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of Economic


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Letter of Transmittal
C O U N C I L OF E C O N O M I C A D V I S E R S ,

Washington, D. C.. December


The President.
SIR: The Council of Economic Advisers herewith submits its First
Annual Repojrt in accordance with the requirements of Congress as
set forth in the Employment Act of 1946.



< m >



Sources of This Legislation



Broad Policy of the Act__


Machinery of the Act


The Council a Consultative and Advisory Body




The Spartan Doctrine of Laissez Faire


The Roman Doctrine of an External Remedy


American Democracy's Doctrine of Mutual Adjustment




E M P L O Y M E N T A C T OF 1 9 4 6




HE Employment Act of 1946 marks a distinct and important step
in the evolution of our national life and our frame of democratic
government. The Council of Economic Advisers, which this act sets
up in the Executive Office of the President, constitutes an undertaking
in the field of political science no less than in the field of economics.
Therefore, it seems appropriate that, in this first annual report, the
Council should clearly set forth its conception of the agency which Congress has established within the executive branch and explain the Council's relations to the administrative departments and independent
agencies, to the Congress, and to nongovernmental agencies in our
economic system. The opening section of this report, accordingly,
will deal with the political philosophy of the Employment Act of 1946.
The second section will consider the economic philosophy of sustained
employment and high-level production. Against this background we
shall then discuss briefly a few outstanding aspects of the outlook for
production and jobs during 1947 and in the years immediately following.
It is the President's Economic Report to the Congress rather than this
Council report which will contain specific economic conclusions and

I. The Political Philosophy
of the Employment Act
It is trite to observe that the responsibilities of the Chief Executive
of the United States and of the Congress have grown enormously in
scope and difficulty during recent decades. This is in part due to the
sheer size to which our population and wealth have grown, but in part
also to the increasing complexity in technical processes and in business
organization which has come with the rapid march of industrialization.
Beyond these changes, still a third factor must be recognized as playing
a part in increasing the difficulty and burdensomeness of the duties of
both President and Congress. This is the fact that the mass of citizens
has come to expect and indeed, as voters, to demand of their Federal
Government a more active role of leadership in dealing with matters
which affect the Nation's economic life.



In the First World War, in the severe depression of the thirties, and
again in the Second World WTar, a general sense of national emergency
led to acceptance of a more active role of executive leadership by the
President and the more prompt development and explicit implementation of a national program by the Congress in activating, directing, or
safeguarding the economic life of the country. Drawn under pressure
of time and in the face of danger, those national programs of both the
executive and the legislative branch often were, of necessity, hastily improvised and sometimes set aside or suspended for a time some deeply
cherished values such as love of individual freedom and our belief in
the efficiency of a flexible business set-up.
As the Second World War drew toward a close there was deep concern in public thinking and in the Congress as to our ability to handle
our affairs in peacetime with the vigor and effectiveness that we had
shown in meeting wartime needs. There was apprehension lest we
might drift into a postwar depression as great as that of the thirties—or
even worse. T w o clearly marked schools of thought arose. One held
it to be imperative not merely to have prompt liquidation of wartime
controls but also the abandonment of depression-born "action programs"
of the Federal Government, so that "individual free enterprise" could,
through automatic processes of the market, effect the transition to fullscale peacetime business and (even with recurrent depressions) the highest
practicable level of prosperity thereafter. The other school held that
the economic activities of individuals and groups need, under modern
industrial conditions, more rather than less supplementation and systematizing (though perhaps less direct regulation) by central government.
Some of this latter group were concerned merely with "spot" remedies
for particular situations which they regarded as peculiarly important or
dangerous. Others centered their attention on some great over-all
device that they believed would assure or promote national economic
stability or guard against a business decline. Followers of this latter
school of thought became active as early as 1944 in drafting legislation
under which the Federal Government should attempt to put their
theories of economic stabilization into practice. Their proposals, however, encountered such sharp disagreement from the opposing school
of thought that the early form of "full employment" legislation became
deadlocked in Congress. Proponents of the bill followed, in this situation, the good American tradition of intellectual give-and-take. They
gave opponents of the measure credit for being no less desirous than
they themselves were of finding some practicable means of avoiding
postwar depression or any unnecessary fluctuations of business. Hence
they said in effect: "If you find our proposals defective, what alternatives
have you to suggest?" Thus challenged, the opponents of the proposed


bill set to work refining definitions, moderating objectives, reducing
commitments as to any specific form of attack, broadening the range
of weapons to be used in the defense against depression or the attack on
The measure which finally emerged from this process of legislative
coalition was a well-balanced and carefully drawn piece of legislation.
Although frequently referred to as a "much watered-down version" of
the original proposal, it is in fact a broad enabling act of great flexibility
as well as vigor. It is far from being a meaningless verbal compromise.
The present act does not make any particular method mandatory. Nor
does it legislate any specific remedy into use. Instead, the law states
quite fully and clearly the general purpose and intention of the Congress and lays down the principle that the executive and the legislature
shall seek diligently for any method which, in the peculiar circumstances
of any given situation, appears to them to be sound and to promise
helpful results. It is hard to see how a measure can be regarded as
"watered down" which so clearly states the
responsibility of the Federal Government to use all practicable means consistent
with its needs and obligations and other essential considerations of national
policy * * * to coordinate and utilize all its plans, functions, and resources—

