[House Hearing, 108 Congress]
[From the U.S. Government Printing Office]





  PRESIDENT'S FISCAL YEAR 2005 BUDGET FOR THE U.S. DEPARTMENT OF LABOR

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 4, 2004

                               __________

                           Serial No. 108-41

                               __________

         Printed for the use of the Committee on Ways and Means


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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana               JIM MCDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania           LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               EARL POMEROY, North Dakota
JERRY WELLER, Illinois               MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri           STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
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.


                            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

 
  PRESIDENT'S FISCAL YEAR 2005 BUDGET FOR THE U.S. DEPARTMENT OF LABOR

                              ----------                              


                        THURSDAY, MARCH 4, 2004

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:13 a.m., in 
room 1100, Longworth House Office Building, Hon. Bill Thomas 
(Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 26, 2004
FC-15

                      Thomas Announces Hearing on

              President's Fiscal Year 2005 Budget for the

                        U.S. Department of Labor

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a hearing on 
the President's fiscal year 2005 budget for the U.S. Department of 
Labor. The hearing will take place on Thursday, March 4, 2004, in the 
main Committee hearing room, 1100 Longworth House Office Building, 
beginning at 10:00 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from the Honorable Elaine Chao, 
Secretary, U.S. Department of Labor (DoL). However, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee and for inclusion in the 
printed record of the hearing.
      

BACKGROUND:

      
    On January 20, 2004, President George W. Bush delivered his State 
of the Union address, in which he discussed several legislative 
initiatives. The President provided further details of these proposals 
on February 2, 2004, in his fiscal year 2005 budget as submitted to the 
Congress. The budget for DoL included initiatives to improve the 
integrity of the Nation's unemployment compensation program, create 
personal reemployment accounts to help laid-off workers return to work, 
and improve opportunities for worker retraining.
      
    In announcing the hearing, Chairman Thomas stated, ``The 
President's budget included proposals to strengthen the economy and 
increase the number and quality of jobs for our workers. That includes 
several important proposals under the U.S. Department of Labor that 
fall within the jurisdiction of the Committee. I look forward to 
Secretary Chao's discussion of the President's proposals to strengthen 
the economy and help workers get new or better jobs.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing will be on DoL proposals in the 
President's fiscal year 2005 budget within the Committee's 
jurisdiction.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person or organization wishing to submit written 
comments for the record must send it electronically to 
[email protected] 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.
      

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 
[email protected], 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.

                                 

    Chairman THOMAS. Secretary Chao, welcome before the 
Committee again. I believe the last time you were with us was 
in March. Any written testimony you have will be made part of 
the record, and you can address us as you see fit in the time 
available. We have new microphones, so there is a little button 
you have to push. Thank goodness you do not have to speak 
directly into it. So, we have moved into the latter part of the 
20th century.
    [The opening statement of Chairman Thomas follows:]

    Opening Statement of The Honorable Bill Thomas, Chairman, and a 
        Representative in Congress from the State of California

    Today we welcome Secretary Elaine Chao of the U.S. Department of 
Labor to discuss the Administration's fiscal year 2005 budget proposals 
to help more Americans find new and better jobs.
    Since Secretary Chao appeared before us last March, our economy has 
turned a corner. Tax cuts allowed taxpayers to keep more of their own 
hard-earned money and resulted in impressive economic growth. Signs of 
our strengthened economy include: a surge in productivity; record-high 
levels of homeownership; increased manufacturing activity; low 
inflation and interest rates; reduced unemployment; and new job 
creation.
    When workers lost their jobs as a result of recession and the 
terrorist attacks on September 11th, Congress responded with needed 
help. In addition to regular unemployment benefits, 8 million 
unemployed workers received $24 billion in extended benefits and States 
were given $8 billion to provide additional assistance. Congress also 
improved and expanded the Trade Adjustment Assistance program, which 
provides generous cash, retraining, and health care benefits to 
dislocated workers.
    America has the best trained, most diverse, hardest-working, and 
most innovative workforce in the world. But despite recent economic 
gains, many workers remain uncertain about the future and their jobs. 
That uncertainty is not surprising in a time of war, ongoing terror 
alerts and increasing global competition. The challenge is to develop 
new ways to help workers emerge stronger than before. That means tax 
policy that promotes more innovation and investment here at home; trade 
policy that continues our engagement with the world; and education and 
training that helps American workers stay ahead of the curve in a 
worldwide economy.
    We also need to keep in perspective that reacting to rhetoric won't 
create jobs. Isolationism won't work. Putting bureaucrats in charge of 
whom American companies can hire is not the answer. Those policies 
would be a step backward.
    Our objective is to produce more and better jobs right here in the 
U.S., and we look forward to learning more about the Administration's 
proposals to accomplish this goal. Before hearing from the Secretary, I 
would like to first recognize the gentleman from New York, Mr. Rangel, 
for any comments he would like to make.

                                 

    Mr. CARDIN. Mr. Chairman, would it be possible to make a 
quick observation. I think the opening statements that have 
been made so far were related to the views and estimates.
    Chairman THOMAS. I would tell the gentleman that the 
Chairman's statement was a relatively general one, but if the 
gentleman wants to, the Chair is prepared to make additional 
statements as well if we want to do that. If you were to be the 
respondent for the minority, the Chair is more than willing to 
recognize the gentleman from Maryland for any remarks he may 
wish to make prior to the Secretary's presentation.
    Mr. CARDIN. Thank you. At this point?
    Chairman THOMAS. At this point.
    Mr. CARDIN. Thank you. I didn't know whether Mr. Rangel 
wanted to let me speak first. Therefore I yield to Mr. Rangel 
for his comments.
    Mr. RANGEL. Thank you. Madam Secretary, I am going to yield 
to the Ranking Member of the Committee of jurisdiction, but I 
do hope in your remarks that you will be able to clarify the 
positions that have been taken by the Economic Report of the 
President as related to the job projections, the intent of the 
Administration to change the descriptions of manufacturing 
jobs, for McDonald's workers, the offshore outsourcing 
incentives for jobs, which Greg Mankiw indicated that it was 
good for the economy, and your position on unemployment 
compensation (UC) for the roughly 100,000 people who become 
ineligible each week for assistance.
    I yield at this time to Mr. Cardin.
    Mr. CARDIN. Thank you, Mr. Rangel. Madam Secretary, 
Secretary Chao, it is a pleasure to have you before the 
Committee, and we certainly look forward to your testimony. 
There are certainly a number of questions that many of us have 
related to President Bush's policies on job creation and on 
helping the unemployed workers.
    The first question I would like you to answer as you make 
your presentation is whether President Bush supports extending 
unemployment benefits for workers who have lost their jobs 
through no fault of their own. Last year, Congress allowed the 
extended benefit program to expire, and the President, quite 
frankly, said nothing in that regard. As a result, three-
quarters of a million workers have been denied extended 
unemployment benefits in just the last 2 months.
    Some of my colleagues on the other side of the aisle have 
said that these workers do not deserve any additional 
assistance because unemployment has been higher in the past. 
That overlooks the fact that the extended benefits program has 
terminated in the past only after the economy has recovered all 
the jobs lost in that recession. In fact, in early 1990, the 
program did not stop until nearly 3 million new jobs had been 
created. Today, we have 2.4 million fewer jobs than when the 
recession started in March 2001. This means, of course, that 
the unemployed have limited job prospects, a fact revealed by 
the data.
    The number of long-term unemployed Americans, meaning those 
jobless for 6 months or longer, remains nearly three times 
higher than in prior recessions. As the chart shows, nearly 2 
million now fall into this category.
    [The chart follows:]

    [GRAPHIC] [TIFF OMITTED] T9663A.001
    

    Furthermore, the exhaustion rates for regular UC which 
stops after 6 months have stayed at record levels. More than 4 
out of every 10 unemployment recipients run out of benefits 
without finding work. These are the people who need extended 
benefits. Over the last month, a majority in both the House and 
the Senate have voted to extend unemployment benefits. Yet we 
have seen no action because of the silence in the White House.
    We have not heard whether President Bush will support or 
not support the extension of unemployment benefits, and I hope 
during the course of this hearing you can clarify the 
Administration's position. Thank you very much, Mr. Chairman.
    [The opening statement of Mr. Cardin follows:]

Opening Statement of The Honorable Benjamin L. Cardin, a Representative 
                 in Congress from the State of Maryland

    I would like to thank Secretary Chao for joining us today. There 
are certainly a number of questions that many of us have related to 
President Bush's policies on job creation and on helping unemployed 
workers.
    The first question I would like to hear answered is whether 
President Bush supports extending unemployment benefits for workers who 
have lost their jobs through no fault of their own. Last year, Congress 
allowed the extended benefits program to expire, and the President said 
nothing.
    As a result, three-quarters of a million workers have been denied 
extended unemployment benefits in just the last two months.
    Some of my colleagues on the other side of the aisle have said 
these workers do not deserve any additional assistance because 
unemployment has been higher in the past. But that overlooks the fact 
that extended benefit programs have been terminated in the past only 
after the economy had recovered all of the jobs lost in the recession. 
In fact, in the early 1990s, the program did not stop until nearly 3 
million new jobs had been created. Today, we have 2.4 million fewer 
jobs than when the recession started in March of 2001.
    This means, of course, that the unemployed have limited job 
prospects--a fact revealed by the data. The number of long-term 
unemployed Americans, meaning those jobless for six months or longer, 
remains nearly three times higher than prior to the recession (nearly 
two million now fall into this category).
    Furthermore, exhaustion rates for regular unemployment 
compensation, which stops after six months, also have stayed at record 
levels. More than four out of every ten unemployment insurance 
recipients run out of benefits without finding work. These are the 
people who need extended benefits.
    Over the last month, majorities in both the House and the Senate 
have voted to extend unemployment benefits (the Senate amendment did 
not pass because it required 60 votes).
    And yet, we still have not heard whether President Bush supports 
extending unemployment benefits for jobless workers. I hope that 
silence will end today. Thank you.

                                 

    Chairman THOMAS. I thank the gentleman, and the Chair would 
recognize the Chairman of the Subcommittee on Human Resources, 
Mr. Herger, for a brief statement as well.
    Mr. HERGER. Thank you, Mr. Chairman. Today, we welcome 
Elaine Chao of the U.S. Department of Labor to discuss the 
Administration's fiscal year 2005 budget proposals to help more 
Americans find new and better jobs.
    Tax cuts allowed taxpayers to keep more of their own hard-
earned money and resulted in an impressive economic growth. 
Signs of our strengthened economy include a surge in 
productivity, record-high levels of homeownership, increased 
manufacturing activity, low inflation and interest rates, 
reduced unemployment, and new job creation.
    When workers lost their jobs as a result of the recession 
and the terrorist attacks of September 11th, Congress responded 
with needed help. In addition to regular unemployment benefits, 
8 million unemployed workers received $24 billion in extended 
benefits, and States were given $8 billion to provide 
additional assistance. Congress also improved and expanded the 
Trade Adjustment Assistance (TAA) program which provides 
generous cash, retraining, and health care benefits to 
dislocated workers.
    Americans have the best trained, most diverse, hardest 
working, and most innovative workforce in the world, but 
despite recent economic gains, many workers remain uncertain 
about the future and their jobs. That uncertainty is not 
surprising in a time of war, ongoing terror alerts, and 
increasing global competition.
    The challenge is to develop new ways to help workers emerge 
stronger than before. That means tax policy that promotes more 
innovation and investment here at home, trade policy that 
continues our engagement with the world, and education and 
training that helps American workers stay ahead of the curve in 
a worldwide economy.
    We also need to keep in perspective that reacting to 
rhetoric won't create jobs. Isolationism won't work. Putting 
bureaucrats in charge of whom American companies can hire is 
not the answer. Those policies would be a step backward. Our 
objective is to produce more and better jobs right here in the 
United States, and we look forward to learning more about the 
Administration's proposals to accomplish this goal.
    I yield back the rest of my time, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman. Now, Madam 
Secretary, if you would provide us with your understanding.

  STATEMENT OF THE HONORABLE ELAINE L. CHAO, SECRETARY, U.S. 
                      DEPARTMENT OF LABOR

    Ms. CHAO. Good morning, Chairman Thomas and distinguished 
Members of the Committee. Thank you for this opportunity to 
testify before this esteemed Committee. I am pleased to have 
the opportunity to discuss the President's fiscal year 2005 
budget proposal, which includes improvements to the Federal-
State Unemployment Insurance (UI) program and the President's 
proposal for the Personal Reemployment Accounts. I am also 
looking forward to sharing with you the progress that we have 
made in implementing the Trade Act of 2002 (P.L. 107-210).
    Recent indicators indicate that the economy is turning the 
corner and jobs are being created. The unemployment rate 
dropped to 5.6 percent in January, even as more people entered 
the job market. Approximately 112,000 new jobs, as noted by one 
survey, were created in January, the largest monthly increase 
since December 2000, and 366,000 jobs have been added over the 
past 5 months. There is another survey which indicates a 
tenfold difference between the surveys (at one point) in the 
amount of jobs being created, but, nevertheless, both surveys 
indicate an increased trend toward more job creation.
    As the President has said many times before, we will not be 
satisfied until every American who wants a job can find one. We 
believe that job training is critical to help workers find new 
jobs and prepare themselves for the opportunities in the 21st 
century workforce.
    There are growth opportunities in certain sectors, and 
there are also sectors that are desperately seeking workers, 
and there again, training and retraining is absolutely critical 
in facing that gap.
    That is why the President has also added $500 million in 
new moneys on top of the $15 billion that American taxpayers 
already paid for a publicly funded workforce development 
system. This new initiative, Jobs for the 21st Century Growth 
Sectors, has about $250 million going to community colleges, 
who have proven themselves so nimble and adroit in meeting the 
employment challenges of the 21st century.
    The overall budget for training has, in fact, increased 
$104 million over last year's enacted, and the Department will 
continue to play a critical role in accomplishing the 
President's agenda of ensuring that America's workers get the 
training that they need to succeed and build better futures for 
themselves and their families.
    The UI reform is something that I want to talk about as 
well. As you know, the UI program is an important element of 
our Nation's social safety net. The UI is also the portal 
through which workers can access a wide array of training and 
employment services. The Department has examined ways to reform 
the UI program so that it better serves workers. While the 
Administration remains committed to UI taxes and administrative 
reform, we have heard from the States that now is not the time 
for comprehensive reform, and, therefore, we will defer 
legislation on reforming the UI system until the States' budget 
outlook improves.
    One of the key elements of our current proposal is closing 
a loophole in many State UI laws that permits some employers to 
pay less than their fair share of State UI taxes. I want to 
thank Chairman Herger and Ranking Member Cardin for introducing 
legislation to close this loophole. We estimate that enactment 
of this proposal would result in UI tax payments of over $200 
million annually from employers who are not now playing by the 
rules.
    We have also requested $50 million in discretionary funding 
for Personal Reemployment Accounts. This will provide up to 
$3,000 to selected UI claimants who are having the most 
difficulty finding work, and this year we propose to launch the 
Personal Reemployment Accounts as a pilot to demonstrate the 
added value of these accounts before replicating them 
nationwide.
    We also want to talk about the tax offsets against Federal 
income tax refunds for UI overpayment. When UI claimants 
receive benefits to which they are not entitled under State 
law, an overpayment is established after notice and opportunity 
for appeal. Although States utilize many methods to collect 
overpayments, many overpayments remain outstanding. For this 
reason, we want to give the States another tool to help them 
recover overpayments and strengthen their trust funds.
    Let me say a few words also about the TAA program. Since 
passage of the Trade Act in 2002, the Department has actually 
made great strides in implementing this program. As of last 
month, the Department has reduced the average processing time 
for certifying trade petitions from 103 days to just 26 days. 
We have also eliminated the petition backlog, and this summer 
we will implement an improved TAA petition process that applies 
more rigorous and standardized procedures that ensure that the 
Department will continue to process petitions within the 40 
days required by the law.
    The Trade Act also authorized an alternative TAA program 
for older workers for whom the retraining benefits offered 
under the regular TAA program might not be appropriate. The 
Department implemented the program on August 6th of last year, 
and we have certified 349 worker groups.
    In partnership with the U.S. Department of Health and Human 
Services and the U.S. Department of the Treasury, the 
Department of Labor has also successfully implemented the 
Health Coverage Tax Credit authorized by the Trade Act.
    Finally, in order to encourage States to better align the 
resources available with the number of workers requiring 
training, we have adopted a new formula method for allocating 
funds to States for trade training. This important reform 
provides States with an advance estimate of the amount of 
moneys they are to receive in the next fiscal year. This is the 
first step in helping the States manage their training 
resources more effectively so that they can help as many 
workers as possible.
    So, today I have shared with you a number of important 
initiatives that will help make programs operate more 
efficiently and effectively for the benefit of workers and 
employers. I look forward to working with this Committee as we 
move forward. Thank you.
    [The prepared statement of Ms. Chao follows:]

 Statement of The Honorable Elaine L. Chao, Secretary, U.S. Department 
                                of Labor

    Good morning. Chairman Thomas and distinguished Members of the 
Committee, I thank you for inviting me to testify. I am extremely 
pleased to have the opportunity to discuss the President's Fiscal Year 
(FY) 2005 budget proposal, which includes improvements to the Federal-
State Unemployment Insurance (UI) program and the President's proposal 
for Personal Reemployment Accounts. Our proposed reforms would 
strengthen the financial integrity and fortify the solvency of the UI 
program. Personal Reemployment Accounts will give UI claimants 
unprecedented choice in accessing the services they need to get back to 
work as quickly as possible.
    I also look forward to sharing with you the progress we have made 
to date on implementation of the Trade Adjustment Assistance Reform Act 
of 2002.

The President's Economic Message
    Recently released job figures indicate that the economy has turned 
the corner and the nation's job market is getting stronger. The 
unemployment rate dropped to 5.6 percent in January, even as more 
people entered the job market, and is down from its recent peak of 6.3 
percent in June 2003. Approximately 112,000 new jobs were created in 
January--the largest monthly increase since December 2000--and 366,000 
jobs have been added over the last five months.
    Despite the improvement we have seen, this Administration will not 
be satisfied until every American who wants a job can find one. To 
sustain and expand the economic recovery, the President has outlined a 
six-point plan for jobs and growth, which will create even more 
opportunities for America's workers by making health care costs more 
affordable and predictable, opening new markets for American products 
and streamlining program regulations and reporting requirements.
    The 21st century workplace demands a competitive and responsive 
workforce, and in FY 2005, the Department of Labor stands ready to 
deliver. With ongoing employment and training programs and new 
initiatives, the Department will continue to play a critical role in 
accomplishing the President's domestic agenda.

