JANUARY 1964 ECONOMIC REPORT OF THE PRESIDENT HEARINGS BEFORE THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES EIGHTY-EIGHTH CONGRESS SECOND SESSION JANUARY 23, 27, 28, and 29, 1964 PART 1 Printed for the use of the Joint Economic Committee U.S. GOVERNMENT PRINTING OFFICE 28-276 WASHINGTON: 1964 For sale by the Superintendent of Documents, U.S. Government Printing Office / Washington, D.C., 20402 -Price 70 cents JOINT ECONOMIC COMMITTEE (Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.) PAUL H. DOUGLAS, Illinois, Chairman RICHARD BOLLING, Missouri, Vice Chairman SENATE HOUSE OF REPRESENTATIVES JOHN SPARKMAN, Alabama WRIGHT PATMAN, Texas J. W. FULBRIGHT, Arkansas HALE BOGGS, Louisiana WILLIAM PROXMIRE, Wisconsin HENRY S. REUSS, Wisconsin CLAIBORNE PELL, Rhode Island MARTHA W. GRIFFITHS, Michigan JACOB K. JAVITS, New York THOMAS B. CURTIS, Missouri JACK MILLER, Iowa CLARENCE E. KILBURN, New York LEN B. JORDAN, Idaho WILLIAM B. WIDNALL, New Jersey JAMES W. KNOWLEs, Executive Director MARn&N T. TRACY, Financial Clerk HAMILTON D. GEWEHR, Administratise Clerk ECONOMISTS W5LLIAM H. MOORE THOMAS H. Bones, JR. GERALD A. POLLACK ALAN P. MURRAY DONALD A. WEBSTER (Mlinority) _ II CONTENTS STATEMENTS JANUARY 23, 1964 Heller, Dr. Walter W., Chairman, Council of Economic Advisers, ac- Page companied by Gardner Ackley and John P. Lewis, members - 8 JANUARY 27, 1964 Gordon, Kermit, Director, Bureau of the Budget, accompanied by Elmer Staats, Deputy Director; Charles L. Schultze, Assistant Director; and Samuel M. Cohen, Deputy to the Assistant Director for Budget Review- 81 JANUARY 28, 1964 Dillon, Hon. Douglas, Secretary of the Treasury accompanied by Paul A. Volcker, Under Secretary of the Treasury for Monetary Affairs- 163 JANUARY 29, 1964 Nathan, Robert R., of Robert R. Nathan Associates, Inc - 201 Fackler, Walter D., professor of business economics and associate dean, Graduate School of Business, University of Chicago -212 EXHIBITS AND OTHER ADDITIONAL INFORMATION Bowman, Raymond T., Assistant Director for Statistical Standards, Bureau of the Budget: "Principal Federal Statistical Programs in the 1965 Budget"-_ - ---------- 93 Curtis, Representative Thomas B.: Questions submitted to the Council of Economic Advisers and the answers thereto -16 "The Dialog on Growth Continued," the W. A. Hammond lecture at Miami University, Oxford, Ohio, April 29, 1963, by Dr. Raymond J. Saulnier, professor of economics, Barnard College, Columbia University ---------------- 28 "Broadening the Scope of Prosperity," excerpt from the 1956 Eco- nomic Report of the President - 35 Memorandum, dated January 21, 1964, from Donald A. Webster, minority economist, to minority members of the Joint Economic Committee pertaining to the President's 1964 Economic Report-- 71 Questions submitted to the Department of the Treasury and the answers thereto -176 "Selected Multipliers," table from an article entitled "Forecasting With an Econometric Model," by Daniel B. Suits - 251 Douglas, Senator Paul H.: List of publications of the Joint Economic Committee pertaining to the subjects entitled "The Problem of Poverty in America," and "The Promise and Problems of Technological Change" - I Recommendations contained in "Automation and Technological Change," Senate Report 1308, 84th Congress- 3 Recommendations contained in "A Program for the Low-Income Population at Substandard Levels of Living," Senate Report 1311, 84th Congress- 4 Miller, Senator Jack: "Monthly Personal Income in the United States," table from the Business News Report of the Department of Commerce. 77 m i IV CONTENTS Patman, Representative Wright: "Swiss Proposal To Curb Inflation Bars Interest on Some Foreign Funds-Construction of Some Buildings Would Be Banned for 1 Year; Other Investment Rules Slated," article from the Wall Street Page Journal, January 28, 1964 -170 "Swiss Map Curbs To Bar Inflation-Planning Controls on Banks, Foreign Funds, and Labor," article from the New York Times, January 28, 1964 -170 "Swiss Hit at Inflation, Restrict Capital Inflow," article from the Journal of Commerce, January 28, 1964 -171 Reuss, Representative Henry S.: Letter, dated December 26, 1963, from Jesse W. Trapp, Chairman of the Board of Directors, Bank of America, to Senator Douglas, containing a statement entitled "The Gold-Reserve Requirement"-252 Schultze, Charles L., Assistant Director, Bureau of the Budget: "Three Measures of Federal Financial Transactions" (special analysis A), an ex- cerpt from the 1965 Budget of the U.S. Government -139 Trapp, Jesse W., Chairman of the Board, Bank of America: Letter, dated December 26, 1963, to Senator Douglas, containing a statement entitled "The Gold-Reserve Requirement"-252 JANUARY 1964 ECONOMIC REPORT OF THE PRESIDENT THURSDAY, JANUARY 23, 