The MacNeil/Lehrer Report; Federal Jobs and Unemployment

ROBERT MacNEIL: Good evening. The unemployment figures took another turn upwards last month. The Labor Department said today the rate of unemployed rose in February from 7.3 in January to 7.5 percent of the work force. The Department blamed the increase on the severe winter weather, causing many temporary layoffs, and an unusually large increase in the total labor force. The figures were released as Congress continued its adjustments to Carter`s stimulus package, including proposals for stepped-up programs to create new jobs. Tonight we examine the Carter plan and how it`s likely to affect unemployment. Jim?

JIM LEHRER: Robin, to flesh out today`s new figure a bit, unemployment among teenagers remained the highest with an 18.5 percent rate; blacks and other racial minorities recorded 13.1 percent; adult women increased from 6.9 percent in January to 7.2 percent last month. Overall, the last five months have seen the national unemployment rate fluctuate between last month`s low of 7.3 percent and November`s high of eight percent. All unemployment figures are fair game for interpretation, of course, political kinds particularly. But basic reality remains the same: unemployment is still a problem -- a serious one, and one President Carter repeatedly promised in his campaign to do something about. Robin?

MacNEIL: One man who knows how to analyze implications of these monthly figures is Seymour Wolfbein, dean of Temple University`s School of Business. Dean Wolfbein is a former economic advisor to the Secretary of Labor and has served as a Deputy Assistant Secretary of Labor himself. Dr. Wolfbein, how do you interpret the latest figures?

SEYMOUR WOLFBEIN: Well, they did go up a couple of tenths of a percent, and the statisticians love to say that`s statistically significant; so it`s up to 7.5. But if you look at it in perspective I think it`s important to note that just a few months ago it was indeed as high as 8.0, and over the months I think there is a declining trend in unemployment. And one of the major questions, indeed is, is the little flip w e got from 7.3 to 7.5 significantly due to the weather? And the Labor Department experts apparently think it is. But -- of course, economists love to say but -- while the trend may be declining over the last three or four months, 7.5 percent is still very high and we really haven`t made a significant dent in unemployment in the United States.

MacNEIL: Historically, when unemployment has been high and it has begun to come down again, for whatever reasons -special programs, or wartime in the case of the Second World War -- has it declined at a faster rate than it is declining now or is this a good rate of decline?

WOLFBEIN: On the average for the last quarter of a century or so I would say this isn`t as quick a decline as we`ve usually had when we`re coming out of a recession. The fourth quarter of the last year really did see a slowdown economically.

MacNEIL: What gloss would you put on the Labor Department saying today that the important thing to notice was that the number of people with new jobs went up in February at a greater rate than the number of people with no jobs went up.

WOLFBEIN: I think that`s very important, because we tend to look at the unemployment rate, seasonally adjusted, of course, and technically very good; but we really ought to remind ourselves every once in a while of the other side of the coin, which is employment. And employment did move up by about 400,000 -- more than the increase in unemployment -- and again, if you look at it in perspective, we`re now about two and a half million higher in employment than a year ago. Now, again, I think this is a mitigating fact in the unemployment. It would be disastrous if in addition to the unemployment we`ve had we had a drop-off in jobs, because as has already been indicated we have had a big increase in the number of new workers.

MacNEIL: This slow rate of improvement -- or relatively slow rate of improvement -- in the unemployment situation, although it is clearly a traceable improvement; does that argue to you that, as it does to some economists, particularly the Ford administration, that not much stimulus to the economy is needed or, if anything, a kind of general stimulus; or that specific targeted programs are needed?

WOLFBEIN: This is right down the line, because I really think the least important item in the story today is indeed the overall rate. It`s only when you open it apart and start looking at what makes it up that you really get the main story. For example, it`s now the fifteenth year in a row, it`s not just this month, that somewhere between twenty and twenty- five percent of all the people we count as unemployed are what we call teenagers -- just sixteen to nineteen years of age. It`s been as high as thirty percent; now it`s about twenty-two, twenty-three percent. Now, there`s a big lump concentrated in a very small group of people. Already mentioned, we have blacks. The number of black teenagers, for example, is only about a third of a million unemployed -- it`s a very high rate; it`s a smaller number, concentrated in urban areas. And so there are people like myself and other economists who say since you`ve got these particular groups -- another one is construction; the unemployment rate there is sixteen, seventeen percent, very high -- maybe what we ought to start looking at as we disaggregate, as we love to say in our fancy language, let`s start custom-tailoring and targeting our programs to really be responsive to these various groups.

