an essay on subject matters and answers to
questions that weren't asked, I would raise it on the question
of a parliamentary inquiry. Since you yield to me, Ms. Chao,
you have as much time to respond as the Chair gives to you.
Mr. BECERRA. Mr. Chairman, I want to raise a
parliamentary----
Chairman THOMAS. If the gentleman will suspend, the Chair
appreciates the gentleman from New York's comments, but he has
no ability to yield time. Time goes through the Chair. The
Chair will respond briefly as an illustration to Members,
especially the Member from California, which was verging on
badgering in asking a question which can be answered in
multiple ways.
Mr. BECERRA. Would the Chairman yield?
Chairman THOMAS. If the Secretary chooses to respond in one
way, that is the Secretary's choice. The attempt to force an
answer from someone when the answer is a complicated one, does
not add to the history of testimony on what is a very important
question, and that is, the attempt to make sure that every
American who wants a job----
Mr. BECERRA. Will Mr. Chairman yield?
Chairman THOMAS. Gets a job. The gentleman from California
is recognized for the remainder of his time.
Mr. BECERRA. Mr. Chairman, would you yield on your comments
with regard----
Chairman THOMAS. I am recognizing the gentleman from
California for the remainder of his time.
Mr. BECERRA. A parliamentary inquiry before I use the
remainder of my time, a parliamentary inquiry?
Chairman THOMAS. The gentleman is recognized for a
parliamentary inquiry.
Mr. BECERRA. The Chairman has said that it is his belief
that he is employing time yielded to himself by the Chair of
the Committee, and I would like to know under what portions of
the rules of the House or this Committee that he is
authorized----
Chairman THOMAS. Tell the gentleman the Chairman is
responsible for the decorum of the Committee, and the Chair can
use whatever means available to the Chairman to ensure decorum,
and what the Chair did was illustrate that when questions are
asked repeatedly, badgering a witness for a particular answer
that the questioner wants and is not satisfied because the
questionee does not give the answer that is sought for, that is
badgering, and it lends a negative feeling to the decorum of
the Committee. That is the power under which the Chair made the
ruling.
Mr. BECERRA. Mr. Chairman----
Chairman THOMAS. The gentleman from California is
recognized for the remainder of his time.
Mr. BECERRA. Mr. Chairman, I have not finished my
parliamentary inquiry.
Mr. RANGEL. We better alert the Capitol Police.
Chairman THOMAS. That was the response to the gentleman's
parliamentary inquiry.
Mr. BECERRA. Mr. Chairman, parliamentary inquiry?
Chairman THOMAS. You have another one?
Mr. BECERRA. Further parliamentary inquiry, Mr. Chairman?
Chairman THOMAS. Yes. The gentleman is recognized for his
parliamentary inquiry.
Mr. BECERRA. Does that mean, Mr. Chairman, that you are not
going to give us a reference within the rules of the House for
the ruling that the Chairman has made?
Chairman THOMAS. I will tell the gentleman the general
decorum of the House is the broad ruling under Jefferson's
rules. If you want chapter and verse, the Chair is more than
willing to provide you, but in any parliamentary body,
regardless of the parliamentary rules, including this one using
Jefferson's manual, general decorum is always available to the
Chairman to maintain order.
Mr. BECERRA. Mr. Chairman, very well. I will just ask that
if you can, in writing, no longer to continue the hearing,
because the Secretary obviously has limited time, that if you
could provide in writing----
Chairman THOMAS. Is the gentleman still under the
parliamentary inquiry?
Mr. BECERRA. Correct, I am, Mr. Chairman.
Chairman THOMAS. The gentleman is recognized for his time.
Does he wish to use it?
Mr. BECERRA. Yes, I do, Mr. Chairman, but I have not
finished the parliamentary----
Chairman THOMAS. The gentleman is recognized----
Mr. BECERRA. Further parliamentary inquiry, Mr. Chairman.
Chairman THOMAS. The gentleman is recognized for the use of
his time.
Mr. BECERRA. Mr. Chairman, further parliamentary inquiry.
Chairman THOMAS. The Chair is not recognizing the gentleman
for the parliamentary, and----
Mr. BECERRA. Mr. Chairman, point of privilege.
Chairman THOMAS. The Chair has that privilege.
Mr. BECERRA. Mr. Chairman, point of personal privilege.
Chairman THOMAS. What is the gentleman's point of personal
privilege?
Mr. BECERRA. The Chair characterized this Member of the
House as having badgered a witness.
Chairman THOMAS. No, that is incorrect. If you will look at
the record it did not say your question was badgering. The
record will reflect a different statement.
Mr. BECERRA. What was that statement, Mr. Chairman, because
I want to make sure that it is very clear that the Chairman is
not saying that I have badgered the witness.
Chairman THOMAS. I believe the word ``bordering'' was in
part of the description.
Mr. BECERRA. Mr. Chairman, could you then provide me the
information? What did I do that bordered on badgering the
witness? I would like to know so I do not do it again.
Chairman THOMAS. The gentleman has every right to do
whatever he wishes to do.
Mr. BECERRA. Mr. Chairman, you have characterized my
conduct----
Chairman THOMAS. The Chair indicated that the gentleman
asked the witness a question----
Mr. BECERRA. Should I----
Chairman THOMAS. A question--see, you are just doing to me
what you were doing to her. The question that you asked was one
that could be answered in a number of different ways, but the
gentleman wouldn't allow the witness to provide an answer which
was her answer. The gentleman from California was attempting to
drive her in a divergent discussion to provide the answer the
gentleman from California wanted.
Mr. BECERRA. I will close my parliamentary----
Chairman THOMAS. It doesn't work that way.
Mr. BECERRA. Mr. Chairman, then I will close my
parliamentary inquiry, awaiting the written response on the
provisions in the rules of the House and of this Committee that
permit the Chairman to engage in additional dialogue beyond the
regular----
Chairman THOMAS. It is called general decorum. Does the
gentleman want to be recognized for his time? The Chair is
ready to recognize another Member of the Committee.
Mr. BECERRA. Yes, I do, Mr. Chairman.
Chairman THOMAS. The gentleman is recognized for the
remainder of his time.
Mr. BECERRA. I appreciate that, Mr. Chairman. Let me ask
the question one more time, Madam Secretary, but I don't expect
you to answer it because I am running out of time, and I think
I know that your answer would go beyond what I have asked.
For the record, so it is clear, this was my question. Given
that you and the President have said that, quote, ``We will not
be satisfied until every American who wants a job can find a
job.'' My question, which the Chairman characterized as
bordering on badgering, was simply this. Would you tell the
American workers that the President and his Secretary of Labor
define full employment as every American who wants to work,
working? I was paraphrasing what you had said. That, according
to the Chairman, is bordering on badgering. I did not mean to
badger you. I was just trying to get an answer to a question
that I think a lot of American workers are trying to get. I
don't expect you to answer at this stage.
Let me continue with a second question I wanted to ask you.
In the last 3 years we have lost close to 3 million jobs in
America. We have seen the Nation's debt increase by more than
$3 trillion. Last year on Labor Day the President met with
workers and promised to appoint a manufacturing czar to deal
with the loss of manufacturing jobs, which total some $2.8
million in the last 3 years of the President's term in office.
Six months after that statement on Labor Day of last year,
there is still no manufacturing czar. Administration officials
have said they are working on it, but while Rome burns, and the
economy has hemorrhaged an additional 250,000 American
manufacturing jobs since that Labor Day statement by the
President and his promise to bring on a manufacturing czar, we
still have not gotten there. Do you know who will be the
manufacturing czar that the President promised 6 months ago?
