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February 14, 1945
Governor Ransom

The attached memorandum was prepared by Kenneth Williams,
who put my name on it. I am glad to sign i t as an expression of my
views — better stated than I would have done.
TheMurrayB i l lwillno doubt be strongly opposed as an attempt
to 1egislate the Keynes-Eccles-Hansen-Beveridge theoryof economic
and t h i s position can obtain support from the terminology
used in the Bill. There i s a real danger that legislation of t h i s sort
might be so used as to permit some particular economic theory to become
firmly vested in public policy and to operate in a situation to which
thattheoryi s not applicable, or in a manner that will serve some
special interest to the detriment of the public interest. Misuse of
the farm-price parity concept I s a living example of such a danger.
Ihe attempt to establish price stabilization as the sole aim of
Federal Reserve policy i s an example of an abortive attempt of the
same nature.
But, as the attached memorandum points out, the Murray Bill
does not n e c e s s a r i l y legislate any p a r t i c u l a r economic theories. I t
provides for the expression of a broad objective and for setting up
machinery for deciding how that objective might be approached under
any set of conditions. These aims seem desirable.
Question may be raised as to whether a joint Congressional
Committee i s the appropriate body to determine such policies under our
constitutional system. But even t h i s i s not e x p l i c i t in the B i l l ;
the President i s authorized to make estimates of needs and recommendations
for satisfying them, to have worked up in[his]ownExecutiveofficesuch
estimates and recommendations in consultation w i t h other executive
departments and agencies, and to set up such advisory c o m m i t t e e s as
he may wish*


February 12, 1945

Governor Ransom Full Employment Act of 1045

What the Bill is
The bill is a statement of goals, not an outline of policies.
It provides machinery to facilitate the adoption of policies intended
to lead to full employment. The machinery consists of two innovations:
(1) The President is required to submit to Congress each
year, along with the regular Federal financial budget, an analysis of
the nation's total budget. If total national expenditures are indicated
to be less than enough for full employment, the President is to recommend 1egislation or policies to make up the deficit in expenditures and
employment. If prospective total national expenditures are more than

enough to provide full employment, the President is to recommend policies to prevent inflation. Estimates of prospective total national
expenditures, public and private, are to be revised quarterly in the
light of actual events.
(2) Congress is to establish a new joint committee to
receive the national budget, appraise the


hold hearings, and to report to Congress.
What the Act does
(1) Commits Congress to acceptance of full employment as a

primary goal of national policy.
(2) Creates a procedure for evaluating legislation and economic
policies in their relation to full employment.
(3) Provides, annually, a powerful sounding board for those
groups favoring full employment policies.
(4) Encourages expansion of research, statistical investigation, and planning directed toward furnishing recommendations for
policy. Thus, in effect, it will r e - c r e a t e many of the functions of
the old National Resources Planning Board.

To: Governor Ransom -2What the Act does not do
(1) It does not itself create or provide any jobs.
(2) It is no panacea and does not commit congress to any
specific program or policy of deficit spending, trust-busting, international economic cooperation, public works, easy money or anything
else. It merely provides a framework for considering such policies
in an organized manner.
(3) It does not guarantee a job to any individual. It hopes
to facilitate establishment of an economic environment in which adequate
job opportunities are available.
(4) It does not contemplate elimination of all unemployment.
Some unemployment is desirable and necessary to assure flexibility of
the economy. It does not define full employment in terms of 60 million
jobs or any other specific number.
(5) It is not intended to increase government expenditures
or to reduce reliance upon private enterprise as the main supplier of
jobs. The sponsors hope that the bill will be implemented by policies
and programs that will permit free enterprise to operate at top effectiveness.
The immediate importance of the bill lies in the plans for
using it as a means for focusing public and Congressional attention
on the problem of full employment. Ambitious preparations are being
made for a series of speeches by favorable Senators, publication of
several magazine articles about the Bill, and extensive "big-name"
hearings -- possibly with Chairman Eccles, Bowles, Hansen and others
dramatizing the economic foundations of full employment. Whether or
not the bill is ever passed, the campaign for it may have a substantial,
if subtle, influence on public opinion.
Already letters have been written to numerous high officials
about the bill. Replies received from several of them were inserted
recently in the Congressional Record. Thus, Crowley said he was
whole-heartedly in favor of the objective and approach taken by the
bill. The right to individual economic security, no less than the
right to engage in private enterprise, is an indispensable component
of a vigorous democracy. Settinius pointed out that serious unemployment creates strong pressures for the adoption of self-defeating

To: Governor Ransom


measures to expand domestic employment attheexpenseofothernations.