for the stated purposes of the act—maximum production, employment,
and purchasing power.
As a result of lengthy deliberations over the bill, and the collaborative
process of drafting, many individuals and groups gained a profound
understanding of the problem and the purposes of the act. Furthermore, such persons and groups succeeded in removing ambiguities of
language or in the elimination of what they regarded as dangerous or
doubtful provisions. Beyond this, these participants contributed to the
final draft such ideas or phraseology that in many cases they not merely
ceased to oppose the bill but actually became supporters of the measure
which was finally adopted. Thus, the Employment Act of 1946 has
an extraordinary amount of friendly interest and approval among the
public, and it was passed in the House of Representatives by a vote of
320 to 84 and in the Senate by a unanimous voice vote. In signing the
act on February 20, President Truman commented:
In enacting this legislation, the Congress and the President are responding to an
overwhelming demand of the people. The legislation gives expression to a deepseated desire for a conscious and positive attack upon the ever-recurring problems
of mass unemployment and ruinous depression. * * * I am happy that the
Senate adopted this legislation unanimously, the House of Representatives by a large
majority. * * *
The Employment Act of 1946 is not the end of the road, but rather the beginning.
It is a commitment by the Government to the people—a commitment to take any and
all of the measures necessary for a healthy economy, one that provides opportunities
for those able, willing, and seeking to work. We shall all try to honor that commitment.




This, then, gives us our first point with reference to the political
philosophy of the act, namely, that it is not specific in character, prescribing a single kind of medicine for a simple kind of economic disease
nor a panacea "good for what ails you." Instead, the act expresses
an intention to call upon all competent sources for diagnosis of
situations as they arise and for the recommendation of such treatment
as the nature of the case, carefully studied, is deemed to require. Before
considering the agencies set up for the purpose of this diagnosis and prescription, one should note carefully the political philosophy expressed
in the declaration of policy in section 2 of the act.
Here, for the first time, the Congress has spelled out in unequivocal
terms as a "continuing policy and responsibility of the Federal Government" something which hitherto had only fallen somewhat ambiguously within the general welfare clause of the Constitution. N o w —
the Congress hereby declares that it is the continuing policy and responsibility of
the Federal Government to use all practicable means consistent with its needs and
obligations and other essential considerations of national policy * * * to
coordinate and utilize all its plans, functions, and resources for the purpose of
creating and maintaining * * * conditions under which there will be afforded
useful employment opportunities, including self-employment, for those able, willing,
and seeking to work, and to promote maximum employment, production, and purchasing power.

A mandate is thus laid on the President and the whole executive establishment and upon both Houses of Congress to pursue this goal of promoting maximum productive use of the Nation's resources, natural and
human, thereby providing work opportunities as ample as are practicably
possible for those who are anxious to apply their labor to the supplying of
their wants.
It should be clearly noted that the act is called the Employment Act
of 1946, avoiding the vague—and in some quarters alarming—use of
the term "full employment." There is in it not the slightest hint that
anyone is to be coerced or constrained to labor more than he wants to,
with inferior equipment, or at anything other than the calling of his
choice. The act stresses maximum production and the purchasing
power that makes for high consumption; it does not stress mere number
of jobs. The freedom of the worker is fully protected by the expression
"willing and seeking to work." The danger of resort to leaf raking or
digging holes and filling them up is guarded against by the expression
"useful employment opportunities."
Finally, it is part of the broad policy of the act that, in carrying out a
central responsibility for promoting high production and the general
welfare, the Federal Government should coordinate its program and
activities with those of State and local governments on the one hand and
of private business agencies—industry, labor, and agriculture—on the
other. It is to operate "in a manner calculated to foster and promote


free competitive enterprise.'* Likewise, it is the expressed policy of the
act that the Council of Economic Advisers, which it sets up, shall be
closely articulated with other agencies of the Federal Government operating in the economic area and that its work shall be cooperatively related
to theirs, coordinating rather than superseding their functions.

W e turn now from the political philosophy of the Employment Act,
as embodied in its statement of purpose and of general method or range
of methods, to note the governmental machinery through which this
purpose is to be attained. The measure as enacted is fully within the
existing frame of government. It does not set up any authoritarian
board or official dictator of labor, of plant, or of production. The
traditional division of function between the executive and legislative
branches of the Government is fully preserved and, as already mentioned, the complementary relation between Federal and State Governments. In the machinery of the act, however, something has been
added to our customary equipment for handling matters that concern
the Nation's economic life. No longer is the study of the multifarious economic problems of the country and the formulating of Executive programs for dealing with national economic welfare to be merely scattered
among the Federal departments and independent commissions or the
still more numerous bureaus and divisions within these agencies.
Instead, a means is provided for reviewing and synthesizing all these
studies, conclusions, and recommendations into a single coordinated
T o this end, the President is called upon to send to Congress at the
beginning of its session an Economic Report—
setting forth ( 1 ) the levels of employment, production, and purchasing power
obtaining in the United States and such levels needed to carry out the policy declared
in section 2 ; (2) current and foreseeable trends in the levels of employment, production, and purchasing power; (3) a review of the economic program of the Federal
Government and a review of economic conditions affecting employment in the
United States or any considerable portion thereof during the preceding year and
of their effect upon employment, production, and purchasing power; and (4) a
program for carrying out the policy declared in section 2, together with such recommendations for legislation as he may deem necessary or desirable.

The new machinery set up for (a) preparing and (b) dealing with
the Economic Report of the President consists of two parts: The Council
of Economic Advisers to the President and the Joint Committee of Congress on the Economic Export.
The Employment Act establishes in the Executive Office of the President a Council of Economic Advisers, consisting of three economists, who,
with the aid of the necessary staff, are to—
assist and advise the President in the preparation of the Economic Report . . .
analyze and interpret economic developments, to appraise programs and activities
of the Government in the light of the policy declared in section 2, and to formu-


late and recommend national economic policy to promote employment, production,
and purchasing power under free competitive enterprise.