Ms. CHAO. Am I allowed to answer? The manufacturing czar is
an assistant secretary position in the Commerce Department, so
there is a lengthy confirmation process that goes along with
that too.
Mr. BECERRA. Madam, but the question was do you know who
that manufacturing czar, the name of the person?
Ms. CHAO. It is not within the Department of Labor.
Mr. BECERRA. Do you know the name of the person?
Ms. CHAO. I would not usually know about the appointments
of any other departments.
Chairman THOMAS. The gentleman's time has expired.
Mr. BECERRA. I thank you, Madam Secretary.
Chairman THOMAS. The Chair would like the gentleman from
California to submit written evidence that Rome is burning.
Mr. BECERRA. Mr. Chairman, I think there is ample evidence,
and I would be more than willing to do so.
Chairman THOMAS. The gentleman from Texas, Mr. Brady?
Mr. BRADY. Thank you, Madam Secretary. Jobs are a concern
for all of us, and I think both you and the Administration are
absolutely right in saying that full employment is making sure
every person who wants to work has a job, and not just a job,
but a good job, which I think your goal is exactly right on
mark.
We know America has the most productive workers in the
world. My question is does America have the most productive
business climate in the world? It seems to me that between a
very high tax rate that makes companies uncompetitive when they
compete around the world, because of lawsuit abuse that drives
prices up and keeps companies from competing, because of high-
energy costs because we are not willing to take responsibility,
and we are not given the opportunity to take responsibility for
our energy needs, and then regulation, much of I think well-
intended, but very restrictive when it is applied one size fits
all, it seems to me that America, in a world where you aren't
granted jobs, you compete for them, it is tough, and you have
to fight for every American job, it seems to me that we may not
have the most productive business climate in the world in order
to create, obtain and keep American jobs.
Can you give us your thoughts on that.
Ms. CHAO. I think the Congressman makes an excellent point
that governments don't really create jobs, it is the private
sector, and the role of the government is to ensure the proper
environment through which job creation can occur.
The President's six-point program does speak to the issue
of the high taxation that faces our workers and employers, the
high energy cost, the fact that we are not energy independent
due to regulations that many businesses face that are too
onerous. We want to protect workers, of course, but there are
some overly onerous regulations, and then the whole issue about
frivolous lawsuits needs to be addressed as well.
The tax cuts have helped a great deal in terms of job
creation in the last 2 years, and so we hope that these tax
cuts will be made permanent so that the continued growth of the
economy can occur and job creation can further accelerate.
Mr. BRADY. Thank you. I also appreciate I think the
difference in the household survey the Department of Labor
does. The economy really is changing. Using the payroll survey,
which is sort of the old-fashioned way you look at big business
and make an extrapolation from that, rather than go deeper into
it and find all of those entrepreneurs in my district, all of
those one- and two-people shops I think is important. If I read
the household survey right, just so I understand it, there are
3 million more Americans working this year than last; is that
what the Labor----
Ms. CHAO. That is correct.
Mr. BRADY. So, we are at, to put it in perspective in
history, my understanding is this appears to be the highest
number of Americans who have ever worked ever?
Ms. CHAO. We have the largest number of Americans ever
working because we have a workforce of 146 million people,
where 70 years ago, the workforce was only 31 million people,
and the wages are getting better, also.
Mr. BRADY. The goal for us is even that is not good enough
for us. We want to retrain workers for health care, for the 77
million baby boomers who will soon become seniors and are going
to need every kind of health care service there is in
biotechnology and all of the types of new technology that is
coming along. Our goal is to not just be satisfied with the
most Americans working, but to make sure every person that
wants a good job, finds one; is that correct?
Ms. CHAO. The President has said on many occasions that we
care about this issue, we care about those who are out of work,
and one worker out of work is one worker too many. We need a
million nurses in the next 7 years, we need health care
technicians, pharmacists. We need skilled trades people,
construction workers.
Mr. BRADY. I think you are exactly right. In the end, we
don't need to be building walls, we need to be building skills.
That is how we are going to put America back to work. Thank
you, Madam Secretary.
Ms. CHAO. Thank you.
Chairman THOMAS. The gentlewoman from--I don't know the
order, but I have down here that the gentlewoman from Ohio, Ms.
Tubbs Jones, is next and then the gentleman from North Dakota
would. Does the gentlewoman wish to inquire?
Ms. TUBBS JONES. Yes, Mr. Chairman. Thank you.
Chairman THOMAS. Thank you.
Ms. TUBBS JONES. Good morning, Secretary Chao. How are you?
Ms. CHAO. Fine. Thank you.
Ms. TUBBS JONES. Good. Good. Glad to have you here. Let us
talk about the TAA program for a moment and the budget.
Non-agricultural employment in Ohio declined by 244,000
jobs between November 1999 and November 2003. Out of that
number, 191,000 manufacturing jobs were lost in Ohio. Total
non-agricultural employment in Cleveland declined by 72,000
jobs between November 1999 and November 2003, and out of that
number 44,000 manufacturing jobs were lost in Cleveland.
A substantial portion of these job losses have been linked
to foreign trade. Since 1995, the TAA and the NAFTA TAA program
data identifies that 46,000 of the jobs that were lost in Ohio
were directly due to international trade in NAFTA. In Cuyahoga
County, over 5,000 jobs were identified.
As you know, the TAA program exists to provide relief to
misplaced workers in Ohio and nationwide. As your
Administration or the President's Administration intends to
sign the Central American Free Trade Agreement and continues to
negotiate Free Trade Area of the Americas, including Central
America, South America, and the Caribbean, except Cuba, the
role of the TAA program will become more important.
Does the estimated budget for the TAA assistance program,
which is $770 million for 2004, and $1 billion for 2005, take
into account the additional burden the program will bear as a
result of these comprehensive trade agreements you seek to
enter into?
Ms. CHAO. The TAA income support is on the mandatory side
of the budget, so it will respond on an entitlement basis to
whatever needs there are. So, yes, the money will be there,
number one.
Number two----
Ms. TUBBS JONES. So, no matter how many jobs are lost and
can be linked, there will be dollars available to assist the
workers. So, if we end up with 88,000 jobs lost in Cuyahoga
County, 88,000 of my folks in Cuyahoga County will receive
assistance through TAA. That is what you are telling me.
Ms. CHAO. It is an entitlement program.
Ms. TUBBS JONES. Also, in these days of thousands of jobs
in Ohio being lost, what is the Department of Labor doing to
keep workers in Ohio, and nationally, fully informed of the TAA
program?
Ms. CHAO. That is our job. We have One-Stop Centers located
throughout Ohio, we have a full staff at the Employment and
Training Administration, and our job is to do outreach to make
sure that all workers who need the assistance of the Department
of Labor----
Ms. TUBBS JONES. What do you do? I know you have these One-
Stop Centers, and I know that you say this is your job, but
what do you do?
Ms. CHAO. They are in every community. We hold seminars,
forums. We go out to clusters where displaced workers are. When
we first hear that a factory----
Ms. TUBBS JONES. Could you, in fact, have someone from your
staff provide me with the information for the programs that you
provided in the last 3 years in the 11th Congressional
District----
Ms. CHAO. We will be happy to provide you----
Ms. TUBBS JONES. And notice me of all of the programs that
you intend to provide when you give notice?
Ms. CHAO. Of course.
