IAWP LEGISLATIVE INFORMATION
January 2008 Archives
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***Weekly Update***
From Legislative Committee Chair: Todd Kolden, Aberdeen Central Office
Week of January 7, 2006
CONGRESS STARTS BUSINESS THE WEEK OF JANUARY 22, 2008
• In the U.S. House of Representatives, the second session of the 11th Congress convened at noon on January 3, 2008, for a pro forma session and will do so again on January 15, 2008, for legislative business. The U.S. Senate will reconvene for pro forma sessions on January 7, 9, 11, 15 and 18. Both the House and Senate will resume business sessions the week of January 22, 2008.
FY 2008 BUDGET SIGNED BY PRESIDENT ON DECEMBER 26, 2007
• On December 26, 2007, the President signed Consolidated Appropriations Act of 2008 (H.R. 2764), which includes the appropriation for the U.S. Department of Labor (USDOL) for Fiscal Year (FY) 2008.
• For the workforce development system, there are three major provisions:
o A 1.747 percent across-the-board appropriations cut for all programs;
o A $250 million rescission of prior youth, adult, and dislocated worker funding under the Workforce Investment Act (WIA) appropriations; and
o An elimination of the $40 million funding for reemployment eligibility and assessments (REAs) for unemployment insurance claimants.
• Staff at the USDOL Employment and Training Administration (ETA) is currently working on the state-by-state allocation for the Workforce Investment Act and Wagner-Peyser programs.
DECEMBER UNEMPLOYMENT RATE RISES TO 5.0 PERCENT WITH PAYROLLS UNCHANGED
• The Bureau of Labor Statistics of the U.S. Department of Labor reported today nonfarm payroll employment was essentially unchanged (+18,000) from the November report and the unemployment rate rose from 4.7 percent in November to 5.0 percent in December. In December, job growth in several service-providing industries, including professional and technical services, health care, and food services, was largely offset by job losses in construction and manufacturing. Average hourly earnings rose by 7 cents, or 0.4 percent.
• With the release of January 2008 data on February 1, 2008, the Current Statistics survey will use a revised basis for industry classification from the 2002 North American Industry Classification System (NAICS) to the 2007 NAICS. The new classification reflects minor definitional changes within manufacturing, telecommunications, financial activities, and professional, scientific, and technical services. Several industry titles and descriptions also will be updated. The conversion to NAICS 2007 will result in minor revisions to some employment, hours and earnings series.
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Week of January 22, 2008
ECONOMIC STIMULUS PACKAGE DOMINATING AGENDA IN CONGRESS AS ECONOMY SLOWSM
• Continued bad economic news and recession predictions have pushed discussion of a stimulus package to the forefront of the congressional agenda. Congressional leaders are seeking to find common ground with the administration that responds to constituents' fears about the economy.
• The effort received a significant boost this week when President Bush offered his support to an emergency stimulus package to jumpstart the economy. The President did not outline specific proposals, but said a growth package would cost about $145 billion and must include tax incentives for business investment and "direct and rapid" tax relief for individuals.
• House Speaker Nancy Pelosi (D-CA) expects to unveil legislation within two weeks. The Speaker indicated the package could be completed within 30 days (after introduction) and House Minority Leader John Boehner (R-OH) echoed the same sentiment that "it needs to happen quickly."
• Many issues will have to be resolved, such as those dealing with the size of the package, tax rebates, infrastructure projects, accelerated depreciation, sub-prime mortgage relief and an unemployment insurance extension.
ECONOMY CONTINUES TO SOFTEN
• Retail sales slipped 0.4 percent in December, posting the worst performance in six months. This helps to solidify expectations that the Federal Reserve will cut interest rates by half a percentage point at its January 29-30 meeting.
• Real average weekly earnings had its biggest decline in 17 years in 2007, falling 0.9 percent, after a gain of 2.1 percent in 2006, according to the Labor Department's Bureau of Labor Statistics (BLS).
• Home construction plunged 14.2 percent in December to a seasonally adjusted 1.006 million annual rate, the slowest pace since 1991. Builders have been pulling back because sales for new homes have plunged and the supply of unsold homes has risen.
UNEMPLOYMENT INSURANCE (UI) REFORMS LIKELY TO BE PART OF STIMULUS PACKAGE
• As congressional leaders and the administration discuss the components of a stimulus package, the anticipation is that an extension of UI benefits, additional funds to administer the spike in unemployment insurance claims, and, possibly, a Reed Act distribution will all be under consideration.
• During the last economic downturn, Congress enacted in March 2002 the Temporary Extended Unemployment Compensation program, which provided up to 13 weeks of additional UI benefits to unemployed workers who had exhausted their entitlement to regular UI benefits and an additional 13 weeks in states with especially high unemployment.
• A new Congressional Budget Office analysis, Options for Responding to Short-Term Economic Weakness, said that extending or increasing jobless benefits could be a "relatively cost-effective" way to boost consumer demand and should be considered as part of a stimulus package to revive the economy.
CONGRESSMAN MCDERMOTT OFFERS BILL EXTENDING UI BENEFITS
• As the second session of the 110 Congress began last week, one of the first bills to be introduced was aimed at expanding unemployment insurance benefits to stimulate the economy and assist the jobless. Representative Jim McDermott (D-WA) introduced the Emergency Unemployment Compensation Act of 2008 (H.R. 4934) on January 14th.
• Mr. McDermott, who chairs the House Ways and Means Committee's Income Security and Family Support Subcommittee, noted "unemployment benefits also serve as an important nationwide economic stimulus because the money collected by unemployed workers is injected into the economy almost immediately."
• Economists expressed similar opinions at a January 16th hearing of Congress's Joint Economic Committee entitled "What Should the Federal Government Do to Avoid a Recession."
