STATEMENT OF JOHN E. COSGROVE, DIRECTOR OF LEGISLATION, PUBLIC EMPLOYEE DEPARTMENT, AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

Mr. COSGROVE. Thank you, Mr. Chairman.

The AFL-CIO Public Employee Department, a coalition of 33 national unions representing a total of over 2 million employees at every level of American Government, appreciates this opportunity to testify. The subject of the general revenue-sharing program is one of particular significance to our members and, of course, is a central element in national public policy.

The public employee department supports the reauthorization of the general revenue-sharing program for 5 more years at the present level. We believe that the general revenue-sharing program over its 8 years, has proven to be a valuable method of sharing national tax income among the different levels of government. While we have urged, and continue to support a larger Federal financial role in such vital programs as welfare, national health, and education-all of which consume major portions of State and local revenues-absent major changes in the assumption of Federal responsibility in such areas, general revenue sharing is increasingly important.

As the testimony of the AFL-CIO on March 6, 1980, indicated, the real volume of outlays for State and local public construction has moved in 9 of the 11 years to a 1979 level of $40 billion, including Federal aid, which, after adjustment for inflation, is 32 percent below 1969 levels.

Many communities, as has been observed by many other witnesses here this morning, have yet to recover from the 1974-75 recession and are unable to deal with the current or predicted recession, much less the runaway inflation, which is at a rate of over 18 percent annualized and has, in fact, introduced severe economic dislocation in the country. The high unemployment of 6.2 percent now, with its decreased revenue income and the increased social cost implied, remains a problem. It is particularly troublesome in our larger cities. These problems will accelerate as the recession advances.

The share of the Federal budget devoted to State and local aid has declined in the last several years. Many Federal grants to States for payment to individuals require State or local matching payments, and public assistance and medicaid are particular examples of this. These add to the financial problems of State and local governments.

We in the Public Employee Department oppose the elimination or reduction of the one-third share of revenue-sharing entitlement which would go to the States. The chief result of this would be to seriously impair the ability of the States to respond to the demand for assistance from local governments at a time when these demands are increasing. One of the most important considerations facing public employees is the fact that tax revenue contributed by virtually all of the citizens of the country flow to States and localities, with few conditions attached. Particularly important is the establishment of basic labor standards and labor relations criteria, in order that the Nation's tax

dollars not, in effect, subsidize substandard social conditions. Consistent labor policy in public and private sectors will better serve the national interest.

We can do no better on this point than to quote, and urge your most careful attention to, the recent testimony of the AFL-CIO on this point:

Now that Congress is considering extending the Revenue Sharing Act, it is appropriate to include the basic minimum wage and overtime provisions of the Fair Labor Standards Act in this statute. Such action would be a reaffirmation of the intent of the 1974 Fair Labor Standards Act in a manner cited by the Supreme Court.

Similarly, standards granting State and local government workers the right to organize and to bargain collectively should be a prerequisite for revenue sharing funds. In 1935, the Congress found that it was in the public interest to establish a method for determining the wishes of workers regarding their desire to be represented by a union and to assure workers a basic right to bargain collectively with employers concerning wages and conditions of employment. Congress found that the denial of the right of employees to organize and the refusal to accept the procedure of collective bargaining led to strikes and other forms of strife or unrest. In the 1935 Wagner Act, Congress recognized the beneficial effects of establishing a system to determine workers' desires regarding union representation and the encouragement of collective bargaining. Similar requirements for State and local government employees should be enacted to enhance their basic rights.

Currently, 38 States and the District of Columbia have statutes or executive orders providing the legal framework for collective bargaining for some or all of the employees. Comprehensive statutes covering all employees are currently in force in 23 States and the District of Columbia.

Thus, we maintain that since the funds available for the program are collected from all Americans through the authority of Federal laws and the Federal tax structure, it is appropriate that Federal standards and safeguards be included.