[The information follows:]
ETA Discretionary Grants Past Three Years
Ohio--11th Congressional District
As of March 31, 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
Term (Extension
Name of Grantee Type of Grant Award Requests may be
Amount pending)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Youth School to Work $2,700,000 9/1997-9/2003
Opportunities Urban Rural Opportunity Grant
Unlimited
2000 East
Ninth Street--
Suite 820
Cleveland,
OH 44115
--------------------------------------------------------------------------------------------------------------------------------------------------------
2 City of WIA Youth Opportunity (Competitive $28,000,000 7/2000-6/2005
Cleveland Youth Awards)
Opportunity
Grant
--------------------------------------------------------------------------------------------------------------------------------------------------------
3 Cuyahoga County WIA Dislocated Workers National $1,165,000 5/2001-8/2003
Workforce Reserve--DEMOS
Investment Board
Dislocated
Workers Skills
Shortage
--------------------------------------------------------------------------------------------------------------------------------------------------------
4 Wire-Net 2 WIA P&D Earmark $765,000 12/2001-12/2002
Detroit Westside Industrial Retention and
Avenue-- Expansion Network
Suite #3
Cleveland,
OH 44102
--------------------------------------------------------------------------------------------------------------------------------------------------------
5 Wire-Net 1 WIA P&D Earmark $500,000 2/2003-1/2004
Detroit Advancing Manufacturing Sector
Avenue-- Training Initiatives in NE Ohio
Suite #3
Cleveland,
OH 44102
--------------------------------------------------------------------------------------------------------------------------------------------------------
6 Cleveland WIA P&D Earmark $100,000 10/2003-10/2005
State The Nuts and Bolts of Governance:
University Research and Executive Training for
2121 Euclid Prospective Members of the State
Avenue Legislature
Cleveland,
OH 44115
--------------------------------------------------------------------------------------------------------------------------------------------------------
7 Wire-Net 2 WIA P&D Earmark $500,000 Pending 2004
Detroit Westside Industrial Retention and
Avenue-- Expansion Network
Suite #3 Enhancing Cross-Sectoral Training in
Cleveland, the Manufacturing Cluster
OH 44102
--------------------------------------------------------------------------------------------------------------------------------------------------------
8 Ohio WIA Formula Grant to State for $4,398,355 7/2001-6/2002
Department Adult, Dislocated Worker and Youth $2,814,382 7/2002-6/2003
of Job and Employment and Training Programs $2,853,502 7/2003-6/2004
Family
Services 3 State Allocation to Local WIA
Area 2 (Cuyahoga County outside $15,804,507 7/2001-6/2002
of the City of Cleveland) $15,870,041 7/2002-6/2003
State Allocation to Local WIA
Area 3 (City of Cleveland) $15,902,808 7/2003-6/2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
1 Grant activities in 10th, 11th, 14th, and 17th Congressional Districts.
2 Grant activities in 10th and 11th Congressional Districts.
3 11th Congressional District includes all or part of Local WIA Area 2 (Cuyahoga County outside of the City of Cleveland) and Local WIA Area 3 (City of
Cleveland).
Ms. TUBBS JONES. How do you provide notice? Do you give it
to individual workers, to their homes? How is that done?
Ms. CHAO. As soon as we hear that a factory might be
closing, we send a Rapid Response Team that goes out and tells
dislocated workers--potentially dislocated workers--what their
benefits are, how to keep up their health insurance, what other
job opportunities there are in the surrounding area, and so we
meet with them on an individual basis.
Ms. TUBBS JONES. My last question. This is the Economic
Report of the President that you were discussing with my
colleague earlier; is that correct?
Ms. CHAO. I believe so, yes.
Ms. TUBBS JONES. You believe so. Do you want me to bring it
over so you can look at it closely? Can I approach the witness,
Mr. Chairman? Excuse me?
Ms. CHAO. I do not have my glasses on.
Ms. TUBBS JONES. Now, I did not interrupt you. Do not
holler at me, okay? This is the book, is it not?
Ms. CHAO. I do not have my glasses on. Yes.
Ms. TUBBS JONES. In the front of the book it has, ``To the
Congress of the United States,'' signed by George W. Bush, the
President, right? So, this is his report to the Congress, and
it in fact provides that job growth for 2004 of over 300,000
jobs per month or 3.5 million jobs for the year, this is the
forecast, in this President's forecast report, is it not?
Ms. CHAO. That is the CEA's report, yes.
Ms. TUBBS JONES. That is the President's report. It is
either yes or no, Ms. Chao. Do not make it complicated. See, I
do not think it is cute that----
Ms. CHAO. I am not trying to be cute.
Ms. TUBBS JONES. I do not think that it is cute that you do
not respond to questions.
Chairman THOMAS. The gentlewoman's time has expired.
Ms. CHAO. I just want some courtesy extended to me as a
witness. That is the Council on Economic Advisers, that is the
report----
Ms. TUBBS JONES. Of the President. It is published, his
name is signed in it.
Ms. CHAO. Ma'am, if you want to----
Chairman THOMAS. The gentlewoman's time has expired.
Ms. TUBBS JONES. Mr. Chairman, I appreciate that my time
has expired, and I hope that you appreciate, and all of you
appreciate that when it comes to answering the questions of the
Republicans, she is very clear and answers; when it comes to
responding to the Democrats--and I was very easy. I was not
cross-examining her. I merely asked her about the report, and
every other Democratic Member could not get an answer.
So, Ms. Chao, I thank you very much for your testimony,
and, Mr. Chairman, I thank you for the opportunity to finish
what I had to say.
Chairman THOMAS. I thank the gentlewoman. Just so the
record understands the gentlewoman's question, what is the book
that you are referring to? What is the title?
Ms. TUBBS JONES. The record is clear. It is called, ``The
Economic Report of the President.'' May I submit it?
Chairman THOMAS. The Chair would ask the gentlewoman, who
is the President?
Ms. TUBBS JONES. Well, you know what----
Chairman THOMAS. It is a simple question.
Ms. TUBBS JONES. I think you answered every other question
for the witness. Answer it, Mr. Chairman. It is George Bush.
Chairman THOMAS. Oh, okay.
Ms. TUBBS JONES. I wish it were not, but it is.
[Laughter.]
Chairman THOMAS. Well, then, we got that question answered.
The Chair is trying to be helpful in getting answers----
Ms. TUBBS JONES. Mr. Chairman, give me a break.
Chairman THOMAS. The Members ask. Does the gentleman from
Florida wish to inquire?
Mr. SHAW. Yes, Mr. Chairman, and I would like to compliment
the Secretary, at least on that side of the dais, of
maintaining the dignity of this Committee. I regret the amount
of badgering that you have put up with, and I might say in a
very graceful manner.
Ms. CHAO. Thank you.
Mr. SHAW. It is very difficult to answer questions when
somebody is yelling at you and interrupting you, and before you
can even get five and six words out, jumping in.
I have not seen this Committee operate like that before.
Obviously, this was rehearsed before this Committee meeting,
and I think that is quite regrettable, in that we are the
Committee on Ways and Means.
I do have a question for you. To help you reduce erroneous
payments in the UC system, the budget provides $20 million for
more face-to-face reviews of unemployed benefits eligibility.
You are expecting this action, I understand, to save up to $400
million. If you could tell us more about this proposal and why
you expect it to result in such savings to the unemployment
system.
I compliment you in trying to get people to get back to
work, to get interviewed, to help them out if you can and also
to make a determination whether or not they are putting forth
the effort to find employment, I would appreciate your
answering the question.
