~~~3 1'F TWENTIETH ANNIVERSARY OF THE EMPLOYMENT ACT OF 1946 AN ECONOMIC SYMPOSIUM JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES EIGHTY-NINTH CONGRESS SECOND SESSION FEBRUARY 23, i966 Printed for the use of the Joint Economic Committee TWENTIETH ANNIVERSARY OF THE EMPLOYMENT ACT OF 1946 AN ECONOMIC SYMPOSIUM HEARING BEFORE THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES EIGHTY-NINTH CONGRESS SECOND SESSION FEBRUARY 23, 1966 Printed for the use of the Joint Economic Committee U.S. GOVERNMIENT PRINTING OFFICE 64-293 0 WASHINGTON: 1966 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C., 20402 . Price 45 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 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. TALMADGE, 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, Executive Director JOHN R. STARK, Deputy Director MARIAN T. TRACY, Financial Clerk HAMILTON D. GEWEHR, Administrative Clerk ECONOMISTS WILLIAM H. MOORE GEORGE R. IIEN NELSON D. MCCLUNG DONALD A. tVEBSTER (Minority) SPECIAL COMMITTEE ON THE TWENTIETH ANNIVERSARY OF THE EMPLOYMENT ACT OF 1946 GROVER W. ENSLEY, Chairman GERHARD COLM RAYMOND J. SAULNIER WALTER W. HELLER HENRY C. WALLICH I CONTENTS MORNING SESSION, 9:30 A.M., INTERNATIONAL BALLROOM EAST, THE WASHINGTON HILTON Page Introduction and opening statement: Representative Wrightl Patman, Chairman, Joint conomic Committee-1 Opening statement: Grover W. Ensley, chairman, Special Committee on the 20th Anniversary of the Employment Act of 1946 _-_-___-_-_---3 THE EMPLOYMENT ACT OBJECTIvES-AFTER 20 YEARS Roy Blough, professor of international business, Graduate School of Business, Columbia University -5 Henry C. Wallich, professor of economics, Yale University - 12 AGGREGATE OR STRUCTURAL- APPROACHES TO ACHIEVING EMPLOYMENT ACT OBJECTIVES Leon H. Keyserling, president, Conference on Economic Progress- 19 Arthur F. Burns, president, National Bureau of Economic Research, Inc., and professor of economics, Columbia University -____-__-_- __ 27 LUNCHEON SESSION, 12 NOON, INTERNATIONAL BALLROOM CENTER, THE WASHINGTON HILTON USING FISCAL AND MONETARY POLICIES To FURTHER EMPLOYMENT ACT OBJECTIVES Walter W. Heller, professor of economics, University of Minnesota -35 - Raymond J. Saulnier, professor of economics, Barnard College, Columbia University -__------__--_------_ -------- _ -- 48 AFTERNOON SESSION, 2:30 P.M., INTERNATIONAL BALLROOM EAST, THE WASHINGTON HILTON PRICE-COST BEHAVIOR AND EMPLOYMENT ACT OBJECTIVES Kermit Gordon, vice president, The Brookings Institution -__-_-___-__ 59 Paul W. McCracken, professor of business conditions, School of Business Administration, University of Michigfin - _-_-_-__-_-_-- 67 ADMINISTRATION OF THE EMPLOYMENT ACT Bertram M. Gross, professor of political science, and director, national planning studies, the Maxwell Graduate School of Citizenship and Public Affairs, Syracuse University--_-------------- 76 Gerhard Colm, chief economist. NationalPlan nningAssoiatin __ - _80 Nei~i f. Jacoby, dean of the Graduate School of Business Administration, University of California (paper read by Karl Brandt, professor emeritus, Stanford University) ----------- 83 John W. Lehman, regional director, U.S. Bureau of Labor Statistics, Cleveland, Ohio---------------------------------7-------------- 87 QUESTIONS AND OBSERVATIONS FROM THE AUDIENCE Grover W. Ensley,.presiding -_____-____ -_-_------------- 90 Participants: 90 Edwin G. Nourse, first Chairman of Council of Economic Advisers _ Theodore J. Kreps, former Staff Director, Joint Economic Committee, and emeritus professor of business economics in the Graduate School of Business at Stanford University - ---------- 91 m IV CONTENTS Participants-Continued Karl Brandt, professor of economic policy, emeritus, sity-93 Stanford Univer- Page George E. Outland, former Congressman from San California, professor, Francisco State College - 95 James Tobin, professor of economics, Yale University -95 Kermit Gordon, replying - 96 Raymond J. Saulnier, replying - 97 Stephen K. Bailey, dean, Maxwell School of Citizenship, University Syracuse Walter 97 Heler, replying -_- 98 Jack Stieber, director of the School of Labor and Industrial Relations and professor of economics, Michigan State University -98 Leon H. Keyserling, replying - 99 Sidney Koretz, economics writer - 101 Kermit Gordon, replying - 102 Louis K. Mather, economics writer - 102 Walter Heller, replying -103 Richard Long, Federal Reserve Bank, Atlanta-- 103 Kermit Gordon, replying-- ____ - -__- _-_103-- William Freund, Prudential Insurance Co -103 