Let me paraphrase that. The problem arises in that the extension by the 1974 amendments of the Fair Labor Standards Act to employees of States and localities was declared by the Supreme Court, in the case of National League of Cities v. Usery, to overextend the commerce clause. It was held in a 5 to 4 decision that the plenary power of the commerce clause was not sufficient but indeed ran into the reserved powers of the States and so was invalid.

This decision has not only been troublesome, of course, in terms of denying the protection of the Fair Labor Standards Act-the minimum wage and overtime provisions to the States and local employees, but in addition to that, it has been used as an argument on the Hill and in other quarters to seek to preclude labor relations legislation, aside from the Fair Labor Standards Act.

Our judgment is that you could, under the commerce clause, still enact such legislation, because, as we all know, a case before the court decides only the precise question presented. And a different question presenting the National Labor Relations Act may well result in a different answer than when you present the issue of the Fair Labor Standards Act.

But, aside from that, even if that ground is not found to be tenable, there are other grounds that one might adduce for the constitutionality of the protection, of the extension of labor relations protection. The fact is that the ability of Congress to tax and to spend for the general welfare could have attached to it as one condition that the States have as an option which would be a prerequisite to acceptance

which would be a prerequisite of the revenue-sharing benefits, or revenue-sharing grants, that they would provide for labor relations coverage similar to that under the Wagner Act-under the National Labor Relations Act-or parallel to it.

This would, of course, then establish a national labor policy for the States as against the chaotic situation which exists now in 50 different jurisdictions.

Thank you.

Mr. FOUNTAIN. Thank you very much for your statement.
Mr. Weiss?

Mr. WEISS. Thank you very much, Mr. Chairman. I want to commend these witnesses. It is refreshing to have testimony which seems to be related to the real America.

A lot of the rhetoric that we hear around here and that we have been hearing for the last couple of months seems to have no awareness at all and no recognition of direction in which the Nation's economy seems to be going. This is at the time when the game plan of the administration seems to be to throw millions of people out of work and making the lives of the people and their localities even more grim.

We, in Congress, are hell-bent on exacerbating that situation by eliminating whatever cushion or safety situation that may exist when a terrible occurrence undoubtedly will take place.

I hope your voices will be at least attracting some attention and, hopefully, they will be listened to.

However, at this point, there seems to be an inexorable tide against your voices.

Thank you, Mr. Chairman.

Mr. FOUNTAIN. Thank you, Mr. Weiss.

Mr. Lucy, you acknowledge that inflation is our society's most important problem. I certainly agree. You stated that the effort to balance the budget to fight inflation is "so much bunk." That view is shared by a lot of people. I think the President himself has said that balancing the budget, per se, is not going to stop inflation. Maybe we should have started in this direction a long time ago on a more gradual basis where the impact would not have been as severe. If that had been gradual, we might have done better. We have seen an increasing number of programs, an increasing national debt, and increasing interest on the national debt.

I have mixed emotions about a sudden balancing of the budget. Yet, I think there is merit to the position that as painful as it may be-and it is going to be painful if we balance the budget-that we have to accomplish it. We are concerned about many programs which I certainly voted for. I am hopeful that if the budget is balanced, those programs where the need is greatest will be hit the least. We hope they will have to make the least sacrifices. But I realize we will all have to make some sacrifices.

However, I do not think there is merit to the position that if we can balance the budget-and we have not done it yet-then we will have made a start. I heard yesterday that the Budget Committee has already added $15 billion to the 1981 budget. I do not know if that is true, but I think this indicates the problems we are faced with and the concerns of people about the impact of whatever action is taken.

What I am saying is that I do think there is merit to the position of the President that the American people, from all walks of life, are becoming concerned that the Federal Government really does not know how to keep its fiscal house in order. We have been spending too much money. In all probability, we have not taken a careful inventory of some of the older programs that were enacted many years ago with a view toward assessing whether or not we need them today. In many instances they make local and State governments spend money which they otherwise would spend in some other area.

The feeling is that if we restore the confidence of the American people to the belief that we can balance the budget, the psychological impact will be tremendous. I do not think government is the sole culprit. I think we, as citizens, have been enjoying a kind of prosperity that we did not necessarily have to enjoy. We could have done without some things. There are some things we would like to have, but we do not absolutely have to have them, and we can do without them. I am talking about all of us as citizens, both privately and collectively.