Ms. CHAO. Well, first of all, we all support making sure
that those who need assistance are indeed getting them. So, we
want to make sure that our programs are effective and that the
people who need the money, who need the resources going through
a very vulnerable period in their lifetime are indeed getting
it. We also want to ensure the integrity of the program as well
and make sure that there are not abuses or mismanagement
because that hurts everyone who would otherwise be able to
participate or benefit from these programs.
So, currently, we have claims that are filed on the
Internet and by the phone to supplement the usual face-to-face.
That has become the more standard way of doing business. There
is research showing that if there are more frequent reviews,
and so we want to make sure, once again, that the integrity of
the program remains intact so that the maximum resources are
available to workers who really need them.
Mr. SHAW. I thank you, and I compliment you for this
program. Mr. Chairman, I yield back.
Chairman THOMAS. I thank the gentleman. Does the gentleman
from Kentucky wish to inquire?
Mr. LEWIS OF KENTUCKY. Yes, Mr. Chairman. Thank you. Madam
Secretary, welcome, and we are certainly, as Kentuckians, very
proud that you are our Secretary of Labor.
Ms. CHAO. Thank you.
Mr. LEWIS OF KENTUCKY. I think it has kind of been a tough
morning. The reason that you have been able to answer the
Republican questions is because we have allowed you to answer.
We have not interrupted you because we are interested in an
answer.
Ms. CHAO. Thank you.
Mr. LEWIS OF KENTUCKY. It is amazing to me, we have 94.4
percent of the workforce employed today, and it seems like my
colleagues across the aisle are not excited about that and that
unemployment has dropped from 6.3 percent down to 5.6 percent,
and we are moving on. So, the President's tax package that he
has sent before us has created opportunities in our society in
job growth. So, we ought to be celebrating that, and of course
we want to continue to make sure that everyone that can work
can get a job, and we are trying to accomplish that to the best
of our ability.
We have been talking a lot about insourcing and
outsourcing. The United States comprises only 6 percent of the
land and 5 percent of the population on the Earth. Despite
this, the United States insources nearly as many jobs as its
businesses outsource to every other country in the world--one
country against the world--and we are bringing a lot of good
employers into this country.
Kentucky is a good example of that, with Toyota and all of
the component parts, automobile industry plants that have come
to Kentucky. We just recently we are having a Canadian company
come into Bowling Green, Kentucky, with I think 1,100 jobs, but
there is a unique place in Kentucky, and it should not be
unique because it is a small place--Campbellsville--and I think
you are aware of what happened in Campbellsville.
From 1997 to 1998, Campbellsville lost Fruit of the Loom,
something like 3,200 people in a community, I think
Campbellsville, the population is like 10,000. Unemployment
skyrocketed to 30 percent in that period of time. Fast-
forwarding to 2003, Campbellsville now has one of the highest
employment rates of any of the counties in Kentucky. They have
3,700 new jobs. They have 13 new employers and major expansions
by more than half a dozen existing industries. It is an example
of how the trade assistance has helped there through
Campbellsville University, a community of leaders that went out
to change that situation, and as you see, changed it very
dramatically in a very short period of time.
I do not think that this should be unusual across the
country because Campbellsville is kind of in a land-locked
situation. Their infrastructure, their transportation coming in
and going out of Campbellsville is not the best in the world.
We are working on that. They have done a tremendous job of
proving that insourcing is great for Kentucky and great for the
economy of the United States. Yes, we lose jobs, but we gain
jobs. That is the world economy we live in, and we have to
participate. So, please, can you make comments to that?
Ms. CHAO. The Department of Labor has all sorts of
assistance programs, and so we want to make sure that those who
do lose their jobs are helped during a very vulnerable period
in their lifetime, and we have programs that will help them get
on their feet, that offer UI, that offer other income support
and also training, and we want to get them back in the
workforce as quickly as they can because it is better for them,
and it is better for their families.
Mr. LEWIS OF KENTUCKY. Absolutely. We look to Congress, we
look to the President, but communities and States also have a
responsibility to deal with some of these job losses, and
Kentucky and Campbellsville is a great example of how it works,
how it is supposed to work, I think.
Ms. CHAO. It is a good example.
Mr. LEWIS OF KENTUCKY. Yes. Thank you, Madam Secretary.
Chairman THOMAS. I thank the gentleman. Does the gentleman
from North Dakota wish to inquire?
Mr. POMEROY. Yes, I do, Mr. Chairman. Thank you. I would
begin by saying I am a bit surprised to hear the happy talk on
the other side of the aisle regarding jobs in this country. The
last statistic I saw was that we are actually down 2.2 million
jobs since the beginning of this Administration. Quite frankly,
I do not find those numbers anything to crow about.
The first question I would have of the Secretary would
involve the pension-reserving legislation working its way
through Congress. The House has passed a bill. The Senate has
passed a bill. It goes into conference committee. My first
question to you, Madam Secretary, what importance do you place,
as State or local, on Congress enacting this legislation?
Ms. CHAO. We place great importance in protecting workers.
Mr. POMEROY. I am asking you, Madam Secretary, if you think
it is important we pass this bill or not. I guess you will have
to confer before you can answer that question. I will wait
here. I appreciate my time not tolling, Madam Secretary, while
the advice continues in terms of whether the Secretary supports
this bill or not.
Ms. CHAO. I think the answer is, yes.
Mr. POMEROY. Madam Secretary, the versions are different
between the House and the Senate.
Ms. CHAO. Yes.
Mr. POMEROY. Does the Department of Labor have a preferred
approach?
Ms. CHAO. It is the House.
Mr. POMEROY. You prefer the House approach. Does the
Department of Labor----
Ms. CHAO. I believe we have a SAP out on this.
Mr. POMEROY. Does the Department of Labor oppose taking
remedial action for multiple employer plans?
Ms. CHAO. We would prefer, again, that pension plans be
funded on a regular basis so that----
Mr. POMEROY. Madam Secretary, that is non-responsive. At
issue, if I might give just a little background, perhaps, the
House plan addresses single-employer plans, while the Senate
has single- and multiple-employer plans. My question to you, as
you express a preference for the House approach, is whether
you, as Department of Labor, oppose a remedial step to address
the funding issues of multiple-employer plans.
Ms. CHAO. We want to work with the Congress on that. Let me
get you something for the record.
[The information follows:]
On April 10, 2004, President Bush signed into law H.R. 3108, the
Pension Funding Equity Act of 2004. This law allows employers who
sponsor multiemployer pension plans meeting certain criteria to defer
making a portion of the payments otherwise required.
Mr. POMEROY. I must say that this is a very important
policy issue----
Ms. CHAO. Yes, it is.
Mr. POMEROY. I am rather surprised that you are not
prepared to answer that question. I have another question. Do
you happen to have Tammy McCutcheon with you, the head of the
Wage and Hour Division?
Ms. CHAO. No, she is not here.
Mr. POMEROY. I am sorry that she is not. Perhaps you can
answer these questions on her behalf.
Ms. CHAO. Sure.
Mr. POMEROY. This involves the guidance sent out to
employers relative to the new overtime regulations. I will tell
you that the people in North Dakota, many of them working long,
long hours at fairly modest-paying jobs are deeply concerned
that the new overtime regulations under development, under your
leadership, will reduce their overtime.
I noted, with some alarm, an Associated Press story, dated
January 6, 2004, in which a Department of Labor advisory, sent
out by Wage and Hour Division Administrator, Tammy McCutcheon,
sets out several advisory points that appear to be advising
employers in terms of how to avoid paying overtime.
Specifically, I would cite to you a paragraph quoted from the
report as quoted by the Associated Press.
