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/•ch 15, 1950. Dear Frank: 1 am enclosing herewith copies of some letters and I Maor&ndtsi covering the setting up of the Council of Economic Advisers, which I thin*c you will find very interesting. They are as follows; 1. Letter to the President, clawed March 15, 194-6; 2. Copy of the memorandum enclosed in that letter • titled "Implementation of the Employment Act of 194.6" > "W: ich outlines H*y su: Loiu re I . . up of the Council of Bconoaie Advisers and gives the reasons why trie Director of the Budget fthould be the Chairman of that Council; 3- Copy of the President1s reply, dated March 16, 1946; 4< Copy of s letter to Barold Saith, the thea Director of tne Budget, dated Tmbrwry 1$, 194-6. :-Diso of Lne vacancy of the Cheiimnehip in the Council of £cor;o;nic Advisers as . criticise which hfti developed with erence to the functioning of the Council, 1 thought it an appropriate tirne to send to you, Use now Director of the Budget, the above referred to enclosures. It say not be loo late to correct the situation by tppol M C/iairman of that organization. One of your assistants, as your designee, could carry most of the work for you. It Is my viev with you the official Chairman there would be much better coordination within the Executive Office with reference to t; 'ling of the economic and financial problems of the Government. Sincerely yours, M. S. Kocles, Honorable Frank Pace, Director, bureau of t:ie Budget, Washington, D. C. Form F. R. 131 BOARD OF GOVERNORS FEDERAL RESERVE SYSTEM Office Correspondence To Chairman McG;.he Prom Governor Eccles Date ^^ ic, 1950. Subject: Council of Economic Adviasra I am unclosing herewith a. copy of a letter to %bm President on March 15, 194-6, and a. copy of the memorandum entitled BImplementation of the Saployasnt let of 1946" enclosed in that letter; also a copy of the Presidents reply, dated March 16, 194&, and a copy of & letter which I sent to Harold Smith, the then Director of the Budget, on February 15, 194b, in Which X enclosed a copy of the memorandum. Trie memorandum la the one about wl icb I spoke of ax, lunch yesterday reference to sotting up o£ the Council of Economic Advisers and of which you said yon would like to have • copy. G G P Y THE KUTI H0BS1 ,rch 16, 1946 Dei.r Mr. keeles: I appreciated very much jaar taoughtfulness in tw>4 Lug g& your note of fcl&rch fifteenth and th© m o r t f t dtjja on the £iaploym«at ^ c t . I cm pleased t o know oi" your i n t e r e s t ftnd to h^ve N art goii'ift., to hove a r e a l progTMl if t h i s l e g i s l a tion can be iiiipieRkeiited at t h l l end of t a s avenue aid, of course, that depends eatii-ely on the individuals who &re on that Caa«i»«ico. Sincerely yours, Harry Honorable K, 6. Eccles X heserve System Washington, 0. C. G 0 P y March 15, 1946. Uy dear Mr. President: Because the objectives of the ^taployaient Act of 1946 are so Interwoven with credit and Boaotary r«#pcoslblliti«fl of the r e serve System »nd M *lJfc« of course, to do an/in ing we cui to Euike that ffleuaure a success, I am taking trie l i b e r t y of enclosing a memor Judum I prep^rsd t o emphasize wry i t M^H of prlaarj importance t h a t trie d i r e c t o r of the Budget b« •*&• ^ru-irmun of the Council of Iconomic advisers If the act i s to be- effectively ^dsdniwti:?reci. If i t i s pre&uffiptuouii to MIM ttilt orgialftatlofiAX nifyttinrij l e t me say in extenuution Ul*t a f t e r tvv?Ive yMtn in iartilnfton of 1nt1—tt i*Ki1r>| *i.tk c r e d i t , r.tonot^ry, f i s c a l ^nd otii^r lat«rtviii«d problems of govviria^it, I tnin.K I h.-.ve learned the luurd WJ iOM valuable lessons ^bout orguiiiiation, c.nd e.lao that I ccji approach tnese objectively. ;.w, . 1 Long vtM in t a l s iftgis.U,,t.ion in reco*iiiizing th*t the OmnrtMiiiMlt b;.s d#flnlte •conoslc responsib i l i t i e s and in statiii^r b.t a —ndltn the objectives tovftrd Milch public policy LTIG action fhould be directed* Utet i s • tr—ttdoui step in It6«lf|i as you are well aw^re. ^^turiilly, 1 would hate t o S':je t h i s nruch l i b e r a l Dx*ogress di&creaited tarough caiy administrat i v e or orraniztiti onal imposse. Hence my effort to put dcMM in meiaoranduai form soiae soggestioiUl that I feel 1 ntied not apologise for forwarding t o you for wi&tevor aid, if c:jay, they mi^ht be to you in dealing vdth what i rec.liz,6 L« ft relatlT«ly subordiiitite proLleaa coap^red vdtn tb« UAJ tremendous ones «ita Miicn you are buraened, nespeetfully yours, i. S« Eccles, Ch&lrtuA. The President, The fehite House, Enclosure OF TH1L EilPLOY-d^T ;XT vF 1. I946 According to trie Act th« Council of leonoailc -advisers i s created in the Executive u i f i c e of the President. I t Li tiie duty •ad function of the Council t o ft**l*t tttd cdvise the President in the preparation 01 tne Economic Report, t o gather tlmeiy ^nd dUthoritai ive informal, ion concerning economic developments cold t r e n d s , to apprals* baa v^ricms [iiii^l i i and <.