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you were compulsorily covered was a question for the Federal Government.
It is the Government that picked that figure in the first place, and right from the start, according to this quotation, it was intended to continue to study this figure and see if it could not be cut down and coverage extended by Federal action as soon as it was administratively possible.
The very fact that it is the Federal legislation that originally put that figure of eight in there must mean that it was intended that that figure should be subject to amendment by Federal action when the time was ripe for greater coverage.
Mr. SIMPSON. Mr. Chairman.
Mr. SIMPSON. That does not answer your question. You asked the question: Why should it not be left to the States? Why should it now be assumed by the Federal Government? Then you cite what was recommended back in 1934, but you do not answer the question.
Mr. LARSON. I think probably one of the many considerations here is the fact that there has not been a single extension of coverage in this direction for 872 years by the States.
Mr. SIMPSON. That only proves that the State does not want it.
Mr. LARSON. On the other hand, in addition to the 6 States with coverage of 1 or more at any time, 32 of the States have expressly put into their acts a provision that when the Federal Government does make its extension of coverage and change this figure of 8 or more they will automatically go along. It seems to me to indicate that they are sort of waiting for the Federal Government to take the lead in this and to carry out this extension on a countrywide basis, just as the Federal Government laid the basis for countrywide coverage in the first place to avoid the competition of differentials between different regions.
I should probably also add there that this is a subject in which the Federal Government has a very legitimate interest. After all, when things go wrong in the realm of unemployment people come to the Federal Government. There is a definite, recognized obligation and duty of the Federal Government here. Unemployment is not a State-by-State matter.
When something goes wrong in the manufacture of automobiles and the demand falls off you begin to feel it in parts manufacturers, retail establishments, tire manufacturers, repairmen, and everybody else throughout the country.
Another answer to your question, sir, would be the fact that this is a Federal tax act that we are talking about. It is the duty, it seems to me, of the Federal Government in its own tax act to see to it that it is not unnecessarily unfair and discriminatory, and if it is discriminatory for no good reason justified by administrative necessity, then it seems to me that it is the duty of the Federal Government in dealing with its own tax act to see to it that it does not have unequitable discrimination against people who employ 8 or 9 or 10, as distinguished from people who employ 1 or 3 or 7.
Mr. COOPER. Mr. Chairman, would it be convenient to inquire at this point? Would it disturb you, Mr. Larson, in making your statement?
Mr. LARSON. No. Carry on.
Mr. COOPER. I would just like to ask a few questions for information. I am not undertaking to indicate my position on this question at this time, but simply to get some information along the line that Mr. Simpson was inquiring.
Did I understand you correctly to say that there now are 17 States that provide for one or more?
Mr. LARSON. That is correct, yes.
Mr. COOPER. And your position is then that the other 31 States should be required to do what the 17 States are doing?
Mr. LARSON. That is right, yes.
Mr. COOPER. And you think, then, that the great majority of the States, having elected to take a different view of things, should be required to do by law what a minority of the States are doing voluntarily?
Mr. LARSON. I have tried to indicate the reasons why I think a great many of the States are ready for this kind of change and also the reason why it is a matter of Federal interest and Federal policy and Federal concern that a change like this be undertaken, that it was a Federal choice in the first place to start at this eight or more level and with the distinct understanding from the very beginning that that was only a temporary expedient while administrative experience was being built up and that it would ultimately be brought down to a more extensive coverage as experience was gained, and that is all that this provision is designed to do.
Mr. COOPER. Is it not true that perhaps the controlling reason for the Federal Government acting in this field in the beginning was because of the competitive situation between businesses throughout the country?
Mr. LARSON. That was one of the important reasons, yes.
Mr. COOPER. And then it was also thought plausible to leave a degree of the discretion with the States as to the way in which they handled the program?
Mr. LARSON That is correct
Mr. COOPER. Now you take the position that it should be federalized more than it has been in the past?
Mr. LARSON. No. There is a distinction it seems to me, between the different details of this legislation; certain details were left up to the States and certain details were passed upon by the Federal Government. There were not very many, just a few, but this was one of the few that the Federal Government made a detailed provision on.
When you come to benefit amounts and duration, without expressing for the moment an opinion on the merits, and proposals to set Federal standards in this regard, there is nothing about that now in the Federal legislation at all, so that if you were going to set Federal standards on dollar amounts or on weekly durations of benefits, then you would have a totally different question, it seems to me. However, here you have a standard, if you like, or a figure that is an inherent part of the Federal detailed legislation on the subject and it seems to me it must have been understood, as this legislative history shows, that it was intended to be subject to change by the Federal Government as time went on.
Mr. COOPER. On that point, there is no question about Congress having the right to change the law. I do not see much weight in that argument. Congress certainly can change the law and has changed it
a number of times. This whole matter of unemployment insurance was originated by Mr. Lewis of Maryland who was then a member of this committee. He introduced a bill on the subject before the Advisory Council to which you refer was ever created. It was my privilege to be a member of the Lewis subcommittee and we worked on the matter for months and then it was determined that the President would appoint this Advisory Council to which you refer, and one of the controlling reasons advanced in the very beginning for the unemployment insurance program was to try to level off the peaks and valleys of employment and unemployment, and also to provide this Federal tax so as to meet the situation with respect to competition between businesses throughout the country.
As I recall, at least one State of the Union I think it was Wisconsin-had unemployment insurance before there was ever any Federal law enacted; is that correct?
Mr. LARSON. Yes; they had a law which had actually been enacted before, but the benefits were not paid until after.
Mr. COOPER. And other States could have done the same thing. Mr. LARSON. That is right.
