The Wrong Priorities for America's Families

Working families looking for solutions to the crises we worry about most won't find them in the $2.4 trillion fiscal year (FY) 2005 budget President George W. Bush now has delivered to Congress.

	The Bush Administration's FY 2005 Budget  • Wage and Hour: Basic Labor Standards Enforcement  • Programs to Audit, Investigate and Prosecute Unions  • Employee Benefits Security Administration  • Worker Safety and Health Program  • Individual Savings Account Proposals  • Social Security Administration  • Individual Health Care Tax Credits  • International Labor Affairs Bureau  • Health Savings Accounts  • Job Training and Jobless Workers

Americans are very clear about their priorities. We need jobs, and we want to hear about concrete plans to create good jobs that will support our families. We need affordable, high-quality health care that can never be taken away. We need security in retirement. We are looking for leadership that will give us confidence in the future for our children.

A budget that addresses and elevates these priorities would call for sound policies and substantial resources to create good jobs here at home, rein in exploding health care costs and improve health coverage for the uninsured and underinsured. It would strengthen Social Security, encourage employers to create and maintain guaranteed pensions for their employees and provide greater safeguards for 40l(k) retirement savings. A budget that puts all Americans first would spend top dollar to ensure every child in America has access to a first-class public school education. And it would call for an end to perverse tax and trade incentives that reward corporations for shipping good American jobs overseas and would hold those companies accountable to their employees and their communities.

A budget for all Americans would take real and tangible steps to rebuild the middle class today and to build a sounder and more secure economic future for America’s children.

President Bush’s budget is not a budget for all Americans. The Bush plan drains resources away from programs and services to strengthen and improve jobs, health care and education and devotes them, instead, to huge new spending on the very rich.

The hallmark of the Bush budget and its driving force is the president’s determination to permanently lock in multitrillion-dollar tax breaks that overwhelmingly benefit the nation’s very wealthy, while undermining our capacity to meet present and future needs and blowing titanic holes in the nation’s finances. The president’s plan—and his priorities—would give the wealthiest 5 percent of Americans, a tiny sliver of the population, nearly half (47 percent) of the payoff from the trillion-dollar tax rollbacks, more than what the bottom 90 percent of America’s households receive. Millionaires would get tax breaks averaging $107,000—a windfall 163 times greater than the modest ($655) benefit for the typical household in America.

The president’s recalcitrant insistence on maintaining unaffordable tax breaks for the wealthy, while cutting back on programs for America’s families, is all the more egregious in light of the steps the administration takes in this budget to disguise real costs America’s families inevitably will have to absorb. In that regard, the budget is so deficient as to suggest an intention to deliberately mislead. How can the costs of a war we have been fighting for almost a year and that has been the subject of earlier budgets be ignored? How can the costs of further tax cuts called for by the administration be camouflaged with deficit forecasts for only five years, rather than the customary 10 years? The budget’s “creative accounting” puts Enron to shame.

In order to pay for these permanent tax-giveaways to millionaires, the Bush FY 2005 budget takes a whack at workers, jobs and school kids—among others. For example, it:

• Proposes to cut worker safety training programs by $7 million compared with actual levels approved by Congress for fiscal year 2004.
• Rejects the best vehicle for quick and significant job creation—investment in infrastructure—and requests only two-thirds of the transportation funding needed to upgrade roads, bridges and mass transit. The Bush budget would create 5.6 million fewer jobs than the leading congressional proposal.
• Continues to underfund the No Child Left Behind Act so significantly relative to authorized levels that hundreds of thousands of children remain left behind—in classes that are too large, with teachers who can’t acquire training needed to upgrade their skills and with too few opportunities to participate in pre-kindergarten programs.
• Refuses to help the workers most hurt by the nation’s ongoing jobs crisis. The emergency federal unemployment benefits program expired in December. Unemployment spells are averaging historic highs, and there are more long-term unemployed workers now than when the program was created initially. Yet the president’s budget ignores the plight of these workers and fails to call for extension of the temporary emergency program—at the same time it undercuts job creation by stinting on transportation funding.

In short, the Bush budget is a blueprint for ensuring all of us will be worse off in order to maximize benefits for those of us already best off.

To be sure, the Bush budget includes a deceptive grab bag of poll-tested, election-year goodies, but more often than not, these token gestures miss the boat. They window-dress, rather than seriously address, major economic problems; they fall well short of actual need; and they come nowhere close to making up for program cuts under earlier Bush budgets. In the area of job training alone:

