American workers today face an economic double whammy: rampant unemployment exacerbated by simultaneous cuts in assistance to unemployed workers.
The culprit in the first is a combination of economic forces and Bush
administration policies. The culprit in the second is the Bush team alone.
Consider the facts: Between 1992 and 2000, with the Clinton administration
in charge, the nation's economy generated more than 20 million new private
sector jobs. Since George W. Bush took office in 2001, the nation has
lost 3.1 million private sector jobs. At this rate, Bush will become
the first president since Herbert Hoover to produce a net job loss during
his first term of office, and the first since Eisenhower to produce a
net job loss over any term of office.
On top of that, Bush will have to take the rap for turning a bad economic
picture into a living nightmare for millions of workers by undercutting
the very program designed to help them get through tough times and adjust
to new economic realities: unemployment insurance (ui) and dislocated
worker assistance. In its single-minded crusade to shrink the federal
government back to 19th century levels, the Bush administration has even
proposed the elimination of the government's quarterly mass layoff statistics,
quashing the very data that puts the lie to its own policies.
Unemployment and underemployment add up to a national crisis. In addition
to 3.1 million lost jobs, 1.4 million Americans are working part time
even though they want full-time work. The unemployment rate shooting up
from 4.1 to 6.4 percent makes more than 9.4 million Americans officially
jobless. More than one-fifth of them have been without work for longer
than six months, the largest proportion in a decade. Yet rather than strengthening
UI and dislocated worker job search assistance and retraining support,
the Bush administration casts these workers adrift without a life preserver.
This approach should be replaced by a policy of equipping workers with
the tools they need to cope.
Holes in the Safety Net. If suppressing embarrassing economic
data were all the harm the administration was up to, it would be bad enough.
But the Bush team goes farther: It has no qualms about driving the already
meager levels of UI benefits even lower, leaving many unemployed workers
barely able to scrape by. Consider its sins:
1) The Bush administration has consistently opposed temporarily extending
UI benefits for workers who have exhausted their benefits. After the Sept.
11 attacks, the administration was willing to go along with a bailout
of the airlines, but opposed providing extended benefits to the nearly
200,000 airline workers who lost their jobs in the aftermath. Bush initially
opposed efforts passed by Congress in May 2003 to extend UI benefits to
millions of workers who had used up their benefits, despite the fact that
the unemployment rate was rising. Moreover, during the early 1990s' recession,
most workers who exhausted their benefits received 26 weeks of extended
benefits. In contrast, in the current slowdown, the administration and
the Republican Congress have grudgingly granted only 13 weeks.
2) Not content with just making sure workers don't get extended benefits,
the Bush administration is also working to make sure that they get fewer
benefits by reducing the tax that employers pay into the unemployment
insurance trust fund. Laughably called the "New Balance," the
administration's proposal would have cut the federal payroll tax paid
by employers on the first $7,000 of wages by three-quarters, from 0.8
percent to 0.2 percent. In addition, most of the federal rules governing
the program would be repealed. Thanks to the long-established "race-to-the-bottom"
dynamics of setting UI taxes and benefits in the states, the New Balance
would almost certainly lead to most states imitating the low-tax, low-benefit
states, resulting in not only lower benefits but also in millions fewer
workers eligible to collect UI. Luckily, Congress did not take up the
proposal in 2002, but a version of the proposal has resurfaced in the
president's 2004 budget.
3) The administration has also proposed creating Personal Reemployment
Accounts (PRA) of up to $3,000 for specially designated laid-off workers
who are more likely to remain unemployed for 26 weeks. Workers who go
back to work sooner would receive a bonus. Like many Bush proposals, what
initially sounds like a good idea ends up containing major problems. First,
a reemployment bonus cannot motivate workers to find jobs that do not
exist. According to the Labor Department's Job Opening and Labor Turnover
Survey (JOLTS), there are now more than three unemployed workers for every
available job opening. The high rate of unemployment is not caused by
a lack of incentives for workers to find jobs. Bush pushes PRA's by arguing
that "the system needs to be simplified and focused on the consumer."
