I would certainly urge if you either provide title 16 or put title 16 in title 1, that you do restore, as a minimum, those 1958 provisions which the House passed which were sound in principle and very meritorious. I am under the impression that the only reason they were taken out either in the Finance Committee or on the floor at that time was in order to attain a bill that the President would sign, at least that is the statement that was made on the floor.

Ninth, in the bill there is an authorization for child welfare services in section 707(a)(3)(a) of $20 million, although the maternal and child health and crippled children authorizations are increased to $25 million. This seems an obvious discrimination to take one of the three childrens' programs and only give it $20 million, and the other two to give them $25 million. Consistent with the report of the advisory council on child welfare services which was also made to this committee we would urge that it be made $25 million.

Tenth, there is one other amendment that I think is desirable. In the House-passed bill, they limited title 3 administrative expenses to the States for the financing of unemployment insurance to $350 million and although they increased the payroll tax one-tenth of 1 percent, bringing in far in excess of that, they then said the States can only get $350 million.

Now, this seems to me an unnecessary limitation on a State when all that money that comes in by a specific payroll tax. It would seem to me if there should happen to be an unfortunate rise in the number of jobless people in the next year or two, to have held down the administrative costs under title 3, even though there is plenty of money coming in. This is an unnecessary restraint on the States. I would urge you to take off that $350 million limitation, and not have any. This is not a cost to the Federal Government, because this is deducted from the payroll tax yield of four-tenths of 1 percent from the employers.

Senator DOUGLAS. The amount formerly allowed for administration was three-tenths of 1 percent, was it not?

Mr. COHEN. Yes, sir, in this bill it is increased to four-tenths of 1 percent.

Senator DOUGLAS. Why is that?

Mr. COHEN. That is because as you recall in connection with the 1958 extension of unemployment insurance, the States borrowed the full $200 million from the loan fund, and then you gentleman authorized, about $600 million to be loaned to the States which they pay back now within the next couple of years.

Now, the House Ways and Means Committee, on the basis of that experience and the recommendations of the Department of Labor, said the loan fund ought to go up to $550 million. So that the States will be better able to borrow if there is another recession. Well, that seems reasonable to me to help the States carry their own load, if joblessness should increase.

But then they said, if it does increase, and you have got to put on more people to pay unemployment claims, we are only going to let the Federal Government give you $350 million worth of administrative expenses. Yet the money is all there. It is money dedicated only to this purpose, not coming out of general revenues. It seems to me that on the face of it that is not only inconsistent but not desirable with

having an unemployment insurance program that will be able to operate quickly and effectively.

Senator DOUGLAS. The extra allowance of one-tenth of 1 percent is really to rebuild the loan fund.

Mr. COHEN. That is correct. It is to rebuild and to increase the loan fund. The previous authorization, first it was you remember the George loan fund of 1944 and then the Reed fund of 1954, has a maximum authorization of $200 million. That has all been disbursed to the States, actually only two States.

Senator DOUGLAS. What were the two States?

Mr. COHEN. The two States were Michigan and Pennsylvania. This bill, incidentally, makes some very desirable changes in making the State repay their loans more promptly so that other States can get it if they need it. All of those provisions in the bill would help the States, which are sound except this one provision which is a definite limitation on the ability of the unemployment insurance system to act quickly.

That is the effective element in unemployment insurance, the automaticity with which the benefits will be paid as soon as the people go into a State unemployment insurance office.

It seems to me, if I may say so, very shortsighted to have put that limitation on. It is my understanding from the House discussions that the Secretary of Labor did urge the committee to take that off, although you may wish to ask if that is still the current policy.

Senator DOUGLAS. May I ask, what proportion of the 3 percent is actually spent for administration? What percentage of benefits, not contributions, would the administrative costs represent?

Mr. COHEN. The administrative costs of the States, not counting the Federal costs, I imagine, are running about $300 million a year, $325 million is authorized for the next year.

Senator DOUGLAS. And how much are the benefits?

Mr. COHEN. Well, the benefits, of course

Senator DOUGLAS. How much were the benefits last year?

Mr. COHEN. The benefits in 1958 during the recession, I remember that figure very distinctly having just published a study on it, were in the neighborhood of $4 billion.

