January 1966 Economic Report of the President
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w110 JANUARY 1966 ECONOMIC REPORT OF THE PRESIDENT HEARINGS BEFORE THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES EIGHTY-NINTH CONGRESS SECOND SESSION FEBRUARY 3, 4, AND 8, 1966 PART 2 Printed for the use of the Joint Economic Committee U.S. GOVERNMENT PRINTING OFFICE 59-311 WASHINGTON: 1966 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C., 20402 -Price 55 cents JOINT ECONOMIC COMMITTEE (Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.) WRIGHT PATMAN, Texas, Chairman PAUL H. DOUGLAS, Illinois, Vice Chairman HOUSE OF REPRESENTATIVES SENATE I RICHARD BOLLING, Missouri JOHN SPARKMAN, Alabama HALE BOGGS, Louisiana J. W. FULBRIGHT, Arkansas HENRY S. REUSS, Wisconsin WILLIAM PROXMIRE, Wisconsin MARTHA W. GRIFFITHS, Michigan HERMAN E. TATMADGE, Georgia THOMAS B. CURTIS, Missouri JACOB K. JAVITS, New York WILLIAM B. WIDNALL, New Jersey JACK MILLER, Iowa ROBERT F. ELLSWORTH, Kansas - LEN B. JORDAN, Idaho JAMES W. KNOWLES, Ezecutive Director JOHN R. STARE, Deputy Director MAaIAN T. TRAcY, Financial Clerk HAMILTON D. GEwEwR, Administrative Clerk ECONOMISTS WILLIAM H. MoosE GEoRaG R. IDEN NELSON D. MCCLUNO DONALD A. WEBSTER (Minority) 11 r 'U- CONTENTS STATEMENTS FEBRUARY 3, 1966 Fowler, Hon. Henry H., Secretary of the Treasury, accompanied by Fred- erick L. Deming, Under Secretary of the Treasury for Monetary Affairs, Page and Robert A. Wallace, Assistant Secretary of the Treasury -172 Supplementary statement - 179 FEBRUARY 4, 1966 Patton, James G., national president, National Farmers Union (presented by Angus McDonald, director of research, National Farmers Union) --- 251 FEBRUARY 8, 1966 Wirtz, Hon. W. Willard, Secretary of Labor, accompanied by Stanley Ruttenberg, Manpower Administrator, and Seymour Wolfbein, Special Assistant to the Secretary for Economic Affairs: Testimony and prepared statement --------------------------------- 273 Ross, Arthur M., Commissioner, Bureau of Labor Statistics: Testimony and prepared statement -_---- _ --- --- 289 EXHIBITS AND ADDITIONAL INFORMATION Curtis, Representative Thomas B.: Submission of requested information by the Treasury Department regarding- The fiscal 1966 budget -238 Financing of the increased budget deficit for fiscal 1966 -239 Mix of debt financing and tax increases in handling the budget deficit - 240 U.S. gold stock -241 Table: "Changes in U.S. gold stock, 1963-65"-241 Claims against the U.S. gold stock -242 Effect of voluntary restraint programs on U.S. trade surplus- 242 Submission of requested statements by the Department of Labor regarding- Number of workers covered by collective bargaining agreements negotiated in 1965 -364 Coordination of the various federally assisted manpower pro- _ grams -380 Coordination of military training programs with other federally assisted programs -381 Unemployment insurance in relation to manpower training -_ 383 Department of Defense training program study -384 Griffiths, Representative Martha W.: Submission of requested statement by Commissioner Ross regarding the effect of the Vietnam war on domestic employment -::: - 356 Javits, Senator Jacob K.: Questions submitted to the Treasury Department and replies thereto 219 Submission of requested statements by the Department of Labor regarding- The long-term unemployed -------- 337 Programs directed at Negro unemployment-- 338 I~II IV CONTENTS Labor, Department of: Statements submitted in response to Senator Javits' request regard- ing- Page -The long-term unemployed -337 Programs directed at Negro unemployment -338 Information submitted in response to Representative Curtis' request regarding the number of workers covered by collective bargaining agreements negotiated in 1965 -364 Statements submitted in response to Senator Proxmire's request regarding- The profile of the unemployed at 3¼S percent of the labor force 366 Efforts to coordinate manpower training activities with other redevelopment activities -372 Statements submitted in response to Representative Curtis' request regarding- Coordination of the various federally assisted manpower pro- grams - 380 Coordination of military training programs with other federally assisted programs - 381 Unemployment insurance in relation to manpower training- 383 Department of Defense training program study -384 Miller, Senator Jack: Submission of information by the Treasury Department regarding changes in the value of the dollar as compared to other currencies- 245 Chart: "Annual rate of cost of living increase"-245 Table: "International comparison of changes in the value of money"-246- Patman, Chairman Wright: Submission of requested information by the Treasury Department regarding earnings on Treasury issues held by the Federal Reserve System and other official accounts -184 Table: "Average rates of earning on Treasury issues held by official accounts"-184 Proxmire, Senator William: Submission of requested information by the Treasury Department on the U.S. balance of payments on the official settlements basis-. 