• The president’s proposed “21st Century Jobs Initiative” to train workers for “jobs of the future” does nothing to create good American jobs or stem their loss today. In just three years, we have lost hundreds of thousands of information services jobs, 80 percent as many as we created between 1998 and 2000. Only a few years ago, these were the “jobs of the future” young people went to college for and older workers got new training to perform. The president’s plan is silent about how to hold onto these jobs or ensure that jobs Americans train for today will still be here tomorrow.
• Proposals to increase worker-training funds ring hollow and hypocritical against the backdrop of deep cuts Mr. Bush has proposed earlier. In real dollars, dislocated worker funding has been cut by half-a-billion dollars since FY 2001. Under the budget proposal, a portfolio of programs designed to provide job training and skills development—dislocated worker funding, adult programs, youth formula grants, youth opportunity grants and the employment service—would see cuts of $1 billion in real dollars since Mr. Bush became president. These cuts matter: Although the U.S. Department of Labor estimated in FY 2002 it would assist 927,000 jobless workers under its dislocated worker program, its most recent data indicates it served only 40 percent—379,000.
• The president’s proposed $250 million to fund education and training by community colleges is a pittance relative to need. The nation’s community colleges have been hammered by the states’ fiscal crises; California and Florida alone have cut enrollments by more than 90,000. The president’s community college proposal would support education and training for roughly 60,000 students (based on the maximum Pell Grant of $4,050)—just two-thirds the number of slots already cut in two states alone.
• The Bush Labor Department budget includes $105 million for a program to help ex-offenders re-enter society. However important this goal, the proposal is a shell game masking earlier efforts to cut similar programs. For the past three years, President Bush tried to end a similar $75 million youth offender program. Each year Congress restored at least part of the funding for the program, most recently authorizing $50 million for it. The Bush budget now merely supplements resources Congress has maintained for a program the president consistently sought to kill.

President Bush and his allies want to convince pundits and the public that the belt-tightening, program-cutting the president wants is required by the unprecedented deficits amassed under his watch; they will exceed $520 billion next year and rise to as much as $5.2 trillion between 2005 and 2014 (including added interest and assuming permanent tax cuts and other likely tax changes). To that end, Mr. Bush has called for laws to cap domestic spending. This proposal is nothing more than cynical sleight of hand intended to dupe the public about the real and primary reason the nation’s financial balance sheet swung from a roughly $5 trillion, 10-year surplus when Mr. Bush first took office to a projected deficit of $4.3 trillion over 10 years (2001–2011). The single largest reason for this deterioration in the nation’s fortunes is declining revenues, occasioned largely by the 2001–2003 tax cuts—not spending increases, as the president implies. According to the Center on Budget and Policy Priorities, increases in spending on domestic discretionary programs caused only 2 percent of the whirlwind turnaround from surplus to deficit. Defense-related spending increases are 10 times more costly, and the tax cuts are 19 times more costly.

The president owes the American people something other than deceptive bootstrapping of a problem he helped create into a basis for cutting important programs and starving the government of resources to shore up critical economic protections. Mr. Bush owes us a budget that puts all Americans first, with policies and resources to create good jobs, provide high-quality, affordable health care, strengthen retirement security, improve public schools, hold corporations accountable and create a secure economic foundation for future generations.

President Bush’s budget is not a budget for all Americans. We hope the U.S. Congress will make it one.

Wage and Hour: Basic Labor Standards Enforcements

Bush Administration’s Proposed 2005 Budget

Wage and Hour and Equal Employment Opportunity Enforcement Funding

The administration’s fiscal year (FY) 2005 budget proposes modest increases in funding for wage and hour and federal contract compliance enforcement compared with FY 2004. Adjusted for inflation, however, the FY 2005 funding requests for these programs are essentially level with the programs’ FY 2001 appropriations.

Wage and Hour: Basic Labor Standards Enforcements

The Wage and Hour Administration enforces basic worker protection laws that cover virtually every American workplace and apply to almost all workers. Enforcement responsibilities include the nation’s minimum wage, overtime, child labor and other employment standards under the Fair Labor Standards Act, the Migrant and Seasonal Agricultural Worker Protection Act, certain provisions of the Immigration and Nationality Act, the Family and Medical Leave Act and other basic worker protection statutes.

The Bush budget seeks $165.9 million for wage and hour enforcement in FY 2005, compared with the FY 2004 budget authority of $161.3 million. In inflation-adjusted dollars, the funding sought for FY 2005 represents a 2 percent increase over the FY 2004 appropriation but is nearly level with the wage and hour appropriation in FY 2001 (0.3 percent increase).

Wage and Hour: Comparison of FY 2001 and FY 2004 actual appropriation (current and real dollars) and FY 2005 budget request FY 2001 FY 2004 FY 2005 request Appropriated amount Inflation-adjusted amount Appropriated amount Inflation-adjusted amount Funding level $152.4 $165.4 $160.1 $162.6 $165.9 Staff (FTEs) 1,528 1,458

Dollars in millions, includes FY 2004 rescission*

Enforcement of the wage and hour laws turns, in part, on adequate numbers of trained staff. The Bush budget requests 1,458 full-time equivalent (FTE) staff for FY 2005, down by 70 positions, or 4.6 percent, since FY 2001.

OFCCP: Federal Contractor Equal Employment Opportunity

The Office of Federal Contract Compliance Programs (OFCCP) is responsible for administering a range of laws and executive orders that prohibit employment discrimination and require affirmative action by businesses contracting with the federal government. Collectively, these laws ban discrimination based on race, sex, religion, color, national origin, disability or veteran status.