Senator DOUGLAS. And this last year?

Mr. COHEN. This last year, in 1959, $1.8 billion.

Senator DOUGLAS. So that

Mr. COHEN. That would be about 15 percent, in sort of a normal period of rather minimal unemployment, and perhaps about, I would say, 8 percent in a period of higher employment.

Mr. Murray points out that includes the employment service as well as unemployment insurance. Yes, the whole system.

Senator DOUGLAS. Yes. Finding jobs as well as paying benefits? Mr. COHEN. Yes, and the reason I am making a big point of it: from some studies I have underway, I rather suspect unemployment is going to be up next year, Senator, and I would like to have our unemployment insurance system be as ready and as effective to meet this instantly as can be.

Senator DOUGLAS. You want to be careful of what you say or you will be called a prophet of doom and gloom. [Laughter.]

SOCIAL SECURITY AMENDMENTS OF 1960

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Mr. COHEN. Well, I am only saying insofar as our unemployment insurance system can meet that and thus help our free enterprise economy, and that is within this particular bill to do, I would urge it to be done.

Now, I would like to submit just two things for the record, Mr. Chairman. I have prepared a table here since the chairman expressed an interest yesterday in the material on the cost of this. You will recall that on page 11 of the House committee report is this table that showed for title 16 Federal cost of that would be $165 million if all of the States came in. I don't believe myself that the States have the financial capacity at this time to raise their $159 million to match that. But what I did do was attempt to show those figures in relationship to the proportion of aged in the country. I want to make just a few comments on this table and then if you want I will put it in the record, Mr. Chairman.

The CHAIRMAN. Without objection.

Mr. COHEN. Under that title 16, four States get 60 percent of the Federal money, and that is—

Senator CURTIS. What four States?

Mr. COHEN. New York, Illinois, New Jersey, and Massachusetts. The CHAIRMAN. You are speaking of the House bill, are you not? Mr. COHEN. I am speaking of the House bill. This is a further elaboration of my argument that to the extent you are going to keep it, put it directly into title 1 where it can be dovetailed much more sensibly.

Senator CURTIS. You say four States get 60 percent of it.

Mr. COHEN. May I say there, Senator, don't forget that this means that Illinois would only get its $19 million if it put up $19 million of new money, whereas in title 1, there is a lot of money that Illinois is already spending which it doesn't get matched at the present time. I believe I could persuade you with regard to Illinois, that your interests would be better served by putting in the title 1.

Senator CURTIS. Do I understand that four States would get 60 percent of it?

Mr. COHEN. Yes, sir.

Senator CURTIS. Of the Federal money?

Mr. COHEN. Yes, sir.

Senator CURTIS. What percent, say, would the top 10 States get? Mr. COHEN. The top 10, and I have done this cumulative so you can tak any combination like that. The top 10 get 83.6 percent of money.

the

Senator CURTIS. How many States would it take to get 90 percent? Mr. COHEN. How many States would it take to get 90 percent? Twelve.

Senator CURTIS. Would you read them?

Mr. COHEN. Yes, sir, New York, Illinois, New Jersey, Massachusetts, Connecticut, California, Indiana, Wisconsin, Ohio, Minnesota, Washington, and Pennsylvania, are the 12 States getting 89.3 percent of the Federal funds. I have all of the States here. I believe that this particular proposal which requires the States to put up new money for this would further distort the picture in terms of the question that you yourself raised, Senator Curtis, with respect to one of the other witnesses about Louisiana, and a number of other States.

Senator CURTIS. You think it will further accentuate that problem? Mr. COHEN. Yes, sir. I think if you study this table very carefully, you will see that the States naturally which can take advantage of title 16 in its present form, would, of course, be very few because they have to put up new money. That is the limiting factor. I think I am doing an exercise in mathematics here merely because I don't see myself, from what I know, that you can expect many of these States to do so. Take my own State, Michigan, which has just gone through a tremendous controversy on raising State funds. Now, under this estimate, we are expected to raise $3,227,000 more for this particular program. Well, we have had our legislature meeting for months arguing how to meet our present obligations, and I don't see how it can be expected that we would be in a position to take advantage of it even though we need to.

