81sT CONGRESS SENATE {NREPORT JOINT ECONOMIC REPORT REPORT OF THE JOINT COMMITTEE ON THE ECONOMIC REPORT ON THE JANUARY 1950 ECONOMIC REPORT OF THE PRESIDENT TOGETHER WITH THE MINORITY VIEWS JuNE 16 (legislative day, JuNE 7), 1950.-Ordered to be printed, with illustrations UNITED STATES GOVERNMENT PRINTING OFFICE 68366 WASHINGTON : 1950 JOINT COMMITTEE ON THE ECONOMIC REPORT (Created pursuant to see. 5 (a) of Public Law 304, 79th Cong.) SENATE HOUSE OF REPRESENTATIVES JOSEPH C. O'MAHONEY, Wyoming, Chairman EDWARD J. HART, New Jersey, Vice Chairman FRANCIS J. MYERS, Pennsylvania WRIGHT PATMAN, Texas JOHN SPARKMAN, Alabama WALTER B. HUBER, Ohio PAUL H. DOUGLAS, Illinois FRANK BUCHANAN, Pennsylvania ROBERT A. TAFT, Ohio JESSE P. WOLCOTT, Michigan RALPH E. FLANDERS, Vermont ROBERT F. RICH, Pennsylvania ARTHUR V. WATKINS, Utah CHRISTIAN A. HERTER, Massachusetts TREODORE J. KREPS, Staff Director GROVER W. ENSLEY, Associate Staff Director JOHN W. LEIRMAN, Clerk 11 CONTENTS I. COMMITTEE FINDINGS Page The fundamental problem - _ ------------------------ 4 The basic solution: Private capital investment -__-___-__-__-____-__ 5 A positive program to strengthen the system of private property -10 Unity in the Congress - 11 Unity in the programs of business, labor, and agriculture -12 Recommendations -13 Comments on the President's legislative'recommendations -15 Comments on subcommittee reports and recommendations -18 Supplementary statement of Senator Douglas - 22 II. VIEWS OF THE MINORITY Appraisal of philosophy of President's report--------------------------- 24 Recognition of problems in economic terms----------------------------- 26 Government responsibility toward private investment------------------- 28 Government spending and fiscal policy--------------------------------- 31 Social and political programs----------------------------------------- 32 Summary------------------------------------------------------------ 33 III. SUPPLEMENTARY STAFF MATERIALS The consumer segment - 837 Consumer income - _ 40 The business segment- 44 The housing and construction boom -_-_-__- _- _-_ 48 The problem of international investment - 49 Business income -51 Corporations never more liquid -52 Profits not equally good for small business -54 Widening fissures in the price structure -57 Steel-59 Farm prices -. 62 Dual pricing in business -64 The framework of business price policies - 65 Competition and bigness -66 The government segment - 67 Government expenditures - 68 How flexible is the 1950-51 budget? - 70 Progress in implementing Hoover Commission recommendations - 72 National defense costs -_ 73 Aids to business ------------------------- 74 Government receipts -76 Excise taxes -_ 78 Estate taxes - 79 The Federal debt --- 80 Appendix A: I. Productivity estimates and deflation of gross national product.. 81 II. Capital equipment boom and backlog -84 III. Employment opportunities attributable to United States exports, 1949 - 90 IV. Prices paid and received by farmers, 1910-49 -92 V. Comparison of business and governmental units with assets exceeding $1,000,000,000 in 1949 -93 VI. Federal cash'payments to the public by type of recipient and transaction -95 VII. Major Federal loan programs -96 VIII. Recommendations of subcommittees of the Joint Committee on the Economic Report: 1. Subcommittee on Monetary, Credit, and Fiscal Policies 99 2. Subcommittee on Investment - 102 3. Subcommittee on Unemployment -103 4. Subcommittee on Low-Income Families -103 IX. Legislative recommendations by business, farm, and labor organizations - - -105 *~~~~~~~~~~~~~ 11 IV CONTENTS Page Appendix B. Summary of the work of the Joint Committee on the Eco- nomic Report, March 1, 1949-February 28, 1950: The committee's report on the President's Economic Report -108 Subcommittee studies - 108 Other hearings and reports -110 Committee activities in the field of regional development -111 Committee activities in the field of economic statistics _…111 Committee relationships with executive agencies and other con- gressional committees -111 Amendments to the Employment Act of 19460- 112 Distribution of Joint Economic Committee materials -113 Statement on statistical gaps -113 Appendix C. Publications of the Joint Committee on the Economic Report, January 1949-April 1950 -121 Charts 1. National output and labor input -_ 36 2. Gross national product - 38 3. Personal income, consumption, and saving - 41 4. Corporate bond and common-stock yields, and earnings/price ratios 53 5. Rates of profit for manufacturing corporations by asset size groups Faces 54 6. Significant business indicators- 56 7. Wholesale prices -- 60 S. Prices received for farm products and prices paid by farmers for commodities used in production, 1910-49 - -63 S. Analysis of budget expenditures, fiscal