`` `Most employers affected by the proposed rule would be
expected to choose the most cost-effective compensation
adjustment method,' the Department said.''
Now, that looks to me like you are advising employers on
how to beat their employees out of overtime. I wish the
administrator who had written this was here, but can you speak
to what she was trying to advise employers with this advisory?
Ms. CHAO. Let me make it very clear. Any employer trying to
evade the overtime rules will feel the full wrath of the U.S.
Government. We will brook no evasion of the law.
Mr. POMEROY. Well, I am very delighted to hear that, but it
seems to me that you are changing the law and so that the law
is more lenient as regards overtime. In fact, going on to quote
from this Associated Press story, it indicates that there are a
number of ways for employers to, essentially, under the new
regulations, not pay overtime, pursuing, in other words, in
your Department's words, Madam Secretary, the most cost-
effective compensation adjustment method.
It appears to me that you have allowed employers to avoid
paying overtime by changing the overtime rules. I understand
you enforce the rules, but you have changed the rules for the
benefit of employers at the expense of their employees who are
putting in way more than 40 hours a week, and this is not a
record you should be proud of.
I yield back my time.
Ms. CHAO. Sir, I take great exception at your tone. I do
not need to be lectured about a tremendous disinformation
campaign that is waged by people who deliberately--
deliberately--taking action that could potentially hurt
workers. That AP reporter, I have said, is an irresponsible
reporter. That story is false. This issue was on the docket. It
was a tremendous manipulation and falsification of what was
written in the regulations. It was required by the regulations.
The regulations appeared in March 2003, and all of a sudden
this story appears in December of----
Mr. POMEROY. It is your own advisory, Madam Secretary----
Ms. CHAO. It is false. That story is false.
Mr. POMEROY. The most cost-effective compensation
adjustment method----
Ms. CHAO. I take exception to that.
Chairman THOMAS. The gentleman's time----
Mr. POMEROY. That is language of the Department of Labor.
Ms. CHAO. That story is--let me make very clear the story--
sir, don't take that tone with me.
Chairman THOMAS. The gentleman's time has expired.
Ms. CHAO. Mr. Chairman, I would like----
Chairman THOMAS. The gentleman from Illinois.
Mr. WELLER. Thank you, Mr. Chairman. Madam Secretary, it is
good to see you.
Ms. CHAO. Thank you.
Mr. WELLER. It is a pleasure to work with you, and I
appreciate your time before our Committee today.
We have had a lot of talk about the economy today, and as
one of those who worked with President Bush, and Chairman
Thomas, and our Committee leadership, as well as the leadership
in the House and Senate, to put together a jobs and economic
growth package, as I know you stated earlier, I am one of those
who is pleased to see that the President's jobs and economic
plan is working. Over 300,000 Americans have been able to
obtain new jobs since that package was signed into law by the
President last summer.
Of course, the bonus deprecation, I would highlight, is a
major factor in that, encouraging the purchasing of
manufacturing assets. Last quarter of 2003, there was a record
level of capital assets purchased by business, and the bonus
deprecation was a contributing or deciding factor in a vast
majority of those decisions to purchase those assets. So, that
is working.
Of course, when you encourage someone to purchase a company
car or a telephone system or a computer or a machine tool,
there is a worker somewhere in America who is producing that,
whose jobs are strengthened as a result of that.
I would also note that the national unemployment rate has
dropped. Last June, it was 6.3 percent when the President's
economic plan was signed into law. It has now been cut down to
5.6 percent as of January this past year. There is more to do,
but we are making progress, and I am committed to working with
you.
I would also note, because I have heard some rhetoric from
some of my friends on the other side of the aisle regarding
temporary extended unemployment benefits, and would note that
back in the 1990s, when the Democrats were in a position to
make a decision regarding the extension of unemployment
benefits, they decided to end unemployment benefits at an
unemployment rate of 6.4 percent, an actually higher level of
unemployment than we experienced last June. So, the rhetoric
changes depending on which shoe is on whose feet.
Also, I want to commend the leadership of the
Administration particularly on the issue of trade. I represent
a district that is heavily dependent on exports. I am pleased
to see that exports are up almost 20 percent over the last
couple of years under the President's efforts to expand trade
opportunities for American manufacturers, as well as American
workers, and I enjoyed the comments of one of my colleagues of
the gentleman from Washington who is not here, but he commented
about his brother's experience with unemployment.
Well, I have a brother who is unemployed. His company or
the plant where he worked was shut down as a result of
litigation, which shut down the manufacturer where he worked,
and he was unemployed for almost a year as a result of lawsuit
abuse and greedy trial lawyers who were attempting to pursue
this company. So, they chose just instead to shut down the
plant, costing hundreds of workers their jobs, including my
brother, but it was exports that gave my brother the
opportunity to go back to work because another manufacturer,
after 12 months, was able to obtain an export contract, and
that gave my brother to go back to work. So, trade has made a
difference for my own family in ensuring that we experience
employment for everyone, and I believe that is a continued
positive step forward.
Madam Secretary, we have worked together on the Integrated
Systems Technology (IST) Advance Manufacturing programs, a
program where you have shown tremendous leadership, and I
appreciate your commitment over the last couple of years to
develop a program to give dislocated workers an opportunity to
gain skills for the 21st century, give them the opportunity to
obtain skills, to operate, maintain and troubleshoot the most
advanced high-tech manufacturing equipment, such as the robots
in the workplace. We have a shortage of these kind of workers,
so it is giving workers the opportunity.
I know in the State of Illinois, we have had four community
colleges enrolled in this program. Kankakee Community College,
in my district, will start a program later this year
participating in the IST program. As a result, I just want to
report to you, Madam Secretary, that 112 Illinois employers
have hired already 129 graduates of this program, 227 people
have completed the program in its first year. So, with your
leadership, we have been able to help workers make a transition
with new skills.
My question for you is how do you view, what is the next
step when it comes to this type of program, the IST? Is it on
track? Do you feel the program is successful? What more do we
need to do?
Ms. CHAO. Well, the President has put $500 million devoted
to helping workers find jobs in the 21st century economy. As I
mentioned $250 million of that goes to community colleges, but
there are high-growth sectors which offer good-paying jobs,
with good career paths, going into the future, and so we want
to continue to emphasize those because we do want workers to
find good jobs with higher paying skills and with higher wages.
Mr. WELLER. Thank you, Madam Secretary. I see my time has
expired.
Ms. CHAO. Thank you.
Chairman THOMAS. Does the gentleman from Florida wish to
inquire?
Mr. FOLEY. Thank you very much, Mr. Chairman, and, Madam
Secretary, for your appearance today. Some of my colleagues
today who have been asking questions could have been character
actors during the Depression. They seem to want to talk about
all of the gloom and doom that surrounds us, and they do not
look for the bright lights that are before us, the opportunity
that we see now with jobs growing, the economy getting
stronger.
We have to remember and go back to the year 1999, the
presidency of Bill Clinton, the economic unraveling, if you
will, of so many of the companies that have built their books
based on shoddy numbers, loose with facts. People were jumping
into the stock market at record numbers, taking advantage or
hopefully taking advantage of what they thought were ``get rich
quick'' schemes, sponsored by people who have now fortunately
been arrested, some were on trial, some were going to jail.
When the chief executive officer of this Nation lies to a
grand jury, then everyone else in corporate America decided on
that day that it is all right for the number one man America.
We can all lie. We can fudge the books. We can go ahead and do
things to the shareholders without any regard for truth,
justice or law.
