Boosting benefits for workers hurt by trade

President Bush had to make some significant concessions to key Democrats in Congress to win special authority to negotiate trade agreements.

The biggest was a major expansion of "trade adjustment assistance" (TAA) – to help workers who lose their jobs because of imports or the flight of factories abroad.

A significant new provision gives displaced workers a subsidy to maintain health insurance for their families. They can get a refundable tax credit covering 65 percent of the cost of keeping coverage.

"This is an incredible precedent," says Howard Rosen, a former Democratic staff director of the Joint Economic Committee of Congress. Mr. Rosen left to work closely with Senate Finance Committee Chairman Max Baucus (D) of Montana to improve TAA for workers.

The White House and key congressional Republicans fought successfully to keep any health-insurance subsidies for laid-off workers out of the stimulus package before Congress earlier this year.

Senate majority leader Tom Daschle gave up on that fight, but strengthened his resolve to push trade legislation he cosponsored that would create an unprecedented federal healthcare benefit for workers hit by imports. Watered down somewhat, that provision was included in the final bill that President Bush signed last week.

"We are starting down a slippery slope here," warns Ron Bird, an economist with the Employment Policy Foundation in Washington, whose organization is backed by businesses, individuals, and philanthropic groups. If the federal government helps one class of unemployed workers keep health insurance coverage, other jobless workers could press Congress for the same.

The AFL-CIO, though opposing the trade bill itself, welcomes the expanded TAA with its health-insurance provision.

"We are glad there is some minimal benefit," says Elizabeth Drake, an international policy analyst at the labor federation in Washington. "It does set a precedent."

Some see it as a piecemeal step toward national health insurance. Texas Sen. Phil Gramm (R) calls the health-insurance aspect of TAA "socialism."

Mr. Rosen sees it as an acknowledgement by Congress that maintaining health insurance is "a necessary expense – just like food and shelter" – for workers.

The expansion of TAA is not cheap.

The Congressional Budget Office estimates TAA's cost rising from $416 million in fiscal 2002, helping 35,000 displaced workers, to $1.2 billion a year, or $12 billion over 10 years. Mr. Bird makes it $23.6 billion over 10 years, making different assumptions as to how many workers will take advantage of the new TAA provisions.

In federal terms, that is starting to be significant money.

But nobody really knows the future cost. Experts can only guess how many workers will apply for benefits under the expanded entitlement program.

To Rosen, TAA expenditures are only fair to workers hit by expanded trade.

Economists have estimated that removing foreign barriers to trade would increase annual US prosperity by $2,500 per family by lowering prices and expanding the choice of goods. It also would force American firms to become more productive to meet the increased competition.

But this overall benefit comes at the expense of some workers and firms. One study finds that workers who lost their jobs in import-competing industries over the past decade suffered a 13 percent decline in average weekly earnings after finding work. Some 25 percent lost 30 percent or more.

So Rosen figures that the $15-per-household tax cost of TAA "pales in comparison with the benefits people enjoy from trade."

Besides the health-insurance provision, TAA provisions continue unemployment insurance of about $1,000 a month for up to 18 months beyond the initial 26 weeks. The worker has to be enrolled for job training in order to receive these insurance payments.

(The average duration of assistance was actually 35 weeks in 2000.)

Another section provides TAA for "secondary workers" hit by imports – say, workers who make the zippers sold to the jeans company that has moved its factories abroad. Though convoluted in its detail, this change alone could double the number of workers eligible for TAA, Rosen says.

A new element is the provision of "wage insurance" for workers over 50 and earning less than $50,000 a year. They will be reimbursed for up to 50 percent of the difference between a worker's new and old wage for two years, up to $5,000 a year.

This is considered an incentive for older workers to remain in the workforce and for employers to hire them. It also reflects the view that on-the-job training is better than government training of the jobless.

Some Republican negotiators saw the expanded TAA as "ransom" for the "trade promotion authority" the bill gives Mr. Bush. Any treaty his administration signs faces only an up-or-down vote in Congress. It can't be nitpicked by special interests through Congress.

"America is back at the bargaining table in full force," Mr. Bush proclaimed on signing the bill last Tuesday.

Maybe. But veteran trade experts in Washington suspect that the prospects of the administration negotiating a worldwide trade liberalization measure under the World Trade Organization and getting it approved by Congress are slim. The bill passed the House by only three votes. Any major trade treaty would include controversial concessions.

"All these congratulations are pretty premature," says Rosen.

Certainly no WTO trade round is likely to pass congressional muster before the next presidential term, says Harald Malmgren, a veteran economic consultant who helped negotiate the Kennedy Round in the 1960s.

Perhaps Mr. Bush can get a congressional OK for a free-trade deal with Singapore, Morocco, South Africa, or the Americas. "Odds and ends," says Mr. Malmgren.