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B O A R D OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence Tin Chairman BooleB From l Date February 17. Subject; Murrey Pull Skaplovment Act Kenneth B. Mlliams Summary The b i l l i s a statement of goals, not an outline of policies« I t provides machinery to f a c i l i t a t e the adoption of policies intended to lead to f u l l employment. The machinery consists of two inovations: (1) The President i s required to submit to Congress each year, along with the regular Federal financial budget, an analysis of the nation 1 s total budget. I f t o t a l national expenditures are indicated to be less than enough for f u l l employment, the President i s to recommend legislation or policies to make up the d e f i c i t in expenditures and employment. I f prospective total national expenditures are more than enough to provide f u l l employment, the President i s to recommend p o l i cies to prevent i n f l a t i o n . Estimates of prospective total national expenditures, public and private, are to be revised quarterly in the light of actual events. (2) Congress i s to establish a new joint committee to receive ( the national budget, appraise the President's recommendations, hold hearings, and to report to Congress. Evaluati on The immediate importance of the Act l i e s in the plans for using i t to focus public and Congressional attention on the problem of f u l l employment. Ambitious preparations are being made for speeches, magazine a r t i c l e s , and extensive hearings. Yihether or not the b i l l i s passed, the campaign for i t s adoption should have substantial, i f subtle, influence on public opinion. The Act does not i t s e l f create or provide any jobs. I t merely commits Congress to acceptance of f u l l employment as a primary goal of national policy. The Act i s no panacea and does not commit Congress to any specific program or policy. I t merely provides an organized procedure for evaluating legislation and economic policies in terms of their relation to f u l l employment. - 2 - The Act does not guarantee a job to any individual» I t i s , rather, intended to establish an economic environment in which adequate job opportunities are available. I t does not contemplate the elimination of a l l unemployment. Some unemployment i s desirable and necessary to assure f l e x i b i l i t y i n a dynamic economy. The Act does not contain a definition of f u l l employment i n terms of 60 million, or any other specific number o f , jobs. The Act m i l provide a powerful sounding board for those groups favoring f u l l employment policies and the assumption by government of increased responsibility for the operation of the economy. Even though the Act does nothing concrete about assuring f u l l employment, opposition i s substantial and w i l l become greater. The opposition i s not concerned with what the Act contains but with the economic philosophy underlying i t . The Act implies, in the way i t states the problem, acceptance of the over-saving thesis and many of i t s sponsors accept this analysis of the functioning of the economic system« However, the Act contains no commitment to the over-saving thesis and in the hands of a conservative President and a conservative Congress policies expressing opposite views about economic a f f a i r s probably would be adopted. Meaning of Full Employment The term " f u l l employment'1 should not be taken too l i t e r a l l y » Ho one favoring a policy of 11 f u l l employment11 contemplates making employment the only goal of society. I f i t were the only goal, we would discard democracy, free enterprise, and freedom of opportunity and obtain " f u l l employment" easily by adopting Fascism or developing a slave economy. Within the context of the American or British environment, however, " f u l l employment" i s merely a convenient short phrase intended to mean that the economy should operate at f u l l capacity, that i t should provide jobs, higher living standards, and greater freedom of opportunity f o r most people. I t i s properly taken for granted that " f u l l employment11 i s not to be obtained at the expense of individual freedom or by infringement upon the dignity of the individual as the fundamental basis of democracy. Thus, in this context " f u l l employment" i s eminently democratic and r i g i d l y a n t i - f a s c i s t . "Full employment" does not mean the complete absence of unemployment. I n a dynamic economy there w i l l always be sane unemployment as people s h i f t jobs, industries expand and contract, and markets change tinder the pressure of consumer choice. "Full employment" merely means that unemployment should be reduced to the practical minimum and that those who are able to work and want to work should not be forced to remain ~ 3 - idle f o r long periods» How large this minimum of unemployment should be i s partly a matter of opinion. Some contend that unemployment of 5 million i s permissible within the meaning of " f u l l employment11. Others say that no more than 500*000 should be unemployed. Most careful students of the labor market tend to place minimum unemployment in a range between 1 and 2.5 million. A great deal of additional research i s required before any specific figure can be firmly established. Conclusion In my opinion the Murray Act i s l i k e l y to have a great deal of influence in the right direction. I t i s an excellent f i r s t step toward obtaining agreement on the principle that government in modern economic society must be more than an umpire and must provide firm assurance of markets f o r business and employment for workers. The Act i s in line with the best economic thinking of recent years. While the Act w i l l not, nor does i t pretend to, solve a l l our economic problems, i t should be very helpful in establishing a framework and a climate of public opinion which w i l l f a c i l i t a t e their solution»