When this President inherited this economy, we had the
stock market reeling, we had people who were pessimistic about
an investment opportunity, people who saw their Individual
Retirement Accounts and 401(k)s and others drop precipitously
before, I might add, the election of this President.
He got in office to stabilize this economy, and then, lo
and behold, in 2001, September 11th hits this Nation and takes
the wind out of the economy and the wind out of the sails of
entrepreneurs and investors, and our hearts still ache for
those who lost their lives in New York, in Washington, and
Pennsylvania.
Ms. CHAO. Yes.
Mr. FOLEY. The President embarked on a tax-cut opportunity
to enhance the economy, and let me tell you today what is in
the New York Post.
``Chief Executives Planning to Hire Outnumber Those Who
Foresee Cuts. Chief executives of the Nation's largest
companies said they are fully and finally ready to begin hiring
again.''
[The information follows:]
Chief Executives Planning to Hire Outnumber Those Who Foresee Cuts
By DAVID LEONHARDT
Chief executives of the Nation's largest companies say they are
finally ready to begin hiring again.
For the first time in at least a year and a half, more executives
plan to increase employment in the United States over the next 6 months
than plan to cut jobs, according to a survey released yesterday by the
Business Roundtable, a lobbying group. Thirty-three percent of the
executives said they would add jobs, up from just 12 percent in
October, while 22 percent said they would reduce the number of
employees.
``C.E.O.'s believe that the U.S. economy is on course for continued
steady improvement,'' said Henry A. McKinnell, chairman of the Business
Roundtable and chief executive of Pfizer, the drug company.
A separate survey of midlevel managers in the service sector and a
Federal Reserve report on regional economic conditions, both released
yesterday, suggested that employment had continued to grow slowly in
recent weeks.
Dr. McKinnell said that he still did not expect job growth this
year to reach the levels of past recoveries, largely because companies
have become more efficient and can produce more goods with fewer hands.
Asked whether he expected the economy to add 200,000 to 300,000 jobs a
month, as it did through parts of the 1980's and 1990's, Dr. McKinnell
said, ``We're not quite that bullish at this point.''
He added: ``But we're headed in that direction.''
The survey of purchasing managers at service companies suggested
that economic growth remained healthy but that companies were still not
adding large numbers of workers. The Institute of Supply Management's
index of economic activity in the service sector fell to 60.8 in
February, from 65.7 in January. The employment index for the sector
dropped slightly, to 52.7 from 53.4.
A reading above 50 suggests growth.
``February was a month of growth, but just not the same pace as we
had seen in the month of January,'' said Drew T. Matus, an economist at
Lehman Brothers. ``This is still a strong number.''
The Fed, in its regular review of regional economies, known as the
beige book, said that employment grew slowly in January and February
and that salaries ``increased slightly.'' The economy continued to grow
across the country and appeared to be accelerating in the West, the
Southwest and New York State, according to the report.
The Fed also said that retail prices were stable or rising slowly,
while prices for industrial items like iron ore increased more rapidly.
Most investors expect that inflation will remain low in the coming
months and that the Fed will wait until the summer to raise its
benchmark short-term interest rate.
The new signs of the economy's continued growth helped lift the
dollar to a three-month high against the euro. The Standard & Poor's
500-stock index rose slightly, closing at 1,151.03, up 1.93 points.
The economic growth, however, has done relatively little to improve
the labor market. From July of last year to January, even as the
economy was growing at a healthy pace, it added just 57,000 jobs a
month, far too few to keep up with population growth.
Economists expect the Labor Department to report tomorrow that
around 125,000 to 150,000 jobs were created in February, which would be
the biggest gain since late 2000.
The outsourcing of American jobs to lower-wage countries has become
a hot topic in the presidential campaign and the media, but most
economists say that the productivity gains are the main cause of the
weak job growth.
Dr. McKinnell echoed that argument yesterday, calling outsourcing
``a fact of life'' and noting that the pharmaceutical industry has
actually brought a large number of research jobs into the United States
from other countries in recent years. His concern, he said, was that
American elementary and high schools were not strong enough to produce
workers for high-skill, high-wage jobs.
``Some of these jobs are going abroad for cost reasons,'' he said.
``Others are going for capability reasons.''
In the Business Roundtable survey, 88 percent of the executives
said they expected their sales to increase in the next six months, down
from 93 percent in December. Only 1 percent--or one executive--expected
a drop.
Of the group's 150 members, 122 completed the survey, the group
said. The survey was first conducted in late 2002 and until this month
the number of executives planning job cuts had always outnumbered those
expecting to increase their payrolls.
Over the next six months, 43 percent of the executives plan to
increase their spending on new plants, equipment and software, and 50
percent said their investment would not change.
The executives expect the economy to grow 3.7 percent this year;
Wall Street forecasters are more optimistic, predicting about 4.5
percent growth on average. Since the economy began to slow in 2000,
executives have generally been less optimistic, and more prescient,
than professional economists.
Manufacturing Grew in Most Areas
A roundup of regional economic conditions in recent months for the
Federal Reserve's 12 districts, according to the beige book report
issued by the Fed yesterday.
Minneapolis--``Firm'' economic growth was led by increases in
residential real estate, consumer spending and manufacturing.
San Francisco (Includes Alaska and Hawaii)--Economic growth
continued to expand with improvements in manufacturing and a fast pace
in housing construction.
Chicago--The region's economy ``picked up somewhat,'' with
increases in manufacturing.
St. Louis--Economic activity expanded slowly. Manufacturing and
service sectors reported improvement. Retail and auto sales declined.
Kansas City, Mo.--Retail sales and manufacturing improved. Housing
and energy sectors ``maintained a brisk pace.'' Labor markets remained
sluggish.
Dallas--Manufacturing and retail sales increased. Energy prices
rose, causing a rise in other prices.
Cleveland--The region's economy improved slowly. Industrial
production increased from a year earlier, with a surge in demand for
steel.
Boston--Manufacturers reported stabilized or increased revenues.
Commercial real estate has weakened in Boston.
New York--Economic activity was ``increasingly robust'' with strong
retail sales and improved labor markets.
Philadelphia--Manufacturers reported gains in business and expect
improvements. Retail and auto sales increased from a year earlier.
Richmond, Va.--The region's economy showed signs of growth.
Manufacturing grew. Farming was slowed by severe winter weather.
Atlanta--Commercial real estate improved, housing remained strong
and retail sales met economic forecasts.
Jobs are created after there is some optimism. A year ago,
the Dow Jones Industrial was 7,250. Today, we stand at 10,595.
The Nasdaq is over 2,000--well over 2,000.
The fundamentals are in place for job opportunities and
growth, and we finally start seeing the economy starting to
click, and it is proclaimed here on the papers of the New York
Times about jobs hiring. Manufacturing orders will start
increasing. Representative Jerry Weller and others who have
sponsored tax reductions for deployment of capital in
industries thank you for looking into the union issues so that
they comply with the laws of this Nation. There are hundreds of
thousands of good, hardworking union members that should expect
to see their pensions solvent, but nobody wants to talk about
that because that is absolutely sacrosanct. You cannot talk
about union pensions.
They want to make charges against corporate America. Let us
look at all of the books of all of these unions, and of chief
executives, and of corporations to make sure the hardworking
people that worked 40 years in the steel industry have a
pension to rely on. That is what you have done, and I am proud
of you for it.
Let me stop about One-Stop Service Centers because I have
been in several these last couple of weeks. They work. Minority
populations largely are in those centers finding jobs, being
trained, being taught to do resumes. The joy in their eyes and
faces, as I entered those rooms, looking at a Republican Member
of Congress that I am certain they never voted for, saying
thank you to the Department of Labor for bringing this job
opportunity. Multilingual telling me that this is the first
time they have had hope in their life. These are real examples.