It was clearly the intent of the framers of the act that this shall be a small
coordinating agency immediately adjacent to the President and effecting
liaison between him and the vast area of technical services dealing with
economic matters already available within the governmental establishment. It is not itself to be a fact-finding agency or one doing original
statistical or economic research.
The intent of Congress to keep this new agency within the Executive
Office of the President a small top-level consultative organization is evidenced by a statutory limitation on the salaries of the members, officers,
and employees of the Council to an annual total of $345,000—a limitation which the Council considers very salutary and hopes to see maintained in future. The same intent is manifest in the provision that—
the Council shall, to the fullest extent possible, utilize the services, facilities, and
information (including statistical information) of other Government agencies as
well as of private research agencies, in order that duplication of effort and expense
may be avoided.

In conformity with these evident intentions of Congress, the Council
has set up a small (not to exceed 10) top staff of broadly trained economists, selected with a view to their competence to analyze the state of
the Nation's business as a whole and appraise the functioning of the
entire economy. Each, however, has specialized knowledge of the
problems, the methods of analysis used, and materials and personnel
available in some special area such as labor relations, plant capacity,
agricultural problems, consumer demand, price-wage-cost relationships,
money and credit factors, taxation, and fiscal problems. Together with
a small secondary staff, these "specialized generalists" are utilized under
the Council's direction to bring to its deliberations the best thinking of
the economic and statistical profession in the Federal Government
agencies, in non-Federal governments, and in the private organizations
of business, labor, and agriculture. Easy and effective relations were
promptly established between the Council's staff and the staffs of these
many agencies.
As the deliberations of the Council and its staff lead to conclusions
and recommendations at the policy level on matters concerning any
agency or organization, the Council itself invites the consultation and
comments of the respective agency or organization head. It seeks thus
to arrive at the greatest degree of mutual understanding and agreement
that is possible as to each element of the broad economic program
which would be conceived as promoting the interests of the whole
Nation. Such consultations at the policy level draw upon the thinking
of experienced leaders of business, of finance, of labor, and of agriculture, as well as the executive heads of Government, local, State, and
Federal. It is only after giving careful consideration to such views and
suggestions that the Council would feel itself justified in offering its


counsel and advice to the Chief Executive as to an over-all economic
program for the Nation. We are deeply gratified at the frank and
cordial manner in which these various agencies have collaborated with
the Council.
It is not within the province of this Council to elaborate on the functions of the other agency set up under the Employment Act, namely, the
Congressional Joint Committee on the Economic Report. It should be
noted, however, that the act in no way trenches on the primacy of the
Congress in the field of final policy making. It simply sharpens thai
body's tools for evaluation of proposals made by the President as well
as for the initiation of proposals of its own. Obviously, the joint committee will have at its disposal the improved facilities made available
under the Congressional Reorganization Act as well as recourse to those
contacts with all governmental and nongovernmental sources of facts
and ideas which are the traditional prerogatives of Congress.
In the words of the act:
It shall be the function of the joint committee—(1) to make a continuing study of
matters relating to the Economic Report; (2) to study means of coordinating programs
in order to further the policy of this Act.

When the President's Economic Report is presented to the Congress at
the opening of its session, it is to be referred to this joint committee.
After study of the proposals embodied in the President's economic program and in the light of such studies as the committee may already have
conducted into the economic problems which it considers pertinent, it
will prepare—
its findings and recommendations with respect to each of the main recommendations
made by the President in the Economic Report—

and submit them to the two Houses of Congress by February 1.
congressional report is designed to be—


a guide to the several committees of the Congress dealing with legislation relating to
the Economic Report.

The outstanding feature of this procedure is that it tends to unite the
President and Congress through mutual consideration of national economic policy as a coordinated whole instead of proceeding in an
unrelated piecemeal fashion. It guards against the danger that economic
legislation shall be incomplete, inconsistent, or directly conflicting, much
as the creation of the Bureau of the Budget 25 years ago undertook to
remedy the haphazard process of estimating fiscal needs and allocating
public revenues.
Besides its February 1 report, the joint committee may also—
from time to time make such other reports and recommendations to the Senate and
House of Representatives as it deems advisable.

A final point as to the political science aspect of the Council of Economic Advisers is that, although set up as an arm of the Executive Office,


the Council as such does not have any administrative powers or responsibilities. It is purely a consultative and advisory agency. Besides its
duty to—
assist and advise the President in the preparation of the Economic Report-—

it is t o —
analyze and interpret * * * developments and trends * * * appraise
the various programs and activities of the Federal Government in the light of the

of promoting maximum employment, production, and purchasing
power, and make interim and supplementary studies either on its own
initiative or at the request of the President. Thus it is designed to serve
as a continuous agency of counsel to the President on the professional
plane in regard to administrative decisions as well as his approval—or
even veto—of legislative proposals.
The Council of Economic Advisers does not reallocate basic public
responsibilities; it merely puts improved professional techniques and
resources at the disposition of those who make national policy. Since
the President must formulate his policies and shape his program within
his own evaluation of the most varied and comprehensive political and
social, as well as economic influences and considerations, it is not to be
expected that his Report to Congress will merely reflect the conclusions
and recommendations of his Economic Council. He will simply use as
he deems wise such economic analyses, appraisals, conclusions, and
recommendations as they prepare for him. What is said here is
intended—as subsequent annual reports and perhaps interim reports
will be—to serve as a general explanation of the purposes of the act and
the nature of the Council's work. It sketches also the general setting
of economic philosophy and policy-determining considerations within
which our specific conclusions and particular recommendations to the
President are developed.