MacNEIL: Well, let`s see now how those ideas sit in Washington. Jim?

LEHRER: Yes, Robin, first to the Jimmy Carter tailored plan. President Carter`s economic stimulus plan contained four ways to go directly at the unemployment problem. First, an increase in public service jobs from 310,000 last year to over 600,000 by the end of this year, and 725,000 by December 1978. Second, public works projects aimed at stimulating jobs in the construction business -- an additional two billion dollars in the Carter plan for this year, another two billion in 1978. Third, an extension of anti-recession revenue sharing through 1982 at a slightly higher rate of payment. And finally, increases in employment training programs. These parts, as well as the others in the total stimulus package are now getting a going-over in Congress. Democrats, backed by organized labor and others, say the President`s specific jobs programs don`t go far enough. "Insufficient" was the word used, in fact, by one of the key Democratic Congressional leaders most involved in shaping the final Congressional version, Congressman Robert Giaimo of Connecticut, chairman of the House Budget Committee. Congressman, the Congress has now had the President`s plan for a month; what has been done so far to make it more sufficient, in your opinion?

Rep. ROBERT GIAIMO: In the tax area, which is the major part of the plan, as you know -- $13.8 billion suggested tax reduction by way of rebates by President Carter; Congress has gone along with that figure, although we suspect it will be somewhat less than 13.8 and probably will be in the area of $13.1 billion. In the area of jobs stimulus programs, trying to get immediate jobs in the remainder of this fiscal year -- in other words, from April until September 30 -- we have increased President Carter`s job stimulus programs from about $1.9 billion to $3.7 billion.

LEHRER: What does that mean in terms of jobs?

GIAIMO: That means in terms of jobs that what we have done is increased counter-cyclical outlays, counter-cyclical revenue sharing money that would be paid to the cities and towns, increased accelerated public works; and while you mentioned a figure of two billion dollars and four billion dollars that isn`t the significant figure. The significant figure is outlay; it`s not budget authority. How much will four billion dollars` worth of budget authority in accelerated public works mean in terms of outlay, because it`s outlay and spending which stimulates the economy; and how much will be spent this year. And we felt we could get it up to $400 million rather than President Carter`s $100 million by way of changing the types of public works program. The same in the CETA program for public service.

LEHRER: Changing the types in what way? Give me an example.

GIAIMO: All right. Part of the problem in public works programs is the long lead time between when you authorize a program and when you actually get men and women hired, working, paid and therefore, you see, those are the outlays which stimulate the economy. There`s long lead times, even though we put a name "accelerated" in front of the public works. But remember, because of going down this road last year we have on the shelf twenty billion dollars` worth of public works programs all over the country, approved, ready to go; and last year I believe we appropriated two billion dollars for the twenty billion dollars` worth of programs. So therefore we have these programs in being; mayors have them, they can process them immediately. Now if we change the nature of these programs to some degree, if we change them so that those that will be funded will be the highly labor-intensive programs, the smaller type programs, maintenance type programs. If we do that, we feel that we could get $400 million worth of pay and spending between April and October first, and that that would be a stimulus to the economy.

LEHRER: Based on all these things that you are wanting to add to the President`s plan, have you run a final total and a timetable in terms of how many jobs you`re going to create and by when?

GIAIMO: Remember, now, that when we talk in this whole area of the economy, as Dr. Wolfbein himself mentioned earlier, you`re talking estimates. We make the best estimates we possibly can -the economists do, the analysts do, the statisticians do, and we people in public life like Jack Kemp and myself have to go on that. The best estimates are that we can get close to a million new jobs out of our job stimulus program this year.

LEHRER: Okay. And you`re talking about by the end of this year, you mean September.

GIAIMO: I mean by October first.