year 1951: January 1950 estimate ------------------------- 71 10. Internal revenue derived from individual income and estate and gift taxes, 1939 and 1949 - -80 Tables 1. Selected series relating to consumption -40 2. Net personal saving and net income of each fifth of the Nation's spending units -42 3. Distribution of spending units by 1948 money income level who held no United States savings bonds in early 1949 -42 4. Money income received by each fifth of families-and single persons, 1935-36, 1941, and 1948 -43 5. Gross private domestic investment and new public construction as percentages of gross national product, selected periods -45 6. Sources and uses of corporate funds, 1946-49 -46 7. New construction activity, 1948-49 and first 4 months of 1950 --- 49 8. Current assets and liabilities of United States corporations, 1942-49 52 9. Distribution of wholesale price changes for 733 commodity price series, August 1948 to August 1949 -58 10. Prices and private investment, 1919-50 -61 11-a. Federal payments to the public by major functions - 68 1-b. Federal receipts from the public -68 12. Average Federal employment in executive branch, fiscal years 1939, 1948, and first half of 1950, with comparisons-broken to show civilian employment in Post Office Department, National Military Establishment, Veterans' Administration, and other agencies-- 73 13. Budget authorizations and expenditures for selected national security activities -74 14. Cash outgo to business and to farmers -75 15. Summary of obligations by objects (general and special accounts) for the fiscal years 1949, 1950, and 1951 -76 16. Federal receipts from the public, 1939, 1945, and 1949 -77 17. Percentages of individual income-tax receipts paid by income groups -78----------------------------- -- 18. Comparison of effective rate of individual income tax under recent revenue acts -78 19. Public and private debt- 80 81ST CONGaRESS SENATE f REPORT 2d Session 5 No. 1843 JOINT ECONOMIC COMMITTEE REPORT ON THE ECO- NOMIC REPORT OF THE PRESIDENT, JANUARY 1950 JUNE 16 (legislative day, JUNE 7),1950.-Ordered to be printed, with illustrations Mr. O' MAHONEY, from the Joint Committee on the Economic Report submitted the following REPORT [Pursuant to Public Law 304, 79th Cong.] (Together with the minority views) Transmitted herewith is the 1950 annual report of the Joint Com- mittee on the Economic Report. This report, prescribed by the Employment Act of 1946, is intended to serve "as a guide to the several committees of the Congress dealing with legislation relating to the Economic Report." It indicates the committee's findings and recom- mendations with respect to materials covered in the President's report. Also attached are views of the minority and supplemental materials prepared by the committee staff. The committee held hearings on the President's report on January 17, 18, 19, and 20. The American economy is today the greatest productive unit in the world. Its strength and balance are the main source of hope for hundreds of millions of people everywhere who cherish freedom. What happens in the American economy vitally affects the long- range struggle between communism and democracy throughout the world. American economic policy is the cornerstone of successful strategy for world peace. Every decision made by government in shaping that policy, and every major action taken by industry which influences the efficiency and expansion of the economy must be viewed against the background of international realities. Wisdom and integrity in the policies of government, and responsi- bility and courage in the conduct of industry are the fundamental requirements. To sustain an increasing level of production, employ- ment, and income to meet the needs of a growing population, and to enable this country to provide the broad economic base for a leading position in the world economy-these are the primary responsibilities of industry under free competitive enterprise. To guide so that maxi- mum benefits may be obtained for the Nation as a whole is the task of government. To achieve these purposes, there must exist a clear 1 'A 2 JOINT ECONOMIC REPORT and unshakeable agreement upon principles. There must be a clear realization that if the American economy falters in its stride, or weakens in its confidence of aims, the consequences may well endanger the life of democratic society throughout the world. American economic policy is thus a major instrument of world peace. No sound decision with respect to the steps that Government should take to shape it can be made except against the background of the struggle now being waged on the international stage between communism and democracy. The Communist has no difficulty in fixing policy. He has only to dictate it. Then he enforces