Mr. COOPER. However, it was soon apparent that this competitive element entered into it and therefore it was thought advisable to have a Federal tax.
Mr. LARSON. Yes.
Mr. COOPER. However, subsequent to that time, with the provision for the so-called experience rating, at least to some extent, the question of uniformity of tax to meet the competitive situation was considerably altered, was it not?
Mr. LARSON. Uniformity of tax?
Mr. LARSON. Yes; that came in somewhat after the original enactment.
Mr. COOPER. To some extent at least that altered the original conception of having a uniform tax throughout all of the country to meet the competitive situation, did it not?
Mr. LARSON. That is right.
Mr. COOPER. So now you think the program should be more federalized and although the States now have the right to provide for one or more if in their discretion they think they should, you think all the States should be required to do what 17 States are now voluntarily doing?
Mr. LARSON. I do not think I would describe that as greater federalization. It is really no greater federalization to say you must cover one or more than that you must cover eight or more because you are dealing with exactly the same detail. It is just bringing up to date exactly what was done back in the days when you were active in the preparation of this legislation.
Mr. COOPER. Of course, it has been recommended a number of times in the past by previous administrations.
Mr. LARSON. I realize that.
Mr. COOPER. It has been recommended that the law be amended so as to provide for coverage of one or more.
Mr. LARSON. Yes, and I think the time is ripe right now.
Mr. COOPER. Previous administrations thought the time was ripe then and recommended it, but Congress did not follow that recommendation. That is true, is it not?
as we can.
Mr. LARSON. Yes, that is true. I sincerely hope it will this time. I feel the ball is on the 5-yard line and it is time it really got pushed over.
Mr. COOPER. Just one more question, if I may. It is your position that the unemployment insurance program is sound; is that correct?
Mr. LARSON. Absolutely.
Mr. LARSON. Not entirely, but by and large, yes. It is doing the bulk of the job it was intended to do. What we have to do is to perfect it and get rid of the inadequacy and shortcomings it has as rapidly
Mr. COOPER. It has operated satisfactorily so far as it has gone.
Mr. Mason. Mr. Chairman.
Mr. Mason. Following up the questions of Mr. Cooper, when this program was adopted in the first place the Federal Government said,
3 "We will establish a standard for the coverage, eight or more. However, the Federal Government drew back and said, “We will not enter the field of the dollar amount of benefits nor the length of benefits. Let the States do that for themselves.”
Is that right?
Mr. Mason. And in accepting it on that basis now it seems it is perfectly proper for the Federal Government and the Congress to act along the same lines as it did in the first place, is it not?
Mr. LARSON. That is right.
Mr. Mason. The only question that comes to my mind, sir, now is this extended coverage will take in several million additional employees.
Mr. LARSON. That is right.
Mr. Mason. How many additional employere will it take in; do you know, approximately?
Mr. LARSON. You have to distinguish between the number that will come in additionally under the Federal laws, the Federal tax, of course, and those that will come in under the State laws.
Mr. MASON. Yes.
Mr. Mason. 1,400,000 employers and that will cover how many employees?
Mr. LARSON. Three and a half million roughly.
Mr. Knox. I would like to ask the Secretary a question. Mr. Secretary, you made the statement that there were some 32 States
who now have definite provisions in their laws that would not interfere with the amendments that would be enacted by the Congress if we followed these recommendations. What are the States that do not have the definite provision in their laws and what would be the mandate upon those States should the Congress enact the recommendations following these bills?
Mr. LARSON. Of course, I do not have those names right in my memory. Perhaps I could get them for you here. I do know that of the 13 that do not have it, some of those are the one or more States already, so there would be a comparatively few number where special legislation would be necessary. I believe the ones that do not have it are Alaska, Arkansas, California—those are all one or more States District of Columbia, Hawaii, and Montana.
Here are the States that do not have automatic coverage of the Federal standards: Michigan, Colorado, South Carolina, which are 8 or more States, New Jersey, and Oregon, which are 4 or more States, Ohio, which is 3 or more, and then 7 States with 1 or more provisions already, but with some restriction, are Arkansas, California, Idaho, Montana, Nevada, New Mexico, and Wyoming; With your permission, Mr. Chairman, I would like to insert a table at this point giving the States which have an automatic coverage provision as well as the coverage of all States.
The CHAIRMAN. Without objection it is so ordered. The Chair hears none.
(The table referred to follows:)
State coverage of employers automatically resulting from extension of coverage under
Federal Unemployment Tax Act 1 or more at any time: Alaska, District of Columbia, Hawaii, Maryland, Pennsylvania, Washington--
6 Automatic coverage resulting from Federal extension: Alabama, Arizona,
Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New York, North Carolina, North Dakota, Oklahoma, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, Wisconsin.-
Size-of-firm restriction: Michigan, Colorado, South Carolina, 8 or more; New Jersey, Oregon, 4 or more; Ohio, 3 or more.
6 1 or more with payroll or weeks of employment restriction: Arkansas, California, Idaho, Montana, Nevada, New Mexico, Wyoming--
13 Mr. Knox. I assume from that statement that it would be necessary for these States to call a special session of the legislatures in order to enact the necessary legislation in order to conform with the Federal program should this bill be enacted into law?
Mr. LARSON. State legislation would be necessary in several of these States to give full expression to this Federal legislation and Standard, but in the meantime, people could voluntarily elect in these States coverage in accordance with Federal standards, and I think that could go a long way toward taking care of the transitional period.
Mr. Knox. You named 38 States that had definite provisions within their laws to cover 1 or more employees should the Congress enact