LEHRER: All right. Congressman, thank you. Many Republicans in Congress have a different view than that of the President and the Democratic leadership as represented here by Congressman Giaimo. They say the best way to stimulate the economy and thus create new jobs is to enact a permanent tax cut. And Congressman Jack Kemp, the man just mentioned, who is a Republican from Buffalo, New York, and a member of the House Appropriations Committee is one of the main proponents of this approach. Congressman, what`s wrong with the Carter-Giaimo Democratic approach, in your opinion?

Rep. JACK KEMP: I would like to talk about the central thesis or the central point about the Democratic proposal to stimulate the economy. We all agree that we think that stimulus is needed. The question is, how do you get it? How do you receive jobs and how do you create those jobs without reigniting the fires of inflation that do threaten not just the incomes of every working American but also the type of capital expenditures that are so important to expand our economy, to make it more productive and of course to modernize and bring about the type of tools that increase real produced goods and services in our economy? So I would attack it on the basis that it is primarily attempting to do what this country has been going through in the last couple of decades, and that is it`s trying to spend our way towards stimulating the economy, spend our way into prosperity by increasing expenditures for public works projects, public service jobs, and the type of a shortrun, quick-fix type of a tax rebate of putting fifty dollars in the hand of just about every American who earns less than $30,000, without recognizing that we need a permanent reduction in the tremendous burden of taxation that now exists not only on consumers but on producers as well.

LEHRER: Congressman, certainly that`s one problem, but then what do you offer as a way to do something about the 7.5 unemployment rate in the country?

KEMP: Let me advance an idea that is not necessarily original with, me but is more original with President Kennedy in the early 1960`s. In the early 1960`s we were operating our plants` total capacity at about eighty percent, so there were many of the same elements of unused plant capacity and operation in the early 1960`s; in fact, President Kennedy ran on the idea of getting the economy going again, getting the country moving again. Unemployment was hovering around 6.8 to 6.9 percent, there was a fear of inflation -- it was not as high as it is today, but there was that threatening fear of inflation, hovering around three percent. I submit that the parallels in the economy at that time -- we were coming out of a recession of the late 1950`s and of 1960 -- I submit that the parallels were somewhat the same; and President Kennedy reduced tax rates on all business and personal income as a means of increasing the incentive of people to work, produce, save, invest. In other words, he believed that the only real way -- as I believe -- to put America back to work and achieve full employment is to expand the stock of capital investment in your country. And Professor Wolfbein mentioned that we are creating jobs, certainly -- 4.3 million jobs have been created since 1975 -- but we`re not doing it fast enough to keep up with the tremendous demands upon the economy of new workers who want jobs.

LEHRER: Isn`t your approach the slower approach, though, than the direct approach of the Democrats?

KEMP: Let me answer that by just continuing this analogy.

The rates were cut in `62 and-`64. We did expand the capital stock, that is, the capital investment section of our economy in the early 1960`s. Unemployment dropped immediately. Revenues picked up by government as people worked harder, produced more, as companies were expanding, as business activity picked up; as the real output of goods and services picked up revenues -- i.e., the taxes that business and individuals pay -- flowed into the treasury. And from 1962 until about 1967 there was not a loss to the federal treasury of revenues, there was an increase in revenues and it happened right away. It was not a trickle-down, it was literally taking some of the handcuffs off the producing sector of the economy. And the mistake, I think, that is being made -- and sincerely, because I think, as I said before, everybody wants more jobs and without inflation -but basically you cannot spend your way to prosperity. Britain has tried it; and if they could Britain would be the most prosperous place on this earth. You cannot spend your way to prosperity because all those public works projects, all those public service jobs, all that public spending has to be financed; and who finances it but the working people and the producing sector of our economy. I think we need to reduce the drag on the economy that is caused by excessive taxation and excessive regulation and let the private enterprise system provide jobs. It can do it if we just take the handcuffs off it.

LEHRER: Congressman Giaimo?