The President's FY 2005 Budget Request
    Before addressing Unemployment Insurance and Trade Adjustment 
Assistance programmatic issues, I would like to comment briefly on the 
President's FY 2005 budget request for these two programs. The total FY 
2005 budget for the Department of Labor is $57.3 billion. The budget 
reflects a $2.9 billion, or 6 percent, projected decrease in mandatory 
spending due mostly to an improved economic forecast, and therefore, an 
anticipated reduction in unemployment-related benefits.
    The budget request includes $2.7 billion in discretionary funding 
for grants to States for UI administration, a $24 million increase from 
the funding level enacted for FY 2004. These funds will finance the 
States' efforts in processing 22.3 million initial UI claims and 
collecting State payroll taxes from 7.2 million employers.
    The FY 2005 budget request includes $1.1 billion for the Trade 
Adjustment Assistance (TAA) and Alternative Trade Adjustment Assistance 
(ATAA) programs. This funding request will allow the Department of 
Labor to provide States funds for training, income support, and job 
search and relocation allowances to an estimated 60,000 dislocated 
workers impacted by international trade. In addition, we have 
implemented a number of key management reforms that will allow us to 
more effectively operate the program so workers can get the assistance 
they need.

UI Reform Background
    As you know, the Unemployment Insurance program is an important 
element of our Nation's economic response during economic downturns by 
providing temporary, partial wage replacement for workers who have been 
laid off and are seeking reemployment. In addition, UI is the front 
door for these workers to a wide array of training and employment 
services available through the workforce investment system.
    For several years we have been examining ways to reform the UI 
program so that it reflects the 21st century economy and workforce. In 
response to concerns of the system's major stakeholders--worker 
advocates, businesses, and State officials--we developed a 
comprehensive reform proposal that I discussed with you last year. 
While the Administration remains committed to UI tax and administrative 
reform, we have heard from the States that now is not the time for 
comprehensive reform. For this reason, we will defer legislation on 
reforming the UI system until the States' budget outlook improves.
    In the meantime, we propose several smaller, but critical UI 
reforms in the FY 2005 budget. The Administration's three-pronged 
proposal will strengthen the financial integrity of the UI program by 
curtailing unscrupulous employer tax avoidance; improving prevention 
and quick detection of benefit overpayments; and collecting past 
overpayments by offsets from Federal income tax returns. I will also 
discuss initiatives to help unemployed claimants get back to work 
faster.

SUTA Dumping
    One of the key elements of our current proposal is closing a 
loophole in many State UI laws that permits some employers to pay less 
than their fair share of State unemployment taxes.
    Most unemployment benefits are financed by employer-paid State 
unemployment taxes. In order for employers to receive full credit 
against Federal unemployment taxes, Federal law requires that each 
employer's tax rate be related to its ``experience with respect to 
unemployment.'' This is usually measured by the UI benefits paid to its 
former workers. In general, when a worker collects UI benefits, the 
former employer's account within the State's unemployment fund is 
charged. The more charges to the account, the higher the tax rate, up 
to a maximum set by State law. If the employer has a stable workforce 
with few layoffs, the charges and tax rate are low. Employers with 
higher turnover generally pay higher taxes. This tax determination 
system is known as ``experience rating.'' A new employer who does not 
yet have sufficient experience to qualify for a rate based on 
experience is assigned a ``new employer'' tax rate.
    Experience rating has been an important part of the Federal-State 
UI system since its enactment in 1935. It helps ensure an equitable 
distribution of costs among employers based on an employer's experience 
with UI. It also encourages employers to stabilize their workforce and 
provides an incentive for an employer to provide relevant information 
to State agencies when employees quit or are fired for cause.
    However, over the past several years, some employers have found 
ways to manipulate their experience rating so that they pay lower State 
UI taxes than they should based on their UI benefit experience. For 
example, some employers create a new ``shell'' company that establishes 
a lower UI tax rate, and then transfer some or all of their payroll to 
the new company. This abusive practice is commonly called ``SUTA 
dumping'' (``SUTA'' refers to State unemployment tax acts). It can 
deprive States of the revenues they need to provide workers the 
unemployment benefits to which they are entitled under State law and 
shifts some benefit costs to other employers. We believe that those 
most affected by cost shifting are smaller employers who have neither 
the expertise nor the resources to set up such schemes and employers 
with low UI costs who have no need to participate in these schemes.
    As a result of these concerns, last September I transmitted the 
Administration's proposal to Congress that would close this loophole, 
and a bill including the proposal was introduced by Chairman Herger and 
Ranking Member Cardin in the House of Representatives as H.R. 3463. We 
estimate that enactment of this proposal would result in UI tax 
payments of over $200 million per year from employers who would 
otherwise engage in SUTA dumping.
    Because of the Administration's strong commitment to eliminating 
fraud and abuse, our proposal to curtail SUTA dumping is included in 
the FY 2005 budget. We will continue to work with Committee staff to 
refine the proposal.

National Directory of New Hires Database
    Detection and prevention of improper UI payments is a high priority 
for this Administration. In the UI program, we are working closely with 
States to measure the extent of improper benefit payments, and set 
ambitious goals to reduce them. To further assist States in their 
efforts to prevent and quickly detect UI benefit overpayments, we 
propose allowing States to match benefits with data in the National 
Directory of New Hires. This directory is a database, created for the 
Department of Health and Human Services, that is used in connection 
with child support enforcement. Employers are required to swiftly 
provide information on all new hires for inclusion in the database. 
Many States are already using their State Directories of New Hires for 
quick detection of individuals who have gone back to work. However, 
they do not have access to new hires reported to other States. Our UI 
reform proposal would remedy this problem by giving all States access 
to the National Directory of New Hires. This access would be an 
additional, important tool for helping States quickly detect fraud and 
would result in savings to State unemployment trust funds.
    I transmitted this proposal with the proposal to curtail SUTA 
dumping last September. We appreciate the Committee's support for this 
provision, which is included in the House reauthorization bill for the 
Temporary Assistance for Needy Families (TANF) program, as well as in 
H.R. 3463. The estimated outlay savings resulting from enactment of 
this proposal is $372 million over the next ten fiscal years.

Tax Offset for UI Overpayments
    When UI claimants receive benefits to which they were not entitled 
under State law, an overpayment is established after notice and 
opportunity for appeal. States utilize many methods to collect 
overpayments including use of collection agencies and offsets of State 
tax refunds, State lottery winnings, and future UI benefits. However, 
many overpayments remain outstanding. This is a major concern because 
erroneous benefit payments drain States' unemployment trust funds of 
the resources needed to provide benefits to eligible workers. As a 
result, States may have to borrow from the Federal Government to pay 
benefits to eligible workers, or increase their unemployment taxes to 
make up the difference.
    For this reason, we want to give the States another tool to help 
them recover overpayments and strengthen their trust funds. The 
Treasury currently operates an offset program that matches delinquent 
debts owed to various government agencies against Federal income tax 
refunds and deducts these debts from the refunds paid to these 
individuals. The Administration proposes allowing the States to use 
this offset program, called the Treasury Offset Program (TOP), to 
recover UI overpayments that they cannot collect using their normal 
procedures. If States are unable to collect overpayments, they can send 
a request to the Treasury to match them against any Federal income tax 
refunds due. Upon establishing a match, the Treasury would deduct the 
overpayment and any fees from the refund sent to the taxpayer and would 
transfer the overpayments collected to the States' accounts in the 
Unemployment Trust Fund. The Departments of Labor and Treasury would 
jointly oversee the effort. Additionally, the Labor Department would 
coordinate State offset requests and communication with the Treasury 
Department.
    Enactment of this proposal is estimated to result in recovery of 
approximately $3 billion in UI overpayments over the next ten fiscal 
years.

Eligibility Reviews
    The Administration is taking concrete steps to fortify the UI 
system, recognizing that it is critical to workers' security as a 
safety net during economic downturns. The FY 2005 budget request 
includes $20 million in discretionary funding for a new program to 
allow staff in One-Stop Career Centers to conduct 50 percent more face-
to-face UI eligibility reviews. More UI eligibility reviews will reduce 
the number of erroneous payments and reduce the duration of 
unemployment, resulting in annual UI savings of up to $400 million. 
More importantly, claimants will get connected to training and 
reemployment assistance through the public workforce investment system 
much more quickly.

Personal Reemployment Accounts
    The Department's FY 2005 budget includes $50 million in 
discretionary funding for Personal Reemployment Accounts, which would 
provide up to $3,000 to selected unemployment insurance claimants who 
are most likely to exhaust their benefits. This incentive-based program 
would provide individuals more control over their return-to-work 
efforts. The resources provided to each individual could be used for 
the training and services that best benefit him/her. This year, we 
propose to launch the Personal Reemployment Accounts project as a pilot 
that would allow the workforce investment system to demonstrate the 
value of the accounts before replicating it nationwide. Our proposal 
also provides the flexibility to test varied designs and identify which 
models work best.
    When I testified before you last year, I mentioned that although 
the Personal Reemployment Accounts are closely tied to the UI program, 
they do not supplant or replace UI benefits. They are an additional 
means of assisting with the reemployment of UI claimants. In that 
sense, they complement both the existing UI and One-Stop Career Center 
systems. Receipt of account funds would not adversely affect an 
individual's UI eligibility nor make a UI exhaustee ineligible for 
public assistance. The accounts also make use of UI ``profiling,'' a 
Social Security Act requirement that this Committee originated in 1993. 
Under this requirement, States identify those workers who are at 
greatest risk of exhausting their UI benefits and most in need of 
reemployment assistance and connect them with reemployment services 
available through the workforce investment system. Personal 
Reemployment Accounts would ensure that a wide range of reemployment 
services is available to the UI beneficiaries who are identified 
through this system.

Implementation of the Trade Adjustment Assistance Reform Act of 2002
    Since passage of the Trade Adjustment Assistance (TAA) Reform Act 
of 2002, the Department has made great strides in implementing 
significant programmatic and management reforms and additions to the 
TAA program. As one example, as of last month, the Department is 
processing trade petitions within the required time limit, having 
reduced the average processing time from 103 days to just 26 days. 
Correspondingly, we have eliminated the petition backlog, which for 
years often numbered in the hundreds. This means that workers are being 
certified expeditiously, which allows them timely access to training 
and other reemployment services, ultimately returning them to the 
workforce more quickly. This summer we will implement a reengineered 
TAA petition process in order to apply more rigorous and standardized 
investigative procedures to the group eligibility process and to ensure 
we continue to process petitions within the 40 days required by law.
    The TAA Reform Act also authorized an Alternative TAA program for 
older workers for whom the retraining benefits offered under the 
regular TAA program might not be appropriate. Enrolled workers who 
obtain new employment at annual wages of less than $50,000 within 26 
weeks of their layoff receive a wage supplement of 50% of the 
difference between their old and new wages, up to $10,000, payable over 
the two-year eligibility period. The Department implemented the ATAA 
program on August 6, 2003, as authorized under the TAA Reform Act. By 
the end of 2003, we had certified 349 worker groups; by mid-January, 
113 workers had applied for the program and 42 of them were employed 
and had received at least one payment.
    In partnership with the Departments of Treasury and Health and 
Human Services, the Department of Labor has successfully implemented 
the Health Coverage Tax Credit (HCTC) authorized by the TAA Reform Act. 
All States have established a system to forward the names of HCTC-
eligible TAA and ATAA recipients to the HCTC program office at the 
Internal Revenue Service, which has responsibility for administering 
the advance payment option. The HCTC allows eligible individuals to 
receive a refundable tax credit for 65% of their health coverage 
premium to help them continue their coverage while participating in the 
TAA or ATAA program.
    Finally, in order to encourage States to balance the resources 
available with the number of workers requiring training, we have 
adopted a new formula method for allocating funds to States for trade 
training. This important reform provides States with an advance 
estimate of the amount of funds they are to receive in the next fiscal 
year. The new formula distributes only 75% of available funds, which is 
$220 million annually, reserving $55 million to provide funding to 
those States that experience large, unexpected layoffs. This year, a 
hold-harmless provision ensured that each State received at least 85% 
of the amount it would have received last fiscal year had the formula 
been in place at that time. The use of new planning estimates is the 
initial step in helping States better manage their training resources 
within the limits authorized by the TAA program. In addition, improved 
assessment practices will help ensure that workers who need training 
receive it and that workers who have immediate employment potential are 
provided reemployment services so they can quickly transition to a new 
job.

Evaluation Strategy
    An important component of President Bush's Management Agenda is 
budget and performance integration. As part of this effort, the 
Department is embarking on a series of rigorous evaluations designed to 
determine the effectiveness of our programs. This year we are beginning 
a long-term evaluation of the TAA program.
    The overall objective of the TAA evaluation is to provide a 
quantitatively-based assessment of (1) whether the service intervention 
received by TAA participants had an impact on their reemployment 
outcomes as compared to individuals not receiving TAA services; and (2) 
explaining the findings using a qualitative analysis that also 
evaluates implementation of the reformed TAA program.
Restructuring of the Black Lung Disability Trust Fund
    Recently, the Department also has submitted to this Committee a 
legislative proposal to restructure and eventually retire the Black 
Lung Disability Trust Fund debt, to ensure the continued availability 
of funding to provide benefits to the victims of Black Lung disease. 
Absent legislative action, the Trust Fund's debt is estimated to exceed 
$9 billion in FY 2005.
    The current system for financing the Trust Fund is broken. Despite 
steadily declining benefit obligations and tax revenues that 
significantly exceed the cost of the benefit payments, the Trust Fund 
debt continues to increase in a vicious cycle that is out of control. 
Since FY 2000, interest on the debt has exceeded total tax revenue. 
Without this urgently needed legislation, the Trust Fund will never be 
solvent, the debt will continue to grow, and the Trust Fund will have 
to continue borrowing in ever increasing amounts.
    The restructuring plan will provide for the repayment of the debt 
of the Black Lung Disability Trust Fund and ensure the continued 
stability of the Trust Fund for future beneficiaries. Specifically, the 
plan will restructure the Trust Fund debt by replacing the traditional 
30-year borrowings, with an average coupon of 8.0 percent, with zero-
coupon Treasury bonds with an effective rate of 5.5 percent. This will 
enable the Trust Fund to take advantage of current lower interest 
rates; more closely match the program's operating surplus with debt 
payments; and remove the risk of higher interest rates in the future. 
The Plan also provides a one-time appropriation of $3.3 billion to the 
Trust Fund to cover the loss to the Treasury as a result of converting 
the existing debt to lower interest rate zero-coupon bonds, and extends 
current coal excise tax rates, which are set to decrease in 2014, to 
insure that the Trust Fund revenues are sufficient to cover benefit 
payments and return the Trust Fund to solvency. Once the debt has been 
repaid, coal excise tax rates will be substantially reduced.

Conclusion
    Today I have shared with you a number of bold and important ideas 
to make programs operate more efficiently and effectively for the 
benefit of workers and employers. I am proud of the efforts undertaken 
at the Department to implement new laws and improve the management of 
existing programs. I look forward to working with this Committee as we 
move forward. This concludes my remarks. I will be glad to respond to 
any questions you may have. Thank you.

                                 

