of such excess, so much of such remainder as does not exceed the balances of advances made pursuant to section 905(e) or this section shall be transferred to the general fund of the Treasury and shall be credited against, and shall operate to reduce, first the balance of advances under section 905(e) and then the balance of advances under this section."

APPROVAL OF STATE LAWS

SEC. [207] 208. Section 3304 (a) of the Internal Revenue Code of 1954 is amended by inserting after paragraph (10) (added by section 121 (a) of this Act) the following new paragraph:

"(11) extended compensation shall be payable as provided by the Federal-State Extended Unemployment Compensation Act of 1966; and".

EFFECTIVE DATES

SEC. [208] 209. (a) In applying section 203, no extended benefit period may begin with a week beginning before January 1, 1969. (b) Sections 204 and 205 shall apply with respect to weeks of unemployment beginning after December 31, 1968.

(c) The amendment made by section [207] 208 shall apply to the taxable year 1969 and taxable years thereafter.

TITLE III-FINANCING

INCREASE IN TAX RATE

Amendment.-Section 301 of the bill is amended to read as follows: "(a) Section 3301 of the Internal Revenue Code (relating to rate of tax under Federal Unemployment Tax Act) is amended

"(1) by striking out 1961' and inserting in lieu thereof '1968', "(2) by striking out 3.1 percent' in the first sentence and inserting in lieu thereof '3.25 percent', and

"(3) by striking out the last two sentences [.] and substituting therefor the following:

In the case of wages paid during the calendar year 1967, the rate of such tax shall be 3.3 percent in lieu of 3.1 percent.""

Explanation. The proposed change would provide that when the wage base for the Federal unemployment tax is increased above $3,000, the Federal tax rate will be reduced. The H.R. 15119 proposal for a Federal unemployment tax rate of 3.3 percent for taxable year 1967 and thereafter would be limited to the taxable year 1967.

For the taxable year 1968 and subsequent years, when the amount of wages taxable is more realistically related to wage levels, a Federal unemployment tax rate of 3.25 percent will produce adequate revenue to finance both the administrative costs and the new programs of extended benefits.

On the higher new wage base, administrative costs can be financed by a 0.4 percent tax rate. The new extended benefit programs— including the Federal sharing of one-half the cost of any regular State benefits in excess of 26 weeks and the full Federal payment of extended benefits in period of high unemployment-could, it is estimated, be financed over a period of years at a tax rate of 0.15 percent on the recommended wage base.

INCREASE IN WAGE BASE

Amendment.-Section 302 of the bill is amended to read as follows: "SEC. 302. (a) Effective with respect to remuneration paid after December 31, [1968] 1967, section 3306(b)(1) of the Internal Revenue Code of 1954 is amended by striking out '$3,000' each place it appears and inserting in lieu thereof ['$3,900'] '$5,600'.

"(b) Effective with respect to remuneration paid after December 31, [1971] 1970, section 3306(b)(1) of such Code (as amended by subsection (a)) is amended by striking out ['$3,900'1 '$5,600' each place it appears and inserting in lieu thereof ['$4,200'] ‘$6,600'."

Explanation. The proposal would provide a greater increase in the taxable wage base than is provided by H.R. 15119 and would advance the effective date of the changes.

The initial increase would be to $5,600, rather than to $3,900, and it would be effective with respect to remuneration paid after December 31, 1967, rather than after December 31, 1968.

The second step, to $6,600 instead of $4,200, would be effective in calendar year 1971 rather than 1972.

The increases in H.R. 15119 are not large enough, nor do they become effective soon enough. A substantial increase in the wage base for both State and Federal taxes is needed promptly to provide adequate revenue on an equitable basis.

The $3,000 limitation was added to the unemployment compensation program in 1939 for the sole purpose of making it possible to simplify employer reporting by using the same base for unemployment taxes as for OASDI. After the limit was added, 98 percent of wages in covered employment were still taxable. In the quarter century since then, wages have so increased that only about 53 percent of wages in covered employment are taxable, and the wage base for OASDI has been increased repeatedly to the present level of $6,600.

The widening gap between wages subject to contributions and total wages in covered employment has contributed to serious financial problems and to inequities in the incidence of both State and Federal taxes among covered employers.