II. The Economic Philosophy of
Sustained Employment


N examining the Employment Act of 1946 from the standpoint of
political science, we have of necessity given some intimation of the
economic philosophy with reference to national employment and
production which it embodies. Quite naturally, this theory or approach
to the problem of the Nation's business and how it may be made most
healthy and vigorous is not set forth formally or in detail in the act. It
may, however, quite readily ba inferred, in part from provisions which

were explicitly rejected by Congress during the drafting of the law and
in part from the character of the provisions that were included.
Nowhere in the Employment Act can one find the expression "business
cycle" or even such familiar and harmless single words as "prosperity"
and "depression." And yet, no sooner had the Council been set up than
the Man-on-the-Street began referring to us as having been assigned the
task of "taming the business cycle" and the Inquiring Reporter pressed
us for an opinion on the prospect for a postwar "boom and bust." This is
only natural. For if, through constructive economic policies, the Nation
were enabled to come closer to the attainment of "maximum employment, production, and purchasing power," business depressions would,
to that extent, have been filled up and the turns of the cycle would have
lost their former power to work hardship on the people. The passing
of the Employment Act by Congress would have been no more than a
senseless gesture if it did not express a considered belief that, by mobilizing our capacity of economic reasoning and the brains and experience
of business management, labor leaders, and others, we could moderate
in the future the devastating periods of business depression.
The three appointees who make up the initial membership of the
Council, though no one of them had so much as met either of the others
at the time of his selection, have found themselves in a gratifying state
of like-mindedness on this matter. All of us believe wholeheartedly in
the basic purposes of the act. W e believe its broad enabling powers
provide a device through which practical action can be suited to the
demands of changing circumstances. In our judgment, too, there has
come to be a broader understanding of the basic relationships among
production, purchasing power, and employment, and an actionable
degree of willingness to meet the requirements of better sustained general
prosperity in the future.
All that this claims is that the American people really are smart
enough to organize themselves in groups of sufficient size for high efficiency and yet keep the necessary flexibility of action under free
enterprise and democratic government. But if such efforts are to be
practically successful, they must be based on or guided by sound understanding of what really happens when our economic arrangements get
so tangled up that production is held up, forced unemployment appears,
and purchasing power ebbs away from the market. Businessmen,
union officials, and organized farmers as well as economists have given
an increasing amount of attention during the past generation to the ups
and downs of business activity, employment, and market demand.
Three major steps mark the progress of this thinking. By reviewing
them briefly we can see the significance of the action taken by Congress
in the Employment Act of 1946.








Early thinking about the general upswings and downswings of business were of a highly individualistic and essentially fatalistic character.
Those who follow this line of thought—and some still do—accept
the cycle as a result produced by causes deeply rooted in physical
nature or in fundamental human behavior and following an intricate
pattern of short-, medium-, and long-time swings. They do not claim
that this pattern is precise as to timing or invariable as to magnitude,
like the movement of the stars. But they do think in terms of essentially
mechanical relationships rather than human institutions that can be
modified by intelligent action in a republic, and human behavior that
can be changed by wise leadership.
Now if the businessman becomes convinced that cyclical swings will
inevitably recur in response to sunspots, weather cycles, or some deep
alternating pulls or tides of human behavior, what is the practical consequence? His prime concern becomes that of perfecting a technique
for discovering what this extraneous pattern is and of measuring his
position and that of business in general with reference to the progress
of prosperity or depression. Insofar as he admits the likelihood of some
variation in the pattern, he becomes concerned in identifying signs of
its probable timing and magnitude. His major objective of business
management centers on trying to outguess the course of the business
Whatever the mixture of trained measurement, experienced interpretation or evaluation, and sheer hunch, the practical outcome of this
approach to the problem of economic fluctuations is, in the main, that of
conformity or indeed exaggeration, not one of corrective action. If a
majority of businessmen become convinced that a business recession "is
due" in a specified quarter of the following year, ordinary prudence
dictates that they shall put their business house in order for the impending
storm. They will curtail their commitments and revise their operating
plans in general accord with the prediction of time and severity of the
depression in which they have placed their faith. If the various predicted and those who look to them for guidance, progressively comparing
notes, come to substantial agreement in picking the third quarter as the
time, 20 percent the magnitude, and 1 year the probable duration of the
decline, and if the majority of businessmen accept this counsel as their
guide to action, it can be expected that they will make about the appropriate curtailment in operations and will emerge from the storm cellar
at about the appropriate moment so that the prediction will in fact prove
true. It will, indeed, become the engine of its own verification. The
journey into the area of restricted production, unemployment, and low
purchasing power will have been completed according to schedule or
even accelerated. The question, however, might be asked: "Was this
trip necessary?"


Possible ill effects from stanch reliance on cycle theory and predictive
techniques may be no less on the up side. If the business community
in general becomes imbued with the idea that the economy as a whole
is in a pronounced prosperity phase and that the upswing of this cycle
is due to continue for three or five, or whatever number of years, they
are likely to make plans of expansion without due care as to the particular factors of demand and available capacity in their own industry
or their own locality. They are likely to follow looser practices as to
management and cost control or be less cautious as to inventory accumulation and credit commitments than they would be if looking at each
situation strictly on its own merits and in the long-time perspective.
This extreme type of business-cycle theory does not conceive the role
of the business organizer and administrator as in any way different from
that of the squirrel storing up nuts for the winter. It does not ask
whether this individual protective action may, unlike an animal's instinctive conformity to the fixed cycle of the seasons, become itself a contributory cause of the drying up of business. These narrow-visioned
individuals do not consider what happens to the whole economic system when those who are less strongly entrenched to withstand a period
of lean production (or less well equipped with advisers to foretell its
coming and plan protective measures) are allowed to go to the wall.
The real 100-percenters of this school of thought carry their fatalism
one step further. They believe that depression is a wholesome purgative
for business, eliminating those who are too weak or too short-sighted
to be entitled to survive. Like the ancient Spartans, they believe in
exposing the young and weak, no less than the strong, to the full force
of nature, trusting that the strong will survive and only the weak will
perish. They forget or deny that in a depression the strong and efficient
also suffer. This type of economic behavior is complacently referred to
as "riding the business cycle." Those who practice the art believe
that they can—
find as many advantages in depressions as in booms. * * * Smart folks take
advantage of the boom and are then ready for depression-time bargains. * * *
It is to be hoped that depressions are never abolished, for they have many desirable