The FY 2005 budget calls for $82.1 million for equal employment opportunity enforcement, a nominal increase of $2.7 million from FY 2004, or 1.7 percent in inflation-adjusted terms. In real dollars, the FY 2005 funding request is less than the FY 2001 appropriations for OFCCP (0.6 percent decrease).

OFCCP: Comparison of FY 2001 and FY 2004 Actual Appropriation (Current and Real Dollars) and FY 2005 Budget Request FY 2001 FY 2004 FY 2005 request Appropriated amount Inflation-adjusted amount Appropriated amount Inflation-adjusted amount Funding level $76.1 $82.6 $79.4 $80.7 $82.1 Staff (FTEs) 813 749

Dollars in millions, includes FY 2004 rescission*

Staffing for equal employment opportunity enforcement has declined during the Bush years. Budget documents show that FTE staffing stood at 813 in FY 2001; it falls to 749 FTEs, an 8 percent decline, under the Bush FY 2005 budget.

* Note: The original FY 2004 appropriation was $161.3 million for the Wage and Hour Administration and $80.0 million for the OFCCP. To implement a subsequent .59 percent rescission to the overall FY 2004 appropriations, the administration reduced Wage and Hour funding to $160.1 million and OFCCP funding to $79.4 million.

Programs to Audit, Investigate and Prosecute Unions

Bush Administration’s Proposed 2005 Budget

Programs to Audit, Investigate and Prosecute Unions

As it has since fiscal year (FY) 2002, the Bush Labor Department is seeking additional funding and staff increases in FY 2005 to audit, investigate and prosecute unions. These increases are for the department’s Office of Labor–Management Standards (OLMS), which has union oversight and investigation authority, receives and publishes statutorily required union reports, sets standards governing union elections and finances and conducts both civil and criminal investigations into unions’ finances and elections. The department also seeks increased funding and staff for its Office of Inspector General (OIG), in large part to support additional union investigative activities.

OLMS and OIG: Comparison of FY 2001 and FY 2004 Actual Appropriations (Current Dollars and Real Dollars) and FY 2005 Budget Request FY 2001 FY 2004 FY 2005 request Appropriated amount Inflation-adjusted amount Appropriated amount Inflation-adjusted amount OLMS $30.5 $33.1 $38.6 $39.2 $43.5 Staff (FTEs) 290 382 OIG $54.7 $59.4 $65.7 $66.7 $69.9 Staff (FTEs) 409 408

Dollars in millions, includes FY 2004 rescission*

Office of Labor-Management Standards (OLMS)

The Bush administration has sought increased funding for the OLMS in each budget request it has submitted, beginning with FY 2002. The FY 2005 budget is no exception: President Bush proposes to increase OLMS funding to $39.2 million, a $4.9 million or 12.7 percent increase, over the FY 2004 appropriation. This represents an 11 percent hike in inflation-adjusted dollars. Compared with the OLMS budget for FY 2001, the FY 2005 request represents a 31 percent increase in real dollars.

The budget request also seeks an additional 35 full-time equivalents (FTEs) for OLMS, which would bring staffing levels within the program to 382. This represents a 32 percent increase from 290 FTEs in FY 2001.

The OLMS represents slightly less than 10 percent of the Employment Standards Administration (ESA) Salaries and Expenses account (which includes, in addition to OLMS, the Wage and Hour Division, Office of Federal Contract Compliance Programs, the Office of Workers Compensation Programs and the Program Direction and Support operations). The requested increase for OLMS, however, accounts for 27 percent of the total proposed ESA increase in this account. In addition, requested staffing increases for OLMS account for 35 of the 51 (69 percent) proposed additional FTE slots for all of ESA and 35 of a total of 72 (48 percent) additional FTE slots proposed for the entire department.

The Department of Labor’s budget narrative explains that it is seeking additional funding and staffing for OLMS for additional enforcement and assistance to ensure compliance with requirements under the Labor–Management Reporting and Disclosure Act, including annual union filings. The proposed OLMS budget also seeks authority to impose civil monetary penalties on unions and others that fail to make timely filings of their financial reports. The department says its intent is to enhance compliance not penalize inadvertent lapses in filing.

The appendix to the president’s budget states that OLMS plans to undertake “increased union audits and compliance assistance efforts” in FY 2005, including the processing of 36,000 reports and “a total of 4,582 investigations, audits, and supervised elections.” This averages out to 88 per week.

Office of Inspector General (OIG)

The Department of Labor proposes to increase funding for its OIG to $69.9 million, compared with $65.7 million in 2004. This is an increase of 6.4 percent in current dollars and 4.8 percent in inflation-adjusted dollars. Compared with OIG funding in FY 2001, the FY 2005 funding request is more than a 17 percent increase.

The department seeks to increase current OIG staffing levels by 10 additional FTE staff, bringing the total complement to 480, a 17 percent increase over FTE staffing levels in FY 2001 (409).

The department states that the proposed increase in OIG funding “will better prevent organized crime in union matters, safeguard union members’ funds, and fight labor racketeering.”

Taken together, proposed FY 2005 funding levels for OLMS and the OIG are 22.6 percent greater than the FY 2001 appropriation for the programs, adjusted for inflation.