    Mr. HERGER. [Presiding.] Thank you, Secretary Chao. With 
the rapid changes going on in the workforce in the global 
economy, job training is a key to making sure our workers stay 
ahead of the curve and can succeed in the world economy. 
Secretary Chao, could you discuss how the Department of Labor 
currently supports job training and ways you want to improve on 
them in this budget?
    Ms. CHAO. We are a very compassionate people. The American 
taxpayer funds approximately $15 billion in a public workforce 
development system, and this is a wonderful network of one-stop 
centers that are dispersed throughout the country. We have 
about 1,900 of them throughout the country. They are very 
welcoming places in which counselors are present, in which 
computers are available for those that may not have access to 
computers. Workers who have lost their jobs or people who may 
want to change their jobs have an opportunity to go to these 
One-Stop Career Centers and find assistance with finding new 
jobs, finding new training, accessing UI benefits, having one-
on-one skills assessment and assistance if they so wish.
    We also administer the TAA program, which offers up to 104 
weeks of UI benefits, 104 weeks of training, with supportive 
services, including child care expenses and transportation and 
relocation expenses as permitted.
    The Department also helps administer the 65 percent health 
care insurance subsidy for dislocated workers, and for workers 
who are over the age of 50, if they find a job that pays less, 
the Department will subsidize 50 percent of the wage 
differential between their old job and their new job.
    We focus very much on helping people train for new job 
opportunities, and we also want to make sure that workers know 
about some of the opportunities in the high-growth sectors of 
the economy as well.
    Mr. HERGER. Thank you, Secretary Chao. Now I recognize the 
Ranking Member, the gentleman from New York, Mr. Rangel, to 
inquire.
    Mr. RANGEL. Thank you, Madam Secretary, for sharing your 
views with us. The Economic Report of the President was 
delivered to the Congress last month, and the Administration 
claimed 320,000 jobs will be created per month in 2004. The 
press reports that the President does not support this 
projection. Could you share with us what the Administration 
position is in terms of jobs to be created?
    Ms. CHAO. Well, the report that you are referring to is 
done by the Council of Economic Advisers (CEA). There are many 
reports done by many agencies and departments.
    Mr. RANGEL. I am only talking, Madam Secretary, about this 
report.
    Ms. CHAO. Well, yes, I am pleased to answer that question 
for you as well.
    Mr. RANGEL. What does the President think about this 
report?
    Ms. CHAO. Well, may I answer, please? I am not finished 
yet. The CEA report is a report that is produced by the Council 
of Economic Advisers. As I mentioned, there are many other 
reports that have been issued in relation to the economy as 
well as to the job situation.
    Mr. RANGEL. I am concerned about the President's thinking 
about this specific report, because I wasn't----
    Ms. CHAO. I am not finished yet.
    Mr. RANGEL. Talking about all those other reports. You see, 
I have a limited amount----
    Ms. CHAO. Well, the President has----
    Mr. RANGEL. Of time, Madam Secretary.
    Ms. CHAO. The President has been asked about this, and the 
President has said that that is a CEA report. It is our hope, 
of course, that job creation will occur at a faster rate than 
what it has been.
    Mr. RANGEL. What is the President's position on this 
specific report projection? Is he going to sign this report and 
send it to the Congress?
    Ms. CHAO. He doesn't sign this report. The CEA signs that 
report, and----
    Mr. RANGEL. What does he think about the projection of the 
Economic Report of the President of the United States, whose 
name is George Bush?
    Ms. CHAO. As I mentioned, this is a report prepared by the 
CEA.
    Mr. RANGEL. Thank you so much, Madam Secretary.
    Ms. CHAO. You are welcome.
    Mr. RANGEL. If you don't want to answer, it is all right.
    Ms. CHAO. I wish I could have the opportunity to do so.
    Mr. RANGEL. Okay. Thank you so much. The President's chief 
economist, George Mankiw, said that having American jobs go to 
countries with cheaper labor, which we call outsourcing or 
offshore, is a plus for the economy in the long run. Do you or 
the President agree with this chief economist, the President's 
chief economist?
    Ms. CHAO. Outsourcing is an issue that we are all very 
concerned about.
    Mr. RANGEL. Do you agree with this statement made by 
Mankiw? I am interested. You are interested. The President is 
interested. The corporations are interested. I have a limited 
amount of time. I just want to know do you agree with the 
statement that it is a plus for our economy in the long run.
    Ms. CHAO. I think it is--when you talk about outsourcing, 
you have to also talk about insourcing.
    Mr. RANGEL. Okay, thank you.
    Ms. CHAO. You have to talk about----
    Mr. RANGEL. No, no, no. Now, that is good. We can talk 
about sideways-sourcing, outsourcing, insourcing.
    Ms. CHAO. No, I think it is very----
    Mr. RANGEL. You don't want to answer this one. Okay.
    Ms. CHAO. Misinforming just to talk about outsourcing.
    Mr. RANGEL. Let me ask you this: this economic report 
suggests that maybe we can adjust the unemployment figures as 
it relates to manufacturing loss of jobs. It asks, ``When a 
fast-food restaurant sells a hamburger, for example, is it 
providing a service or is it providing inputs to manufacture a 
product?'' Have you given any thought to that observation that 
maybe McDonald's should be considered as a manufacturer rather 
than as a producer of service?
    Ms. CHAO. It is not as if one person is making these 
decisions. Part of----
    Mr. RANGEL. I see. Thank you.
    Ms. CHAO. Part of what we are----
    Mr. RANGEL. You are terrific this morning. I can see why it 
took so long for us to get you here.
    Ms. CHAO. Mr. Rangel, I really would appreciate the 
opportunity to answer some of the questions you----
    Mr. RANGEL. I wish you would answer some of our questions.
    Ms. CHAO. I would be more than delighted to, if given the 
time.
    Mr. RANGEL. Well----
    Ms. CHAO. The issue about McDonald's and how it is 
classified points to a larger issue facing our 21st century 
workforce and, that is, the old classifications no longer 
apply.
    Mr. RANGEL. I understand.
    Ms. CHAO. So, all of us as a society must look at how----
    Mr. RANGEL. I have got a yellow light now, and I just want 
one more question, and that is, we have lost a lot of jobs that 
are not considered manufacturing jobs but service jobs due to 
globalization and outsourcing. The TAA merely deals with 
manufacturing jobs. Do you think that people who have lost 
their employment that may have different types of service jobs 
should be covered by the TAA?
    Ms. CHAO. Well, we administer the TAA as it passed by 
Congress.
    Mr. RANGEL. You are terrific, Madam Secretary. I am telling 
you, if we ever get the majority and don't want to answer any 
questions, you have got a job.
    Ms. CHAO. That is not----
    Mr. RANGEL. You are fantastic. Honestly, you are good. You 
are very good. Thank you.
    Ms. CHAO. I would----
    Mr. RANGEL. Thank you very much.
    Ms. CHAO. Again, given the courtesy of the time to reply, I 
would be more than glad to.
    Mr. HERGER. I would like to remind the Members that our 
witnesses are here at our invitation. I think it would be 
helpful if we did allow the witness an opportunity to answer 
the questions that are being asked. On my time, Secretary Chao, 
would you care to answer some of the questions that were asked 
of you here by our Ranking Member?
    Mr. RANGEL. I would like to join with the Chair in that 
request.
    Mr. HERGER. Since you were not allowed the time to answer 
during the gentleman's time, I would like to allow you an 
opportunity to answer.
    Ms. CHAO. We are all concerned about the economy, 
obviously.
    Mr. HERGER. On the Chairman's time.
    Ms. CHAO. We are also concerned about job creation. The 
President--you obviously disagree--has enacted a number of 
programs which have helped to ameliorate the adverse effects of 
the economy that we inherited when we took over.
    Now, job creation is certainly not occurring as fast as we 
would like, but the issue is of training and retraining. On the 
issue of outsourcing, we are all concerned about that as well, 
but when we talk about outsourcing, we need to talk about the 
6.5 million jobs that might be lost if we isolate ourselves, as 
others have mentioned, from the world. When we talk about 
aspects of our economy that are benefiting from cheaper, less 
expensive, specialization of services, we are very concerned 
about all of that.
    Currently, we have about 2.7 million jobs that are 
unfilled, and there are high-growth opportunities. So, our 
challenge is to help workers get the training that they need to 
be able to transition from one area to another.
    The workforce is changing dramatically, and the workplace 
is changing dramatically. So, the old paradigms about how jobs 
are classified and how they are to be, I guess, classified is 
something that we all have to take a look at.
    Mr. HERGER. I thank the Secretary. Now we will move on. The 
gentlelady from Connecticut, Mrs. Johnson, to inquire.
    Mrs. JOHNSON. Welcome, Secretary Chao. It is a pleasure to 
have you. You are doing some very important work in improving 
the quality of our job training programs so that people 
actually will be able to have resources available to learn the 
skills they need to move into the new areas. It is also true 
that there are a lot of jobs of insourcing jobs that are 
developing as well as outsourcing. As concerned as I am about 
the outsourcing now of administrative jobs, having been part of 
going through the agony of that process in manufacturing, and 
having been part of policies that help insource manufacturing 
jobs in America, policies like helping the machine tool 
industry make the transition so we maintain manufacturing jobs, 
part of forcing Toyota who in the early days only assembled 
cars here but didn't buy parts here, forcing them to buy parts 
here, I know that the Administration, more in another 
Department than your Department, over in the U.S. Department of 
Commerce, is really aggressively looking at a lot of policies, 
more aggressively than at any other time under any 
Administration since the Reagan Administration under Secretary 
Baldrige, is really looking at how do we insource American 
manufacturing jobs and prevent the continued outsourcing.
    In the area of administrative reform, what are you doing to 
enable companies to reduce the cost of their workforce here? I 
know that part of this reclassification issue you told me one 
time was because that is an area where there is the largest 
amount of litigation that imposes tremendous cost on companies. 
So, would you talk a little bit about how your Department is 
looking at reducing the regulatory burden and making our 
companies more competitive so that they can develop jobs in 
America as opposed to outsourcing?
    Now, maybe that is too much off your central topic here, 
but you are doing a lot of very progressive things to help our 
companies be effective, efficient, and compete and create the 
jobs in America as opposed to outsourcing. While we can't pass 
a law--and, to my knowledge, no Democrat colleague of mine has 
introduced legislation to prohibit American companies from 
hiring people in other countries, just a blanket prohibition--
well, maybe you have, Pete--certainly if we did that, that 
would cut off markets to us at a rate that would spin our 
heads. We are doing a lot of things to encourage our companies 
to insource jobs, and if you would like to comment on any of 
those things, I would be happy to have you do so.
    Ms. CHAO. Thank you. As mentioned, the stock market peaked 
in March 2000, and manufacturing went into the doldrums in 
August 2000. At the beginning of 2001, the economy was already 
in a recession, although it was not reported at the time.
    The President's first tax cut helped to put more money in 
the pockets of working Americans, and our economy was just 
coming out of that recession when the devastating attacks of 
September 11th occurred. The attacks of September 11th cost 
this economy approximately 1.5 million jobs. If it were not for 
the two subsequent tax reduction programs which the President 
put forward, our economy would be in worse shape than what it 
is now, and the recession would have lasted longer and been 
deeper.
    The President has now a six-point economic program in which 
he wants to address job creation through regulatory reform, in 
which he wants to decrease the regulatory burdens on 
businesses, especially small businesses which create two out of 
every three new jobs. The President's six-point program also 
talks about energy independence and how the energy program 
passed over 388,000 new jobs in construction alone that the 
Teamsters would have gotten--this is their figure, would have 
been created. We are also talking about litigation reform and 
access to quality, affordable health care, and we are also 
talking about making permanent the tax reduction program so 
that more Americans would have more money in their pockets that 
they can use for more purchases for their households and for 
their families.
    Mrs. JOHNSON. Thank you.
    Mr. HERGER. I thank the gentlelady. The gentleman from 
Michigan, Mr. Levin, to inquire.
    Mr. LEVIN. Welcome.
    Ms. CHAO. Thank you.
    Mr. LEVIN. First, let me talk to you about the matter 
raised by Mr. Cardin. Your testimony does not touch the 
extended benefit issue. What is the position of the 
Administration?
    Ms. CHAO. In the past----
    Mr. LEVIN. I mean now. Really, Mr. Rangel pressed you for a 
specific answer on some issues, and I do not mean to interrupt 
you, but, really, I do mean to interrupt you.
    Ms. CHAO. That is okay.
    Mr. LEVIN. In this sense: I asked you a question. The 
program has expired. We have tried to extend it. Are you, is 
the Administration in favor of it or not, in favor of extending 
it?
    Ms. CHAO. Well, the President has worked with the Congress 
to extend UI three times already in the past 18 months.
    Mr. LEVIN. I know, but now.
    Ms. CHAO. Let me just give some background if I could----
    Mr. LEVIN. Why do you need to give us background when I ask 
you the question whether you want to extend the program now or 
not?
    Ms. CHAO. I think it is--if indeed we are going to--if 
indeed you called me before this Committee for a discussion, I 
think it is very important for us to discuss some of these 
issues----
    Mr. LEVIN. Okay, but----
    Ms. CHAO. Rather than----
    Mr. LEVIN. Then say yes----
    Ms. CHAO. Go ahead and ask for a one-sentence sound bite.
    Mr. LEVIN. No, I am not asking you for one sentence.
    Ms. CHAO. I am not good at the sound bites, by the way, and 
I apologize for that.
    Mr. LEVIN. Say yes or no----
    Ms. CHAO. That is the Administration's----
    Mr. LEVIN. Then explain----
    Ms. CHAO. Position.
    Mr. LEVIN. Then explain your position. Are you in favor----
    Ms. CHAO. Let me just say temporary extended benefits were 
available during January in 11 of the past 32 years from 1973 
to 2004. The average total unemployment rate for these months 
was 7.1 percent, significantly higher than today. Today's 
unemployment rate of 5.6 percent is lower than the unemployment 
rate----
    Mr. LEVIN. Okay, so----
    Ms. CHAO. Of the 1970s, 1980s----
    Mr. LEVIN. Okay, we know that.
    Ms. CHAO. And the 1990s.
    Mr. LEVIN. You are reading it----
    Ms. CHAO. Again, the----
    Mr. LEVIN. Are you in favor of--look, there is a vote in 
the Senate, 58, I think, Senators voted in favor of extending; 
here in the House we brought it up, and a majority voted--it 
wasn't a direct vote on that program, but it was clear what our 
message was. Can you say, are you, is the Administration in 
favor of renewing that program, yes or no?
    Ms. CHAO. I think the Administration is willing to work 
with Congress.
    Mr. LEVIN. No, no. That is what was said a few months ago 
when another representative was here. Do you favor it? Yes or 
no. Does the Administration----
    Ms. CHAO. I am saying the Administration is willing to work 
with Congress----
    Mr. LEVIN. No, no, no. Are you----
    Ms. CHAO. Let me also say there is also $4 billion in Reed 
Act (P.L. 107-147) distribution moneys in the States. If each 
State finds and States unemployment rates are different----
    Mr. LEVIN. You know----
    Ms. CHAO. The States want to increase UI benefits in their 
individual States, they have the resources to do so. There are 
$4 billion----
    Mr. LEVIN. Except the Reed Act money----
    Ms. CHAO. Four billion dollars there.
    Mr. LEVIN. You know the Reed Act money cannot be used----
    Ms. CHAO. That is not true, sir.
    Mr. LEVIN. But----
    Ms. CHAO. With all due respect, it can be used.
    Mr. LEVIN. Let me finish. Except for those who have 
exhausted their extended benefits. Now----
    Ms. CHAO. Not true. It can be used for----
    Mr. LEVIN. All right. So----
    Ms. CHAO. Extending UI benefits.
    Mr. LEVIN. So, your answer is you do not favor renewal of 
this program.
    Ms. CHAO. I have said, number one, the Administration is 
willing to work with Congress----
    Mr. LEVIN. Okay. Are you----
    Ms. CHAO. Number two, the States have their own options as 
well.
    Mr. LEVIN. Okay. Are you willing----
    Ms. CHAO. They have $4 billion in Reed Act fund 
distribution----
    Mr. LEVIN. Madam Secretary, are you willing to advocate, 
the Administration, that this Congress renew this program? Are 
you willing to advocate it? Yes or no.
    Ms. CHAO. What I provide in terms of advice to my fellow 
colleagues is something that remains with them.
    Mr. LEVIN. All right. I just want you to know how I think 
inexcusable, when we have had the largest number of people in 
history exhausting their benefits, that you duck this issue and 
essentially say you will work with us. I thought the President 
said he was a leader. If he is a leader, he should lead on this 
issue. Now, let me----
    Ms. CHAO. As I mentioned----
    Mr. LEVIN. Okay. Enough said. When you are ready to answer 
this----
    Ms. CHAO. I am more than willing to answer.
    Mr. LEVIN. Yes or no, come back here.
    Ms. CHAO. Sir, with all due respect, I think it is 
important to talk about these issues.
    Mr. LEVIN. I am all in favor of talking about them, but we 
need more than talk. We need walk. We need an answer from the 
Administration----
    Ms. CHAO. The President has worked with this Congress to 
extend UI three times.
    Mr. LEVIN. You are----
    Ms. CHAO. Extension of UI has occurred in the past when the 
average unemployment rate is 7.1 percent----
    Mr. LEVIN. I know, but we have had a higher----
    Ms. CHAO. The unemployment rate now is----
    Mr. LEVIN. Percentage--Madam Secretary, let me finish.
    Ms. CHAO. It is 5.6 percent.
    Mr. LEVIN. We have had a higher number of exhaustees than 
in the history of the program, and you sit here and will not--
--
    Mr. HERGER. The gentleman's time has expired.
    Mr. LEVIN. Say yes or no.
    Ms. CHAO. I beg to--that is not the right number, but, 
nevertheless, we are all concerned about them.
    Mr. HERGER. The gentleman's time has expired. The gentleman 
from Illinois, Mr. Crane, to inquire.
    Mr. CRANE. Madam Secretary, we are honored to have the 
privilege of your presence here today and know that you hold a 
unique spot in history as being the first Asian American woman 
who has ever held a Cabinet position in any President's 
Administration in this Nation's history. We pay tribute to you, 
and I also want you to know that most of us agree with the 
President's assessment that you are an individual with strong 
executive talent, compassion, and commitment to helping people 
build better lives, and we look forward to working with you in 
that effort.
    Ms. CHAO. Thank you.
    Mr. CRANE. Something that I would like to raise with you 
today is we are all encouraged that payroll survey data 
indicate about 300,000 new jobs were created since last summer. 
However, the household survey has shown stronger growth in the 
number of workers over a longer period of time. According to 
that survey, nearly 3 million more Americans report they are 
working today compared to January 2002. The current number of 
people who say they are working under this household survey is 
a record high of almost 139 million.
    Can you discuss some of the differences between these two 
surveys and what types of new jobs, such as self-employment, 
contract work, even the thousands of people who trade goods by 
eBay full-time, might not be captured, at least not right away, 
in the payroll survey data?
    Ms. CHAO. Well, first of all, thank you for asking that 
question. Let me also say that the Bureau of Labor Statistics 
is independent within the Department of Labor. They are fine 
professionals, but you do note a difference between two 
employment surveys. One is larger than the other, and so that 
could--we note that difference. It is interesting to note last 
November, for example, the payroll survey showed an increase of 
50,000 new jobs, yet the household survey showed a difference 
of a magnitude of 10. The household survey showed a job 
creation rate of about 500,000 new jobs.
    The payroll employment is business based, and if you are a 
small business person, you are a single proprietor, you have 
your own business, that is not captured in the payroll 
employment survey. If you call up, as we do, the household, 
these individuals will answer the phone and will say that they 
have a job.
    Regardless of the difference in magnitude between these two 
surveys, it is very clear that both are trending in the right 
direction, meaning that more job creation is occurring.
    Another interesting phenomenon is that our economy is so 
big--it is $11 trillion; we have a workforce of 146 million 
people--that these two surveys may lag in recording what is 
truly happening in a dynamic and vibrant workforce and economy. 
So, what we are finding is that we have to revise these numbers 
every month, and what happens is that most of the time these 
numbers get revised upward in terms of employment. Of course, 
revisions do not receive as much news as the initial release of 
the numbers.
    So, we are finding that the revisions have had to occur, 
and the revisions are actually of great magnitude. They are not 
3 or 4 percent difference, but they are quite a lot of 
differences. So, the two surveys, again, I think bode well for 
our economy. They are both trending upward, even though they 
may differ by a magnitude of about 10.
    Mr. CRANE. Thank you, Madam Secretary, and you are doing a 
great job. I yield back the balance of my time.
    Mr. HERGER. Thank you. The gentleman from Maryland, Mr. 
Cardin, to inquire.
    Mr. CARDIN. Thank you, Mr. Chairman. Madam Secretary, I 
find your justifications difficult to accept here, and let me, 
if I might--it was Chairman Greenspan of the Federal Reserve 
System that said that the payroll survey was assuredly more 
accurate, but now you are sort of giving credibility to a 
different survey just because it serves your purpose. I think 
we need to have a common line in order to analyze the 
information that is out there.
    I also find disappointing your testimony today in regards 
to the 2001 tax cut. I was in Congress when we passed that tax 
cut, and it was clearly aimed at the fact that we had a large 
projected surplus. If we were using the fact that we were going 
into a recession, then the projected surpluses would not have 
been as high as the Administration presented to Congress as 
justification for that tax cut.
    So, let me get to the most recent numbers that we have, and 
that is, in the second half of 2003 the Administration said 
that we would create 1.9 million jobs, and you feel 1.8 million 
short. Now, I don't remember anything extraordinary happening 
in the second half of 2003, but do you have a justification as 
to why we fell so short in the second half of 2003?
    Ms. CHAO. Let me go back to your question about the two 
surveys.
    Mr. CARDIN. I didn't ask a question about the two surveys, 
and I really----
    Ms. CHAO. Let me make a comment anyway, then. There are two 
surveys that the Bureau of Labor Statistics----
    Mr. CARDIN. I am not interested in that. I am sorry, but I 
really do want to stay on the subject, and that is, do you have 
an explanation why you fell 1.8 million short in the second 
half of 2003?
    Ms. CHAO. There are two surveys, and both are produced by 
the Bureau of Labor Statistics, and we have an obligation to 
report both surveys.
    On the issue of job creation, we agree with you, job 
creation is not as strong. We have had the recession. We have 
had the attacks of September 11th, which have----
    Mr. CARDIN. No, this is the second half of 2003. The 
recession----
    Ms. CHAO. If I may be allowed----
    Mr. CARDIN. Both of those issues predate those projections. 
These projections were made for the second half of 2003----
    Ms. CHAO. May I have----
    Mr. CARDIN. Well after the recession----
    Ms. CHAO. A minute to answer the question?
    Mr. CARDIN. Well after the--but you are--I think I am a 
rather patient person. If you don't want to answer the 
question, please say so. If you want to answer it, I will be 
glad to----
    Ms. CHAO. I am seldom given an opportunity to do so.
    Mr. CARDIN. Please.
    Ms. CHAO. In 2002 and 2003, we have had the corporate 
scandals. We have also had obviously some uncertainty with the 
economy. Our productivity growth has been very, very high. That 
productivity growth cannot continue unabated. It is going to 
translate into more jobs.
    Mr. CARDIN. Do you know what the numbers will be? In 
January, according to your testimony, you fell--the CEA are the 
President's economic advisers. If he wants to discount their 
information, fine. They projected over 300,000 jobs for 
January. Under your numbers, we are at 115,000, 117,000 jobs. 
Tomorrow or the next day we are going to get the numbers for 
February. Will we hit 300,000 new jobs in February? Do you know 
that answer?
    Ms. CHAO. I do not.
    Mr. CARDIN. Well, we will see whether we make that 
projection or not.
    Let me move on to the UC issues, because one thing is 
clear. We have a negative job growth during this 
Administration. You are going to join the Hoover 
Administration, the last Administration that had a negative job 
growth during the 4-year term of this Administration, and that 
is not a proud record.
    On the UC, Mr. Levin asked a direct question. I am not 
going to ask it again because I appreciate the fact that you 
don't want to answer it and that you are under either 
instructions or your personal view is that you don't want to 
answer that question. Let me just challenge your assumptions 
that the States have adequate money under the Reed Act. Many of 
our largest States have exhausted their Reed Act funds and 
don't have the dollars. California, for example, is actually 
asking to borrow money in order to pay their regular benefits. 
We have a U.S. General Accounting Office report that shows that 
as many as 30 States would have to raise their taxes on 
employers if they used their Reed Act funds.
    Is the Administration suggesting that a better alternative 
than using the trust funds that are here that we have 
accumulated exactly for this purpose, the Federal unemployment 
trust accounts, rather than using that, we would prefer the 
States to raise taxes on employers in order to provide 
additional benefits? Is that what you are suggesting?
    Ms. CHAO. First of all, to compare this Administration's 
record to the Hoover Administration is ridiculous. The Hoover 
Administration had a workforce of 31 million. Our workforce now 
numbers 146 million. The unemployment rate during the Hoover 
Administration or during the great recession----
    Mr. CARDIN. I am just, Madam Secretary----
    Ms. CHAO. Was 25 percent. Our unemployment rate is 5.6 
percent----
    Mr. CARDIN. Quote me accurately, Madam Secretary----
    Mr. HERGER. Order----
    Mr. CARDIN. Mr. Chairman, I have the time. Mr. Chairman, I 
have the time.
    Mr. HERGER. The Members----
    Mr. CARDIN. Mr. Chairman, I have the time.
    Mr. CAMP. Regular order.
    Mr. CARDIN. Regular order is that I have the time, not the 
witness.
    Mr. CAMP. Let the witness answer.
    Mr. CARDIN. I will, but she misquoted me, and I have the 
right to take the time.
    Mr. HERGER. Order. I want to remind the Members again that 
we owe the courtesy to the witness to allow her an opportunity 
to answer the question. During this hearing, we have repeatedly 
heard Members interrupting when the Secretary is attempting to 
answer the questions. I want to once again request of the 
Members to allow our witness to answer. They may not like the 
answers, but we do owe our witness that courtesy.
    Mr. CARDIN. Mr. Chairman? Mr. Chairman, the regular order 
of this Committee is that the Member controls 5 minutes in 
debate to ask questions to the witnesses. I asked a question to 
this witness, and she started to characterize my question 
differently than I asked it. I didn't ask the question about 
the Hoover Administration versus the Bush Administration. What 
I said is that both will go down in record as having negative 
job growth. If she wants to counter that argument that the Bush 
Administration does not have a negative job growth, I am 
willing to listen to that answer. I didn't ask the question. 
She then characterized my question differently.
    I control the time, Mr. Chairman. I have the right to 
reclaim my time.
    Mr. HERGER. The gentleman from Michigan, Mr. Camp, will 
inquire.
    Mr. CAMP. I thank the Chairman. Madam Secretary, thank you 
for being here today, and I just want to mention that there are 
these two surveys--one a payroll survey and one a household 
survey--in terms of jobs. The household survey, for example, 
has a number of jobs that have been created. Can you tell the 
Committee how many jobs were created under that survey?
    Ms. CHAO. It is approximately 1.3 million over the last 5 
months.
    Mr. CAMP. All right. I also want to point out that States 
have in some cases operated State-specific extended 
unemployment benefit programs and do have the ability to do so 
again if they should decide. Is that correct?
    Ms. CHAO. Yes. Vermont, Connecticut, District of Columbia, 
Georgia, Alabama, Maryland, Minnesota, Oklahoma, and Oregon.
    Mr. CAMP. All right. Also, thank you for--also the question 
I have is since mid-2003, the national unemployment rate has 
fallen from 6.3 to 5.6 percent. What was the unemployment rate 
the last time extended unemployment benefits were stopped in 
the mid-1990s?
    Ms. CHAO. I don't have that.
    Mr. CAMP. I believe that it was about 6.4 percent.
    Ms. CHAO. You are exactly right--6.6 percent, actually.
    Mr. CAMP. All right. Since mid-2003, the U.S. national 
unemployment rate has fallen from 6.3 to 5.6 percent, and last 
month, as you testified, more than 100,000 jobs have been 
created. The growth in the second half of 2003 was more than 
twice as fast as the first half of the year. My question is 
this--and I want to thank you for personally being involved on 
the issue of a particular manufacturer leaving my district, 
Electrolux, which announced it will be transferring jobs to 
Mexico and South Carolina from Greenville, Michigan, and I 
appreciate the assistance you have given.
    My question is really on two areas. One is the rapid 
response team that will come in. They have given us a very long 
lead time. They say they may leave at the end of 2005 and 
possibly not until 2006, and I realize the Governor triggers 
the rapid response team coming into the State. I wondered if 
there would be any opportunity that we could, given that we 
have this long lead time, have something come in earlier so 
that these employees can play for the future in advance of 
getting the closing notice and the Governor issuing this 
request to the Department of Labor. I realize there is a unique 
combination of State and Federal here with the Department of 
Labor.
    Ms. CHAO. We would be more than glad to do that, and, in 
fact, we have done that in the past.
    Mr. CAMP. Thank you. I understand there are also some 
emergency grant proposals that are discretionary that may be 
available to communities, and I understand the Governor 
actually triggers the application for those as well. I would 
just ask the ability to work with you, continue to work with 
you and your staff on this particular issue to find a way that, 
if we meet the criteria for that program, that we would be able 
to work with your office and try to establish that.
    Ms. CHAO. I will be more than pleased to.
    Mr. CAMP. Last, I want to thank you for the President's 
budget on the TAA. In fact, if these jobs go to Mexico, there 
is an increase in that category so that employees who may need 
the extended job training would have that available. I know 
that is in the President's budget, and I appreciate that very 
much. I also appreciate your commitment to worker retraining.
    As we went through this very difficult process trying to 
keep this company in Michigan, we found that when we compared 
our nine trading partners, there were many issues that resulted 
in companies deciding to go other places. The major issue and 
the major cost differential between us and our trading partners 
is, frankly, taxes, closely followed by certainly wages and 
benefits, especially when you compare it to Mexico and China, 
which is difficult, but other issues like regulation and energy 
costs. So, I certainly would appreciate all of the help that 
your Department can give to the people in Michigan on this 
particular issue. Thank you.
    Ms. CHAO. We look forward to working with all Members of 
the Committee. Thank you.
    Mr. CAMP. Thank you.
    Chairman THOMAS. [Presiding.] I thank the gentleman. Does 
the gentleman from Washington wish to inquire? The gentleman 
from Massachusetts?
    Mr. NEAL. Thank you, Mr. Chairman. I do wish to inquire. 
Madam Secretary, I have been doing a random survey of the 
Administration. Do you think that Tyco is an American company 
or do you think that it is a Bermuda company? I really don't 
think we need more than a yes or no to that question.
    Ms. CHAO. Why do you ask? I don't----
    Mr. NEAL. Well, they employ thousands of people in America, 
and I would think that you and the staff would have substantial 
opportunity to conclude where the company is based.
    Ms. CHAO. It depends on where it is incorporated.
    Mr. NEAL. So, you believe that it is a Bermuda-based 
company?
    Ms. CHAO. I want to know why the question is----
    Mr. NEAL. Mr. Chairman, would you ask the witness to answer 
the question?
    Ms. CHAO. I don't understand the purpose of the question.
    Chairman THOMAS. Would the gentleman repeat the question?
    Ms. CHAO. What is the point----
    Mr. NEAL. I asked the Secretary, very politely, in fact, 
whether or not she believed that Tyco was an American company 
or a Bermuda company.
    Ms. CHAO. I believe it is incorporated in Bermuda.
    Mr. NEAL. Do you believe that it is an American company or 
a Bermuda company?
    Ms. CHAO. It is incorporated in Bermuda, if I am correct.
    Chairman THOMAS. Would the gentleman yield?
    Mr. NEAL. Yes, I would, Mr. Chairman.
    Chairman THOMAS. The way you ask the question, the answer 
was absolutely correct. It is incorporated in Bermuda.
    Mr. NEAL. Mr. Chairman----
    Chairman THOMAS. The interesting thing about U.S. law is 
that the physical presence of the company----
    Mr. NEAL. Mr. Chairman?
    Chairman THOMAS. The workers, the plants, and the 
management are in the United States.
    Mr. NEAL. Mr. Chairman, could I redirect my time to the 
witness?
    Chairman THOMAS. You certainly can.
    Mr. NEAL. Would you care to venture a guess, Madam 
Secretary, as to whether or not it is a Bermuda company or an 
American company?
    Ms. CHAO. Tyco is just one example, and there are other 
companies----
    Mr. NEAL. There sure are. There sure are.
    Ms. CHAO. Like Heinz.
    Mr. NEAL. That is fine. I am entirely consistent on this.
    Ms. CHAO. Of the 79 companies, 22 are in the United States, 
57 are overseas.
    Mr. NEAL. So, what is the answer? Do you think that it is 
an American company or a Bermuda company?
    Ms. CHAO. I am not a lawyer. It is incorporated----
    Mr. NEAL. Oh, Madam Secretary, let me go to the next 
question. That is a terrible answer, and you know what? The 
members of the staff there----
    Ms. CHAO. I don't understand the purpose of the question.
    Mr. NEAL. The members of the staff there, Madam Secretary, 
they should be doing their job. That is a terrible answer. I 
think everybody would agree with that on this Committee. ``I am 
not a lawyer,'' to answer that question.
    Ms. CHAO. It is----
    Mr. NEAL. Madam Secretary, let me ask you one more question 
on another topic.
    Ms. CHAO. Of course.
    Mr. NEAL. Under the overtime rules that you have proposed, 
is it your position, based upon those rules, that there are 
some firefighters, nurses, and police that could be exempted 
from the rules as proposed?
    Ms. CHAO. The final rule is not out yet, so we don't have a 
final, but that is not the case.
    Mr. NEAL. You believe that they will not be included? They 
will be able to still garner overtime?
    Ms. CHAO. This rule does not impact them because this is a 
white-collar regulation.
    Mr. NEAL. Okay. So, there are in some fire service 
operations white-collar employees. Do you believe that they 
will be, again, exempt from the rule based on overtime 
requirements?
    Ms. CHAO. What is the question?
    Mr. NEAL. Well, there are members of some fire service 
operations where technically some employees----
    Ms. CHAO. No, firefighters, first responders, police, 
nurses, union members covered by collective bargaining 
agreements are not covered.
    Mr. NEAL. Thank you, Madam Secretary. Thank you, Mr. 
Chairman.
    Chairman THOMAS. Does the gentlewoman from Washington wish 
to inquire?
    Ms. DUNN. Thank you very much, Mr. Chairman, and I want to 
thank the Secretary for being with us today, and a special 
thanks too for coming to Washington State a few weeks ago. I 