Now, they can sit here and pontificate about this gloom and
doom, but I see firsthand in my district, in one of the poorest
parts of my 16th Congressional District, I have the richest in
Jupiter Island, the poorest in Glades County, these people
appreciate the work you are doing at the Department of Labor.
Now, again, if this country is going to heal itself and
build itself up, we better stop this ranting and raving and
start focusing on making this country safer for the worker,
more prosperous for the investor, and the President has laid
the template down.
Now, I did miss the exchange about off-shore corporations.
Did I hear the name Heinz mentioned earlier or was I mistaken?
I just want to make sure, as we talk about companies going
overseas, we talk about all of them. What we need to do to help
those companies is not worry and simply accuse them of being
anti-American, we have got to fix the Tax Code so they feel
competitive to stay in this country.
There is a reason Daimler-Chrysler is first, Daimler being
the first name there business the Europeans have a better
advantage taxwise than we in America. Job loss, we can work on
that if my colleagues would join in some of the dialogue. We do
not have every perfect answer as Republicans, but we are at the
table trying to solve these critical problems because every
Member of this Committee, including the President, cares about
the unemployed worker. Fortunately, for Florida, led by
Republican Governor Jeb Bush, our unemployment is the lowest in
the Nation because he has been working for entrepreneurial
capital, looking to develop better means of infrastructure.
So, I just--I know I didn't ask you a question, and you are
probably thankful----
[Laughter.]
My point is, having listened to some of the diatribe today,
you deserve better, you have worked hard, you have investigated
things most people would never have attempted to take on
because of the political ramifications, but you, after all,
were looking for that autoworker who has worked 30 years on an
assembly line, you were looking for that janitor that may have
been members of a union, and all they want to do is when they
go to their mailbox, the check promised by those union leaders
would, in fact, be delivered because the solvency of the
accounts were made possible due to your leadership.
I guess I yield, Mr. Chairman, as much as I don't want to.
Chairman THOMAS. I thank the gentleman for his comments.
The Chair feels compelled, based upon the question from the
gentleman from California, to make sure that the record is
complete, rather than having an answer provided outside the
record when the gentleman from California, Mr. Becerra wished
the Chair to cite chapter and verse in writing.
Under the Manual of Rules that the Committee on Ways and
Means during the 108th Congress adopted January 29, 2003, the
first rule under Part 1 of the Committee is that, ``Except as
provided in Subdivision B, the rules of the House or the rules
of its committees and subcommittees so far as is applicable.''
Under the Jefferson Manual Rules of the House, Rule I,
Clause 2, states, ``The Speaker shall preserve order and
decorum.'' Under the footnotes and the history of the House of
Representatives, recognition is within the discretion of the
Chair. That is reflected in the Committee on Ways and Means
rules under Rule 14, ``Questioning of Witnesses.'' The rule
states, ``Committee Members may question witnesses only when
recognized by the Chairman for that purpose.''
Additional parts of the history of Rule I, Clause 2, state,
``A Member's comportment may constitute a breach of decorum,
even though the content of that Member's speech is not, in
itself, unparliamentary.'' Under this standard, the Chair may
deny further recognition to a Member engaged in unparliamentary
debate who ignores repeated admonitions by the Chair to proceed
in order.
The written testimony of the Committee will be the written
response to the gentleman from California.
The Chair wishes to thank the Secretary for her willingness
to come before the Committee and to respond. All of us believe
that every American who wants a job should have a job, and we
are going to do everything within our power to make sure that
that situation occurs. Although it has never occurred in human
history, we are going to strive to do it under the current Bush
Administration and certainly in the second Bush Administration.
The hearing stands adjourned.
Ms. CHAO. Thank you very much.
[Whereupon, at 12:18 p.m., the hearing was adjourned.]
[Questions submitted from Representative Camp to Ms. Chao,
and her responses follow:]
Question: In my district, we know that Electrolux will be closing
its doors next year and 2,700 people will be out of work. I don't have
to tell you that in Greenville, Michigan where this company is located
this action is going to be devastating for the workers, the local
community and its economy.
But we also know that in many places communities have pulled
together in the face of change and pulled through stronger than before.
These are highly skilled and motivated workers, and they would be
excellent hires for a new company moving into this area, or for another
company already there that is expanding. But that takes understanding
what skills will be needed in the future, and retraining these workers
to ensure they have what it takes to compete. I would much rather
measure our compassion for these hardworking people by how successful
we are in helping them find new jobs, rather than how much in
unemployment benefits we can promise.
What can the Department of Labor do to help these workers and this
community now, before they are laid off, to find new and hopefully
better jobs?
Answer: Pending the response from the U.S. Department of Labor.
Question: Secretary Chao, Michigan, as you know, has a very
significant manufacturing presence. One out of every five manufacturing
jobs have left the State since 2000. As the old saying goes, an ounce
of prevention is worth a pound of cure, and I think we need to start
putting this philosophy into action. I would like to take this moment
to talk about what can be done before we need to provide benefits for
displaced workers.
Are there warning signs that we can identify to become more
proactive?
How can we in Congress help this `ounce of prevention is worth a
pound of cure' mentality become a road map?
Answer: Pending the response from the U.S. Department of Labor.
Question: Madame Secretary, I appreciate your responses to these
tough and complex issues. I would like to continue this conversation
and meet with you and your staff about what more can be done to help
not only these workers but every community dealing with the growing
pains of an evolving economy.
Answer: Pending the response from the U.S. Department of Labor.
[Submission for the record follows:]
Statement of Ross Eisenbrey, Economic Policy Institute
In the face of high unemployment, near-record long-term
unemployment, and increasing job losses due to imports and the off-
shoring of U.S. jobs, the President's FY 2005 budget request for
unemployment insurance, job training, and trade adjustment assistance
is plainly inadequate. Despite the growing need for services and income
support, the President and Secretary Chao are asking for less and plan
to do less for the victims of globalization and failed economic
policies.
The merchandise trade deficit--largely because of increasing
imports of manufactured goods--reached an all-time record high of $549
billion in 2003 and continues to worsen. Payroll jobs in January 2004
were 2.3 million below the level in March 2001, the worst downturn in
jobs since the data series started in 1939. The tepid economic recovery
has left 8.3 million American workers currently unemployed. Many of
these individuals are the victims of trade and dislocation who will
never get their old jobs back. In fact, more than 1.9 million workers
were unemployed for more than six months in 2003. These ``long-term
unemployed'' now make up 22% of the total unemployed, the highest rate
of long-term unemployment since 1983. Gross domestic product growth and
a rising stock market are not translating into job creation.
Despite these clear signs that the plight of dislocated and trade-
impacted workers is getting worse, the President plans to reduce
spending on unemployment insurance by $4 billion, cut spending for the
retraining of dislocated workers, and proposes substantial cuts in
trade adjustment assistance. Congress should reject this callous
treatment of those who are most clearly being failed by the
Administration's policies.
Trade Adjustment Assistance (TAA)
The TAA program benefits only those workers who lose their jobs
because of increasing imports of goods due to U.S. trade agreements
with other nations. A petition must be filed with the Department of
Labor (DOL), and DOL investigates to determine whether to certify
(i.e., approve) the petition and provide benefits to dislocated
workers. DOL routinely denies petitions from service and other non-
manufacturing industries, even though those jobs have also been lost as
a result of international competition. (A February 2004 survey of CEOs
conducted by the Business Council found that 54% of the firms had
shifted domestic employment abroad in the last year.)