* Note: The original FY 2004 appropriation was $38.9 million for the OLMS and $65.8 million for the OIG. To implement a subsequent .59 percent rescission to the overall FY 2004 appropriations, the administration reduced OLMS funding to $38.6 million and OIG funding to $65.7 million.

Employee Benefits Security Administration

Bush Administration’s Proposed 2005 Budget
Employee Benefits Security Administration

The Employee Benefits Security Administration (EBSA) enforces and administers federal laws governing private-sector pension, health and other benefit plans. President Bush proposes increasing EBSA’s funding by 7 percent (5 percent in real dollars) over the fiscal year (FY) 2004 budget. He also proposes increasing the number of full-time equivalent (FTE) staff by 30 (3.2 percent) over FY 2004.

EBSA: Comparison of FY 2001 and FY 2004 Actual Appropriations (Current Dollars and Real Dollars) and FY 2005 Budget Request FY 2001 FY 2004 FY 2005 request Discretionary budget authority Appropriated amount Inflation-adjusted amount Appropriated amount Inflation-adjusted amount Enforcement and participant assistance $83.5 $90.6 $102.6 $104.3 $110.3 Policy and compliance assistance $20.2 $21.9 $16.9 $17.2 $17.5 Executive leadership, program oversight and administration $4.0 $4.3 $4.4 $4.5 $4.5 Total $107.6 $116.8 $124.0 $126.0 $132.3 Staff (FTEs) 850 960

Dollars in millions, includes .59 percent rescission over FY 2004 omnibus

• EBSA’s budget and the size of its workforce pale in comparison to the magnitude of the agency’s responsibility to protect the job-based benefits of more than 150 million people and to watch over trillions of dollars in pension and other benefit plan assets. The proposed 6.9 percent (5.6 percent in real dollars) increase in EBSA’s enforcement and participant assistance budget will enhance the agency’s ability to oversee workers’ benefits.
• Even with the additional funding and staff, EBSA still will remain underfunded, especially when compared with the resources the administration wants to commit to another Department of Labor agency, the Office of Labor–Management Standards (OLMS). The 30 additional staff requested for EBSA still will leave the agency with one staff person for every 6,250 employee benefit plans covered under federal law. By comparison, OLMS, for which the administration is requesting 35 additional FTEs, will have one staff person for every 79 unions within its jurisdiction. EBSA will be funded to do only 7,804 plan reviews and investigations in FY 2005, out of a universe of 6 million employee benefit plans. At that pace, it would take more than 768 years to audit all employee benefit plans. Again, reflecting the department’s and the administration’s priorities, OLMS will be funded to conduct a total of 4,582 investigations, audits and supervised elections in FY 2005, in a universe of approximately 30,000 local, national and international unions that it regulates. At that pace, it would take OLMS fewer than seven years to investigate, audit or supervise elections at every union in the country.
• EBSA’s role is becoming more important over time. The shift away from guaranteed defined-benefit pension plans to 401(k) plans, in which a worker’s retirement benefits depend solely on contributions (from workers’ own paychecks) and investment earnings, has meant that workers’ retirement security depends more than ever on the proper management of retirement plan assets and the administration of plan benefits. The collapse in recent years of companies like Enron and WorldCom has made it clear that effective, adequately funded enforcement is crucial to protecting workers’ retirement benefits. Furthermore, the spread of managed health care and the pressures created by soaring health care costs have increased the need for oversight of job-based health insurance plans and assistance to workers. The proposed increase in the agency’s funding needs to support a broad effort protecting all areas of workers’ benefits.
• Since 2002, workers have been waiting for 401(k) reforms that will protect them from future Enron- and WorldCom-type meltdowns. Although budget documents state that “[t]he Administration will continue to press for enactment of the President’s retirement security plan,” President Bush did not make this issue a priority in 2003, and it remains to be seen whether he will do so this year. Even if President Bush is able to sign his own proposal into law, the Bush plan will fail to prevent future Enron- and WorldCom-failures because it does not address huge incentives executives have when they push workers to buy and hold company stock even as companies sink toward bankruptcy. Ironically (especially in light of recent and ongoing scandals in the mutual fund industry), the Bush plan actually weakens existing worker protections by letting mutual fund companies give workers conflicted investment advice for their 401(k) accounts.
  

Worker Safety and Health Programs

Bush Administration’s Proposed 2005 Budget

Worker Safety and Health Programs

Overview
President Bush’s fiscal year (FY) 2005 budget for worker safety and health programs reflects the Bush administration’s policies towards worker protection. Overall funding levels proposed for the Occupational Safety and Health Administration (OSHA), Mine Safety and Health Administration (MSHA) and National Institute for Occupational Safety and Health are similar to levels appropriated by Congress for FY 2004. This marks the first budget submitted by President Bush that did not propose reductions in the OSHA and MSHA programs.

However, the FY 2005 budget proposes to increase programs for voluntary compliance and employer assistance, while cutting training and outreach programs for workers and freezing standard setting and enforcement programs. At OSHA, the president proposes to cut worker safety training programs by $7.1 million, or 65 percent, and to shift these funds to employer assistance programs. A total of $125.2 million is proposed for programs to provide compliance assistance to employers compared with only $4 million for programs to provide outreach to workers.