think it is important for folks to see that we do have a high 
unemployment rate in Washington State. The last monthly number 
was 7.3 percent, and it is something that concerns us all. We 
appreciate very much your help in so many ways. For example, a 
couple of years ago you secured for us a $15 million national 
emergency grant. We have just received the final $5 million out 
of that grant, and we have used this for very important support 
for those who are looking for jobs, and I want to thank you.
    As you know, Washington State was more severely impacted by 
9/11 than most States. We lost over 20,000 aerospace workers in 
the State of Washington, out of the 35,000 to 40,000 Boeing 
folks who were let off, and a lot of it had to do with the 
industry decline because of 9/11 and because of airlines not 
flying as much, and therefore not ordering additional aircraft.
    What I would like to hear, Madam Secretary, is your 
thoughts on how the Department's 2005 fiscal year budget is 
going to help States like my State, Washington State, as we 
address the economic problems that we are involved in?
    Ms. CHAO. Our budget as proposed and submitted to the 
Congress, we are at about $104 million on top of existing 
dollars for increased training and retraining. We also have 
proposed $50 million for what are called Personal Reemployment 
Accounts that will really empower workers to decide what 
courses they want to access themselves and what training they 
need. We have also added $500 million, as I mentioned, for the 
President's new initiative on a 21st century workforce, $250 
million of that goes to community colleges, who have proven so 
nimble at responding to the needs of the marketplace in terms 
of skills. We also have a $15 billion publicly funded workforce 
development system in which people who need jobs, need 
training, need advice, can access it. Of course, on top of that 
we have UI benefits. We have income support programs as well, 
and we also administer the TAA program, which helps people with 
income support, training, transportation, relocation, and 
expenses of health insurance, as well as wage insurance.
    Ms. DUNN. I think that is a pretty good story to tell, and 
we appreciate all the work you are doing, specifically for 
folks like the ones in Washington State, who want to have jobs, 
but because of the state of the economy in an area that is 
recovering more slowly are not able to find those.
    You mentioned a couple of things that are near and dear to 
my heart, the community colleges. I think that the work that is 
going on out of that $500 million proposal, of which 20 percent 
will go to community colleges because of their ability to adapt 
and to include people who need retraining is very important.
    I'm also particularly interested in TAA. I remember a 
couple of years ago in my Joint Economic Committee hearing, 
Alan Greenspan talk about TAA maybe going to be eventually a 
large part of the answer to some of the things that we call 
outsourcing now, but job loss and manufacturing in other ways, 
and through TAA many of the unemployment benefits, the job 
training, being extended to workers who have been adversely 
affected as a result of trade and foreign competition.
    In the last several years the Department of Labor has 
certified thousands of workers in my area of the country to be 
eligible for TAA. I have heard recently talk among some folks 
who are interested in expanding TAA eligibility to other 
sectors like the software sector and the Information Technology 
(IT) sector, and I am wondering if you have a position on this 
suggestion, if this is something that would be of interest to 
the Administration, and if it is something that we could work 
toward, if there is an official Administration position or just 
generally what your thoughts are on including IT and high-tech 
workers in TAA assistance programs?
    Ms. CHAO. Currently TAA does not envision service workers, 
and when we administer the program we administer it as Congress 
had intended. Obviously, if Congress has additional thoughts on 
this, we will be more than glad to work with all of you and 
consider what some of your thoughts are. We would have to take 
a look at the eligibility requirements and perhaps some of the 
resource allocation issues as well.
    Chairman THOMAS. Thank the gentlewoman. Does the gentleman 
from Washington wish to inquire?
    Mr. MCDERMOTT. I want to thank you, Madam Secretary, for 
taking that cheerleading trip out to the Northwest, and I have 
a couple questions about it. In light of the fact that this 
report that has just come out on the 26th of February called 
``Job Openings and Labor Turnover'' from December, you have 
lost jobs in the economy every single month since June. When 
you got out to Washington State and Oregon, I would like to 
know what did the unemployed workers say to you about the lack 
of an extension of the benefits? Did they say that was fine 
with them, that they were hopeful, or what did they say to you 
when you met with them?
    Ms. CHAO. We talked about job opportunities and where there 
are sectors of the economy in which hiring is going on, and we 
also talked about sectors of the economy which are desperately 
seeking workers.
    Mr. MCDERMOTT. So, where did you tell the people in the 
State of Washington to move to? Where did you tell them to go 
get a job?
    Ms. CHAO. In Washington State there is a tremendous need 
for health care workers, for biotechnology workers or----
    Mr. MCDERMOTT. So, if you were a computer programmer, you 
should now go work in a hospital? Is that what you told them?
    Ms. CHAO. We don't tell them anything. It is their choice, 
and we have----
    Mr. MCDERMOTT. That leads us to the second question, this 
whole business about whether you believe in training or not. 
The 2003 budget, if you take that and go to the 2005 budget, 
this Administration has cut training funds by $750 million, so 
anybody who says there is more money in for training is simply 
playing with the numbers because if you adjust it for 
inflation, that is what you have done.
    You evaded Mr. Rangel, and you essentially filibustered Ms. 
Dunn, but I am going to ask you again. Does the Administration 
believe that service jobs should be covered under the TAA? You 
have the economist for the country saying that outsourcing is a 
good thing. Now, that means people are going to be left without 
jobs in this country, and I want to know if the Administration 
thinks they ought to be eligible for their TAA?
    Ms. CHAO. I believe I answered the question, but I will--we 
administer the law as passed by Congress.
    Mr. MCDERMOTT. Can it be a yes or a no?
    Ms. CHAO. We administer laws as passed by Congress.
    Mr. MCDERMOTT. You have no interest in what we do.
    Ms. CHAO. Oh, of course, of course.
    Mr. MCDERMOTT. You just sit down there and wait for us to 
make a decision? The President of the United States is so 
passive----
    Ms. CHAO. It requires an act of Congress.
    Mr. MCDERMOTT. Wait a minute. You are presenting the 
President of the United States as being a passive man who sits 
down at 1600----
    Ms. CHAO. That is your----
    Mr. MCDERMOTT. Pennsylvania and says, ``I wonder what the 
Congress is going to do for us today.'' He has no interest in 
whether or not we give that?
    Ms. CHAO. That is certainly not true.
    Mr. MCDERMOTT. Nothing that he has told you, I can tell. I 
will tell you why it is important. Because the Boeing Company 
has decided to outsource all of their computer programming. I 
have a personal interest. I have a brother who is 60 years old 
and is going to be out of work with no health care benefits and 
60 years old and no training money. He is not alone. I am not 
pleading the case of my brother. I am saying there are 
thousands of individuals in this country when your economist 
says that outsourcing is a good thing, and then you come 
through and talk about jobs in the Northwest, and you don't 
talk to any unemployed workers about why you don't extend the 
benefits. My brother won't even be eligible for extended 
benefits because this Administration doesn't care about him or 
all of his confreres at the Boeing Company who are getting laid 
off. For anybody to say you put more training money in but you 
will not give it to the people that you in fact know you are 
making unemployed, is in my view misleading this Committee and 
trying to mislead the public. You can go on all those trips you 
want and go all over the country and wave the flag, but the 
workers know that it is a sham.
    When you won't sit up here and say that the President cares 
about them and wants the Congress to act on a bill putting 
service workers in to either a Republican or a Democrat, says 
to me the President doesn't care. All he wants to do is extend 
the tax benefits permanently. That is his plan, and his plan 
has led to a reduction in jobs every month since June.
    I yield back the balance of my time.
    Chairman THOMAS. Thank the gentleman. The Chair would be 
happy to provide any Member who wishes to consult family 
members about the Consolidated Omnibus Budget Reconciliation 
Act of 1985 (COBRA) (P.L. 99-272) programs or other programs 
which make health care available to those who, through no fault 
of their own, are unemployed.
    The gentleman from Pennsylvania wish to inquire?
    Mr. ENGLISH. I do indeed, Mr. Chairman. Secretary Chao, I 
would also like to pursue a couple of these lines of 
questioning, but first I would like to apologize for the fact 
that, in a way very atypical for this Committee, you haven't 
been given an opportunity to fully offer your reply, whether 
Members of the Committee may agree with them or not, on a 
couple of these points, so I hope I can give you an adequate 
opportunity to express the views of the Administration if you 
choose to. I believe that there is a concern in some parts of 
the country, a very legitimate one, for the continuing levels 
of unemployment, and I think there is the potential for dealing 
with it through a rifle shot rather than a blunderbuss 
approach, a much more targeted approach.
    I have introduced the Neighbors in Need Act (H.R. 3295), 
which among other things would provide extended benefits in 
those communities which continue to have high unemployment, 
assistance for those who have already exhausted their 
eligibility on a limited basis, phase in some long-term 
solvency reforms for the UC system, and also an issue that the 
Chairman knows is dear to my heart, provides a moratorium on 
the taxation of unemployment benefits, a concept which has 
attracted very little support from some of those in this 
institution that choose to view all tax cuts as tax cuts for 
the rich.
    I believe there is an opportunity here to maybe target 
those communities where there is continuing high unemployment 
and try to strengthen the safety net for them. You have also 
laid out an agenda I believe of reforms for the UC system. 
Would you care to comment, first of all, on those reforms, and 
second of all, if the Congress were to move forward a much more 
targeted approach to extending unemployment benefits or fixing 
the extended benefits trigger, something that Congress has 
never really had the will to do in the off years, how the 
Administration might react to that?
    Ms. CHAO. We have talked about UI reform on previous 
occasions. I think the overall major UI reform, tax and 
administrative reform program, because of discussions with the 
State, and until the States' budget improve, we are going to 
hold that in abeyance. Nevertheless, we are still very 
concerned about State Unemployment Tax Avoidance dumping and 
the tax offset for UI overpayments, and we want to work with 
the States on ensuring that the UI system remains robust.
    Mr. ENGLISH. As a former State staffer for our Labor and 
Industry Committee, I agree with you that State fiscal 
conditions right now would make it very difficult to 
immediately phase in some of the changes you have contemplated 
in the past for the UC system. Nevertheless, I would like to 
see some of these ideas, many of which have been out there 
since the UC Advisory Commission was in existence, explored 
adequately. Also, under TAA, the issue of the scope of this 
program has been raised. One of the things that has troubled me 
over the years is that we target different classifications of 
TAA benefits to different workers based on the criteria of why 
their job is occurring based on trade and potential competition 
with even different jurisdictions. There is a different TAA 
program for the North American Free Trade Agreement (NAFTA) 
than there is for a TAA that is the result of competition from, 
say, Europe or even China.
    I wonder if you can suggest how you think this system in 
the long term might be better rationalized?
    Ms. CHAO. We are working with the States on better 
management of the TAA program. It is an entitlement program, 
but it has a particular kind of standing within the budget. So, 
we want to make sure that the resources are available to 
workers who truly need them, and we want to make sure also that 
there are some guidelines to the States and how best to utilize 
that fund because right now there are practically no guidelines 
at all. So, we are working with the States on that.
    Mr. ENGLISH. Finally, as the light changes, I would like to 
thank you. I understand the Department of Labor is today 
announcing a new tranche of funding for Pennsylvania, which has 
had great difficulty with its TAA program, but thanks to the 
work of your administration and your Department, and frankly, 
you personally, a lot of the problems that were facing 
Pennsylvania workers are now being addressed I think in a way 
that gives them great confidence that those programs are going 
to be there when they need them.
    So, I want to thank you, and yield back the balance of my 
time.
    Ms. CHAO. Thank you.
    Chairman THOMAS. Thank the gentleman. The gentleman from 
California, Mr. Becerra, wish to inquire?
    Mr. BECERRA. Thank you, Mr. Chairman. Madam Secretary, 
thank you for being here with us. Perhaps we could start off by 
first agreeing that you and the thousands of people that are 
employed by your Department are working on every one of the 
important issues that we have discussed that are important to 
the American workers, and that we can agree right off the bat 
that the President and his Administration are interested in 
working with Congress on these issues. I do not think there is 
a need to go any further than that. I think everyone agrees 
that we are all trying to work here, hopefully together.
    I believe in the early part of your testimony you said 
something to the effect that--and I tried to write it down--
``The President said we will not be satisfied until every 
American who wants a job can find a job.'' More or less 
correct?
    Ms. CHAO. Yes.
    Mr. BECERRA. My understanding is the official number of 
unemployed Americans stands at about 8.3 million men and women, 
and my understanding is that that also does not include nearly 
5 million American men and women who are no longer counted by 
those official estimates, principally because their efforts to 
find a job were frustrated or they hit a dead end. So, then we 
have about, what, some 13 million Americans who are not 
employed. If you add to those 13 million Americans the, what, 
4.5 million or so Americans who are under-employed, working 
part time, who are having to subsist on part-time wages 
throughout the year, you have some 17.5 million Americans who 
are either fully unemployed, seeking work, or working part time 
and hoping to get full-time jobs for the most part.
    My question then will be--and I will try to be specific so 
I can see if I can get an answer from you on this--you just 
said that you and the President will not be satisfied until 
every American who wants a job can find a job. Would you tell 
the American workers, would it be your statement that you could 
tell the American workers that the President and his Secretary 
of Labor define full employment as every American who wants to 
work, working?
    Ms. CHAO. Our employment under----
    Mr. BECERRA. Madam Secretary, we are going to start going 
to----
    Ms. CHAO. If I may just answer the question, please.
    Mr. BECERRA. I know we don't want to try to interrupt you, 
Madam Secretary----
    Ms. CHAO. Unemployment is usually defined as 6 percent----
    Mr. BECERRA. Madam Secretary, the reason we are trying to 
be so specific is because we have a precious 5 minutes to try 
to get answers to any number of questions. I would like to ask 
you about your trade policy, where you believe we should be on 
trade policy. I would love to ask you about the whole issue of 
manufacturing job credits to try to keep--but I will not have 
time, and I am going to have time to perhaps ask you one, if 
I'm lucky, two questions. So, I want to try to be specific.
    Ms. CHAO. Yes.
    Mr. BECERRA. My question to you was--you mentioned, and you 
said this was the President's statement, not just yours--that 
we will not be satisfied until every American who wants a job 
can find a job. My question to you is, which I know that 
workers in my district will ask me, does that mean that the 
President believes that full employment means every American 
working, your definition of full employment? If it is not, that 
is fine, and we can move on. If it is, great, and I will move 
on to my next question. I just want to know, is your definition 
of full employment that every American who wants to work will 
have a job?
    Ms. CHAO. Mr. Chairman, how much time do I have to answer 
this question?
    Chairman THOMAS. I tell the gentlewoman that she has--the 
Secretary, that she has an opportunity to respond directly to 
his question, and his question is of course a hypothetical, and 
that the Secretary could respond that it is the goal of 
everyone to have every individual employed.
    Mr. BECERRA. Mr. Chairman, before I run out of my time----
    Chairman THOMAS. This is not coming out of the gentleman's 
time.
    Mr. BECERRA. Thank you.
    Chairman THOMAS. It was an inquiry by the Secretary of the 
Chair. The Secretary could respond by talking about legislative 
history of what full employment was under legislation that 
became law called Humphrey-Hawkins Act (P.L. 95-523). It was 
determined to be 6 percent. However, everyone believes that the 
world has changed, and that what was full employment at one 
time may not be full employment now. So, as a goal, every 
individual who wants a job should be able to get one.
    Mr. BECERRA. Mr. Chairman, if I could just be----
    Chairman THOMAS. I am responding on my time. As a practice 
matter, given the millions of jobs in this country and the fact 
that every day thousands if not tens of thousands of people 
lose their job, and thousands if not tens of thousands of 
people gain a job, the question of should everyone have a job 
would have to be determined at the exact moment that all of 
those people who lose a job are exactly offset by all those 
people who find a job, which obviously makes it very difficult 
for the Secretary to respond.
    So, the Secretary has an opportunity to respond in the 
manner that she believes is responsive to the question. That is 
the Chair's response to the Secretary's inquiry.
    Now, responding to the gentleman from California----
    Mr. RANGEL. Parliamentary inquiry, Mr. Chairman.
    Chairman THOMAS. The gentleman from New York will state his 
parliamentary inquiry.
    Mr. RANGEL. My parliamentary inquiry directs itself to the 
discretion of the Chair. Since I aspire to become a Chairman I 
want to be as liberal as I can be, but we had some discussions 
as to the time allotted to the minority and the majority. So, 
when the Secretary asks you how much time that she has, and you 
give a speech on Thomas on unemployment, and say that this is 
being given on your time, how do you allocate the Chairman's 
time as opposed to the Ranking Member's time?
    Chairman THOMAS. I have only been on this Committee since 
1983, but in my years on the Committee, for which there has 
been no change since the Republicans became the majority, nor 
since I became a Chairman, is that the Chair's time is 
determined by the Chair.
    [Laughter.]
    Mr. RANGEL. I would assume that would mean that the Ranking 
Member's time is----
    Chairman THOMAS. The gentleman from New York is recognized.
    Mr. RANGEL. My question was, is the Ranking Member's time 
also determined by the Chair? This is a parliamentary inquiry, 
because if the Chair recalls--and I apologize to the Secretary, 
but this was something that we had discussed in the past--there 
was a time that some of the Members of the minority thought 
that the Chair could respond to every question that the 
minority may have, and we wanted to know whether you thought 
that was in your discretion to just give your little remarks on 
everything? You were kind enough to really be considerate 
enough to know that you wanted to have some balance, and I 
thanked you privately, and now I thank you publicly. It wasn't 
that I wanted to be recognized to tell the Secretary how much 
time she had because that was something I thought could be 
determined by the clock. As a matter of fact, I withdraw my 
question since you recognized me, and any time you feel like 
you want to give an essay on subject matters and answers to 
questions that weren't asked, I would raise it on the question 
of a parliamentary inquiry. Since you yield to me, Ms. Chao, 
you have as much time to respond as the Chair gives to you.
    Mr. BECERRA. Mr. Chairman, I want to raise a 
parliamentary----
    Chairman THOMAS. If the gentleman will suspend, the Chair 
appreciates the gentleman from New York's comments, but he has 
no ability to yield time. Time goes through the Chair. The 
Chair will respond briefly as an illustration to Members, 
especially the Member from California, which was verging on 
badgering in asking a question which can be answered in 
multiple ways.
    Mr. BECERRA. Would the Chairman yield?
    Chairman THOMAS. If the Secretary chooses to respond in one 
way, that is the Secretary's choice. The attempt to force an 
answer from someone when the answer is a complicated one, does 
not add to the history of testimony on what is a very important 
question, and that is, the attempt to make sure that every 
American who wants a job----
    Mr. BECERRA. Will Mr. Chairman yield?
    Chairman THOMAS. Gets a job. The gentleman from California 
is recognized for the remainder of his time.
    Mr. BECERRA. Mr. Chairman, would you yield on your comments 
with regard----
    Chairman THOMAS. I am recognizing the gentleman from 
California for the remainder of his time.
    Mr. BECERRA. A parliamentary inquiry before I use the 
remainder of my time, a parliamentary inquiry?
    Chairman THOMAS. The gentleman is recognized for a 
parliamentary inquiry.
    Mr. BECERRA. The Chairman has said that it is his belief 
that he is employing time yielded to himself by the Chair of 
the Committee, and I would like to know under what portions of 
the rules of the House or this Committee that he is 
authorized----
    Chairman THOMAS. Tell the gentleman the Chairman is 
responsible for the decorum of the Committee, and the Chair can 
use whatever means available to the Chairman to ensure decorum, 
and what the Chair did was illustrate that when questions are 
asked repeatedly, badgering a witness for a particular answer 
that the questioner wants and is not satisfied because the 
questionee does not give the answer that is sought for, that is 
badgering, and it lends a negative feeling to the decorum of 
the Committee. That is the power under which the Chair made the 
ruling.
    Mr. BECERRA. Mr. Chairman----
    Chairman THOMAS. The gentleman from California is 
recognized for the remainder of his time.
    Mr. BECERRA. Mr. Chairman, I have not finished my 
parliamentary inquiry.
    Mr. RANGEL. We better alert the Capitol Police.
    Chairman THOMAS. That was the response to the gentleman's 
parliamentary inquiry.
    Mr. BECERRA. Mr. Chairman, parliamentary inquiry?
    Chairman THOMAS. You have another one?
    Mr. BECERRA. Further parliamentary inquiry, Mr. Chairman?
    Chairman THOMAS. Yes. The gentleman is recognized for his 
parliamentary inquiry.
    Mr. BECERRA. Does that mean, Mr. Chairman, that you are not 
going to give us a reference within the rules of the House for 
the ruling that the Chairman has made?
    Chairman THOMAS. I will tell the gentleman the general 
decorum of the House is the broad ruling under Jefferson's 
rules. If you want chapter and verse, the Chair is more than 
willing to provide you, but in any parliamentary body, 
regardless of the parliamentary rules, including this one using 
Jefferson's manual, general decorum is always available to the 
Chairman to maintain order.
    Mr. BECERRA. Mr. Chairman, very well. I will just ask that 
if you can, in writing, no longer to continue the hearing, 
because the Secretary obviously has limited time, that if you 
could provide in writing----
    Chairman THOMAS. Is the gentleman still under the 
parliamentary inquiry?
    Mr. BECERRA. Correct, I am, Mr. Chairman.
    Chairman THOMAS. The gentleman is recognized for his time. 
Does he wish to use it?
    Mr. BECERRA. Yes, I do, Mr. Chairman, but I have not 
finished the parliamentary----
    Chairman THOMAS. The gentleman is recognized----
    Mr. BECERRA. Further parliamentary inquiry, Mr. Chairman.
    Chairman THOMAS. The gentleman is recognized for the use of 
his time.
    Mr. BECERRA. Mr. Chairman, further parliamentary inquiry.
    Chairman THOMAS. The Chair is not recognizing the gentleman 
for the parliamentary, and----
    Mr. BECERRA. Mr. Chairman, point of privilege.
    Chairman THOMAS. The Chair has that privilege.
    Mr. BECERRA. Mr. Chairman, point of personal privilege.
    Chairman THOMAS. What is the gentleman's point of personal 
privilege?
    Mr. BECERRA. The Chair characterized this Member of the 
House as having badgered a witness.
    Chairman THOMAS. No, that is incorrect. If you will look at 
the record it did not say your question was badgering. The 
record will reflect a different statement.
    Mr. BECERRA. What was that statement, Mr. Chairman, because 
I want to make sure that it is very clear that the Chairman is 
not saying that I have badgered the witness.
    Chairman THOMAS. I believe the word ``bordering'' was in 
part of the description.
    Mr. BECERRA. Mr. Chairman, could you then provide me the 
information? What did I do that bordered on badgering the 
witness? I would like to know so I do not do it again.
    Chairman THOMAS. The gentleman has every right to do 
whatever he wishes to do.
    Mr. BECERRA. Mr. Chairman, you have characterized my 
conduct----
    Chairman THOMAS. The Chair indicated that the gentleman 
asked the witness a question----
    Mr. BECERRA. Should I----
    Chairman THOMAS. A question--see, you are just doing to me 
what you were doing to her. The question that you asked was one 
that could be answered in a number of different ways, but the 
gentleman wouldn't allow the witness to provide an answer which 
was her answer. The gentleman from California was attempting to 
drive her in a divergent discussion to provide the answer the 
gentleman from California wanted.
    Mr. BECERRA. I will close my parliamentary----
    Chairman THOMAS. It doesn't work that way.
    Mr. BECERRA. Mr. Chairman, then I will close my 
parliamentary inquiry, awaiting the written response on the 
provisions in the rules of the House and of this Committee that 
permit the Chairman to engage in additional dialogue beyond the 
regular----
    Chairman THOMAS. It is called general decorum. Does the 
gentleman want to be recognized for his time? The Chair is 
ready to recognize another Member of the Committee.
    Mr. BECERRA. Yes, I do, Mr. Chairman.
    Chairman THOMAS. The gentleman is recognized for the 
remainder of his time.
    Mr. BECERRA. I appreciate that, Mr. Chairman. Let me ask 
the question one more time, Madam Secretary, but I don't expect 
you to answer it because I am running out of time, and I think 
I know that your answer would go beyond what I have asked.
    For the record, so it is clear, this was my question. Given 
that you and the President have said that, quote, ``We will not 
be satisfied until every American who wants a job can find a 
job.'' My question, which the Chairman characterized as 
bordering on badgering, was simply this. Would you tell the 
American workers that the President and his Secretary of Labor 
define full employment as every American who wants to work, 
working? I was paraphrasing what you had said. That, according 
to the Chairman, is bordering on badgering. I did not mean to 
badger you. I was just trying to get an answer to a question 
that I think a lot of American workers are trying to get. I 
don't expect you to answer at this stage.
    Let me continue with a second question I wanted to ask you. 
In the last 3 years we have lost close to 3 million jobs in 
America. We have seen the Nation's debt increase by more than 
$3 trillion. Last year on Labor Day the President met with 
workers and promised to appoint a manufacturing czar to deal 
with the loss of manufacturing jobs, which total some $2.8 
million in the last 3 years of the President's term in office. 
Six months after that statement on Labor Day of last year, 
there is still no manufacturing czar. Administration officials 
have said they are working on it, but while Rome burns, and the 
economy has hemorrhaged an additional 250,000 American 
manufacturing jobs since that Labor Day statement by the 
President and his promise to bring on a manufacturing czar, we 
still have not gotten there. Do you know who will be the 
manufacturing czar that the President promised 6 months ago?
    Ms. CHAO. Am I allowed to answer? The manufacturing czar is 
an assistant secretary position in the Commerce Department, so 
there is a lengthy confirmation process that goes along with 
that too.
    Mr. BECERRA. Madam, but the question was do you know who 
that manufacturing czar, the name of the person?
    Ms. CHAO. It is not within the Department of Labor.
    Mr. BECERRA. Do you know the name of the person?
    Ms. CHAO. I would not usually know about the appointments 
of any other departments.
    Chairman THOMAS. The gentleman's time has expired.
    Mr. BECERRA. I thank you, Madam Secretary.
    Chairman THOMAS. The Chair would like the gentleman from 
California to submit written evidence that Rome is burning.
    Mr. BECERRA. Mr. Chairman, I think there is ample evidence, 
and I would be more than willing to do so.
    Chairman THOMAS. The gentleman from Texas, Mr. Brady?
    Mr. BRADY. Thank you, Madam Secretary. Jobs are a concern 
for all of us, and I think both you and the Administration are 
absolutely right in saying that full employment is making sure 
every person who wants to work has a job, and not just a job, 
but a good job, which I think your goal is exactly right on 
mark.
    We know America has the most productive workers in the 
world. My question is does America have the most productive 
business climate in the world? It seems to me that between a 
very high tax rate that makes companies uncompetitive when they 
compete around the world, because of lawsuit abuse that drives 
prices up and keeps companies from competing, because of high-
energy costs because we are not willing to take responsibility, 
and we are not given the opportunity to take responsibility for 
our energy needs, and then regulation, much of I think well-
intended, but very restrictive when it is applied one size fits 
all, it seems to me that America, in a world where you aren't 
granted jobs, you compete for them, it is tough, and you have 
to fight for every American job, it seems to me that we may not 
have the most productive business climate in the world in order 
to create, obtain and keep American jobs.
    Can you give us your thoughts on that.
    Ms. CHAO. I think the Congressman makes an excellent point 
that governments don't really create jobs, it is the private 
sector, and the role of the government is to ensure the proper 
environment through which job creation can occur.
    The President's six-point program does speak to the issue 
of the high taxation that faces our workers and employers, the 
high energy cost, the fact that we are not energy independent 
due to regulations that many businesses face that are too 
onerous. We want to protect workers, of course, but there are 
some overly onerous regulations, and then the whole issue about 
frivolous lawsuits needs to be addressed as well.
    The tax cuts have helped a great deal in terms of job 
creation in the last 2 years, and so we hope that these tax 
cuts will be made permanent so that the continued growth of the 
economy can occur and job creation can further accelerate.
    Mr. BRADY. Thank you. I also appreciate I think the 
difference in the household survey the Department of Labor 
does. The economy really is changing. Using the payroll survey, 
which is sort of the old-fashioned way you look at big business 
and make an extrapolation from that, rather than go deeper into 
it and find all of those entrepreneurs in my district, all of 
those one- and two-people shops I think is important. If I read 
the household survey right, just so I understand it, there are 
3 million more Americans working this year than last; is that 
what the Labor----
    Ms. CHAO. That is correct.
    Mr. BRADY. So, we are at, to put it in perspective in 
history, my understanding is this appears to be the highest 
number of Americans who have ever worked ever?
    Ms. CHAO. We have the largest number of Americans ever 
working because we have a workforce of 146 million people, 
where 70 years ago, the workforce was only 31 million people, 
and the wages are getting better, also.
    Mr. BRADY. The goal for us is even that is not good enough 
for us. We want to retrain workers for health care, for the 77 
million baby boomers who will soon become seniors and are going 
to need every kind of health care service there is in 
biotechnology and all of the types of new technology that is 
coming along. Our goal is to not just be satisfied with the 
most Americans working, but to make sure every person that 
wants a good job, finds one; is that correct?
    Ms. CHAO. The President has said on many occasions that we 
care about this issue, we care about those who are out of work, 
and one worker out of work is one worker too many. We need a 
million nurses in the next 7 years, we need health care 
technicians, pharmacists. We need skilled trades people, 
construction workers.
    Mr. BRADY. I think you are exactly right. In the end, we 
don't need to be building walls, we need to be building skills. 
That is how we are going to put America back to work. Thank 
you, Madam Secretary.
    Ms. CHAO. Thank you.
    Chairman THOMAS. The gentlewoman from--I don't know the 
order, but I have down here that the gentlewoman from Ohio, Ms. 
Tubbs Jones, is next and then the gentleman from North Dakota 
would. Does the gentlewoman wish to inquire?
    Ms. TUBBS JONES. Yes, Mr. Chairman. Thank you.
    Chairman THOMAS. Thank you.
    Ms. TUBBS JONES. Good morning, Secretary Chao. How are you?
    Ms. CHAO. Fine. Thank you.
    Ms. TUBBS JONES. Good. Good. Glad to have you here. Let us 
talk about the TAA program for a moment and the budget.
    Non-agricultural employment in Ohio declined by 244,000 
jobs between November 1999 and November 2003. Out of that 
number, 191,000 manufacturing jobs were lost in Ohio. Total 
non-agricultural employment in Cleveland declined by 72,000 
jobs between November 1999 and November 2003, and out of that 
number 44,000 manufacturing jobs were lost in Cleveland.
    A substantial portion of these job losses have been linked 
to foreign trade. Since 1995, the TAA and the NAFTA TAA program 
data identifies that 46,000 of the jobs that were lost in Ohio 
were directly due to international trade in NAFTA. In Cuyahoga 
County, over 5,000 jobs were identified.
    As you know, the TAA program exists to provide relief to 
misplaced workers in Ohio and nationwide. As your 
Administration or the President's Administration intends to 
sign the Central American Free Trade Agreement and continues to 
negotiate Free Trade Area of the Americas, including Central 
America, South America, and the Caribbean, except Cuba, the 
role of the TAA program will become more important.
    Does the estimated budget for the TAA assistance program, 
which is $770 million for 2004, and $1 billion for 2005, take 
into account the additional burden the program will bear as a 
result of these comprehensive trade agreements you seek to 
enter into?
    Ms. CHAO. The TAA income support is on the mandatory side 
of the budget, so it will respond on an entitlement basis to 
whatever needs there are. So, yes, the money will be there, 
number one.
    Number two----
    Ms. TUBBS JONES. So, no matter how many jobs are lost and 
can be linked, there will be dollars available to assist the 
workers. So, if we end up with 88,000 jobs lost in Cuyahoga 
County, 88,000 of my folks in Cuyahoga County will receive 
assistance through TAA. That is what you are telling me.
    Ms. CHAO. It is an entitlement program.
    Ms. TUBBS JONES. Also, in these days of thousands of jobs 
in Ohio being lost, what is the Department of Labor doing to 
keep workers in Ohio, and nationally, fully informed of the TAA 
program?
    Ms. CHAO. That is our job. We have One-Stop Centers located 
throughout Ohio, we have a full staff at the Employment and 
Training Administration, and our job is to do outreach to make 
sure that all workers who need the assistance of the Department 
of Labor----
    Ms. TUBBS JONES. What do you do? I know you have these One-
Stop Centers, and I know that you say this is your job, but 
what do you do?
    Ms. CHAO. They are in every community. We hold seminars, 
forums. We go out to clusters where displaced workers are. When 
we first hear that a factory----
    Ms. TUBBS JONES. Could you, in fact, have someone from your 
staff provide me with the information for the programs that you 
provided in the last 3 years in the 11th Congressional 
District----
    Ms. CHAO. We will be happy to provide you----
    Ms. TUBBS JONES. And notice me of all of the programs that 
you intend to provide when you give notice?
    Ms. CHAO. Of course.
    [The information follows:]
               ETA Discretionary Grants Past Three Years
                   Ohio--11th Congressional District