• The legislation would do the following:
o Extend unemployment benefits for an additional 26 weeks through the end of 2008, and uniformly increase weekly benefit amounts to be paid by $50 per week for every claimant. (Assuming early this year the total number of unemployed persons in all states, as measured by the Current Population Survey, increases by one million over the number from the previous year).
o Enact a series of permanent benefit expansion provisions and federal requirements as conditions of selected states receiving up to $7 billion in special Reed Act distributions into state unemployment benefit funds and up to $100 million additional per year for administration of UI.
o The bill proposes to appropriate the funds without providing for offsets for the increased spending and by depleting balances in the federal unemployment trust fund accounts.
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Week of January 14, 2008
PROSPECT OF A RECESSION SPAWNS ECONOMIC STIMULUS PACKAGE PROPOSALS
• With the increase in the unemployment rate from 4.7 to 5.0 percent last month and worries about falling home prices and rising home mortgage foreclosures, many economists now believe the U.S. economy is on the brink of a recession. As a result, the President, Congress, and Presidential candidates are scrambling to develop and propose economic stimulus packages.
o The President is considering selective tax measures, including a rebate of personal income taxes for individuals and accelerated depreciation on investment in new equipment for businesses. This would be similar to the measures enacted in 2001 and 2002 when the federal government sent checks of $300 or $600 to about two-thirds of households over a ten-week period and provided accelerated and "bonus" depreciation to businesses on new equipment purchases.
o The Congressional majority is working on a joint House-Senate proposal that would include tax relief and spending. Senator Schumer (NY) was quoted as saying if the President "...takes spending stimuli off the table, it's going to be hard to deal with him."
o Former economic adviser to President Reagan Martin Feldstein said the Administration should develop a stimulus package, but wait on activating it until private employment declines three consecutive months.
o Senator Barack Obama (IL) has proposed a tax credit of $500 per single individual or $1,000 per family.
o Advisor to Senator Hillary Clinton (NY) and former Secretary of Treasury Lawrence Summers has recommended a package costing $50 to $75 billion.
o Former New York City Mayor Rudy Giuliani also proposed a tax cut this week.
o Center on Budget and Policy Priorities Chief Economist Chad Stone said funds should be put into the hands of those who would spend it quickly. He said the most effective measures are increasing unemployment insurance benefits, food stamps, individual tax rebates, and federal aid to state governments.
o In a speech in Washington, Federal Reserve Chairman Ben S. Bernanke said the Fed "must remain exceptionally alert and flexible, prepared to act in a decisive and timely manner and, in particular, to counter any adverse dynamics that might threaten economic or financial stability." Analysts speculate the Fed will cut its key short-term interest rate by a half percentage point by the end of this month.
o Yale University economist William D. Nordhaus is skeptical a stimulus package can counter fully the impact of higher oil prices. He said the more than $30 per barrel increase in oil prices in the past 5 months is equivalent to a $150 billion federal tax increase.
• With unemployment insurance and federal aid to state governments mentioned as possible components of a stimulus package, state workforce agencies could be affected by possible enactment later this year. A package could include an extension of benefits, additional funds to administer the spike in unemployment insurance claims, and, possibly, a Reed Act distribution, all of which were part of the last economic stimulus package in 2002.
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Week of January 28, 2008
ECONOMIC STIMULUS --TOP PRIORITY FOR CONGRESS
• Congressional leaders, working with the White House, reached agreement on a $150 billion economic stimulus package. House Speaker Nancy Pelosi (D-CA) worked with House Minority Leader John Boehner (D-OH) and Treasury Secretary Henry Paulson and outlined an approach on January 25th. Speaker Pelosi is hoping the legislation could pass Congress and be sent to the President by February 15.
• The centerpiece of the package is more than $100 billion dollars that would come in the form of tax rebate checks of up to $600 for individuals or $1,200 for couples. The remainder of the tax cuts are aimed at encouraging businesses to increase their investments in new equipment by the end of 2008.
• The proposal does not include an extension of unemployment insurance benefits. It also does not include a request from the National Governors Association to provide $12 billion in state aid with half of the funding dedicated to Medicaid assistance and half to a flexible block grant.
• While the legislation is expected to go through the House quickly, it may have a tougher time in the Senate. A number of Senators have expressed concern that the package does not include jobless benefits and other items. Senate Finance Chairman Max Baucus (D-MT) intends to mark up his own economic stimulus bill next week.
• In addition, if the economy continues to falter, congressional leaders may draft a second economic stimulus bill later in the year that would include long-term growth measures, such as spending on infrastructure and aid to states or an unemployment insurance extension.
• The urgency for the legislation was underscored this week when the Federal Reserve made the unusual move to cut the Fed's short-term interest rate three-quarter's of a percentage point. The Fed is scheduled to meet next week when it might reduce rates even further.
SENATOR KENNEDY INTRODUCES UNEMPLOYMENT EXTENSION
• Senator Edward M. Kennedy (D-MA), Chairman of the Health, Education, Labor and Pensions Committee, introduced legislation to temporarily extend unemployment compensation benefits for millions of Americans. When introducing the legislation, Senator Kennedy said "Too many hard working people have been pounding the pavements looking for a job for more than six months... and the system is abandoning them when they need help the most."
• The bill does the following:
o Extends and expands benefits: Provides 20 more weeks of benefits to eligible workers with an additional 13 weeks in states with high unemployment. Benefits would be temporarily increased by $50 per week to help families with skyrocketing energy and food costs. Eligibility for the extension would last for one year.
o Covers recent exhaustees. Provides benefits to unemployed workers who exhausted their regular benefits in the year prior to enactment.
o Does not burden states or employers: Fully funds this temporary program to avoid forcing states to make spending cuts or increase taxes on employers.
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