Occupational Safety and Health Administration (OSHA) ($ in thousands)

Fiscal year Budget request or appropriation Positions in FTEs FY 2001 $425,886 2370 FY 2002 request $425,835 2276 FY 2002 enacted $443,651 2300 FY 2003 request $437,000 2217 FY 2003 enacted $453,000 2233 FY 2004 request $450,000 2236 FY 2004 enacted $460,786 2236 FY 2004 rescission $457,500 2236 FY 2005 request $461,600 2238

The FY 2005 budget proposes $461.6 million in funding for OSHA compared with $460.8 million in the FY 2004 Omnibus spending bill passed by Congress in January. (To implement a subsequent .59 percent rescission to the overall FY 2004 appropriations, the administration reduced OSHA’s FY 2004 funding to $457.5 million, with the biggest cut coming from worker training programs).

• Adjusting for inflation, the FY 2005 proposed OSHA budget represents a $6.5 million cut over FY 2004 appropriations.
• For the third year in a row, the Bush Administration proposes to slash OSHA’s worker training and education programs from $11.1 million to $4 million. Each year the Congress has rejected these proposed cuts and maintained funding for worker safety training programs. The administration would shift this money to compliance assistance programs for employers, bringing the total funding for these employer programs to $125.2 million, up from $119.9 million in FY 2004.

Funding for Worker Safety Training Programs Verses Employer Compliance Assistance Programs ($ in thousands)

Fiscal year Worker safety and health training Employer compliance assistance (federal and state) FY 2001 $11,175 $105,089 FY 2002 request $8,175 $106,014 FY 2002 enacted $11,175 $109,804 FY 2003 request $4,000 $112,800 FY 2003 enacted $11,175 $115,274 FY 2004 request $4,000 $120,000 FY 2004 enacted $11,102 $119,968 FY 2004 rescission $10,500 $119,200 FY 2005 request $4,000 $125,200

The proposed budget freezes funding for safety and health standards—$16.1 million is proposed compared with $16 million in FY 2004. Instead of developing new protections, the Bush administration has set as its priority the review of existing rules. According to the administration’s latest Regulatory Agenda issued in December 2003, no new significant final standards are planned, making this the first administration in OSHA’s history to issue no major safety and health standards during its tenure. Instead, the administration overturned OSHA’s ergonomics standard, killed pending final rules on indoor air quality and tuberculosis and withdrew or delayed dozens of other important safety and health rules.

• Since the Bush administration took office in 2001, it has reduced OSHA staff by 132 positions, from 2,370 full-time equivalents (FTEs) in FY 2001 to 2,238 proposed for FY 2005. The majority of these staff cuts have been in the standards and federal enforcement programs.
• No specific funds or activities are proposed to address ergonomic hazards or to implement the administration’s Comprehensive Approach to Ergonomics that was announced in April 2002. Since that time federal OSHA has issued only one voluntary guideline—for nursing homes—and issued 13 general duty citations for ergonomic hazards.

Mine Safety and Health Administration (MSHA) ($ in thousands)

Fiscal year Budget request or appropriation Positions in FTEs FY 2001 $246,306 2357 FY 2002 request $246,306 2310 FY 2002 enacted $254,768 2310 FY 2003 request $254,300 2264 FY 2003 enacted $271,741 2310 FY 2004 request $266,800 2334 FY 2004 enacted $270,826 2236 FY 2004 rescission $268,800 2336 FY 2005 request $275,600 2334

The FY 2005 budget proposes $275.6 million in funding for MSHA compared with $270.8 appropriated in FY 2004. (To implement a subsequent .59 percent rescission to the overall FY 2004 appropriations, the administration reduced MSHA FY 2004 funding to $268.8 million).

• The Bush administration has proposed a cut in Coal Enforcement activities from $116.4 million in the FY 2004 Omnibus Bill to $114.9 million in the FY 2005 request.
• For Metal/Non-Metal Enforcement activities, $66.8 million is requested, compared with $66.4 appropriated in FY 2004.
• $2.3 million is requested for MSHA Standards Development program, similar to the FY 2004 level. However, like its sister agency OSHA, no new major safety and health rules are planned. Instead, many important safety and health rules have been blocked or withdrawn.
• Since the Bush administration took office in 2001, they have reduced MSHA staff by 23 positions, from 2,357 FTEs in FY 2001 to 2,334 FTEs proposed for FY 2005.

National Institute for Occupational Safety and Health (NIOSH) ($ in thousands)

Fiscal year Budget request or appropriation FY 2001 $260,134 FY 2002 request $266,135 FY 2002 enacted $276,400 FY 2003 request $247,318 FY 2003 enacted $274,899 FY 2004 request $246,000 FY 2004 enacted $278,900 FY 2004 rescission * FY 2005 request $278,900

• For FY 2005, the Bush administration has proposed a $ 278.9 million budget for National Institute for Occupational Safety and Health (NIOSH)—$237 million for program activity and an additional $41.9 million to fund the National Occupational Research Agenda (NORA). This is the same level of funding provided by the FY 2004 Omnibus Spending Bill and represents a $4.4 million cut in real-dollar terms. In the previous three years, the administration proposed major cuts in the NIOSH budget, all of which were rejected by the Congress.