Senator DOUGLAS. Mr. Cohen, if you don't expect the Michigan Legislature to appropriate $3 million, how would it appropriate the enormous sums which would be required under the administration medical care bill?

Mr. COHEN. Impossible. It would be impossible for me to conceive of our Michigan Legislature after the whole discussion on new money needed for education and other needed public services, putting up a single penny within the foreseeable future under the administration proposal. I just can't see it—————

Senator DOUGLAS. Now, the Secretary yesterday was very optimistic.

Mr. COHEN. Well, I have talked with the State welfare administrators, I talked with 8 or 10 of them myself. They are very close, I think, to State budget directors, State Governors, Štate people, and uniformly when I discussed this possibility with them, they said, "We see no possibility." They said, "If we had the money now we would use it to expand our present old-age assistance program." So I think it is very unlikely. I think you might like to have the detailed figures in the record.

The CHAIRMAN. Yes.

Mr. COHEN. The other statement that I would like to have put in the record that 22 of those of us who either have been connected with the administration of social security or on any of the advisory councils have signed a statement here urging that the health benefits be met through the contributory social insurance probram.

Senator CURTIS. With what bill?

Mr. COHEN. We do not underwrite a particular bill. We underwrite the principle.

Senator DOUGLAS. That is the principle to which the Secretary said he was unalterably opposed?

Mr. COHEN. Yes, sir, and may I point out that three of the members of the administration, that is, who were in this present administration, two of the Commissioners of Social Security, Mr. Tramburg and Mr. Shottland, and one Deputy Commissioner of Social Security, Mr. Wyman, have signed this statement.

Senator DOUGLAS. Mr. Shottland was the social security administrator.

Mr. COHEN. So was Mr. Tramburg, under this administration. Senator DOUGLAS. And I believe he was commissioner of social security of California.

Mr. COHEN. He was the Federal Commissioner from 1954 to 1958. Mr. Tramburg was Commissioner in 1953. Mr. Wyman was Deputy Commissioner in 1959. There is in the list the former Commissioner of Social Security, Mr. Altmeyer, and quite a number of other people. I would just like to summarize it this way, in line with what Senator Byrd said, the committee has to make a decision of public policy as to whether there should be any intervention into this field at all. I recognize there are differences of opinion but if you do, Senator Byrd, the contributory social system offers you the best device for assuring fiscal responsibilty that I know of as against general revenue financing which is on a year to year basis, and, therefore, we have signed this statement urging very strongly that the contributory social insurance system be the preferred method of dealing with this question.

The CHAIRMAN. The insertions will be made in the record. (The documents referred to are as follows:)

DISTRIBUTION OF FEDERAL FUNDS AMONG THE STATES UNDER THE PROPOSED MEDICAL SERVICES FOR THE AGED PLAN

Table 1 shows the estimated distribution of Federal funds under the proposed medical services for the aged plan in the first full year of operation; these estimates are based on the assumption that all States will develop and put plans into effect in that year.

These figures indicate that one-half the States would receive more than 99 percent of the total Federal funds and the other half only 1 percent. New York alone would receive over 30 percent of the total Federal funds. The 4 States receiving the largest amounts would receive almost 60 percent of total funds; 8 States, 77 percent of the total; and 12 States over 91 percent of the funds. The remaining 9 percent of Federal funds would be distributed among 39 States, with 8 percent going to 12 States and 1 percent distributed among the remaining 27 States.

The States receiving the bulk of Federal money tend to be the wealthier industrial States. The States that would receive very small amounts of Federal funds include almost all of the poorer States. For example, almost all the Southern and Western States (not counting the Pacific States) would receive less than one-tenth of 1 percent of the total Federal funds.

All of these poorer States receive a disproportionately small share of Federal funds to their proportion of the total aged population. Thus while New York has 10 percent of the total aged population, it will receive 30 percent of Federal funds; Texas with almost 41⁄2 percent of the aged population will receive only 0.1 percent of Federal funds. The situation in Texas is typical of the other lower per capita income States. Thirty-seven States with 50 percent of the aged population would receive 10 percent of the Federal funds.