I have seen evidence of extravagance at local and State levels. When I talk about extravagance, I do not mean that these things are not desirable, but that maybe they could have been postponed until other obligations had been met.

I just got back from an Interparliamentary Union meeting in Oslo, Norway, where some 80 countries were represented in parliamentary debate. This was on a number of subjects.

I might add that we were fortunate enough to get on the agenda for debate and won it with a resounding vote a resolution condemning Russia for its invasion of Afghanistan. Also, we condemned Iran's actions with respect to our hostages. This strongly suggested that the hostages should be released immediately. This was not just another organization, but one composed of elected representatives of all the Nations involved. There were, of course, a few that were not elected under the system of democracy to which we are accustomed.

In many of those discussions during the course of our meeting, we learned that many parts of the world are going through the same experience we are. Many are much worse off than we are.

I was dumbfounded by the prices when I paid for some of the nominal meals equivalent to a hamburger at one of our fast food places. Incidentally, we found a McDonald's in Brussels on the way back. I enjoyed a good American cheeseburger there and some frenchfried potatoes.

But many other countries are going through the same inflationary process. It seems to be worldwide. Not only are we going to have to get our house in order, but the whole world is.

There is merit to some of the criticism that has been leveled at the sudden balancing of the budget, which is resulting in some cuts. However, all of us must be prepared to tighten our belts somewhat.

Let me ask this question. Has your organization made any in-depth study and developed an approach which you have recommended, or will recommend, to the President and the Congress for fighting inflation?

Mr. Lucy. Certainly, Mr. Chairman. Let me say this. Let me comment on your prior statement. We recognize that inflation is one of

the most critical problems that we are faced with. I agree with you. that it is a worldwide problem.

However, the attack on inflation cannot be perceived as a onefactor or a one-facet attack.

There is the question of the budget. You put it well. It is designed for psychological impact. Probably what has led us to the point where we need that psychological boost is the political rhetoric that gives the impression that the budget is out of balance as a result of programs that are supportive of the less fortunate of our society.

I suspect that that is where we are coming back from. I think that when people say the Federal Government has lost its ability to deal with its household that that reflects a lack of knowledge of exactly what the Federal Government happens to be.

To balance the budget, if you are going to move in that direction, clearly means you are going to have to balance it out of those discretionary areas of the budget where you can do it which are the particular areas that affect people.

I think the whole question of fighting inflation is a two-pronged program. Clearly we have to do something with regard to the spending, but at the same time we have to do something about economic policy.

We have suggested that a stronger and more firm posture be taken with regard to economic controls. I don't think wage controls and price controls in and of themselves will work to deal with inflation, but controls over the entirety of economic activity will stabilize inflation probably to the point where we can then take a look at positive steps in addition to that.

What we have is political rhetoric that plays well in Peoria but the impact of it in terms of the well-being of our country is what I suspect you and your colleagues need to measure.

As we discuss revenue sharing, we talk about the fact that particular kinds of responsibilities that are shared between State and local governments will have to be reduced or some other means of paying for them will have to be brought about.

That is one-half of the equation. To attack inflation, certainlyinterest rates, dividends, profits-all of these are factors in the economic picture that nobody wants to address.

As we look at the whole question of what has been taken out of the economy, the energy community I think is doing pretty well, and little concern has been expressed for the kinds of profits that have been reaped there. I think all of these are approaches that can be made.

A short answer to your question is yes. We have suggested to the administration and certainly in testimony before various congressional committees that perhaps we ought to be looking at an overall economic control as opposed to just trying to simply control wages.

The history of the last few years has certainly indicated that wages are chasing prices and not the other way around.

Mr. FOUNTAIN. I agree with you. I don't think anyone ought to get the impression that we have inflation solely because of the cost of these programs. A combination of factors have brought on inflation. The action of the OPEC countries in connection with oil has had a