                                                                  As of March 31, 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       Term (Extension
                                                                Name of Grantee               Type of Grant                Award       Requests may be
                                                                                                                          Amount           pending)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1                                                                        Youth                        School to Work    $2,700,000        9/1997-9/2003
                                                                 Opportunities         Urban Rural Opportunity Grant
                                                                     Unlimited
                                                                     2000 East
                                                                Ninth Street--
                                                                     Suite 820
                                                                    Cleveland,
                                                                      OH 44115
--------------------------------------------------------------------------------------------------------------------------------------------------------
2                                                                      City of    WIA Youth Opportunity (Competitive   $28,000,000        7/2000-6/2005
                                                               Cleveland Youth                               Awards)
                                                                   Opportunity
                                                                         Grant
--------------------------------------------------------------------------------------------------------------------------------------------------------
3                                                              Cuyahoga County       WIA Dislocated Workers National    $1,165,000        5/2001-8/2003
                                                                     Workforce                        Reserve--DEMOS
                                                               Investment Board
                                                                    Dislocated
                                                                Workers Skills
                                                                      Shortage
--------------------------------------------------------------------------------------------------------------------------------------------------------
4                                                                   Wire-Net 2                       WIA P&D Earmark      $765,000      12/2001-12/2002
                                                                       Detroit     Westside Industrial Retention and
                                                                      Avenue--                     Expansion Network
                                                                      Suite #3
                                                                    Cleveland,
                                                                      OH 44102
--------------------------------------------------------------------------------------------------------------------------------------------------------
5                                                                   Wire-Net 1                       WIA P&D Earmark      $500,000        2/2003-1/2004
                                                                       Detroit        Advancing Manufacturing Sector
                                                                      Avenue--       Training Initiatives in NE Ohio
                                                                      Suite #3
                                                                    Cleveland,
                                                                      OH 44102
--------------------------------------------------------------------------------------------------------------------------------------------------------
6                                                                    Cleveland                       WIA P&D Earmark      $100,000      10/2003-10/2005
                                                                         State     The Nuts and Bolts of Governance:
                                                                    University   Research and Executive Training for
                                                                   2121 Euclid      Prospective Members of the State
                                                                        Avenue                                      Legislature
                                                                    Cleveland,
                                                                      OH 44115
--------------------------------------------------------------------------------------------------------------------------------------------------------
7                                                                   Wire-Net 2                       WIA P&D Earmark      $500,000         Pending 2004
                                                                       Detroit     Westside Industrial Retention and
                                                                      Avenue--                     Expansion Network
                                                                      Suite #3   Enhancing Cross-Sectoral Training in
                                                                    Cleveland,             the Manufacturing Cluster
                                                                      OH 44102
--------------------------------------------------------------------------------------------------------------------------------------------------------
8                                                                         Ohio        WIA Formula Grant to State for    $4,398,355        7/2001-6/2002
                                                                    Department    Adult, Dislocated Worker and Youth    $2,814,382        7/2002-6/2003
                                                                    of Job and      Employment and Training Programs    $2,853,502        7/2003-6/2004
                                                                        Family
                                                                    Services 3                  State Allocation to Local WIA
                                                                                     Area 2 (Cuyahoga County outside   $15,804,507        7/2001-6/2002
                                                                                           of the City of Cleveland)   $15,870,041        7/2002-6/2003