Perkins said the national budget idea is a constructive one and pointed
out that at the I.L.O. conference in Philadelphia, United States
accepted the principle that each government should recognize its duty
to maintain a high level of employment. Wickard indicated his complete
sympathy with the objective and approach of the bill and reiterated
his view that full industrial production and employment at good wages
are the first essentials for a prosperous agriculture. Bowles states
that only government can assure the conditions under which free enterprise can operate most efficiently and was strongly in favor of the
assumption by government of the responsibility for full employment.
Blandford thought it was highly desirable to focus and coordinate attention at a high official level on the major policies required for full
The President's message in transmitting the budget for
fiscal 1946 included a calculation similar to that suggested by the
Murray Bill. He showed a table for calendar years 1939 and 1944 indicating the relations between the nation's budget and the regular
Federal budget. The table showed separately for each broad economic
group its expenditures and receipts and how these fitted together to
make up the total gross national product. For 1944 the figures were 1944
as follows:
Receipts Expenditures Excess
(Billions of Dollars) deficit
Income, after taxes


Gross capital formation
Excess of receipts over capital

Undistributed brofits and reserves


State and Local Government
Receipts from public, except borrowing
Payments to public
Excess of receipts over payments
Federal Government
Receipts from public, except borrowing
Payments to public


Excess of payments over receipts
Less: Adjustments
Total: Gross National Product





TO: Governor Ransom


Significance of the Act
If one were cynical one might way the Act is of no significance since it does nothing concrete about assuring full employment.
In this respect it is somewhat like an act declaring sin is contrary
to the public interest. Anyone can vote for the Full Employment Act
without committing himself to anything except the generalization that
full employment is desirable. Nevertheless, the Act is important as a
symbol or a first step, toward a better organization of the economy.
Opposition to the Murray Act is substantial, and will become
greater. The opposition, rightly I think, is not concerned by what the
Act contains but about the economic philosophy underlying it. Thus the
National City Bank criticizes the Act because if provision of employment
is made a primary function, costs and usefulness of work will become
subordinate considerations. In the end, the Bank thinks private enterprise may be destroyed. The Bank also points out that the government
can not prophesy one or two years ahead and hence can not make proper
recommendations. This inability to foresee the future, of course, is
irrelevant, since government and business must necessarily plan ahead
and forecast in any case. Merely organizing the guessing sensibly and
focusing it does not increase the errors of forecasting.
The best philosophy underlying the Act is that government
must assume a larger degree of responsibility for the effective operation of the economy. This is nothing new. It is precisely what
almost everyone from Dewey to Beveridge has been saying recently.
The term"full employment" should not be taken to literally.
No one favoring a policy of "full employment" contemplates making
employment the only goal of society. If it were the only goal, we
would discard democracy, free enterprise, and freedom of opportunity
and obtain "full employment" easily by adopting Fascism or developing
a slave economy. Within the context of the American or British environment, however, "full employment" is merely a convenient short phrase
intended to mean that the economy should operate at full capacity, that
it should provide jobs, higher living standards, greater freedom of
opportunity, and a larger degree of economic participation to more
people than now exists. It is properly taken for granted that "full
employment" is 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 "full employment" is eminently
democratic and rigidly anti-fascist. Its main purpose is to express
dissatisfaction with the way the economy operated before the war to deny
millions of unemployed the benefits and rights of democracy.

To: Governor Ransom -5"Full employment" does not mean the complete absence of
unemployment. In a dynamic economy there will always be some unemployment as people shift jobs, industries expand and contract, and
markets change under 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 idle for long periods. How large this minimum
of unemployment should be is partly a matter of opinion. some contend
that unemployment of 5 million is permissible within the meaning of
"full employment". 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 is required before any specific figure can be
firmly established.
The Murray Bill tends to be associated with the EcclesHanson-Keynes-Beveridge conception of the functioning of the economic
system because of the way the problem is approached in the bill. It
implies that the total volume of expenditures, public and private,
is the determinant of the level of employment and that policies should
be aimed directly at the maintenance of total expenditures.
However, the bill contains no programs or policies and what
effect it would have in operation will depend on the policies adopted
by Congress. One can be opposed to the over-saving theory and still
be in favor of the Murray Bill. It is an economic truism that total
expenditures, public and private, determine the level of employment.
Thus, a high level of total national expenditures is essential for a
high level of employment. Some economists, however, contend that
placing the major emphasis on maintaining total expenditures is a
mistake and likely to lead to the adoption of undesirable policies.
They say that a high level of total expenditures should be viewed as
an automatic result of wise policies of all kinds and that if such
policies are adopted no direct attention will need to be given to the
problem of maintaining total expenditures or employment. As the
National City Bank says, responsibility for full employment is the
responsibility of everyone -- of labor not to price itself out of jobs,
and to give full work for full pay, of the employer to conduct his
business with vision and enterprise, and of government to provide
an economic environment favorable to free enterprise. While this
is all true as far as it goes, it is not enough to assure business
the markets it requires or labor the jobs it must have for full

To: Governor Ransom -6Conclusion
In my opinion, the Murray Bill is likely to have a great
deal of influence. It is a reasonable first step in the direction
of obtaining agreement on the principle that government, in modern
economic society, must be more than an umpire. It must be concerned
with the problem of providing assurance of markets for business and
employment for workers. The Act does not commit the government to
any given policies but it does commit Congress to acceptance of
responsibility for the functioning of the economy. The Act is in
line with the best economic thinking of recent years. I see no reason
why the Act's objective and approach should not be endorsed wholeheartedly. The act will no, nor does it pretend to, solve all of our
economic problems. But it should be helpful in establishing a
framework within which they can be solved or minimized.

Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102