Although the program's design limits its beneficiaries, there are
also problems with DOL's administration of TAA. The U.S. Court of
International Trade recently reprimanded DOL for ``flaws and
dysfunctions'' in its administration of TAA and noted that DOL's
``dereliction of duty'' is depriving workers of the aid they need. Most
dislocated manufacturing employees get no help from TAA. For example,
the U.S. lost more than 500,000 manufacturing jobs in 2003, but only
195,738 workers were certified under the TAA program in FY 2003. While
DOL has yet to publish how many certified individuals were actually
served under TAA in program year 2003, DOL's program year 2002 numbers
(for June 30, 2002 to June 30, 2003) show only 68,568 individuals
received services under TAA.
TAA's income support includes 52 weeks at the rate of regular State
UI compensation, with the possibility of an additional 26 weeks of
income support in the form of basic Trade Readjustment Allowances (TRA)
when the worker is enrolled in TAA training or has recently completed
TAA training. In addition to income support, some workers receive basic
reemployment services, job search allowances, and training services.
Training services, however, are capped at a maximum of $259 million a
year. TAA also provides limited health insurance coverage assistance--a
tax credit of up to 65% of the monthly health insurance premium (COBRA)
paid by eligible participants. This tax credit has not been sufficient
to ensure health care coverage for unemployed workers, because the
COBRA premiums, even with the tax credit, are financially out of reach
for most unemployed workers. Nationwide, only about 5% of eligible
employees have been able to use the tax credit, which should be
increased to 90%.
The FY 2005 budget proposes to maintain the same level of funding
for TAA training, $259 million, which is a $4 million cut in real terms
from FY 2004. This cut comes at a time when training money is crucial,
the number of TAA beneficiaries is on the rise, and there are not
enough training funds to meet the demand. For example, last fall
several States ran out of TAA training money before the end of the
fiscal year. The FY 2005 budget proposes a total of $48 million in wage
insurance benefits (a $38 million increase), which pays workers a
temporary supplemental income when they take a new job that pays a
lower salary than the job they lost. However, the FY 2005 budget
proposes a 29% decrease in funding authority for TAA benefits, from
$1.06 billion in FY 2004 to $750 million in FY 2005. In the past,
actual TAA program outlays have been far below TAA budget authority:
TAA outlays were less than 60% of the authorized levels in FY 2003 and
2004. For example, in FY 2004 the TAA program had a total budget
authority of $1.338 billion, but outlays only totaled $770 million.
Because of inadequate outreach by the DOL, the full TAA benefit
allocation has not reached workers who need the assistance. Instead of
improving DOL's outreach and program administration, the President's
budget proposes significant cuts to the TAA benefits program. DOL must
do a better job of getting TAA benefits into the hands of the workers
who need it and should not just restore funding for TAA benefits to the
FY 2004 level but increase it.
Dislocated Worker Program
The dislocated worker program provides skills training and job
placement services to workers who have been laid off. Unfortunately,
this program has not kept up with the demand for its services.
According to recently released program year 2002 figures (for June 30,
2002 to June 30, 2003), only 71,871 individuals received training
services (e.g., skills training and retraining, on-the-job training,
job readiness training, adult education and literacy) under the
dislocated worker program, and 68,181 received only core and intensive
services (i.e., assessment, job search, informational services,
assessments, some training).
The FY 2005 budget cuts $79 million in dislocated worker formula
grants to States, a 7% decline from FY 2004 levels. These are not the
first cuts the Administration has made--the dislocated worker program
grant funding to States will have been cut 11% from over $1.2 billion
in FY 2002 to less than $1.1 billion the FY 2005 proposal. The
dislocated worker national reserve program funding has increased 3%
from FY 2004 levels, but has been cut by 8% since FY 2002. As a result,
the average dislocated worker program expenditure per worker has
declined more than $100 per unemployed worker between FY 2001 ($274/
worker) and the FY 2005 budget proposal ($167/worker). These cuts come
at a time when long-term unemployment is at the highest level in 20
years. Funding for an effective dislocated worker program should be
increased, not decreased, when so many Americans are out of work. The
dislocated worker program should make these workers whole, by
identifying new careers for them, providing the training they need to
enter a new field, and helping them secure a new job.
Unemployment Insurance
Job seekers whose employers have paid FUTA taxes on their behalf
may receive unemployment compensation, which typically replaces up to
50% of a worker's salary for up to 26 weeks. In March 2002, Congress
enacted the Temporary Extended Unemployment Compensation (TEUC) program
to guarantee workers an additional 13 weeks of benefits after their
State benefits expired. That program was extended twice, but expired in
December 2003. Since then, workers who run out of regular State UI
benefits are no longer eligible for the additional 13 weeks of
benefits. There is still a vital need for TEUC, given the 1.9 million
unemployed who have been out of work for more than six months. With
only one job for every three unemployed workers, it is extremely
difficult for these workers to find a new job, a fact reflected in the
falling index of consumer confidence. Approximately 760,000 workers
have exhausted their State UI benefits since December 22, 2003 without
receiving any Federal benefit--this is an all-time record. The House
passed a measure to extend TEUC in early February, and a recent Senate
measure was supported by a bipartisan majority. It is time for the
Administration to show real compassion and leadership by supporting a
six month extension of TEUC benefits, making it retroactive to December
2003.
The Administration's Legislative Priorities
Many of the Bush Administration's legislative priorities are poorly
chosen. Some examples include:
Block granting existing programs. The FY 2005 Budget
seeks to consolidate four existing employment training programs (WIA
adult program, WIA dislocated worker program, Employment Service State
grants, and reemployment service State grants) into a single, large
block grant. The Senate previously rejected such a measure. Eliminating
a program targeted at the needs of dislocated workers reduces even
further the likelihood that their needs will be met.
Employment services. The Budget cuts $56 million (12%) in
State Employment Service grants, from $787 million in FY 2004 to $696
million in FY 2005. The budget zeroes out all funding for Employment
Service reemployment grants that were funded at $35 million in FY 2004.
Given the large number of unemployed workers and the inadequate number
of jobs being created, this is not the time to cut Employment Services.
New programs in FY 2005. The President's budget also
includes funding for two entirely new programs--Community Based Job
Training Grants and a pilot demonstration for Personal Re-Employment
Accounts (PRA)--which make up its ``Jobs for the 21st Century'' plan.
The job training component consists of a community college grant
program based on partnerships with industries. This program is so
poorly funded ($250 million) it is insufficient to compensate for cuts
to community college training programs in other parts of the FY 2005
education budget. The PRA initiative is a pilot project funded at $50
million that would provide $3,000 to individuals likely to exhaust
their UI benefits so as to help them purchase employment services
(e.g., training), child care, and transportation. Under the PRA
initiative, workers would actually qualify for less funding than they
would under WIA or TAA, and acceptance of a PRA disqualifies them from
WIA intensive or training services for one year or more. There is,
moreover, little empirical evidence that such cash incentives help the
long-term unemployed find work. In fact, reemployment bonuses have been
particularly ineffective when given to displaced workers and others who
are structurally unemployed. Finally, PRAs are not a viable alternative
to extending unemployment insurance for the long-term unemployed and
should not be used as such.
Conclusion
The President's budget grossly underfunds the essential Federal
programs that provide a safety net for workers dislocated by trade,
structural changes in the economy and off-shoring. Congress must act to
protect the future of these workers and their families.