Walter Heller, replying -103 Additional comments- Leon H. Keyserling -104 Bertram M. Gross -- 104 Henry C. Wallich -104 Gerhard Com -105 DINNER SESSION, 7:30 P.M., INTERNATIONAL BALLROOM, THE WASHINGTON HILTON Grover W. Ensley, presiding -107 GreetingsRepresentative from- Wright Patman, chairman, Joint Economic Committee 109 Senator Jacob K. Javits, ranking minority member, Joint Committee -110 Economic Messages from- Former President Harry S Truman: read by Hon. Richard Bolling, member, Joint Economic Committee -112 Former President Dwight D. Eisenhower: read by Hon. William B. Widnall, member, Joint Economic Committee -113 President Lyndon B. Johnson: read by Hon. Henry H. Fowler, Sec- retary of the Treasury - 113 Summary of Symposium- James W. Knowles, executive director, Joint Economic Committee-- 115 Responses to Summary- Senator Paul H. Douglas, vice chairman, Joint Economic Committee 120 Representative Thomas B. Curtis, senior minority member, Joint Economic Committee -123 Gardner Ackley, Chairman, Council of Economic Advisers - 128 APPENDIX History of the Employment Act of 1946 -_ - _ -_ -3 133 Press release announcing formation of Special Committee on the 20th Anniversary of the Employment Act of 1946 (dated Aug. 6, 1965) 0 140 Press release announcing 20th anliversary of Employment Act of 1946 to be marked by all-day economic symposium (dated Oct. 22, 1965) ---- - 141 Advance program of economic symposium - _- _-4 142 Press release announcing that economic symposium of Feb. 23 would be moved to downtown hotel because of space limitations at the Capitol 146 Biographies of members of the Joint Economic Committee and of par- ticipants at economic symposium -_ - -- _-4 147 EMPLOYMENT ACT OF 1946 (PUBLIC LAW 304-79TH CONGRESS) DECLARATION OF POLICY The Congress declares that it is the continuing policy and responsi- bility of the Federal Government to use all practicable means con- sistent with its needs and obligations and other essential considerations of national policy, with the assistance and cooperation of industry, agriculture, labor, and State and local governments, to coordinate and utilize all its plans, functions, and resources for the purpose of creating and maintaining, in a manner calculated to foster and promote free competitive enterprise and the general welfare, conditions under which there will be afforded useful employment opportunities, including self- employment, for those able, willing, and seeking to work, and to pro- mote maximum employment, production, and purchasing power. V AN ECONOMIC SYMPOSIUM ON THE OCCASION OF THE 20TH ANNIVERSARY OF THE EMPLOYMENT ACT OF 1946 WEDNESDAY, FEBRUARY 23, 1966 CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, D.C. MORNING SESSION, 9:30 A.M., INTERNATIONAL BALLROOM EAST, THE WASHINGTON HILTON The symposium convened at 9:30 a.m., in the International Ball- room East of The Washington Hilton Hotel, Representative Wright Patman (chairman of the Joint Economic Committee) presiding. Present: Representatives Patman, Bolling, Boggs, Reuss, Griffiths, Curtis, Widnall, and Ellsworth; Senators Douglas, Javits, Miller, and Jordan. Also present: James W. Knowles, executive director; John R. Stark, deputy executive director; Marian T. Tracy, financial clerk; Hamilton D. Gewehr, administrative clerk; and staff economists William H. Moore, Nelson D. McClung, George R. Iden, and Donald A. Webster (minority). STATEMENT OF REPRESENTATIVE WRIGHT PATMAN, CHAIRMAN, JOINT ECONOMIC COMMITTEE Representative PATMAN. This morning the Joint Economic Com- mittee begins another unique experiment in congressional procedures, stimulated by the 20th anniversary of the Employment Act of 1946 under which our committee was created.' The actual anniversary date fell on February 20-last Sunday. It is indeed fitting that we should again be experimenting with new techniques of economic investigation and debate as we begin the third decade of the history of one of the most important experiments in economic policy formulation in American history. ____Te actltself was inspired bv the exDerienceof om._P olon-ed depression, war, and by fear of repetitioin of the economic dislocations which had so badly damaged the Nation in the 1930's. Those of us who labored to obtain national agreement on this statute believed that there was a wide variety of policy tools available which were not being adequately employed to prevent mass unemployment, depression, fall- inns farm prices, bankruptcy and loss of profits. We believed that World War II had tauo-ht that proper coordination