In our modern economy, however, little recessions often develop
into big depressions, once a setback causes contraction of purchasing
power and markets. Efficient as well as inefficient businesses incur losses.
Efficient workers as well as inefficient workers become unemployed,
and the Nation as a whole suffers. Besides the human misery and the
waste of productive resources implied, we wonder how often our social
fabric can stand "cures" of the type prescribed by the Spartan school
of thought.
Changing our figure of speech, the business cycle is often likened to
swings of a pendulum. It is said that, when it has gone to one side or
the other of the equilibrium point a certain distance determined by


mechanical laws* natural forces will check its deviation and turn it back.
This may be measurably true as to the excesses of price inflation or
deflation. A midpoint of stable values may be the object and the basis
of a natural control process. But as to production and employment,
such is definitely not the case. The greatest amount of employment
attained at the peak of the boom (except the most extreme war boom)
is quite within the desires of the workers to apply their energies toward
the satisfaction of their wants. All the idleness and underconsumption
which develops as business moves toward the midpoint and on to the
bottom of the depression is net loss, not a true corrective movement.
So, too, the volume of production at the top does not represent excess,
with the midpoint as the goal of our "stabilization" devices. It is prices
and property values and credit extensions that are excessive and unstable
at the top of the swing and that are artificially shrunken and carrying
the potential of a rise when the bottom has been reached. We do not
in a boom have an excessive physical volume of production or excess of
employment (even though there may be a faulty distribution of it) that
needs to be corrected by idleness and a reduction in total production—
with resultant want. The greatest danger of recent years has been
that our economic institutions and our business practices would bring
us to a more or less permanent equilibrium at a low or "stagnation"
level. The Employment Act of 1946 reflects truly the proper goal of
business stabilization in setting maximum production, maximum employment, and maximum purchasing power or scale of living as the kind
of stability to which we are to apply our "plans, functions, and resources."

Unlike those whose belief in the external character of the cycle causes
them to conclude that nothing can be done about it but to adapt one's
business operations or exploit it for individual profit, a second group
would master the cycle by a remedy equally external to the processes of
private business—the power of government to spend and create a purchasing medium. There has arisen in recent years a widespread belief
that, whatever the "cyclical" forces beating upon business in general
or whatever adaptations to such forces may be spontaneously made
by the dictates of private managerial understanding or prudence, the
economy as a whole may be kept on a reasonably even keel merely
through the intervention of central government in the monetary and
fiscal area.
According to this philosophy of external remedy, the essential phenomenon of a business depression is a too restricted volume of purchasing
power being turned into the system, and this particularly in the form of
capital expenditures. The obvious remedy, therefore, is for central
government to measure the amount of this aggregate deficiency and
restore the Nation's business to a satisfactory state of activity by injecting


an appropriate amount of the purchasing medium. There is a certain
undeniable cause-and-result logic in the prescription of government
spending limited to specific support or "pilot" purposes, just as there is a
measure of validity also in the doctrine of individual adaptation to cycle
forces. But there are also rather obvious shortcomings and indeed
dangers in the extreme proposals of this as a "cure-all" remedy.
In contrast to the Spartan business theory and practice that carried a
cult of individual self-reliance to the point of brutality and needless waste,
we believe it is not fanciful to liken this doctrine of an over-all offset to
managerial maladjustment to the Roman system that swung to an
extreme opposite to that of Sparta. Roman citizens were—for a time—
relieved of the compulsion of relying on their own efforts to keep their
economy as a desirable level. "Bread and circuses" were provided for all
through the power of the state. Similarly, this theory relieves businessmen
of the necessity of themselves making the business adjustments by which
they would keep the system going at a satisfactory level. As we found
in the Spartan school of thought, it is with the 100-percenters or perhaps the 90-percenters that we disagree. Extremists of the Roman
doctrine says that we need not worry about any maladjustments in our
enterprise system. Monopolistic price policies may curtail markets and
cause unemployment. Excessive wage demands may drive costs up and
paralyze profits, investments, and employment. We do not need to
worry because we can always create full employment by pumping
enough purchasing power into the system. If there is too much demand
for labor and materials—that is inflation—we turn the faucet off and
cause a contraction. Thus by manipulation of Government expenditures and taxation, continuing full employment is assured, and we do
not need to worry about anything else in the economy.
It would be very simple indeed if we could rely on fiscal policy as a
panacea. Broadly speaking, the shortcoming of this single-track doctrine of fiscal policy is that it does not face the complexity of our economic
system. It assumes that by pumping money up or down the Government could control the Nation's economic life without regard to what
employers and workers, farmers, and traders were doing in the countless
specific price and wage and profit relationships that make up the body
of their business life.
If certain industries are suffering set-backs, or if economic development in certain regions of the country is lagging, or if consumers are
bidding up prices for scarce goods, a regulation of purchasing power in
general by fiscal measures will not help. W e cannot assume that deficiency of demand in one particular area or of ofie particular character
can be made up just by adding purchasing power in general, for instance,
through tax relief. Nor can we assume that demand for houses or automobiles in excess of supply can be curtailed by an increase in general