For State purposes, a wage base realistically related to the wage levels on which benefits are based is needed if the required revenue is to be collected on an equitable basis as between employers. Increasing the taxable wage base will permit rates to reflect employer experience more completely.

Federally, an increase in the wage base to $5,600 for 3 years and to $6,600 thereafter will permit financing of both administrative costs and more nearly adequate benefits for long-duration unemployment at a net tax rate of 0.55 percent, instead of the 0.6 percent proposed in H.R. 15119.

Moreover, even the 0.6 percent would be inadequate in a short time. Program cost increases follow the increases in wage levels more closely than would the revenue increases on the limited wage base provided in H.R. 15119. In its first year, 1969, the proposed $3,900 wage base would represent only 62 percent of total wages in covered employment, and the proportion would decrease in succeeding years.

Senator WILLIAMS. The committee will consider them, and I may be for some of them; I may be against some, but there is a possibility that the committee would not accept them. You realize that?

Secretary WIRTZ. Yes.

Senator WILLIAMS. And they may not accept the recommendations in the House. If we get to that point, then we are confronted with the question, Do we want the bill or don't we? and I would like to have the position of the administration.

Secretary WIRTZ. It is a perfectly proper question. I answer quite candidly. I don't know at this point what the administration position would be with respect to that.

Senator WILLIAMS. Will you furnish to the committee a recommendation in that connection before the hearings close?

Secretary WIRTZ. I would be hesitant about that, Senator. It assumes a set of developments which probably isn't important, but it seems to me very wrong. I would hesitate to be put in a position of being asked what the administration position would be about something other than has already been determined on by the Senate. Senator HARTKE. Will the Senator yield?

Senator WILLIAMS. Yes. But this is a possibility. It has happened in the House, and we in the Senate ofttimes get confronted with that question. We did just the other day. There were many features of a bill which I didn't like and many features which I did like.

You have to weigh the good against the bad, and make a decision. It is very unfortunate, and embarrassing sometimes, but we do have to say yes or no. We are going to be confronted in the committee with. that choice, and of course, the administration would likewise. I don't insist on the answer.

Secretary WIRTZ. I understand.

Senator WILLIAMS. But I think it is a proper question.

Senator HARTKE. Will the Senator yield?

Senator WILLIAMS. Sure.

Senator HARTKE. Let me ask you this in a different way. What you are telling us, as I understand it, is what you think is right and just what your recommendation is.

Secretary WIRTZ. And we have gone beyond that, Mr. Chairman, to try to suggest a position which takes account of the conflicting forces.

Senator HARTKE. By taking account of the conflicting ideas. You are not here bargaining with us as to what you can get.

Secretary WIRTZ. No.

Senator HARTKE. You are trying to tell us and give us the best advice and let us make up our minds on the basis of that advice. We are going to finally write the bill, and then, the only question is whether the President will veto it or not.

Secretary WIRTZ. That is right.

Senator HARTKE. Is that right? I think that is fair. We put too much emphasis sometimes, with due respect to my dear friend, and I know he is sincere, but we put too much emphasis on what the administration will be willing to accept. I think it is better for us to go ahead and let you tell us what you think is right and give your reasons why it is right. Then let somebody else come in, and if they want to dis

agree with that, let them give their reasons. We try to be just and honest men, and we try to make a clear decision on the basis of the facts, and let opinions and what druthers would be go by the wayside.

Secretary WIRTZ. That is right.

Senator WILLIAMS. I want it to be clear that I wasn't asking the Secretary as to his opinion whether the President would veto the bill. I fully recognize that question would be improper.

I was asking the Secretary, in his capacity and knowledge of this subject, whether, when the chips are down, whether he would rather have this bill or have no bill. I have great respect for the responsibility of the President, but I have equal respect for the Secretary, that he too has an opinion.

I think you understood the basis of the question. I wasn't pressing for an answer, but it is one that we will be confronted with, and it is one that you will be answering before it is over.

Senator HARTKE. Let me interrupt.

Secretary WIRTZ. The chairman has very properly, I think, described my situation. As Secretary, all of these factors you refer to are in there. Now if you were to ask my personal answer to your question, Senator, I would have two reactions. One is that it is not worth anything, therefore, why do you ask me in my personal capacity.