                                                                                                State Allocation to Local WIA
                                                                                          Area 3 (City of Cleveland)   $15,902,808        7/2003-6/2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
1 Grant activities in 10th, 11th, 14th, and 17th Congressional Districts.
2 Grant activities in 10th and 11th Congressional Districts.
3 11th Congressional District includes all or part of Local WIA Area 2 (Cuyahoga County outside of the City of Cleveland) and Local WIA Area 3 (City of
  Cleveland).


                                 

    Ms. TUBBS JONES. How do you provide notice? Do you give it 
to individual workers, to their homes? How is that done?
    Ms. CHAO. As soon as we hear that a factory might be 
closing, we send a Rapid Response Team that goes out and tells 
dislocated workers--potentially dislocated workers--what their 
benefits are, how to keep up their health insurance, what other 
job opportunities there are in the surrounding area, and so we 
meet with them on an individual basis.
    Ms. TUBBS JONES. My last question. This is the Economic 
Report of the President that you were discussing with my 
colleague earlier; is that correct?
    Ms. CHAO. I believe so, yes.
    Ms. TUBBS JONES. You believe so. Do you want me to bring it 
over so you can look at it closely? Can I approach the witness, 
Mr. Chairman? Excuse me?
    Ms. CHAO. I do not have my glasses on.
    Ms. TUBBS JONES. Now, I did not interrupt you. Do not 
holler at me, okay? This is the book, is it not?
    Ms. CHAO. I do not have my glasses on. Yes.
    Ms. TUBBS JONES. In the front of the book it has, ``To the 
Congress of the United States,'' signed by George W. Bush, the 
President, right? So, this is his report to the Congress, and 
it in fact provides that job growth for 2004 of over 300,000 
jobs per month or 3.5 million jobs for the year, this is the 
forecast, in this President's forecast report, is it not?
    Ms. CHAO. That is the CEA's report, yes.
    Ms. TUBBS JONES. That is the President's report. It is 
either yes or no, Ms. Chao. Do not make it complicated. See, I 
do not think it is cute that----
    Ms. CHAO. I am not trying to be cute.
    Ms. TUBBS JONES. I do not think that it is cute that you do 
not respond to questions.
    Chairman THOMAS. The gentlewoman's time has expired.
    Ms. CHAO. I just want some courtesy extended to me as a 
witness. That is the Council on Economic Advisers, that is the 
report----
    Ms. TUBBS JONES. Of the President. It is published, his 
name is signed in it.
    Ms. CHAO. Ma'am, if you want to----
    Chairman THOMAS. The gentlewoman's time has expired.
    Ms. TUBBS JONES. Mr. Chairman, I appreciate that my time 
has expired, and I hope that you appreciate, and all of you 
appreciate that when it comes to answering the questions of the 
Republicans, she is very clear and answers; when it comes to 
responding to the Democrats--and I was very easy. I was not 
cross-examining her. I merely asked her about the report, and 
every other Democratic Member could not get an answer.
    So, Ms. Chao, I thank you very much for your testimony, 
and, Mr. Chairman, I thank you for the opportunity to finish 
what I had to say.
    Chairman THOMAS. I thank the gentlewoman. Just so the 
record understands the gentlewoman's question, what is the book 
that you are referring to? What is the title?
    Ms. TUBBS JONES. The record is clear. It is called, ``The 
Economic Report of the President.'' May I submit it?
    Chairman THOMAS. The Chair would ask the gentlewoman, who 
is the President?
    Ms. TUBBS JONES. Well, you know what----
    Chairman THOMAS. It is a simple question.
    Ms. TUBBS JONES. I think you answered every other question 
for the witness. Answer it, Mr. Chairman. It is George Bush.
    Chairman THOMAS. Oh, okay.
    Ms. TUBBS JONES. I wish it were not, but it is.
    [Laughter.]
    Chairman THOMAS. Well, then, we got that question answered. 
The Chair is trying to be helpful in getting answers----
    Ms. TUBBS JONES. Mr. Chairman, give me a break.
    Chairman THOMAS. The Members ask. Does the gentleman from 
Florida wish to inquire?
    Mr. SHAW. Yes, Mr. Chairman, and I would like to compliment 
the Secretary, at least on that side of the dais, of 
maintaining the dignity of this Committee. I regret the amount 
of badgering that you have put up with, and I might say in a 
very graceful manner.
    Ms. CHAO. Thank you.
    Mr. SHAW. It is very difficult to answer questions when 
somebody is yelling at you and interrupting you, and before you 
can even get five and six words out, jumping in.
    I have not seen this Committee operate like that before. 
Obviously, this was rehearsed before this Committee meeting, 
and I think that is quite regrettable, in that we are the 
Committee on Ways and Means.
    I do have a question for you. To help you reduce erroneous 
payments in the UC system, the budget provides $20 million for 
more face-to-face reviews of unemployed benefits eligibility. 
You are expecting this action, I understand, to save up to $400 
million. If you could tell us more about this proposal and why 
you expect it to result in such savings to the unemployment 
system.
    I compliment you in trying to get people to get back to 
work, to get interviewed, to help them out if you can and also 
to make a determination whether or not they are putting forth 
the effort to find employment, I would appreciate your 
answering the question.
    Ms. CHAO. Well, first of all, we all support making sure 
that those who need assistance are indeed getting them. So, we 
want to make sure that our programs are effective and that the 
people who need the money, who need the resources going through 
a very vulnerable period in their lifetime are indeed getting 
it. We also want to ensure the integrity of the program as well 
and make sure that there are not abuses or mismanagement 
because that hurts everyone who would otherwise be able to 
participate or benefit from these programs.
    So, currently, we have claims that are filed on the 
Internet and by the phone to supplement the usual face-to-face. 
That has become the more standard way of doing business. There 
is research showing that if there are more frequent reviews, 
and so we want to make sure, once again, that the integrity of 
the program remains intact so that the maximum resources are 
available to workers who really need them.
    Mr. SHAW. I thank you, and I compliment you for this 
program. Mr. Chairman, I yield back.
    Chairman THOMAS. I thank the gentleman. Does the gentleman 
from Kentucky wish to inquire?
    Mr. LEWIS OF KENTUCKY. Yes, Mr. Chairman. Thank you. Madam 
Secretary, welcome, and we are certainly, as Kentuckians, very 
proud that you are our Secretary of Labor.
    Ms. CHAO. Thank you.
    Mr. LEWIS OF KENTUCKY. I think it has kind of been a tough 
morning. The reason that you have been able to answer the 
Republican questions is because we have allowed you to answer. 
We have not interrupted you because we are interested in an 
answer.
    Ms. CHAO. Thank you.
    Mr. LEWIS OF KENTUCKY. It is amazing to me, we have 94.4 
percent of the workforce employed today, and it seems like my 
colleagues across the aisle are not excited about that and that 
unemployment has dropped from 6.3 percent down to 5.6 percent, 
and we are moving on. So, the President's tax package that he 
has sent before us has created opportunities in our society in 
job growth. So, we ought to be celebrating that, and of course 
we want to continue to make sure that everyone that can work 
can get a job, and we are trying to accomplish that to the best 
of our ability.
    We have been talking a lot about insourcing and 
outsourcing. The United States comprises only 6 percent of the 
land and 5 percent of the population on the Earth. Despite 
this, the United States insources nearly as many jobs as its 
businesses outsource to every other country in the world--one 
country against the world--and we are bringing a lot of good 
employers into this country.
    Kentucky is a good example of that, with Toyota and all of 
the component parts, automobile industry plants that have come 
to Kentucky. We just recently we are having a Canadian company 
come into Bowling Green, Kentucky, with I think 1,100 jobs, but 
there is a unique place in Kentucky, and it should not be 
unique because it is a small place--Campbellsville--and I think 
you are aware of what happened in Campbellsville.
    From 1997 to 1998, Campbellsville lost Fruit of the Loom, 
something like 3,200 people in a community, I think 
Campbellsville, the population is like 10,000. Unemployment 
skyrocketed to 30 percent in that period of time. Fast-
forwarding to 2003, Campbellsville now has one of the highest 
employment rates of any of the counties in Kentucky. They have 
3,700 new jobs. They have 13 new employers and major expansions 
by more than half a dozen existing industries. It is an example 
of how the trade assistance has helped there through 
Campbellsville University, a community of leaders that went out 
to change that situation, and as you see, changed it very 
dramatically in a very short period of time.
    I do not think that this should be unusual across the 
country because Campbellsville is kind of in a land-locked 
situation. Their infrastructure, their transportation coming in 
and going out of Campbellsville is not the best in the world. 
We are working on that. They have done a tremendous job of 
proving that insourcing is great for Kentucky and great for the 
economy of the United States. Yes, we lose jobs, but we gain 
jobs. That is the world economy we live in, and we have to 
participate. So, please, can you make comments to that?
    Ms. CHAO. The Department of Labor has all sorts of 
assistance programs, and so we want to make sure that those who 
do lose their jobs are helped during a very vulnerable period 
in their lifetime, and we have programs that will help them get 
on their feet, that offer UI, that offer other income support 
and also training, and we want to get them back in the 
workforce as quickly as they can because it is better for them, 
and it is better for their families.
    Mr. LEWIS OF KENTUCKY. Absolutely. We look to Congress, we 
look to the President, but communities and States also have a 
responsibility to deal with some of these job losses, and 
Kentucky and Campbellsville is a great example of how it works, 
how it is supposed to work, I think.
    Ms. CHAO. It is a good example.
    Mr. LEWIS OF KENTUCKY. Yes. Thank you, Madam Secretary.
    Chairman THOMAS. I thank the gentleman. Does the gentleman 
from North Dakota wish to inquire?
    Mr. POMEROY. Yes, I do, Mr. Chairman. Thank you. I would 
begin by saying I am a bit surprised to hear the happy talk on 
the other side of the aisle regarding jobs in this country. The 
last statistic I saw was that we are actually down 2.2 million 
jobs since the beginning of this Administration. Quite frankly, 
I do not find those numbers anything to crow about.
    The first question I would have of the Secretary would 
involve the pension-reserving legislation working its way 
through Congress. The House has passed a bill. The Senate has 
passed a bill. It goes into conference committee. My first 
question to you, Madam Secretary, what importance do you place, 
as State or local, on Congress enacting this legislation?
    Ms. CHAO. We place great importance in protecting workers.
    Mr. POMEROY. I am asking you, Madam Secretary, if you think 
it is important we pass this bill or not. I guess you will have 
to confer before you can answer that question. I will wait 
here. I appreciate my time not tolling, Madam Secretary, while 
the advice continues in terms of whether the Secretary supports 
this bill or not.
    Ms. CHAO. I think the answer is, yes.
    Mr. POMEROY. Madam Secretary, the versions are different 
between the House and the Senate.
    Ms. CHAO. Yes.
    Mr. POMEROY. Does the Department of Labor have a preferred 
approach?
    Ms. CHAO. It is the House.
    Mr. POMEROY. You prefer the House approach. Does the 
Department of Labor----
    Ms. CHAO. I believe we have a SAP out on this.
    Mr. POMEROY. Does the Department of Labor oppose taking 
remedial action for multiple employer plans?
    Ms. CHAO. We would prefer, again, that pension plans be 
funded on a regular basis so that----
    Mr. POMEROY. Madam Secretary, that is non-responsive. At 
issue, if I might give just a little background, perhaps, the 
House plan addresses single-employer plans, while the Senate 
has single- and multiple-employer plans. My question to you, as 
you express a preference for the House approach, is whether 
you, as Department of Labor, oppose a remedial step to address 
the funding issues of multiple-employer plans.
    Ms. CHAO. We want to work with the Congress on that. Let me 
get you something for the record.
    [The information follows:]