* Unknown at this time.

Prepared by: AFL-CIO Safety and Health Department, Feb. 3, 2004.

Individual Savings Account Proposals

The Bush administration is proposing to create lifetime savings accounts (LSAs) that would hold savings for any purpose and retirement savings accounts (RSA) for retirement savings. The administration also is proposing to create an employee retirement savings account (ERSA) to replace all existing 401(k)-type plans that accept employee pretax deferrals and after-tax contributions. In addition, the administration would eliminate and modify existing retirement benefit linkage rules that limit how much highly paid workers can contribute to job-based plans, depending on how much rank-and-file workers benefit from the plans.

• The administration’s proposal represents an enormous expansion of tax-favored savings accounts that primarily benefit people already saving large sums of money each year. An individual would be permitted to contribute twice as much to these new accounts as can be put into a Roth IRA under current law—$10,000 combined into an LSA and an RSA—compared with $4,000 to a Roth IRA (in 2005). Combined with the limit on what a worker can contribute to a 401(k) account—$13,000 in 2004 and rising to $15,000 by 2006—the total cap on tax-advantaged savings exceeds what many workers take home in a year.
• The administration’s proposal sets up an enormous budget trap with costs that will explode in the next decade at the very same time the costs of baby-boomer retirements begin to hit home. The LSA and RSA proposals raise revenue in the short-term—$21.1 billion from 2005 to 2009—because they allow individuals to convert existing tax-deferred accounts into the new plans by paying taxes on any tax-deferred contributions and effectively divert future contributions away from tax-deferred accounts. However, it quickly turns into a revenue loser, draining away $15.6 billion from 2010 to 2014 and exploding in cost thereafter.
• Advocates of Social Security privatization closely aligned with the Bush administration are unabashedly touting RSAs and LSAs as laying the groundwork for taking money out of the Social Security trust fund to pay for private accounts. According to Tax Notes, Kevin Hassett, an economist at the American Enterprise Institute, recently “praised Bush’s LSA proposal as the most important economic initiative” and “said LSAs …are the first step toward privatizing Social Security.”
• Increases in the contribution limits for tax-favored savings accounts are a giveaway to individuals who are saving already—not a tool to get more people to save. Few people contribute to any IRAs today. Busting the limits on contributions will not increase the numbers. Instead, it will lead people who already are saving to shift money into these new accounts so they can reap the tax benefits.
• The LSA and RSA proposals actually may reduce retirement plan coverage at small businesses. Some business owners will find the combined couple contribution limit of $20,000 for LSAs and RSAs more attractive than an employer-based plan in which contributions might have to be made for their employees.
• The administration’s proposals to “simplify” employer defined-contribution retirement plans include a number of provisions that would gut existing taxpayer protections requiring substantial benefits to accrue to rank-and-file workers, not just highly paid employees.

Social Security Administration

More than 50 million people receive critical cash benefits from the Social Security Administration (SSA) each month, including Social Security retirement, survivor and disability benefits and Supplemental Security Income (SSI) benefits for poor aged, disabled and blind Americans. Although SSA’s benefit payments are entitlements and therefore are not subject to the budget process, treatment of the agency’s administrative budget affects SSA’s ability to serve the tens of millions of Americans who interact with the agency each year. In addition to administering Social Security and SSI, the SSA administers certain health insurance functions, particularly for Medicare and the newly enacted Medicare prescription drug benefit. The Bush administration proposes increasing SSA’s administrative budget (LAE) by 6.8 percent, or $565 million. That represents a 5.1 percent increase above inflation.

Dollars in millions, includes .59 percent rescission over FY 2004 omnibus

• The proposed increase in SSA’s administrative budget is needed to help the agency face both an existing large backlog of pending disability claims and a not-too-distant surge in retirement and disability claims as members of the baby-boom generation begin to collect benefits. Furthermore, SSA faces a wave of retirements within its own workforce in the near future that will strain its capacity to deliver the high level of service the public has come to expect.
• SSA still needs a comprehensive, long-term plan that ensures the agency can deliver services commensurate with the steeply rising demands that will be placed on it over the next decade and beyond.
• The Bush administration’s fiscal year ( FY) 2005 request for Social Security is just 4.1 percent greater than what it requested last year. The enacted FY 2004 SSA administrative budget was $217 million less than requested by the Bush administration.

Individual Health Care Tax Credits

More than 43 million Americans have no health insurance. The administration’s flagship proposal to address the health insurance crisis is a refundable income tax credit for the purchase of health insurance, costing $70.1 billion over 10 years. A version of this proposal (with a 10-year cost of $89.2 billion) was included as part of President Bush’s FY 2005 budget request.

Under the most recent proposal, low-income workers would be eligible for refundable tax credits to buy health insurance of up to $1,000 for individuals and $3,000 for families. Maximum benefits under the Bush plan are available only to individuals who earn $15,000 or less per year (modified adjusted gross income [AGI]) and who have no dependents and to all other filers with $25,000 or less in income (modified AGI). The maximum credit percentage is 90 percent of the policy premium up to $1,000 per adult and $500 per child for up to two children only. The credit would be available only to individuals without job-based insurance and who are not eligible for Medicaid.