But, second, there wouldn't be much hesitation about the answer. Senator WILLIAMS. I would appreciate having it, and it would be worth a lot.

Senator HARTKE. Let me say to my distinguished friend, the Secretary, I hope that you do not assume the position of being a U.S. Senator, that you will just be the Secretary of Labor, and that you will administer the law that we enact, to the best of your ability. Let us use our judgment on what is right and what is wrong. We will try to make the basis, if you will give us the facts, and that is what we hope you will do

Secretary WIRTZ. I appreciate your statement.

Senator HARTKE. If you want to give your personal opinions, that is all right; I am not going to object to them, but we will consider the source of all personal opinions and give them the weight to which we think they are entitled.

Secretary WIRTZ. Thank you.

Senator WILLIAMS. Now that the Secretary has decided to leave it to the committee, and you are willing to accept our opinions, I have no further questions, and I am delighted to leave it there. I thought you would have some opinions, but since the acting chairman thinks that you shouldn't express any opinions, why, I accept that.

Senator HARTKE. I didn't say he shouldn't express any. Let me make it very clear. He can express any opinions he wants to. All I said was that the committee ought to have enough commonsense in its own right to make a judgment on the basis of whether the argument has good logic behind it, or whether the opinions are not good. I think we are off on a dispute, and I think it is a tactical play for what is going to happen on the floor of the Senate later. We are going to say this is what the administration wants; this, the administration doesn't want. I am really not much concerned about that. I am more concerned about what is going to be good for these people who are working. I am interested in what happens to the man who

loses his job. That is what the Secretary should try to do in my opinion, to try to tell us what is best, not alone for the man who loses a job, but for the country as a whole, and I hope he will do that.

Senator WILLIAMS. I don't think there was any dispute or misunderstanding between the Secretary and myself, and I thought we had pretty well established our opinions until the acting chairman go in. I think what you interpreted as a dispute was in reality a clear understanding of the Secretary himself as to his position on this.

Senator HARTKE. I did not want to let it go by that it was a clear understanding with this Senator, because I want to know what is right and what is just and what the facts are and what the conclusions are, based on the facts, rather than upon some position as to whether or not the administration is willing or not willing to accept it. Let them make up their minds after we make up our minds. That suits me fine. I am willing to do that.

The Senator from Illinois.

Senator DIRKSEN. At this juncture, Mr. Chairman, I only have one question.

Senator HARTKE. Maybe we can pass this bill out this afternoon. Senator DIRKSEN. Mr. Secretary, this bill had an overwhelming vote in the House, 374 to 10. It had an overwhelming vote in the committee. I haven't talked with any House Members. I have not talked with Chairman Mills.

It would occur to me, however, that the House would probably be pretty well adamant on the position that they have taken in this particular bill, H.R. 15119, and if this went to conference, I don't know just what the ultimate result would be, assuming that the Senate encumbered it with a good many amendments.

Secretary WIRTZ. Senator, I don't know the proprieties of the House Ways and Means Committee rules and, therefore, would be grateful if the record here be in the end in accordance with those rules, but my point, of course, is that on the key and critical issue, the House Ways and Means Committee vote was 13 to 12, and I think that probably reflects the practical situation.

Everybody knows that we have got a real closely disputed issue involved in this whole thing, and I say I hope that the record, if this violates any confidence, it does it only in a technical sense, because this is a practical answer to your point. It is a very close question as to what the standards ought to be on these key points.

Senator DIRKSEN. Mr. Ruttenberg was reported to have said that if something similar was not approved in this session, that it might be 10 years before you had any improvement in your unemployment compensation structure. Others are of the opinion that it probably wouldn't be that long, maybe 3 or 4 years. How fatal would it be if

there was none?

Secretary WIRTZ. If there was no change?

Senator DIRKSEN. Yes.

Secretary WIRTZ. I tried to answer that earlier, Senator, in these terms. A car is running well as far as the economy is concerned. There are a bunch of people that are left out. The question is whether we have got a jack in the back end of the car, if we should have a flat tire. Now, that is about what it comes down to.

If theeconomy continues to run this way, then the casualties are going to be comparatively few, only 4 million. Well, I hate to say it