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99–663 2005

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 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

BILL THOMAS, California, Chairman 

PHILIP M. CRANE, Illinois 

E. CLAY SHAW, JR., Florida 

NANCY L. JOHNSON, Connecticut 

AMO HOUGHTON, New York 

WALLY HERGER, California 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

JIM NUSSLE, Iowa 

SAM JOHNSON, Texas 

JENNIFER DUNN, Washington 

MAC COLLINS, Georgia 

ROB PORTMAN, Ohio 

PHIL ENGLISH, Pennsylvania 

J.D. HAYWORTH, Arizona 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

SCOTT MCINNIS, Colorado 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

ROBERT T. MATSUI, California 

SANDER M. LEVIN, Michigan 

BENJAMIN L. CARDIN, Maryland 

JIM MCDERMOTT, Washington 

GERALD D. KLECZKA, Wisconsin 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

MAX SANDLIN, Texas 

STEPHANIE TUBBS JONES, Ohio 

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 in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

iii 

C O N T E N T S 

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 

(1) 

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:] 

2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

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. 

3 

FORMATTING REQUIREMENTS: 

Each statement presented for printing to the Committee by a witness, any written statement 

or exhibit submitted for the printed record or any written comments in response to a request 

for written comments must conform to the guidelines listed below. Any statement or exhibit not 

in compliance with these guidelines will not be printed, but will be maintained in the Committee 

files for review and use by the Committee. 

1. All statements and any accompanying exhibits for printing must be submitted electronically 

to hearingclerks.waysandmeans@mail.house.gov, along with a fax copy to (202) 225–2610, in 

Word Perfect or MS Word format and MUST NOT exceed a total of 10 pages including attachments. Witnesses are advised that the Committee will rely on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All statements must include a list of all clients, persons, or organizations on whose behalf 

the witness appears. A supplemental sheet must accompany each statement listing the name, 

company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

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 accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

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 

4 

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. 

f 

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 

5 

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:] 

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. 


Insert 99663A.001
6 

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. 

f 

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 hardearned 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. 

7 

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 proVerDate Aug 04 2004 23:53 Aug 22, 2005 Jkt 077629 PO 00000 Frm 00011 Fmt 6633 Sfmt 6602 E:\HR\OC\99663A.XXX 99663A
8 

gram 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 efVerDate Aug 04 2004 23:53 Aug 22, 2005 Jkt 077629 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 E:\HR\OC\99663A.XXX 99663A
9 

fectively 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. 

10 

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. 

11 

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 faceto-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 OneStop 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. 

12 

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 

13 

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. 

f 

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. 

14 

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? 

15 

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—— 

16 

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 

17 

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. 

18 

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. 

19 

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. 

20 

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 fulltime, 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. 

21 

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—— 

22 

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. 

23 

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? 

24 

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 mid1990s? 

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. 

25 

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. 

26 

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 

27 

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 Con- gress, 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 wonVerDate Aug 04 2004 23:53 Aug 22, 2005 Jkt 077629 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 E:\HR\OC\99663A.XXX 99663A
28 

dering 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. 

29 

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 AdVerDate Aug 04 2004 23:53 Aug 22, 2005 Jkt 077629 PO 00000 Frm 00033 Fmt 6633 Sfmt 6602 E:\HR\OC\99663A.XXX 99663A
30 

ministration 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 

31 

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—— 

32 

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. 

33 

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, 

34 

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? 

35 

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. 

36 

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. 

37 

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 

38 

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. 

39 

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:] 

40 

ETA Discretionary Grants Past Three Years 

Ohio—11th Congressional District 

As of March 31, 2004 

Name of 

Grantee Type of Grant 

Award 

Amount 

Term (Extension 

Requests may be 

pending) 

1 Youth 

Opportunities 

Unlimited 

2000 East 

Ninth Street— 

Suite 820 

Cleveland, 

OH 44115 

School to Work 

Urban Rural Opportunity Grant 

$2,700,000 9/1997–9/2003 

2 City of 

Cleveland 

Youth 

Opportunity 

Grant 

WIA Youth Opportunity 

(Competitive Awards) 

$28,000,000 7/2000–6/2005 

3 Cuyahoga 

County 

Workforce 

Investment 

Board 

Dislocated 

Workers Skills 

Shortage 

WIA Dislocated Workers National 

Reserve—DEMOS 

$1,165,000 5/2001–8/2003 

4 Wire-Net 2

Detroit 

Avenue— 

Suite #3 

Cleveland, 

OH 44102 

WIA P&D Earmark 

Westside Industrial Retention and 

Expansion Network 

$765,000 12/2001–12/2002 

5 Wire-Net 1

Detroit 

Avenue— 

Suite #3 

Cleveland, 

OH 44102 

WIA P&D Earmark 

Advancing Manufacturing Sector 

Training Initiatives in NE Ohio 

$500,000 2/2003–1/2004 

6 Cleveland 

State 

University 

2121 Euclid 

Avenue 

Cleveland, 

OH 44115 

WIA P&D Earmark 

The Nuts and Bolts of Governance: 

Research and Executive Training for 

Prospective Members of the State 

Legislature 

$100,000 10/2003–10/2005 

7 Wire-Net 2

Detroit 

Avenue— 

Suite #3 

Cleveland, 

OH 44102 

WIA P&D Earmark 

Westside Industrial Retention and 

Expansion Network 

Enhancing Cross-Sectoral Training 

in the Manufacturing Cluster 

$500,000 Pending 2004 

8 Ohio 

Department 

of Job and 

Family 

Services 3

WIA Formula Grant to State for 

Adult, Dislocated Worker and Youth 

Employment and Training Programs 

State Allocation to Local WIA 

Area 2 (Cuyahoga County outside 

of the City of Cleveland) 

State Allocation to Local WIA 

Area 3 (City of Cleveland) 

$4,398,355 

$2,814,382 

$2,853,502 

$15,804,507 

$15,870,041 

$15,902,808 

7/2001–6/2002 

7/2002–6/2003 

7/2003–6/2004 

7/2001–6/2002 

7/2002–6/2003 

7/2003–6/2004 

Notes: 

1Grant activities in 10th, 11th, 14th, and 17th Congressional Districts. 

2Grant 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). 

f 

41 

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. 

42 

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 pay- ments 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 

43 

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 

44 

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—— 

45 

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 singleand 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. 

f 

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 

46 

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 

47 

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 

48 

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.’’ 

49 

[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 threemonth 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 

50 

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. 

f 

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, 

51 

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. 

52 

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. 

53 

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. 

f 

[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 

54 

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 

55 

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 longterm 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. 

Æ