Placing too sweeping reliance on the supposed importance and persistence of certain general relationships between consumption, saving, and
investment, this attack ignores both the difference in these relationships
in different parts of the economy and their changes—as technological or
institutional conditions change. Jobs and markets depend on very
specific wage-price-cost relationships. If labor is pricing itself out of
jobs or manufacturers and fanners are pricing themselves out of a market,,
or capital is pricing itself out of investment, the basic remedy is the correction of these specific situations, not the injection of some aggregate purchasing power in a dose measured in size to offset an estimated future
total of unemployment.
The causes of a fall in production and employment at any given time
may be one of a numerous set or combination of conditions. For some
of these the single remedy prescribed is not effective or not the best
remedy. For example, a temporary decline in employment and production may accompany a decline of inflated prices and reduction of
excessive inventories, both of which are necessary to bring prices into
a balance with purchasing power that will be sustained. Use of the
"all-embracing" cure might bolster up prices for a time but retard the
necessary readjustment. Why limit ourselves to a single remedy—
and a crude remedy at that—when we can muster a set of remedies fitted
to the whole range of particular situations? In placing sole reliance on
action external to the markets and the bargaining tables where investment, output, prices, and wages are determined, this doctrine fails to
marshal the abilities of individuals and leaders of groups in the world
of affairs were many of the causes of depression originate, to aid in
maintaining maximum employment, production, and purchasing power
by wise and statesmanlike decisions in their conduct of affairs. Surely
we are not such a soft people that we do not want to participate
vigorously in such a vital matter as this.
We of the Council of Economic Advisers do not believe that the facts
of the situation or the requirements of the process are so simple. W e
believe that the internal relationships of business must be carefully
adjusted by business participants themselves within an institutional
atmosphere made favorable by government but also that government
itself is now and must to a somewhat greater extent in future be an actual
stimulative and guiding element in the economy. Its role is thus complementary to that of private business. It should not, and need not, be
either conflicting or confusing. We pass on, therefore, to state briefly
the outlines of this complementary relationship between mutually
interested partners in a total business relationship.


Although American thought has largely been of the Spartan pattern
of self-reliance, not without some of the brutally wasteful accompani-


ments of laissez faire, and although the softer Roman philosophy of external salvation has been aggressively sponsored in recent years, we believe the great body of American thinking on economic matters runs
toward a more balanced middle view. This view stresses the importance
of having the specific wage-profit-investment-disbursement relationships
soundly adjusted at the points where business is actually done, markets
found, and jobs created. It recognizes, however, that not all economic
functions are or ever have been performed entirely by private enterprise
rather than as government agencies. It is essential, therefore, that those
parts of the national business which we find it necessary or convenient to
initiate through agencies that are organized as public enterprises shall
be as soundly conceived, as flexibly modified in the light of changing
conditions, and as efficiently operated as our knowledge of managerial
principles and economic forces will permit.
This broad concept of national economic life we find to be written
securely into the Employment Act of 1946. The act states clearly at
the very outset that the objectives of maximum employment, production,
and purchasing power are to be pursued in ways "calculated to foster
and promote free competitive enterprise and the general welfare." But,
at the same time, there is a "continuing policy and responsibility of the
Federal Government." This is not an intention to create jobs artificially
or pad the Government pay roll, but "to create and maintain conditions
under which there will be afforded useful employment opportunities,
including self-employment for those able, willing, and seeking to work."
It accepts the well-known fact that Americans by and large are a nation
of businessmen, whether in overalls or white collars, alert to see and skillful to develop opportunities for better income. It assumes also something that is not as yet proved as fully as we might wish. They still have
to demonstrate that, in claiming for themselves the right to embrace these
opportunities, they display an adequate understanding of fundamental
economic forces and of how to work out such mutual wage, price, and
profit relationships as will correlate an efficient system of production
with a fluid and vigorous market. It is an integrated consideration of
private and public functioning in the economic sphere that the act is
designed to promote.
T o achieve such a system of broad-viewed organization of the Nation's
business, with the maximum of individual freedom but the degree of
self- and group-discipline necessary for high efficiency is the challenge
of our democratic system. The war experience gave us a great lesson as
to the productive power we develop when private enterprise is harnessed
to a unified national effort. The Employment Act of 1946 enunciates
sustained peacetime utilization of our productive resources as a no less
important national purpose and proposes a concerted effort to develop
an equally good coordination of effort among all agencies, without the
legal controls which were both endurable and necessary in the face of
our war danger. The Congress in this act did not either exclude


Government nor put exclusive reliance on this single means of attacking
the problem of stabilizing the practically attainable maximum of production or utilization of the Nation's resources. Far from shutting out
other measures or means of approach, the act plainly invites the Council
to pursue its studies and make its recommendations "with the assistance
and cooperation of industry, agriculture, labor, and State and local
governments" and to proceed "in a manner calculated to foster and
promote free competitive enterprise and the general welfare."
In moving toward this realistic, understanding, and efficient organization of private and public business activity a few basic principles seem
evident. For the actual operation of the major forms of business, we
need the intimately informed and flexible decision making of private
individuals in their business relations and of executives of business organizations. But we must recognize also that the practically sound and
individually efficient management of private farming, manufacturing,
transportation, distribution, and banking in the practical situations in
which the active managers must make their decisions will not, year in
and year out, add up to a sustained and satisfactorily stabilized total
utilization of the Nation's resources in producing the national well-being
of which we are in fact capable.
Hence experience and experimentation teach us that there is an important area of Government action in stimulating, facilitating, and complementing the enterprise of private business even if individually well managed. This functional differentiation and cooperation between private
enterprise and public enterprise is in our view something quite different
from and much better suited to our situation and temperament than the
nationalization of industries to which our English cousins have now
resorted. Nor does it involve that regulation of actual business operation
which would constitute bureaucratic "regimentation."
W e believe, therefore, that when the Congress instructed the Council
of Economic Advisers to set up consultative relations "with such representatives of industry, agriculture, labor, and consumers, State and local
governments, and other groups as it deems advisable," this outlines one
of the major features of our work and one of the most important ways
in which we may prove of aid in creating and maintaining conditions of
maximum employment and the high standards of living that go with it.
By consulting with the most thoughtful and responsible leaders of these
groups with reference to conditions which would promote the welfare
of the country as a whole, we believe that our counsel and advice on the
national economic program will reflect a realistic grasp of the needs and
difficulties of the several factors in the total economic process. We trust
also that in the course of these consultations we may reflect back to the
leaders of these groups something of the demands that successful operation of a total system make upon each of its component parts. In
particular, we trust that we may translate objectively to the representa-