1964 CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, D.C. The joint committee met, pursuant to notice, at 10 a.m., in room 1114, New Senate Office Building, Hon. Paul H. Douglas (chairman) presiding. Present: Senators Douglas, Sparkman, Proxmire, Pell, Javits, Miller, and Jordan; and Representatives Reuss, Griffiths, Curtis, and Kilburn. Also present: James W. Knowles, executive director; Hamilton D. Gewehr, administrative clerk; and Donald A. Webster, minority economist. Chairman DOUGLAS. It is now 10 o'clock. The committee will come to order. We begin this morning the committee's consideration of the Eco- nomic Report of the President, whicbl'was transmitted to the Congress on the 20th of January, by hearing from the Council of Economic Advisers, Walter W. Heller, Chairman, accompanied by Gardner Ackley and John P. Lewis, members of the Council. Members of the Joint Economic Committee who are always con- cerned with, and by law must consider the Economic Report, are particularly interested in the report this year since it contains two chapters which emphasize matters that have long been of interest to the Joint Economic Committee. One of these relates to the chapter entitled "The Problem of Poverty in America," and, second, the chapter entitled "The Promise and Problems of Technological Change." In order that the committee may have before it a reminder of its previous deliberations and reports, I want to include in the record at this point a list of the relevant past committee publications on these two subjects. (The exhibits referred to follow:) Low-INcoME FAMILIES The following studies, hearings, etc., have been conducted by the Joint Economic Committee: "Selected Government Programs Which Aid the Unemployed and Low-Income Families" (materials assembled by the staffs of the Subcommittee on Unem- 1 2 JANUARY 1964 ECONOMIC REPORT OF TEE PRESIDENT ployment and the Subcommittee on Low-Income Families), committee print, November 1949. "Low-Income Families and Economic Stability" (materials on the problem of low-income families assembled by the staff of the Subcommittee on Low-Income Families), Senate Document 231, September 1950; reprinted from committee print of November 1949. "Low-Income Families," hearings, Subcommittee on Low-Income Families (December 12, 13, 14, 15, 16, 17, 19, 20, 21, and 22, 1949.) "Low-Income Families and Economic Stability" (final report of the Subcom- mittee on Low-Income Families), Senate Document 146, March 1950. "Underemployment of Rural Families," materials prepared for the Joint Com- mittee on the Economic Report, committee print, February 1951. "Making Ends Meet on Less Than $2,000 a Year, Case Studies of 100 Low-Income Families" (communication to the Joint Committee on the Economic Report from the conference group of nine national voluntary organizations convened by the National Social Welfare Assembly), committee print, July 1951. "Characteristics of the Low-Income Population and Related Programs" (mater- ials prepared by the staff of the Subcommittee on Low-Income Families), com- mittee print October 1955. "Low-Income Families," hearings, Subcommittee on Low-Income Families (November 18, 19, 21, 22, and 23, 1955) December 1955. "A Program for the Low-Income Population at Substandard Levels of Living" (report of the Subcommittee on Low-Income Families), committee print, December 1955 became Senate Report 1311, January 1956. "The Low-Income Population and Economic Growth," by Robert J. Lampman (Study Paper No. 12, "Study of Employment, Growth, and Price Levels"), December 1959. AUTOMATION The following studies, hearings, etc., have been conducted by the Joint Eco- nomic Committee: "Automation and Technological Change," hearings, Subcommittee on Economic Stabilization (October 14, 15, 17, 18, 24, 25, 26, 27, and 28, 1955). "Automation and Technological Change" (report of the Subcommittee on Eco- nomic Stabilization), committee print, November 1955 became Senate Report 1308, January 1956. "Instrumentation and Automation," hearings, Subcommittee on Economic Stabilization (December 12, 13, and 14, 1956). "Automation and Recent Trends," hearings, Subcommittee on Economic Stabli- zation (November 14 and 15, 1957). "New Views on Automation" (papers submitted to the Subcommittee on Auto- mation and Energy Resources), committee print, October 1960. Chairman DOUGLAS. Unfortunately these items are all out of print except for a quite limited supply of the reports to which I am about to refer. Two of the items on this list represent subcommittee reports which were approved by the full committee for transmission to the Congress. I believe that the recommendations of these two subcommittees, transmitted through the full committee, afford a good summary of the breadth and depth