• The administration’s health insurance tax credit proposal fails the uninsured. The proposed premium credit assistance ignores the high costs of individual polices, particularly for older and sicker individuals with higher medical bills. According to a Commonwealth Fund study of 2001 premium costs, individual insurance coverage is substantially more expensive than employer group insurance for all but young, healthy males. Furthermore, covered benefits are less generous and patient cost sharing is greater in individual plans than in employer plans.
• In many cases individuals in poor health or with particular health conditions cannot find an insurer to sell them policies, or coverage exclusions for their conditions are built into the policies. Some are forced to turn to state-organized high-risk pools, which may offer a way to acquire coverage but at exorbitant rates.
• According to a 2002 study by the Center for Studying Health System Change, premiums for individual policies ranged from $1,452 a year for a young adult (ages 18-29) in excellent health to $3,276 per year for an early or near retiree (ages 55-64) in poor health. Under the Bush plan, an individual who had $20,000 in annual income and no dependents would be eligible for a $556 premium credit, only slightly more than one-third the cost of the least expensive policy.
• It is important to keep in mind the premium rates cited above reflect premium levels in 1998–1999 and health insurance costs have grown substantially since then. In 2003, monthly premiums for coverage under employer plans rose 13.9 percent. It was the third straight year of double-digit increases and the largest increase since 1990.
• The record for existing health insurance tax credits shows that tax credits are an ineffective means to get families covered. According to a recent New York Times article, the Health Coverage Tax Credit, created to help manufacturing workers who lose their jobs and coverage as a result of trade, is benefiting only 5 percent of eligible individuals. A large part of the problem is the high cost of individual and family policies. In Maine, for example, the premium for a family, including a person older than 55, is $18,000 per year ($1,500 per month). By contrast, the family (two adults, two children) maximum allowable premium for credit purposes under the Bush proposal is $3,334 per year (or $277.83 per month).
• The Bush tax credit proposals also threaten to undermine job-based coverage for low- and moderate-income workers. If young, healthy workers believe they can find adequate coverage with the tax credits, they may abandon employer-sponsored plans. As a result, employers’ risk pools would dry up and lead to higher per worker insurance costs for those that remain. Some employers—especially those with predominantly low-wage workforces—may eliminate their health insurance plans altogether and urge their workers to rely on the Bush premium credits, even though they may be inadequate.

International Labor Affairs Bureau

The International Labor Affairs Bureau (ILAB) develops and promotes the U.S. Department of Labor’s key initiatives on such issues as protecting workers’ rights abroad, HIV/AIDS education and international labor.

President Bush has sought to slash ILAB funding in every budget he has submitted to Congress. In FY 2002, he proposed cutting ILAB funding in half. Last year, he proposed to reduce ILAB’s funding to only $12.3 million. Congress repeatedly has rebuffed these drastic cuts to a program that plays a central—and constructive—role in improving living standards for workers around the world and enhancing relationships between our nation and other countries. It is ironic that an administration so bent on expanding trade agreements and markets for American companies should be so indifferent to the consequences of cuts in programs designed to help workers.

For FY 2005, the administration proposed funding ILAB at only $30.5 million, compared to $109.9 million in 2004, a reduction of $79.4 million. This translates into a cut of 72.3 percent in current dollars (slightly more, 72.8 percent, when adjusted for inflation). And it is an 81 percent cut in real dollars from ILAB’s FY 2001 appropriation.

The Bush FY 2005 budget would devastate the ILAB program and reduce the personnel working on worker rights abroad and related programs from 106 full-time equivalent employees in fiscal 2004 to 67 in 2005, more than a one-third drop.

• The administration proposes to drastically reduce funding for ILAB’s bilateral and technical assistance programs. Congress appropriated $99.5 million for these programs in FY 2004. The administration proposes an 82 percent reduction down to $18 million for FY 2005.
  • The cut in bilateral and technical assistance programs would significantly weaken the International Labor Organization (ILO) program to promote its Declaration on Fundamental Principles and Rights at Work, which reaffirms the universal right of all people to organize and bargain collectively, to refuse forced labor, to reject child labor and to work free from discrimination. The United States has been the largest contributor to this program.
  • The ILO’s Child Education initiative and the ILO’s International Program on the Elimination of Child Labor (IPEC) would be decimated by these cuts. The U.S. contribution to these programs equals all other country contributions combined.
• The administration proposes to eliminate virtually all support for international workplace-based education programs to combat HIV/AIDS.

These draconian proposed cuts in U.S. contributions to the ILO contradict President Bush’s own International Trade Agenda, released May 2001. The administration’s agenda vows to “strengthen and raise the profile” of the ILO, “provide strong support” for the ILO and improve the ILO’s technical capabilities.

