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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.




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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




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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»