above outlined in inaugurating the system. We recommend, however, that the Federal administrative authority study the problem of extending the coverage of the employees of less than 6 employees. They happened to be recommending six or more at the time. They also go on to say: We recommend also that it work out plans for unemployment compensation to the employees of the Federal Government. So, you see, it was contemplated from the start by the very people who worked this all out that you had to start with a figure like this in order to get this untried system going, but that you should start right in from that point 20 years ago and work toward this sort of thing that we are bringing up here this morning, a much more universal coverage. This figure of eight or more, as you gentlemen know better than I do-many of you have been with this much longer than I have-was a kind of compromise. There was not anything terribly scientific about it at the time. I think, as I recall, the Senate had the figure of 4, and the House had a figure of 10, and somehow it was split and it came out 8. Mr. COOPER. Would you mind repeating that statement? Mr. LARSON. In the original legislation the Advisory Council, I believe, recommended 6 or more, the House had a bill, I believe, with 10 or more in it, and the Senate had something like 4 or more in it, so it came out 8. Mr. COOPER. I was on the committee at the time and am somewhat familiar with the situation. Mr. LARSON. Yes, I know. I think I have it right, have I not? Mr. COOPER. That is my recollection, substantially so. Mr. LARSON All the benefits of unemployment insurance, if we can possibly administratively extend them to this broader group of people, will be just that much more effective. I think perhaps I should point out that the well-known benefit in preventing this vicious spiral that we hear so much about when you lay people off and then they lose their purchasing power and less goods are produced and more people are laid off, the check on that by unemployment insurance will now be extended to many more localities. For example, many small communities where small firms predominate will now begin to get the economic benefit of this sort of thing where they never did before. I think now we might turn to some of the various objections that have been raised to the coverage of one or more employees. These are fairly familiar. I am sure you know them all very well, but I would like to take them 1 by 1 because the administration has gone over these very carefully and has reached the conclusion that none of these objections are valid or supportable. Probably the one that is heard the most frequently is, "Whatever you may say and whatever the merits of all this might be, is not this, after all, something for the States to do? Should we not continue to leave this job up to the States and let them decide how many people should be compulsorily covered? I have just read you this quotation from the Advisory Council that worked on the original legislation and it seems to me to be perfectly clear from that statement that it was always contemplated that this particular question of how many employees you had to have before you were compulsorily covered was a question for the Federal Govern ment. 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. The CHAIRMAN. Mr. Simpson would like to inquire. 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 81⁄2 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 48088-54- -3 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. COOPER. Experience rating. Mr. LARSON. Yes; that came in somewhat after the original enact ment. 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? 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. COOPER. And that it is desirable? Mr. LARSON. Definitely. Mr. COOPER. And in the interests of the people of the country. Mr. COOPER. And has operated satisfactorily? 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 as we can. Mr. COOPER. It has operated satisfactorily so far as it has gone. Mr. COOPER. Now you want to go further and extend it further. Mr. LARSON. I would like to see the benefits extended to the people who really need it, about 6 million more people. Mr. MASON. Mr. Chairman. The CHAIRMAN. Mr. Mason will inquire. Mr. MASON. Following up the questions of Mr. Cooper, when this program was adopted in the first place the Federal Government said, "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. LARSON. That is correct, yes. 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 employ ees. 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. LARSON. It will bring in under State laws, an added 1,400,000. Mr. MASON. 1,400,000 employers and that will cover how many employees? Mr. LARSON. Three and a half million roughly. Mr. MASON. An average of less than three. Mr. LARSON. Yes, that is correct. Mr. KNOX. Mr. Chairman. The CHAIRMAN. Mr. Knox will inquire. Mr. KNOX. I would like to ask the Secretary a question. Mr. Secretary, you made the statement that there were some 32 States |