These cuts undermine the administration’s ability to fulfill the objectives mandated by the Trade Promotion Authority (TPA) legislation. TPA instructs the president to “promote universal ratification and full compliance” with the ILO Convention on eliminating the worst forms of child labor and also to “promote respect for” the core ILO standards. These objectives will be difficult to achieve without significantly greater funding.

In sum, the administration’s budget proposals cripple efforts to promote the ILO’s core principles, combat HIV/AIDS a the workplace, combat the worst forms of child labor and provide education opportunities for child laborers.

Health Savings Accounts

In a bow to conservatives, the administration included a provision in the 2003 Medicare prescription drug law that allows individuals covered only by high-deductible health insurance policies (i.e., at least $1,000 annual deductibles for individuals, $2,000 for families) to establish Health Savings Accounts (HSAs) they can use to pay medical expenses. Individuals or their employers may purchase the high-deductible policies that trigger individuals' eligibility to set up HSAs.

HSAs are an expanded version of Medical Savings Accounts (MSAs), limited numbers of which have been authorized since the late 1990s. To date, there have been few takers for MSAs. Under current law, contributions, earnings on account assets and withdrawals used to pay unreimbursed medical expenses are not taxed.

In his fiscal year 2005 budget submission, President Bush proposes to make HSAs more attractive, by allowing individuals who contribute to HSAs to deduct the premium amount they pay for coverage under the high-deductible plan, regardless of whether they otherwise itemize expenses. HSAs already have unique tax advantages-contributions, account earnings and withdrawals are not taxed-not given to any other savings arrangement. This new deduction to subsidize high-deductible coverage would cost the government $24.8 billion over 10 years.

Costs of Deductibility of Health Savings Account Premiums
(Millions of Dollars)

• Adding on special tax breaks for HSA high-deductible policies tilts the playing field even further in favor of these health arrangements, which invariably benefit wealthier people. Current law and proposed tax subsidies for HSAs favor high-income Americans because the value of the tax subsidy is substantially higher for people in higher income tax brackets. Under the Bush plan, a high-income family in the top 35 percent tax bracket would get a subsidy of $1,400 for a high-deductible family policy with a $4,000 annual premium, according to a recent analysis by the Center on Budget and Policy Priorities. A moderate-income family in the 10 percent tax bracket, by contrast, would get a subsidy of $400 for such a policy.
• Individual health savings accounts already favor wealthier people who can afford the risk of high deductible plans and put away enough savings to cover large medical expenses.
• HSAs favor healthier people and therefore, cause adverse selection and higher costs for the employer-based system: Individuals with high medical expenses will end up concentrated in employer plans, further boosting soaring premium costs and giving employers incentives to shift premium costs to workers or drop coverage altogether.
• But even beyond the unfairness of this Bush tax break for the rich and the adverse selection problems for existing group health insurance lurks an even bigger threat to existing employer-based health coverage. The creation of HSAs and the new Bush proposal to allows individuals with HSAs to deduct the premiums for their high-deductibility plans provide enormous incentives for employers to restructure their health care plans in radical ways to lower their costs and shift the burden of health care to working families, just as the recent Medicare drug law shifted costs off employers and toward retirees.
• A recent Kaiser Family Foundation report, 2003 Employer Health Benefits Survey, found that more than a quarter (27 percent) of all companies were very or somewhat likely to offer workers a high-deductible plan in the next year, a significant departure from the affordable coverage traditionally provided through employer plans.
• Creation of HSAs, with their triple tax advantages, and allowing individuals to deduct premiums is a huge invitation for employers to restructure their health benefits. If this proposal is enacted by Congress, employers will be able to argue that changing from traditional insurance arrangements to a high deductible plan will be win-win-saving the employer money and using the tax code to help subsidize workers. It will be a perfect fit for the Wal-Mart insurance model, in which only catastrophic coverage is assured.
• According to a recent analysis by the Center on Budget and Policy Priorities, the premium deductibility may extend only to cases in which a worker pays the entire premium. Companies likely will use this as an excuse to make workers pay the entire premium for health coverage.
• HSA premium deductibility may result in some workers losing health coverage on the job. Some employers may use the premium deductibility and preferential tax treatment of HSAs as an excuse to terminate coverage for workers. Many workers would be unable to afford coverage on their own; premium deductibility and the HSA tax benefits would be of no or small value to the great many workers who pay no income taxes and middle-income Americans in the lowest tax brackets.
  

Job Training and Jobless Workers

Good jobs that support families are the foundation of a strong economy and a strong nation, and creating and sustaining good jobs is the number one priority for Americans. Effective and meaningful job training programs and income support for jobless workers combined with job search assistance are key components of a comprehensive jobs strategy.

The president’s budget fails every part of the good jobs test:

• It does nothing to create and sustain good jobs in America. Indeed, only one week after the budget was released, the White House chief economic advisor told reporters that “[o]utsourcing [jobs] is just a new way of doing international trade. More things are tradable than were tradable in the past. And that’s a good thing.”
• It cuts job training overall and steals resources from programs that provide job retraining and job search assistance to dislocated workers in order to fund new job training initiatives of uncertain design or effect.
• It dramatically shortchanges long-term unemployed workers, squandering resources that could be used to provide them emergency unem