GIAIMO: I get very nervous when I hear my good friend Jack Kemp and the Republicans praising something that John Kennedy did fourteen years later. I hope President Carter doesn`t have to wait that long to get similar praise. But let me say this: those were different days. A permanent tax cut now such as Mr. Kemp and Mr. Rousselot and some of the others offered in committee would be unfair, because it would really apply across the board and it would hit the wealthy and the near-wealthy and those who would benefit most from a tax cut because they have higher incomes. We`ve got a simple problem here. Of course the private sector is what really makes the economy go in this country. We`re talking about an economy of a trillion eight hundred billion dollars, and we`re talking about a total budget of $450 billion and our stimulus program has to be taken...

LEHRER: Those figures are even hard to visualize in the real world.

GIAIMO: Of course. But just think: of our total annual budget of $450 billion our stimulus package is $3.7 billion of it. So you see, it`s a small part. Of course we depend upon the private sector to really drive this economy and get it moving and get unemployment going down and employment up. But what we are really trying to do here is to do this: we say we have a period of high unemployment; we have suffering, therefore, and the suffering is unevenly distributed. And you yourself mentioned the figures High where? Among teenagers, among minorities, among blacks; and we`re in effect saying to them, "While we are getting this economy to restore itself via the private sector you`re going to have to suffer a while longer -- another year, another two years -- and you`re going to have to stay unemployed and carry the higher proportion of suffering." What President Carter is saying is, that`s not fair, and what we have to try to do in the meantime, while the economy is regaining its strength in the private sector...

LEHRER: And doing what Congressman Kemp was talking about.

GIAIMO: And what he wants done-- while we`re doing that we have an obligation also in government to try to stimulate through these type jobs which will put some of these people to work and reduce unemployment.

LEHRER: Let me ask Dr. Wolfbein, what`s the record? Philosophy aside, you`ve heard what Congressman Kemp has said that President Kennedy did and you`ve heard the argument from Congressman Giaimo. What`s the clean record on creating new jobs, either of the two approaches that we`ve just heard?

WOLFBEIN: Congressman Kemp was correct in indicating what was done under the Kennedy administration. I should point out that at the very same time the Manpower Development Training Act was passed in 1962, so the menu that was developed did try to provide a one-two punch of fiscal and monetary stimulus.

LEHRER: The Manpower plan did create public jobs?

WOLFBEIN: And the Manpower Development Training Act, which was the forerunner of CETA now, did have the idea of training people and trying to provide jobs.

LEHRER: But was it a massive program?

WOLFBEIN: It wasn`t hardly as massive as what`s being suggested now. And to be responsive to your specific question, I think the record so far doesn`t indicate a real fast response from Man power programs, and I would hope that the legislation that`s coming through would very specifically pay attention to that and make sure that there`s direction given that when those funds become available there`s the minimum amount of paperwork and all the other hassle that`s involved in getting programs going because I happened to be the first director of Manpower programs for three years -

I won`t show you my scars... (Laughter.)

WOLFBEIN: ...one of the big problems we had was to really get the stuff off the ground, get the people together into programs, get it funded, get it at the right place, watch your geography, etcetera, etcetera. That`s not a problem to be underestimated.

LEHRER: Does that bother you, too, Congressman Kemp?

KEMP: I agree with the Professor, and I agree with Bob Giaimo that there are programs that need to be used in a cyclical fashion or in special circumstances, but that doesn`t seem to me to be the problem that exists right now in our economy.

LEHRER: 7.5 is not high enough, in your opinion, to require these...

KEMP: Oh, it`s too high; it`s much higher in Buffalo, and I`m concerned about it. For instance, in Buffalo some people thought that if they could finally get a federal grant to build a brick wall around a monument, that somehow that would create jobs and reduce unemployment in Buffalo.

LEHRER: Of course, you had the tremendous snow problems, too, that helped the situation, didn`t it?