tives of the various business, labor, and agricultural groups the purposes
and methodology of the Government programs so that, instead of blind
opposition which might arise through misunderstanding, there may
always be constructive criticism, which will lead to useful adaptation.
As to the methods by which "competitive private enterprise55 in consultation with the Federal Government through its Council of Economic
Advisers and other agencies may systematically perfect a peacetime program of "maximum production, employment, and purchasing power,"
only a few words can be said here. The process itself must stretch
over the future years and draw upon the best thinking of many devoted
citizens. It is clear, however, that in this day of large corporations, large
labor unions, and comprehensive agricultural organizations, cooperatives, and trade associations, private business management cannot safely
accept a cynical philosophy of "riding the cycle55 or of such isolationist
company management and accounting as merely assumes that the strong
shall be in a position to survive even the deepest depression. Their
counsel and their pressure for legislation governing business forms and
practices and also tax and fiscal measures must be geared to a broad and
sincere endeavor to give all who are able, willing, and seeking to work
an opportunity to add their effort to augment the Nation's total product
and, in that proportion, raise their own purchasing power or scale of
living. Only by attaining such general welfare can they in their several
roles as capitalists, as laborers, as farmers, or as managers and technicians
gain their own greatest profit and security.
Besides promoting a more adequate use of our national resources by
private enterprise, several methods of stabilizing the economy lie within
the hands of the Government alone. It must review, as part of a total
program, the legal aids and financial subsidies that it has always given
to particular branches or phases of transportation, manufacture, trade,
and finance, and, more recently, to agriculture and labor. It must
gauge carefully the amount and character of public informational, regulatory, and service work the Government needs to perform as a means of
preventing fraud, discrimination, or waste, and securing maximum
advance in efficiency of operation, particularly among the very small
business units, at a minimum of cost. It must consider carefully how
much of the national income it shall allow to be channeled into military
outlay in view7 of the nature of dangers and the possibility of physical
protection in the light of latest developments. It must decide whether
changes in our traditional use of Government agencies in the fields of
education, health, and conservation would most surely advance our
total production and purchasing power. The timing, volume, and
distribution of its own expenditures must be considered in relation to
those of private business and State and local governments. The Government must weigh the claim made by some citizens and businessmen
that taxation (as such or after the rate has reached some point) is legal-


ized robbery. Or is it being so handled as to be the means by which
Government can redress faults in the distribution of total product and
the adjustment of these shares to individual or group contributions,
faults which tend to keep production below its possible maximum?
The agents of government must diligently study and vigorously use
a democratic and statesmanlike control of the public purse to put a
brake at certain strategic points where boom forces develop dangerous
trends, and to stimulate employment and production and support purchasing power when and where it becomes unduly depressed. Here
Government must constantly face the same dilemma that every doctor—
and every parent—faces. Calm judgment must be exercised not to
rush in fussily, ministering to small and temporary disturbances that
would right themselves sooner and better if left to themselves. On the
other hand, carelessness or ignorance must not keep Government from
detecting serious symptoms promptly and initiating corrective measures
with skill and decisiveness.
With this broad principle in mind, a few observations may be made
as to the actual situation by which the Nation's business is confronted as
the President and the Congress undertake to put into operation the
policy enunciated in the Employment Act of 1946.

III. Some Aspects of the Outlook
for Production and Jobs
| ^HIS first report of the Council of Economic Advisers appears at a
time which is highly ambiguous in the economic affairs of the
J L Nation. W e were not devastated by the war, but emerge with
a plant, labor force, and technology whose productive capacities exceed
anything known in our past. Likewise, we have funds more than adequate to full use of our physical resources. We have a postponed consumer demand, enterpriser ambitions, and purchasing power which hold
the potential of some years of great activity along lines essentially similar
to past periods of prosperity. This much could be accomplished without
any material change in traditional patterns of business life. These conditions present the possibility, for a people who know how to use them,
of great prosperity in 1947. By foresight and intelligence we believe
such prosperity for the Nation could be approximately stabilized and
broadly disseminated so long as world peace can be preserved.
On the other hand, even with these favorable conditions, it is easy to
visualize such a mishandling of our economic affairs as might make 1947
a year of curtailed production, irregular employment, and unsatisfactory



purchasing power. The year and a half since the end of active fighting
have been marked by anything but smooth transition to peaceful and
economically efficient conditions of business—including the relationship
of private enterprises to the agencies of government. We stand at the
moment in a situation of misunderstanding and tension among the indispensable parties to our total economic life that causes many persons to
forecast a business recession starting some time in 1947. We do not
find many accredited business officials or professional economists who
are really apprehensive that a recession once started will induce a downward spiral into deep or prolonged depression, although a chain reaction
in the economic area is always conceivable. The basic economic conditions show such a strong recuperative power as to minimize such a fear—
barring international tension verging on war or a persistent round of
What has been said in the preceding section of this report about
mutual adjustment of wage, price, cost, and profit relations by the
voluntary bargaining of the parties at interest shows clearly that we
believe that the outlook for production and jobs in 1947 lies primarily
in whether the responsible persons in these groups will show a willingness
to face the issues and demands of a free enterprise system realistically
and show intelligence and skill or flexible experimentation in arriving at
workable formulas of adjustment. Something can no doubt be done
during the coming year toward improving the institutions under which
such negotiation is carried on and the terms of adjustment carried out.
But legislative changes in our business institutions will be a minor determinant of what actually happens in 1947. The major determinant will
be found in the statesmanship or the obstinacy of the men, particularly
the leaders, who are the active parties in business operation.
Mere legislative acts alone will not force capitalists to invest, employers
to hire, or laborers to work. What was said in the previous section
also indicates that we do not believe that 1947 presents a situation in
which government should undertake heroic measures of public works,
consumer or producer subsidies to quicken employment or stimulate production. We suggest that the impediments to prosperity in the
near future are of the sort that must be worked out, without benefit of
direct Government intervention, through the practical wisdom of
management and labor, farmers, and financiers.
In a sense, of course the Government is, in spite of itself, forced to be
a contributing factor in the maladjustments of the present time. It becomes an indirect influence in the labor situation, in fact bidding against
employers by the extent of the aid it gives GI's to go back to school rather
than into the labor market. Through veteran hospitals and other
services and through whatever construction work is undertaken in lines
deferred by Government agencies during the war it is bidding for both
labor and materials which are already short as compared with the


