Joint Economic Report

7.7 1976 JOINT ECONOMIC REPORT Joint Economic Committee Congress of the United States Senate Report No. 94-690 .................. .................................................................. 94TH CONGRESS SENATE I REPORT Sd Session J l No. 94-690 THE 1976 JOINT ECONOMIC REPORT REPORT OF THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES ON THE JANUARY 1976 ECONOMIC REPORT OF THE PRESIDENT TOGET[HER WiTH AN INTERNATIONAL SECTION IN WHICH MAJORITY AND MINORITY CONCUR, AND MINORITY, SUPPLEMENTAL, AND ADDITIONAL VIEWS MARCH 10, 1976 Printed for the use of the Joint Economic Committee U.S. GOVERNMENT PRINTING OFFICE 67-73 0 WASHINGTON: 1976 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 -Price $2.80 JOINT ECONOMIC COMMITTEE (Created pursuant to see. 5(a) of Public Law 304, 79th Cong.) HUBERT H. HUMPHREY, Minnesota, Chairman WRIGHT PATMAN, Texas, Vice Chairman SENATE HOUSE OF REPRESENTATIVES JOHN SPARKMAN, Alabama RICHARD BOLLING, Missouri WILLIAM PROXMIRE, Wisconsin HENRY S. REUSS, Wisconsin ABRAHAM RIBICOFF, Connecticut WILLIAM S. MOORHEAD, Pennsylvania LLOYD M. BENTSEN, JR., Texas LEE H. HAMILTON, Indiana EDWARD M. KENNEDY, Massachusetts GILLIS W. LONG, Louisiana JACOB K. JAVITS, New York CLARENCE J. BROWN, Ohio CHARLES H. PERCY, Illinois GARRY BROWN, Michigan ROBERT TAFT, JR., Ohio MARGARET M. HECKLER, Massachusetts PAUL J. FANNIN, Arizona JOHN H. ROUSSELOT, California JOHN R. STAaK, Executive Director SENIOR STAFF ECONOMISTS WILLIAM A. Cox JERRY J. JASINOWSKI JOHN R. KARLIK LoufnLIN F. MCHUGH COURTENAY M. SLATER RICHARD F. KAUFMAN, General Counsel ECONOMISTS WILLIAM R. BUECHNER SARAH JACKSON LUCY A. FALCONE ROBERT D. HAMEIN GEORGE R. TYLER L. DOUGLAS LEE RALPH L. SCHLOSSTEIN LARRY YUSPEH MINORITY CHARLES H. BRADFORD (Senior Economist) GEORGE D. KRUMBHAAR, Jr. (Counsel) M. CATHERINE MILLER (Economist) (II) CONTENTS Page I. Introduction and summary-------------------------- ------------ 5 Main recommendations-----------------_____-- ------------ 12 II. Economic situation and outlook---------------------- ----------- 20 Outlook for 19760 _________________- ____-- --------------- 21 Will the recovery 'be sustained? ------------------- -------- 22 Energy _______--__-- ___-- -- - 26 Longer-run growth prospects __________________-- -______ 27 III. Fiscal, monetary and price-incomes policies--------------- --------_ 29 Goals of economic policy------------------------ ----------- 29 Fiscal policy _____________-_______---___________ 33 Price-incomes policy -------------------------------------- 40 Monetary policy-- ___-- ___________________________-___ 43 Coordination of economic policy -_____________________-___- 46 IV. Special policies to achieve full employment __________-- -------- 49 The high cost of extended unemployment ------------- ----- 49 The proper role for unemployment compensation ----------- 51 A program of job creation ________________-- -__ 54 Economic planning-- __------------_----____ 61 V. Federal budget priorities---------------------------------------- 63 Expenditures ---------------------------------------- ____ 63 Income security ----------------------------- _-____ 65 Housing ----------------------------- - ------------- 71 Energy ------------------ __-------------------____ 74 Agriculture ------------ _--__---_-------------------____ 75 Defense spending---------- ----- 77 Tax reform--________________________________ - 82 Small business ------------------------------------- ____ 85 VI. Investment requirements and capital sufficiency -------------- 88 Investment needs--_______________--_______ 89 Availability of funds--__________--________________________ 90 Can business finance needed investment?--------------------- 95 Broadening the ownership of new capital__________----------- 98 VII. Economic problems of regions, States, and cities------------------- 101 Operating budgets ____________----------------------- 101 Sustaining State unemployment funds----------------------- 106 The municipal bond market -___________---___________--- 107 Chronically depressed regional economics-------------------- 110 The need for regional economic information------------------ 114 VIII. International economic issues----------------------------------- 116 Monetary reform ___-__________--___________________ 116 Coping with oil deficits ------------------------------------- 1 Commitment to concessional aid----------------------------- 126 Consumer-producer conferefices------------------------------ 127 International energy policy---------------------------------- 129 Achieving world food security ----------------------------- 130 Supplemental views of Vice Chairman Wright Patman ----------- ------- 132 Supplemental views of Senator William Proxmire-------------- -------- 136 Supplemental views of Senator Abraham Ribicoff--------------- -------- 138 Supplemental views of Senator Lloyd Bentsen __________-- --------- 139 Supplemental views of Senator Edward M. Kennedy------------- ------- 142 Supplemental views of Representative William S. Moorhead------------ 152 Supplemental views of Representative Gillis Long--------------- -------- 153 (III) w Page Minority views------------------------------------------------------- 157 I. Introduction--_____________________________.