KEMP: Of course, but it`s been high for quite some time. The point that I want to make in response to the remarks that my friend Bob Giaimo had made is simply this: that the poor, the lower-middle income people and lower income people in America generally -minorities and young people -- they are being denied the job opportunities that they need simply because there is a declining rate of investment in our country as a percentage of the labor force. And the same thing happened in Britain in the last two decades. And as the labor force expands without a corresponding expansion of your capital investments -- you know, the basic tools of production that are so important to an economy -- you`re going to get not only declining production but you`re going to get a decline in the number of jobs that people need on a real basis, jobs that produce goods and services that people want and jobs that create wealth and create tax revenues rather than just consume it, such as in public service jobs. I do not have any basic disagreement with those who think that over a short term some degree of public service job programs are good; I voted for them. But I don`t think that now, while the problem is not a lack of demand, the problem is a lack of real income in the hands of workers and investors and savers and people who are willing to take some entrepreneurial risk, and I think that the high rate of taxation -- I`m not just talking about the dollar cut, I`m talking about the rates -- they are a drag on incentive, they are a drag on those decisions that businesses and investors and savers must make if we are to increase the amount of investment that this country needs. Not only for our own country, but to be competitive with other countries in the world, who are now matching us dollar for dollar in some goods.

LEHRER: All right. Robin?

MaCNEIL: Gentlemen, one of the things that intrigues me is the disparity one sees in different estimates of how much money invested in these Manpower programs -- how many jobs certain amounts of money will create. Congressman Giaimo, you said a little while ago you hoped a million jobs. Ray Marshall, the Secretary of Labor, said if the Congress acted on the President`s plan, two million jobs. I see the Congressional Budget Office worked out something a couple of years ago saying that a billion dollars would create between 16,000 and 46,000 jobs in the short term. Is this just really throwing darts at a dart board?

GIAIMO: No.

MacNEIL: How do you know?

GIAIMO: Let me just say this: the apparent disparity between the million jobs that I mentioned and Secretary Marshall`s two million jobs that you mentioned -- the jobs proportion of the, stimulus package is designed to stimulate approximately 900,000 to 1,000,000 jobs and then the tax reductions, the $13 billion tax reductions and payments which is the other major portion of the Carter stimulus proposal, it is estimated that in the private sector because of the increase in the economy as a whole that that will generate an additional million jobs. Therefore, your total would be two. Of course, there are differences in estimates, but in that instance I think we are on track.

MacNEIL: I see. Is it easy to target these kinds of things -you`ve spoken in favor of that, and I think the others have agreed, that there are certain areas of chronic, persistent high unemployment -- you`ve spoken about targeting. Is it actually possible to spend this money where the jobs are most needed and to make sure that the people who most need the jobs -- the unemployed, the under trained, the youth and so on -- get the jobs?

WOLFBEIN: A one-word answer would be yes..

MacNEIL: It is.

WOLFBEIN: But not easy, and this is why I indicated -- and the two very articulate presentations we`ve had recognize this -this is not easy. This is why I begged as a former Manpower administrator to give as much opportunity for people right smack at where it is to custom tailor these particular programs. It can be done; there`s enough documentation now, w e don`t need any more experiments to indicate that it indeed can be done.

MacNEIL: Do you agree with that, Congressman Giaimo? Can it be done?

GIAIMO: It can be done, and I certainly agree that it`s not easy to do any of these things. What we`re trying to do is to get money out to put people to work, both in the private sector through the tax cuts and the stimulus and through public service type jobs. It`s not easy, but we can try. And I think given the desire of the new administration to move quickly in public works type jobs and in public service type jobs, and given the fact that we have these twenty billion dollars` worth of accepted projects on the shelf, many of which would be funded -- and we`re not planning to fund the twenty billion of them, as you know -- we can get some of the job intensive ones moving immediately, and the administration is ready to roll. We can do it. And we can put people to work between now and October, which is what this stimulus package -- and I will say it`s a modest stimulus package -- is designed to do. It doesn`t cure the whole unemployment problem; the most we can hope to do by the end of this fiscal year is to get it down to 6.7 or 6.8 percent unemployment, and that doesn`t take into consideration the additional effects of this very bad winter that we`re suffering. But w e can try.

MaCNEIL: We have to leave it there. I`m sorry, Congressman Kemp; I see you itching to talk, but I`m afraid we have to leave it there for this evening. Thank you both very much in Washington.

Good night, Jim. Thank you, Professor Wolfbein. Jim Lehrer and I will be back on Monday, evening. I`m Robert MacNeil. Good night.