    On April 10, 2004, President Bush signed into law H.R. 3108, the 
Pension Funding Equity Act of 2004. This law allows employers who 
sponsor multiemployer pension plans meeting certain criteria to defer 
making a portion of the payments otherwise required.

                                 

    Mr. POMEROY. I must say that this is a very important 
policy issue----
    Ms. CHAO. Yes, it is.
    Mr. POMEROY. I am rather surprised that you are not 
prepared to answer that question. I have another question. Do 
you happen to have Tammy McCutcheon with you, the head of the 
Wage and Hour Division?
    Ms. CHAO. No, she is not here.
    Mr. POMEROY. I am sorry that she is not. Perhaps you can 
answer these questions on her behalf.
    Ms. CHAO. Sure.
    Mr. POMEROY. This involves the guidance sent out to 
employers relative to the new overtime regulations. I will tell 
you that the people in North Dakota, many of them working long, 
long hours at fairly modest-paying jobs are deeply concerned 
that the new overtime regulations under development, under your 
leadership, will reduce their overtime.
    I noted, with some alarm, an Associated Press story, dated 
January 6, 2004, in which a Department of Labor advisory, sent 
out by Wage and Hour Division Administrator, Tammy McCutcheon, 
sets out several advisory points that appear to be advising 
employers in terms of how to avoid paying overtime. 
Specifically, I would cite to you a paragraph quoted from the 
report as quoted by the Associated Press.
    `` `Most employers affected by the proposed rule would be 
expected to choose the most cost-effective compensation 
adjustment method,' the Department said.''
    Now, that looks to me like you are advising employers on 
how to beat their employees out of overtime. I wish the 
administrator who had written this was here, but can you speak 
to what she was trying to advise employers with this advisory?
    Ms. CHAO. Let me make it very clear. Any employer trying to 
evade the overtime rules will feel the full wrath of the U.S. 
Government. We will brook no evasion of the law.
    Mr. POMEROY. Well, I am very delighted to hear that, but it 
seems to me that you are changing the law and so that the law 
is more lenient as regards overtime. In fact, going on to quote 
from this Associated Press story, it indicates that there are a 
number of ways for employers to, essentially, under the new 
regulations, not pay overtime, pursuing, in other words, in 
your Department's words, Madam Secretary, the most cost-
effective compensation adjustment method.
    It appears to me that you have allowed employers to avoid 
paying overtime by changing the overtime rules. I understand 
you enforce the rules, but you have changed the rules for the 
benefit of employers at the expense of their employees who are 
putting in way more than 40 hours a week, and this is not a 
record you should be proud of.
    I yield back my time.
    Ms. CHAO. Sir, I take great exception at your tone. I do 
not need to be lectured about a tremendous disinformation 
campaign that is waged by people who deliberately--
deliberately--taking action that could potentially hurt 
workers. That AP reporter, I have said, is an irresponsible 
reporter. That story is false. This issue was on the docket. It 
was a tremendous manipulation and falsification of what was 
written in the regulations. It was required by the regulations. 
The regulations appeared in March 2003, and all of a sudden 
this story appears in December of----
    Mr. POMEROY. It is your own advisory, Madam Secretary----
    Ms. CHAO. It is false. That story is false.
    Mr. POMEROY. The most cost-effective compensation 
adjustment method----
    Ms. CHAO. I take exception to that.
    Chairman THOMAS. The gentleman's time----
    Mr. POMEROY. That is language of the Department of Labor.
    Ms. CHAO. That story is--let me make very clear the story--
sir, don't take that tone with me.
    Chairman THOMAS. The gentleman's time has expired.
    Ms. CHAO. Mr. Chairman, I would like----
    Chairman THOMAS. The gentleman from Illinois.
    Mr. WELLER. Thank you, Mr. Chairman. Madam Secretary, it is 
good to see you.
    Ms. CHAO. Thank you.
    Mr. WELLER. It is a pleasure to work with you, and I 
appreciate your time before our Committee today.
    We have had a lot of talk about the economy today, and as 
one of those who worked with President Bush, and Chairman 
Thomas, and our Committee leadership, as well as the leadership 
in the House and Senate, to put together a jobs and economic 
growth package, as I know you stated earlier, I am one of those 
who is pleased to see that the President's jobs and economic 
plan is working. Over 300,000 Americans have been able to 
obtain new jobs since that package was signed into law by the 
President last summer.
    Of course, the bonus deprecation, I would highlight, is a 
major factor in that, encouraging the purchasing of 
manufacturing assets. Last quarter of 2003, there was a record 
level of capital assets purchased by business, and the bonus 
deprecation was a contributing or deciding factor in a vast 
majority of those decisions to purchase those assets. So, that 
is working.
    Of course, when you encourage someone to purchase a company 
car or a telephone system or a computer or a machine tool, 
there is a worker somewhere in America who is producing that, 
whose jobs are strengthened as a result of that.
    I would also note that the national unemployment rate has 
dropped. Last June, it was 6.3 percent when the President's 
economic plan was signed into law. It has now been cut down to 
5.6 percent as of January this past year. There is more to do, 
but we are making progress, and I am committed to working with 
you.
    I would also note, because I have heard some rhetoric from 
some of my friends on the other side of the aisle regarding 
temporary extended unemployment benefits, and would note that 
back in the 1990s, when the Democrats were in a position to 
make a decision regarding the extension of unemployment 
benefits, they decided to end unemployment benefits at an 
unemployment rate of 6.4 percent, an actually higher level of 
unemployment than we experienced last June. So, the rhetoric 
changes depending on which shoe is on whose feet.
    Also, I want to commend the leadership of the 
Administration particularly on the issue of trade. I represent 
a district that is heavily dependent on exports. I am pleased 
to see that exports are up almost 20 percent over the last 
couple of years under the President's efforts to expand trade 
opportunities for American manufacturers, as well as American 
workers, and I enjoyed the comments of one of my colleagues of 
the gentleman from Washington who is not here, but he commented 
about his brother's experience with unemployment.
    Well, I have a brother who is unemployed. His company or 
the plant where he worked was shut down as a result of 
litigation, which shut down the manufacturer where he worked, 
and he was unemployed for almost a year as a result of lawsuit 
abuse and greedy trial lawyers who were attempting to pursue 
this company. So, they chose just instead to shut down the 
plant, costing hundreds of workers their jobs, including my 
brother, but it was exports that gave my brother the 
opportunity to go back to work because another manufacturer, 
after 12 months, was able to obtain an export contract, and 
that gave my brother to go back to work. So, trade has made a 
difference for my own family in ensuring that we experience 
employment for everyone, and I believe that is a continued 
positive step forward.
    Madam Secretary, we have worked together on the Integrated 
Systems Technology (IST) Advance Manufacturing programs, a 
program where you have shown tremendous leadership, and I 
appreciate your commitment over the last couple of years to 
develop a program to give dislocated workers an opportunity to 
gain skills for the 21st century, give them the opportunity to 
obtain skills, to operate, maintain and troubleshoot the most 
advanced high-tech manufacturing equipment, such as the robots 
in the workplace. We have a shortage of these kind of workers, 
so it is giving workers the opportunity.
    I know in the State of Illinois, we have had four community 
colleges enrolled in this program. Kankakee Community College, 
in my district, will start a program later this year 
participating in the IST program. As a result, I just want to 
report to you, Madam Secretary, that 112 Illinois employers 
have hired already 129 graduates of this program, 227 people 
have completed the program in its first year. So, with your 
leadership, we have been able to help workers make a transition 
with new skills.
    My question for you is how do you view, what is the next 
step when it comes to this type of program, the IST? Is it on 
track? Do you feel the program is successful? What more do we 
need to do?
    Ms. CHAO. Well, the President has put $500 million devoted 
to helping workers find jobs in the 21st century economy. As I 
mentioned $250 million of that goes to community colleges, but 
there are high-growth sectors which offer good-paying jobs, 
with good career paths, going into the future, and so we want 
to continue to emphasize those because we do want workers to 
find good jobs with higher paying skills and with higher wages.
    Mr. WELLER. Thank you, Madam Secretary. I see my time has 
expired.
    Ms. CHAO. Thank you.
    Chairman THOMAS. Does the gentleman from Florida wish to 
inquire?
    Mr. FOLEY. Thank you very much, Mr. Chairman, and, Madam 
Secretary, for your appearance today. Some of my colleagues 
today who have been asking questions could have been character 
actors during the Depression. They seem to want to talk about 
all of the gloom and doom that surrounds us, and they do not 
look for the bright lights that are before us, the opportunity 
that we see now with jobs growing, the economy getting 
stronger.
    We have to remember and go back to the year 1999, the 
presidency of Bill Clinton, the economic unraveling, if you 
will, of so many of the companies that have built their books 
based on shoddy numbers, loose with facts. People were jumping 
into the stock market at record numbers, taking advantage or 
hopefully taking advantage of what they thought were ``get rich 
quick'' schemes, sponsored by people who have now fortunately 
been arrested, some were on trial, some were going to jail.
    When the chief executive officer of this Nation lies to a 
grand jury, then everyone else in corporate America decided on 
that day that it is all right for the number one man America. 
We can all lie. We can fudge the books. We can go ahead and do 
things to the shareholders without any regard for truth, 
justice or law.
    When this President inherited this economy, we had the 
stock market reeling, we had people who were pessimistic about 
an investment opportunity, people who saw their Individual 
Retirement Accounts and 401(k)s and others drop precipitously 
before, I might add, the election of this President.
    He got in office to stabilize this economy, and then, lo 
and behold, in 2001, September 11th hits this Nation and takes 
the wind out of the economy and the wind out of the sails of 
entrepreneurs and investors, and our hearts still ache for 
those who lost their lives in New York, in Washington, and 
Pennsylvania.
    Ms. CHAO. Yes.
    Mr. FOLEY. The President embarked on a tax-cut opportunity 
to enhance the economy, and let me tell you today what is in 
the New York Post.
    ``Chief Executives Planning to Hire Outnumber Those Who 
Foresee Cuts. Chief executives of the Nation's largest 
companies said they are fully and finally ready to begin hiring 
again.''
    [The information follows:]

   Chief Executives Planning to Hire Outnumber Those Who Foresee Cuts
                           By DAVID LEONHARDT

    Chief executives of the Nation's largest companies say they are 
finally ready to begin hiring again.
    For the first time in at least a year and a half, more executives 
plan to increase employment in the United States over the next 6 months 
than plan to cut jobs, according to a survey released yesterday by the 
Business Roundtable, a lobbying group. Thirty-three percent of the 
executives said they would add jobs, up from just 12 percent in 
October, while 22 percent said they would reduce the number of 
employees.
    ``C.E.O.'s believe that the U.S. economy is on course for continued 
steady improvement,'' said Henry A. McKinnell, chairman of the Business 
Roundtable and chief executive of Pfizer, the drug company.
    A separate survey of midlevel managers in the service sector and a 
Federal Reserve report on regional economic conditions, both released 
yesterday, suggested that employment had continued to grow slowly in 
recent weeks.
    Dr. McKinnell said that he still did not expect job growth this 
year to reach the levels of past recoveries, largely because companies 
have become more efficient and can produce more goods with fewer hands. 
Asked whether he expected the economy to add 200,000 to 300,000 jobs a 
month, as it did through parts of the 1980's and 1990's, Dr. McKinnell 
said, ``We're not quite that bullish at this point.''
    He added: ``But we're headed in that direction.''
    The survey of purchasing managers at service companies suggested 
that economic growth remained healthy but that companies were still not 
adding large numbers of workers. The Institute of Supply Management's 
index of economic activity in the service sector fell to 60.8 in 
February, from 65.7 in January. The employment index for the sector 
dropped slightly, to 52.7 from 53.4.
    A reading above 50 suggests growth.
    ``February was a month of growth, but just not the same pace as we 
had seen in the month of January,'' said Drew T. Matus, an economist at 
Lehman Brothers. ``This is still a strong number.''
    The Fed, in its regular review of regional economies, known as the 
beige book, said that employment grew slowly in January and February 
and that salaries ``increased slightly.'' The economy continued to grow 
across the country and appeared to be accelerating in the West, the 
Southwest and New York State, according to the report.
    The Fed also said that retail prices were stable or rising slowly, 
while prices for industrial items like iron ore increased more rapidly. 
Most investors expect that inflation will remain low in the coming 
months and that the Fed will wait until the summer to raise its 
benchmark short-term interest rate.
    The new signs of the economy's continued growth helped lift the 
dollar to a three-month high against the euro. The Standard & Poor's 
500-stock index rose slightly, closing at 1,151.03, up 1.93 points.
    The economic growth, however, has done relatively little to improve 
the labor market. From July of last year to January, even as the 
economy was growing at a healthy pace, it added just 57,000 jobs a 
month, far too few to keep up with population growth.
    Economists expect the Labor Department to report tomorrow that 
around 125,000 to 150,000 jobs were created in February, which would be 
the biggest gain since late 2000.
    The outsourcing of American jobs to lower-wage countries has become 
a hot topic in the presidential campaign and the media, but most 
economists say that the productivity gains are the main cause of the 
weak job growth.
    Dr. McKinnell echoed that argument yesterday, calling outsourcing 
``a fact of life'' and noting that the pharmaceutical industry has 
actually brought a large number of research jobs into the United States 
from other countries in recent years. His concern, he said, was that 
American elementary and high schools were not strong enough to produce 
workers for high-skill, high-wage jobs.
    ``Some of these jobs are going abroad for cost reasons,'' he said. 
``Others are going for capability reasons.''
    In the Business Roundtable survey, 88 percent of the executives 
said they expected their sales to increase in the next six months, down 
from 93 percent in December. Only 1 percent--or one executive--expected 
a drop.
    Of the group's 150 members, 122 completed the survey, the group 
said. The survey was first conducted in late 2002 and until this month 
the number of executives planning job cuts had always outnumbered those 
expecting to increase their payrolls.
    Over the next six months, 43 percent of the executives plan to 
increase their spending on new plants, equipment and software, and 50 
percent said their investment would not change.
    The executives expect the economy to grow 3.7 percent this year; 
Wall Street forecasters are more optimistic, predicting about 4.5 
percent growth on average. Since the economy began to slow in 2000, 
executives have generally been less optimistic, and more prescient, 
than professional economists.
Manufacturing Grew in Most Areas
    A roundup of regional economic conditions in recent months for the 
Federal Reserve's 12 districts, according to the beige book report 
issued by the Fed yesterday.
    Minneapolis--``Firm'' economic growth was led by increases in 
residential real estate, consumer spending and manufacturing.
    San Francisco (Includes Alaska and Hawaii)--Economic growth 
continued to expand with improvements in manufacturing and a fast pace 
in housing construction.
    Chicago--The region's economy ``picked up somewhat,'' with 
increases in manufacturing.
    St. Louis--Economic activity expanded slowly. Manufacturing and 
service sectors reported improvement. Retail and auto sales declined.
    Kansas City, Mo.--Retail sales and manufacturing improved. Housing 
and energy sectors ``maintained a brisk pace.'' Labor markets remained 
sluggish.
    Dallas--Manufacturing and retail sales increased. Energy prices 
rose, causing a rise in other prices.
    Cleveland--The region's economy improved slowly. Industrial 
production increased from a year earlier, with a surge in demand for 
steel.
    Boston--Manufacturers reported stabilized or increased revenues. 
Commercial real estate has weakened in Boston.
    New York--Economic activity was ``increasingly robust'' with strong 
retail sales and improved labor markets.
    Philadelphia--Manufacturers reported gains in business and expect 
improvements. Retail and auto sales increased from a year earlier.
    Richmond, Va.--The region's economy showed signs of growth. 
Manufacturing grew. Farming was slowed by severe winter weather.
    Atlanta--Commercial real estate improved, housing remained strong 
and retail sales met economic forecasts.