-ctivitie& of th« Federal QIHIIIHBWIII vltfa r#^p«et to tba declared policy 01 the Efaployment *i.ctf and to develop and i-ecomaend to the Preoiient national economic policies designed t o mtk\nt din eaipioyment, production, tnd puichasiag pammr* The Council, kMllB| created in Ul« l:x culive Office of ttie Pre&ident, la designed <*s an ui.d t o the President in meeting fcila raapcOAibilitjf in tha foramlation of isii overall i n t e grated econoadc profraa M required under the * c t . 2* isince the Sooooaie Council la set up in the i'x- cutiye Offlo of the President for trie norpotM euumeiatvd c»bove, i t i s important tru.t tne chief coordin^/icu, a^aacj of the uov; ;-;incnt, tne ftm »«u of the Budget, snouid be intimately inte^rat'-d feitn the Council. achieve thin To end i t BOoXd seea to ba expedient aod indeed neces^ci.ry t h a t tne Director of the Burtw ol tne uu.dget siiould serve aa the Chalimaai of the Council of Economic AdrlMHNU There i s nothing in tne XMttyfBAgt of t n e a\et th^t, Mould prevent tns President freai apBirinting th« J : rector of tha Budget to BMa^barahlp in the oouncil of SOQOCMBlc a d v i s e r s , subject to co&flnMitloD bj the Saa*t*« Under t h i s trro&gWMttt the Director of the liureau of the Budget aould, of cours*, draw a e&l*ry in one o f f i c i a l e*p*cltj only, • • r r i a j in the other without pay. Unites thi Director oi t.ae Bureau of the budget I s ^Iso ft lie-saber of oiid flu 1 lain of the Council of Iconoalc advisers, thoro •ould in effect be t*vo coordinating . Les in tfei ix- eutive of. ice of the President — t:ie iiureau oi* the Badgtt tad the Council. 6uch a con- dition **'.)uld v i o i - t e the prineiplea ox ^uo-i goT^nuMnt iMftrln1 fftration and vomld L«*d to continued coafllct althia Ui« A4i1nlntnitlfMi it would render i t d i f f i c u l t , If not lflpo*albl«| for the President to prefe^nt ft coordinated program witn respect to the Federal budget und trie various overall DaiiODAl OOODOSlc p o l i c i e s , a c t i v i t i e s , tmA programs ox UM Federal uovernoiGnt, 3. Tbe jict provides th*t the Council th*U to tao fu.ilest possible ext-nt tttillM Govern Kkt agaciclts. the services ifid l ^ c i i i t i e s of existing In order to accoapll^l t h i s eifectlvfiiy it would app«*r desir^Dio for the FrosldiBi to 1MU« M Executive order est«bii&ain.p an Inter' dopart—atAl Economic St&ff consisting of a technically qoftliflod repre^entativv^ of bi^b jtandlng from e^ch of the nnTnnwiint dtp*rta»toti (exceot i*r, ivuv^, and Post Office) uid from the bureau of trie Bu;;g?^t, tho Federal ueserve Board, tae V&tioa&l Housing A,^;-ncy, the Federal hor&s kgmicj$ the Federbl ^acurity AgtBOJi Midi for thl pi-c5eut, t a e j f i i c e of i*o-r Hohl 11 Mfct i o n , iddd tae i f f i c o of Kconomic Stabilia&tion. Ko.cn of these represent stives shouia bo rt0; oneible to th« head of his *f«B$y« Such rt-prefcentotivee should devote full t i a t to the work of the Inter-departs.ental Fcononlc $t*ff« They vottld thus oe in • position to serve t s liaison officers b»twm their respective tgaasl** tad the Council of Economic /-.dvis^rs *titn respect to rese&i en ittd policy I'ormui, tion. ^ith rttfmrd to sp^did problems — uic-net^i-y lad ilsc^.1 BftttarVj for example — i»ubc^mmittoefci of tae Intcr-dep^i>t:A?vnto.l St&ff isiight Kell be established. ii.. Mecessarily In tttt Booooaio Keport of the Pr«sldiBt to t'ne Con^r€Bi> recownendations will oe nk;de on y&rlottl nuittors of policy fth; ch concern trie reaoonsibiiities of various af«Diei«t of the Gov^rnaont. In th« prcparAtlan oi this &«port ta& Prf^i^ent will, of coure -, consult Cabinet feeaibers sod heads of agencies r—pon<lbl« for policy i'oxvnul-vtion. these hi^^raAklng o i f i c i a l s will, iuoreov-r, htfiH bftd an opportunity cotitinuoiatiy to assist in the wurlf fon«ilatioo of policy r>ciIMW\t\11,loni through their representatives In the lni'-r~depcrtri\ental Economic 6tc.ff, M Mil as through Jirect contact vith t-ie Pre^idenl Had the Council. February 15> 1946 Honorable Harold D. S s l Director, Bureau of the S t a t e rtipiTtiiBiinti Building; iaghington (25) D. C. Dear HftroXdl Together with ifl^xiri of the s t a f f , I a^ve glv«B 1 great deal of thought t o t h e stt&tt^r of staking effective th«ftqplojMMBtnet of 19A6. Uur coaciu&ions «re contained in the accoap&nyiii^ aiesior«i'idura. I be ho.ppy t o hkve you use mg EIMMI in connftution suppoit for • profTMl of the type outlined in t h e l &h:>\iid yon cas • to do &o. Our view la that Bill ft 11 the Director of the biiJget i s made Chtlnuua pi the CotinciX of Iconosic Advisers the Act will not be effectively <idrrziaistered. To esWoiibh ail ^itir.dy n«l o ;ency in the Kxocutive Offle« of the President to coordin^ta economic policies and progrwu without Integrating i t »ith t:ie bureau of the Budget . I 1 to -us to go counter to tae ^-ner^i need for greater c©ntrailiati011 of u.uthority and r*«poii«lbility •lth rilfict to Federal •coooaic -olicy. i i i y yours, It. S. Eccles, ...oiiU.re
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