___ 161 II. Economic outlook----------------------------------------------- 163 III. Monetary policy------------------------------------------------ 166 IV. Fiscal policy--------------------------------------------------- 169 V. Employment - -- ------------------------------------------- 172 VI. Energy -------------------------------------------- 175 VII. Capital formation-------------------------------------- 177 VIII. State and local governments-------------------------------------- 181 Supplemental views of Senator Jacob K. Javits…-----------_____________ 186 Additional views of Senator Charles H. Percy--------------------------- 199 Additional views of Representative Garry Brown------------------------ 201 Additional views of Representative John H. Rousselot------------------- 205 Committee and subcommittee activities in the past year_-____________-__ 209 Subcommittee membership, Ninety-fourth Congress---------------------- 227 94TrH CONGRESS t SENATE 4 REPORT 2d Sesmion 3 I No. 94X690 REPORT ON THE JANUARY 1976 ECONOMIC REPORT OF THE PRESIDENT MAncH 10, 1976.-Ordered to be printed with illustrations Mr. HuMprnxy, from the Joint Economic Committee, submitted the following REPORT together with AN INTERNATIONAL SECTION IN WHICH MAJORITY AND MINORITY CONCUR, AND MINORITY, SUPPLE- MENTAL, AND ADDITIONAL VIEWS [Pursuant to sec. 5(a) of Public Law 304, 79th Congress] This report is submitted in accordance with the requirement of the Employment Act of 1946 that the Joint Economic Committee file a report each year with the Senate and the House of Representatives containing its findings and recommendations with respect to each of the main recommendations made by the President in the Economic Report. This report is to serve as a guide to the several committees of Congress dealing with legislation relating to economic issues. (1) Report of the Joint Economic Committee on the January 1976 Economic Report of the President I. INTRODUCTION AND SUMMARY The condition of the United States economy continues to be a matter of distress to Members of this Committee. De- spite recent signs of improvement, seven million people re- main out of work by official count. If discouraged and underemployed workers are included, the figure exceeds 10 million. An estimated 60 to 75 million people in 1975 were members of families in which someone was unemployed. No one can be complacent about the recent gains when full employment is still years away. To inform itself first hand on the extent of the economic crisis, the Committee held a series of hearings on unemployment in cities throughout the country. It traveled to Chi- cago, New York, Atlanta, Los Angeles, Boston and Fall River, Massachusetts to hear testimony, including state- ments by unemployed persons, State and local officials, and others. This testimony was very useful, and some of the recommendations in this Report were developed from ideas presented at these hearings. The problem of unemployment is especially acute in the case of young people. In January, 3.7 million persons under the age of 25 were unemployed. Indeed, this prolonged recession threatens to spawn a large disenchanted group of young adults-out of the work force, without opportunity for adequate self-support, and alienated from the society that fails to accord them a productive role. The Great Recession of 1973-1975, as Chart I/1 starkly shows, dwarfs all previous postwar recessions in depth and duration. Two and one half years after this recession began, the economy has not yet returned to its 1973 income levels. Meanwhile, the Nation's economic potential has grown faster since 1973 than during most previous downturns. Lost income and production since the start of the recession now totals some $400 billion in constant 1972 dollars, and further losses by 1980 will run in the range of $600 to $900 billion depending on the speed of recovery. In either case, this unnecessarily severe recession continues to involve a monumental waste of national resources. (5) Chart l/1 POSTWAR RECESSION AND RECOVERY PATHS Index of real GNP (Previous peak = 100) 103 1960.61- 102 - 1957 58 41' 1969-70 101 - 0,90 100 NMI 98 1953d54 1973-75 97 95 I 11 111 IV V VI Vil Vill Source: Department of Commerce TIME INTERVALS

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