                                 

    Jobs are created after there is some optimism. A year ago, 
the Dow Jones Industrial was 7,250. Today, we stand at 10,595. 
The Nasdaq is over 2,000--well over 2,000.
    The fundamentals are in place for job opportunities and 
growth, and we finally start seeing the economy starting to 
click, and it is proclaimed here on the papers of the New York 
Times about jobs hiring. Manufacturing orders will start 
increasing. Representative Jerry Weller and others who have 
sponsored tax reductions for deployment of capital in 
industries thank you for looking into the union issues so that 
they comply with the laws of this Nation. There are hundreds of 
thousands of good, hardworking union members that should expect 
to see their pensions solvent, but nobody wants to talk about 
that because that is absolutely sacrosanct. You cannot talk 
about union pensions.
    They want to make charges against corporate America. Let us 
look at all of the books of all of these unions, and of chief 
executives, and of corporations to make sure the hardworking 
people that worked 40 years in the steel industry have a 
pension to rely on. That is what you have done, and I am proud 
of you for it.
    Let me stop about One-Stop Service Centers because I have 
been in several these last couple of weeks. They work. Minority 
populations largely are in those centers finding jobs, being 
trained, being taught to do resumes. The joy in their eyes and 
faces, as I entered those rooms, looking at a Republican Member 
of Congress that I am certain they never voted for, saying 
thank you to the Department of Labor for bringing this job 
opportunity. Multilingual telling me that this is the first 
time they have had hope in their life. These are real examples.
    Now, they can sit here and pontificate about this gloom and 
doom, but I see firsthand in my district, in one of the poorest 
parts of my 16th Congressional District, I have the richest in 
Jupiter Island, the poorest in Glades County, these people 
appreciate the work you are doing at the Department of Labor.
    Now, again, if this country is going to heal itself and 
build itself up, we better stop this ranting and raving and 
start focusing on making this country safer for the worker, 
more prosperous for the investor, and the President has laid 
the template down.
    Now, I did miss the exchange about off-shore corporations. 
Did I hear the name Heinz mentioned earlier or was I mistaken? 
I just want to make sure, as we talk about companies going 
overseas, we talk about all of them. What we need to do to help 
those companies is not worry and simply accuse them of being 
anti-American, we have got to fix the Tax Code so they feel 
competitive to stay in this country.
    There is a reason Daimler-Chrysler is first, Daimler being 
the first name there business the Europeans have a better 
advantage taxwise than we in America. Job loss, we can work on 
that if my colleagues would join in some of the dialogue. We do 
not have every perfect answer as Republicans, but we are at the 
table trying to solve these critical problems because every 
Member of this Committee, including the President, cares about 
the unemployed worker. Fortunately, for Florida, led by 
Republican Governor Jeb Bush, our unemployment is the lowest in 
the Nation because he has been working for entrepreneurial 
capital, looking to develop better means of infrastructure.
    So, I just--I know I didn't ask you a question, and you are 
probably thankful----
    [Laughter.]
    My point is, having listened to some of the diatribe today, 
you deserve better, you have worked hard, you have investigated 
things most people would never have attempted to take on 
because of the political ramifications, but you, after all, 
were looking for that autoworker who has worked 30 years on an 
assembly line, you were looking for that janitor that may have 
been members of a union, and all they want to do is when they 
go to their mailbox, the check promised by those union leaders 
would, in fact, be delivered because the solvency of the 
accounts were made possible due to your leadership.
    I guess I yield, Mr. Chairman, as much as I don't want to.
    Chairman THOMAS. I thank the gentleman for his comments. 
The Chair feels compelled, based upon the question from the 
gentleman from California, to make sure that the record is 
complete, rather than having an answer provided outside the 
record when the gentleman from California, Mr. Becerra wished 
the Chair to cite chapter and verse in writing.
    Under the Manual of Rules that the Committee on Ways and 
Means during the 108th Congress adopted January 29, 2003, the 
first rule under Part 1 of the Committee is that, ``Except as 
provided in Subdivision B, the rules of the House or the rules 
of its committees and subcommittees so far as is applicable.''
    Under the Jefferson Manual Rules of the House, Rule I, 
Clause 2, states, ``The Speaker shall preserve order and 
decorum.'' Under the footnotes and the history of the House of 
Representatives, recognition is within the discretion of the 
Chair. That is reflected in the Committee on Ways and Means 
rules under Rule 14, ``Questioning of Witnesses.'' The rule 
states, ``Committee Members may question witnesses only when 
recognized by the Chairman for that purpose.''
    Additional parts of the history of Rule I, Clause 2, state, 
``A Member's comportment may constitute a breach of decorum, 
even though the content of that Member's speech is not, in 
itself, unparliamentary.'' Under this standard, the Chair may 
deny further recognition to a Member engaged in unparliamentary 
debate who ignores repeated admonitions by the Chair to proceed 
in order.
    The written testimony of the Committee will be the written 
response to the gentleman from California.
    The Chair wishes to thank the Secretary for her willingness 
to come before the Committee and to respond. All of us believe 
that every American who wants a job should have a job, and we 
are going to do everything within our power to make sure that 
that situation occurs. Although it has never occurred in human 
history, we are going to strive to do it under the current Bush 
Administration and certainly in the second Bush Administration. 
The hearing stands adjourned.
    Ms. CHAO. Thank you very much.
    [Whereupon, at 12:18 p.m., the hearing was adjourned.]
    [Questions submitted from Representative Camp to Ms. Chao, 
and her responses follow:]

    Question: In my district, we know that Electrolux will be closing 
its doors next year and 2,700 people will be out of work. I don't have 
to tell you that in Greenville, Michigan where this company is located 
this action is going to be devastating for the workers, the local 
community and its economy.
    But we also know that in many places communities have pulled 
together in the face of change and pulled through stronger than before. 
These are highly skilled and motivated workers, and they would be 
excellent hires for a new company moving into this area, or for another 
company already there that is expanding. But that takes understanding 
what skills will be needed in the future, and retraining these workers 
to ensure they have what it takes to compete. I would much rather 
measure our compassion for these hardworking people by how successful 
we are in helping them find new jobs, rather than how much in 
unemployment benefits we can promise.
    What can the Department of Labor do to help these workers and this 
community now, before they are laid off, to find new and hopefully 
better jobs?

    Answer: Pending the response from the U.S. Department of Labor.

    Question: Secretary Chao, Michigan, as you know, has a very 
significant manufacturing presence. One out of every five manufacturing 
jobs have left the State since 2000. As the old saying goes, an ounce 
of prevention is worth a pound of cure, and I think we need to start 
putting this philosophy into action. I would like to take this moment 
to talk about what can be done before we need to provide benefits for 
displaced workers.
    Are there warning signs that we can identify to become more 
proactive?
    How can we in Congress help this `ounce of prevention is worth a 
pound of cure' mentality become a road map?

    Answer: Pending the response from the U.S. Department of Labor.

    Question: Madame Secretary, I appreciate your responses to these 
tough and complex issues. I would like to continue this conversation 
and meet with you and your staff about what more can be done to help 
not only these workers but every community dealing with the growing 
pains of an evolving economy.

    Answer: Pending the response from the U.S. Department of Labor.

                                 

    [Submission for the record follows:]

         Statement of Ross Eisenbrey, Economic Policy Institute

    In the face of high unemployment, near-record long-term 
unemployment, and increasing job losses due to imports and the off-
shoring of U.S. jobs, the President's FY 2005 budget request for 
unemployment insurance, job training, and trade adjustment assistance 
is plainly inadequate. Despite the growing need for services and income 
support, the President and Secretary Chao are asking for less and plan 
to do less for the victims of globalization and failed economic 
policies.
    The merchandise trade deficit--largely because of increasing 
imports of manufactured goods--reached an all-time record high of $549 
billion in 2003 and continues to worsen. Payroll jobs in January 2004 
were 2.3 million below the level in March 2001, the worst downturn in 
jobs since the data series started in 1939. The tepid economic recovery 
has left 8.3 million American workers currently unemployed. Many of 
these individuals are the victims of trade and dislocation who will 
never get their old jobs back. In fact, more than 1.9 million workers 
were unemployed for more than six months in 2003. These ``long-term 
unemployed'' now make up 22% of the total unemployed, the highest rate 
of long-term unemployment since 1983. Gross domestic product growth and 
a rising stock market are not translating into job creation.
    Despite these clear signs that the plight of dislocated and trade-
impacted workers is getting worse, the President plans to reduce 
spending on unemployment insurance by $4 billion, cut spending for the 
retraining of dislocated workers, and proposes substantial cuts in 
trade adjustment assistance. Congress should reject this callous 
treatment of those who are most clearly being failed by the 
Administration's policies.
Trade Adjustment Assistance (TAA)
    The TAA program benefits only those workers who lose their jobs 
because of increasing imports of goods due to U.S. trade agreements 
with other nations. A petition must be filed with the Department of 
Labor (DOL), and DOL investigates to determine whether to certify 
(i.e., approve) the petition and provide benefits to dislocated 
workers. DOL routinely denies petitions from service and other non-
manufacturing industries, even though those jobs have also been lost as 
a result of international competition. (A February 2004 survey of CEOs 
conducted by the Business Council found that 54% of the firms had 
shifted domestic employment abroad in the last year.)
    Although the program's design limits its beneficiaries, there are 
also problems with DOL's administration of TAA. The U.S. Court of 
International Trade recently reprimanded DOL for ``flaws and 
dysfunctions'' in its administration of TAA and noted that DOL's 
``dereliction of duty'' is depriving workers of the aid they need. Most 
dislocated manufacturing employees get no help from TAA. For example, 
the U.S. lost more than 500,000 manufacturing jobs in 2003, but only 
195,738 workers were certified under the TAA program in FY 2003. While 
DOL has yet to publish how many certified individuals were actually 
served under TAA in program year 2003, DOL's program year 2002 numbers 
(for June 30, 2002 to June 30, 2003) show only 68,568 individuals 
received services under TAA.
    TAA's income support includes 52 weeks at the rate of regular State 
UI compensation, with the possibility of an additional 26 weeks of 
income support in the form of basic Trade Readjustment Allowances (TRA) 
when the worker is enrolled in TAA training or has recently completed 
TAA training. In addition to income support, some workers receive basic 
reemployment services, job search allowances, and training services. 
Training services, however, are capped at a maximum of $259 million a 
year. TAA also provides limited health insurance coverage assistance--a 
tax credit of up to 65% of the monthly health insurance premium (COBRA) 
paid by eligible participants. This tax credit has not been sufficient 
to ensure health care coverage for unemployed workers, because the 
COBRA premiums, even with the tax credit, are financially out of reach 
for most unemployed workers. Nationwide, only about 5% of eligible 
employees have been able to use the tax credit, which should be 
increased to 90%.
    The FY 2005 budget proposes to maintain the same level of funding 
for TAA training, $259 million, which is a $4 million cut in real terms 
from FY 2004. This cut comes at a time when training money is crucial, 
the number of TAA beneficiaries is on the rise, and there are not 
enough training funds to meet the demand. For example, last fall 
several States ran out of TAA training money before the end of the 
fiscal year. The FY 2005 budget proposes a total of $48 million in wage 
insurance benefits (a $38 million increase), which pays workers a 
temporary supplemental income when they take a new job that pays a 
lower salary than the job they lost. However, the FY 2005 budget 
proposes a 29% decrease in funding authority for TAA benefits, from 
$1.06 billion in FY 2004 to $750 million in FY 2005. In the past, 
actual TAA program outlays have been far below TAA budget authority: 
TAA outlays were less than 60% of the authorized levels in FY 2003 and 
2004. For example, in FY 2004 the TAA program had a total budget 
authority of $1.338 billion, but outlays only totaled $770 million. 
Because of inadequate outreach by the DOL, the full TAA benefit 
allocation has not reached workers who need the assistance. Instead of 
improving DOL's outreach and program administration, the President's 
budget proposes significant cuts to the TAA benefits program. DOL must 
do a better job of getting TAA benefits into the hands of the workers 
who need it and should not just restore funding for TAA benefits to the 
FY 2004 level but increase it.

Dislocated Worker Program
    The dislocated worker program provides skills training and job 
placement services to workers who have been laid off. Unfortunately, 
this program has not kept up with the demand for its services. 
According to recently released program year 2002 figures (for June 30, 
2002 to June 30, 2003), only 71,871 individuals received training 
services (e.g., skills training and retraining, on-the-job training, 
job readiness training, adult education and literacy) under the 
dislocated worker program, and 68,181 received only core and intensive 
services (i.e., assessment, job search, informational services, 
assessments, some training).
    The FY 2005 budget cuts $79 million in dislocated worker formula 
grants to States, a 7% decline from FY 2004 levels. These are not the 
first cuts the Administration has made--the dislocated worker program 
grant funding to States will have been cut 11% from over $1.2 billion 
in FY 2002 to less than $1.1 billion the FY 2005 proposal. The 
dislocated worker national reserve program funding has increased 3% 
from FY 2004 levels, but has been cut by 8% since FY 2002. As a result, 
the average dislocated worker program expenditure per worker has 
declined more than $100 per unemployed worker between FY 2001 ($274/
worker) and the FY 2005 budget proposal ($167/worker). These cuts come 
at a time when long-term unemployment is at the highest level in 20 
years. Funding for an effective dislocated worker program should be 
increased, not decreased, when so many Americans are out of work. The 
dislocated worker program should make these workers whole, by 
identifying new careers for them, providing the training they need to 
enter a new field, and helping them secure a new job.

Unemployment Insurance
    Job seekers whose employers have paid FUTA taxes on their behalf 
may receive unemployment compensation, which typically replaces up to 
50% of a worker's salary for up to 26 weeks. In March 2002, Congress 
enacted the Temporary Extended Unemployment Compensation (TEUC) program 
to guarantee workers an additional 13 weeks of benefits after their 
State benefits expired. That program was extended twice, but expired in 
December 2003. Since then, workers who run out of regular State UI 
benefits are no longer eligible for the additional 13 weeks of 
benefits. There is still a vital need for TEUC, given the 1.9 million 
unemployed who have been out of work for more than six months. With 
only one job for every three unemployed workers, it is extremely 
difficult for these workers to find a new job, a fact reflected in the 
falling index of consumer confidence. Approximately 760,000 workers 
have exhausted their State UI benefits since December 22, 2003 without 
receiving any Federal benefit--this is an all-time record. The House 
passed a measure to extend TEUC in early February, and a recent Senate 
measure was supported by a bipartisan majority. It is time for the 
Administration to show real compassion and leadership by supporting a 
six month extension of TEUC benefits, making it retroactive to December 
2003.

The Administration's Legislative Priorities
    Many of the Bush Administration's legislative priorities are poorly 
chosen. Some examples include:

      Block granting existing programs. The FY 2005 Budget 
seeks to consolidate four existing employment training programs (WIA 
adult program, WIA dislocated worker program, Employment Service State 
grants, and reemployment service State grants) into a single, large 
block grant. The Senate previously rejected such a measure. Eliminating 
a program targeted at the needs of dislocated workers reduces even 
further the likelihood that their needs will be met.
      Employment services. The Budget cuts $56 million (12%) in 
State Employment Service grants, from $787 million in FY 2004 to $696 
million in FY 2005. The budget zeroes out all funding for Employment 
Service reemployment grants that were funded at $35 million in FY 2004. 
Given the large number of unemployed workers and the inadequate number 
of jobs being created, this is not the time to cut Employment Services.
      New programs in FY 2005. The President's budget also 
includes funding for two entirely new programs--Community Based Job 
Training Grants and a pilot demonstration for Personal Re-Employment 
Accounts (PRA)--which make up its ``Jobs for the 21st Century'' plan. 
The job training component consists of a community college grant 
program based on partnerships with industries. This program is so 
poorly funded ($250 million) it is insufficient to compensate for cuts 
to community college training programs in other parts of the FY 2005 
education budget. The PRA initiative is a pilot project funded at $50 
million that would provide $3,000 to individuals likely to exhaust 
their UI benefits so as to help them purchase employment services 
(e.g., training), child care, and transportation. Under the PRA 
initiative, workers would actually qualify for less funding than they 
would under WIA or TAA, and acceptance of a PRA disqualifies them from 
WIA intensive or training services for one year or more. There is, 
moreover, little empirical evidence that such cash incentives help the 
long-term unemployed find work. In fact, reemployment bonuses have been 
particularly ineffective when given to displaced workers and others who 
are structurally unemployed. Finally, PRAs are not a viable alternative 
to extending unemployment insurance for the long-term unemployed and 
should not be used as such.

Conclusion
    The President's budget grossly underfunds the essential Federal 
programs that provide a safety net for workers dislocated by trade, 
structural changes in the economy and off-shoring. Congress must act to 
protect the future of these workers and their families.