We couldn't agree more, but this means making a firm commitment to providing
help to workers. In contrast, while PRAs give workers more choice, they
also appear to be a stalking horse for devolution. The ultimate withdrawal
of the federal government from this area will force the states ultimately
to pick up the tab, resulting in dramatically smaller benefits.
"Here's Your Last Paycheck: Good Luck." For the Bush
administration, it's not enough to cut unemployment insurance. It is also
cutting programs for job search assistance and employment re-training.
Federal funding per dislocated worker has fallen from about $300 in the
last year of the Clinton administration to just $161 now, putting the
United States near the bottom of all advanced nations in support to dislocated
workers. It's not just funding for dislocated workers that is being cut,
but employment and training in general. For example, the Bush administration
has proposed cutting the funds for training workers in IT and technical
occupations funded by the fees employers pay on
H1-b visa applications for high-skilled workers. If the initiative succeeds,
$130 million will be cut from assistance to help workers gain these high-tech
skills. Rather than reform programs, the Bush administration has since
2002 cut funding for training and employment programs by more than $680
million.
This double-whammy of more lay-offs and less support has meant that four
months before the end of the 2003 fiscal year, many states are running
out of funds to help laid-off workers. This was brought all too close
to home for the 100 workers in Newton, Iowa, who were laid off when Maytag
transferred a production line to Mexico. Normally, these workers would
be eligible for benefits under the Trade Adjustment Assistance Act. But
because there have been so many layoffs, the state informed the workers
that they would have to wait until at least October to get support for
retraining. Iowa is not alone. A number of other states, including Michigan
and Illinois, are in a similar fix. When such funding shortfalls happened
in the Clinton administration, the Department of Labor provided emergency
grants to states. So far, the Bush administration has given them only
piecemeal help.
If the administration and the Republican Congress get their way, this
devolution of responsibilities from the federal government to the states
will be a prelude of what's to come. Republicans in the House have proposed
major changes in the Workforce Investment Act (the legislation governing
federal activities), including consolidating the various federal titles
into one block grant and eliminating the U.S. Employment Service. If this
passes, not only will there be less targeting of funds to the workers
or states that need them most, but the legislation will be a first step
in devolving both authority and funding responsibility to the states.
Every-Man-For-Himself. Why is the Bush administration throwing
a double whammy at workers at a time when high unemployment should be
bad enough? The answer is ideological. The policies are a direct result
of the administration's every-man-for-himself philosophy. Former Bush
administration economic advisor Glen Hubbard summed that up when he stated
that, "because adjustment is a market phenomena, a reliance on individuals
is the best adjustment policy." In part, that's because, as in so
many other policy areas, the Bushies believe that in this area, government
makes things worse. After all, they believe that extending UI benefits
when unemployment is high "creates more unemployment." Bush's
message is: "Don't expect any help. After my tax cuts, you won't
need these government programs because you'll get to keep more of your
money."
At the end of the day, the choice couldn't be starker. The Bush administration
believes that dislocated workers should be on their own. Democrats, by
contrast, believe that because adjustment is a market phenomenon, a reliance
on individuals empowered with effective tools is the best adjustment
policy. Instead of cutting support for dislocated workers, we should equip
them with new tools for success. We should expand and reform unemployment
insurance, including establishing a floor that state UI programs could
not go below and ensuring that millions of part-time and low-wage workers
are covered. At the same time, we should make it easier for workers to
enter training while collecting UI. We should restore funds for assisting
dislocated workers. We should build upon steps taken by Congress in 2002
and expand the 65 percent refundable tax credit for health insurance to
cover all dislocated workers.
These are steps that a New Democrat administration would take to make
sure that American workers get the help they need to manage economic transitions.