207 Table: "U.S. balance-of-payments deficit on liquidity basis and on basis of official reserve transactions"-207 Submission of requested statement by the Department of Labor re- garding- The profile of the unemployed at 3>4 percent of the labor force- 366 Efforts to coordinate manpower training activities with other redevelopment activities -372 Submission of requested statement by Commissioner Ross on the price outlook for 1966 -374 Reuss, Representative Henry S.: Submission of requested statements by the Treasury Department on- Swedish investment reserves for economic stabilization - 198 The profile of 'the area's of expected improvement in the 1966 balance of payments -200 Ross, Arthur M., Commissioner, Bureau of Labor Statistics: Table: "Unemployed persons by age and sex; January 1966, and seasonally adjusted unemployment rates, January 1965, October to December 1965, and January 1966"-350 Statement requested by Representative Griffiths regarding the effect of the Vietnam war on domestic employment -356 Statement requested by Senator Proxmire on the price outlook for 1966 -374 ,,I CONTENTS V Treasury Department: Statement submitted in response to Chairman Patman's request regarding earnings on Treasury issues held by the Federal Reserve Page System and other official accounts --- 184 Table: "Average rates of earning on Treasury issues held by official accounts"- 184 Statements submitted in response to Representative Reuss' request regarding- Swedish investment reserves for economic stabilization -198 The profile of the areas of expected improvement in the 1966 balance of payments -------- -- -------------- 200 Information submitted in response to Senator Proxmire's request on the U.S. balance of payments on the official settlements basis- 207 Table: "U.S. balance-of-payments deficit on liquidity basis and basis of official reserve transactions"- 207 Answers to questions submitted by Senator Javits -219 Information submitted in response to Representative Curtis' request regarding- The fiscal 1966 budget -238 Financing of the increased budget deficit for fiscal 1966 -239 Mix of debt financing and tax increases in handling the budget deficit -240 U.S. gold stock - 241 Table: "Changes in U.S. gold stock, 1963-65"- 241 Claims against the U.S. gold stock -242 Effect of voluntary restraint programs on U.S. trade surplus ---- 242 Information submitted in response to Senator Miller's request re- garding changes in the value of the dollar as compared to other currencies -- 245 Chart: "Annual rate of cost of living increase"- 245 Table: 'International comparison of changes in the -value of money"------------------------------------ 246 JANUARY 1966 ECONOMIC REPORT OF THE PRESIDENT THURSDAY, FEBRUARY 3, 1966 CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, D.C. The joint committee met at 10 a.m., pursuant to recess, in room S-407, the Capitol, Representative Wright Patman (chairman of the joint committee) presiding. Present: Representatives Patman, Reuss, Griffiths, Curtis, Wid- nall, and Ellsworth; Senators Douglas, Proxmire, Javits, and Miller. Also present: James W. Knowles, executive director; John R. Stark, deputy director; Donald A. Webster, minority counsel; and Hamilton D. Gewehr, administrative clerk. Chairman PATMAN. The committee will please come to order. This morning we will hear Secretary of the Treasury Fowler on the subject of the President's Annual Economic Report. It is obvious that the activities of the Treasury Department play a crucial role in the functioning of the economy-taxation, management of the public debt, Government expenditures and monetary policy have an exten- sive effect on the total performance of the economy. They also affect each other in many ways and cannot be separated. From time to time I will have something to say about the lack of coordination of economic policy and I will have some questions on the subject later. We hope, too, that you can enlighten us as to current problems in the management of the public debt. Looking over the Treasury Department's figures on the public debt, I see that the outstanding amount under the statutory ceiling at the end of the year was $316.5 billion. Of that amount, $61.7 billion was held by U.S. Government investment accounts, like the social secu- rity trust fund; and another $40.7 billion was in the hands of the Federal Reserve banks. This left a total of $213.9 billion in the hands of private investors. Of that amount, about $53.5 billion was not marketable so that the public marketable