demands of private construction. No one would for a moment suggest
that the Government should not do these things wherever service people
are concerned. And we are anxious also to make these outlays when
they furnish protection, provide civilian health aids, and make better
provision for the education of the oncoming generation. But we cannot
ignore the conflicting factor they inject into the general economic picture.
Government has in fact withdrawn from such activities or pared them
down during 1946 to such an extent as seemed practicable, both in the
interest of keeping from contributing to inflationary pressures and of getting more for each dollar spent at a later time. This deferment means
that these public works added to the backlog can be made available at
some subsequent time when private demand slackens.
While the prospect for high employment and production in the near
term is good—barring the possibility of a brief dip—it is pretty generally
recognized that the bases of this activity are somewhat artificial or at
least that activity in the present lines cannot be expected to continue
indefinitely. Thus the plans of private business and the thinking of the
Government cannot too soon be directed toward appraising the probable
duration of present sources of activity and toward foreseeing what may
be done to utilize the Nation's resources after present stimuli have been
removed or weakened.
The outstanding factor in the present situation is that we are working
under a strong domestic urge and foreign demand to catch up on durable (producer and consumer) goods, whose production had to be postponed during the war at the same time that, because of high income and
war savings, the majority of the population are eager and able to maintain a higher than prewar level of consumption also of nondurables.
Added to these two more-than-ordinary supports of employment and
productive enterprise is a third—the need to reconvert plant, reequip
it for these particular types of production, and expand these industries to
meet the accelerated rate demanded by this race to catch up after the
war's interruptions. Everybody without a house or a car wants one
this year. The success of '47 and '48 is gauged by our ability to make
and sell 6,000,000 cars, 1,500,000 housing units, and similar numbers
of electric refrigerators, washing machines, and other accessories in each
of these years. But the closer we come to this standard of performance
in the immediate future, the more pressing becomes the problem of
sustaining employment, production, and purchasing power in the years
that follow. Automobiles, as we have learned under war conditions,
have a normal life expectancy of 8 to 10 years and houses last anywhere
from 25 years to generations or even centuries. Hence, the very industries which feature the prosperity of the moment could, if nothing is done,
be expected to drop to a replacement basis after a few years.
This might spell deep depression for some later time—but only if we
fail to make the gradual shift in expenditures and resource use that wise


foreseeing and astute planning for this inevitable trend of development
suggests to a sagacious people. For it would be absurd to say that there
are not things to do with these resources after the present making up of
war deprivations has been completed. W e must recognize the real
magnitude of our productive power and keep it going to produce for all
the things that only the more favored have enjoyed in the past. As
progress is made in catching up on the wartime postponables, we must
feed into our "product mix" more of those semi-luxuries, those welfare
and culture goods, which are put within the reach of our people as a
whole by reason of our unparalleled productive capacity. This, as we
have said before, will combat depression and even up the years of traditional recession by allowing those able, willing, and seeking to work to go
on supplying themselves rather than being every few years forced to
loaf amid want.
In a word, then, our view as to the outlook for production and jobs
is that it should be more than ordinarily favorable for a period of some
years ahead. In spite of certain conditions that might make for a dip in
1947, we believe that courageous and sensible action by those responsible for the administration of private business relations (including labor
unions) can at least hold such a recession to moderate proportions if
not avert it. Thereafter, it would seem that broad basic conditions suggest that it v/ill be easy to have some years of high production, employment, and purchasing power without the display of any extraordinary
economic statesmanship by leaders of industry, labor, farming, and
finance. In those years, however, we should not be satisfied with a level
of production and conditions of use which fail to produce favorable
results for all sections of the country and all segments of the population.
In those years, also, if foresight is not keen and action vigorous, the
stage will be set for serious unemployment, underproduction, and want
in the years that follow. It is our belief, however, that enough time
is afforded in which wise policy and action on the part of labor, of
management, of agriculture, and of finance, with a very carefully
considered complementary role by Government, will not only raise the
national prosperity to new high levels but will maintain those levels
with a degree of stability which has not characterized the earlier exploratory arid speculative decades of our industrial life. It is toward such a
system of continuous study and collaborative guidance of the Nation's
business on a basis of competitive private enterprise and economic
democracy that the Employment Act of 1946 is directed. T o its
achievement the Council of Economic Advisers dedicates its best efforts.


[PUBLIC L A W 3 0 4 — 7 9 T H


[ C H A P T E R 3 3 — 2 D SESSION]
[S. 380]
T o declare a national policy on employment, production, and purchasing power, and
for other purposes.

Be it enacted by the Senate and House of Representatives
United States of America in Congress assembled,

of the


This Act may be cited as the "Employment Act of



SEC. 2. The Congress hereby declares that it is the continuing policy
and responsibility of the Federal Government to use all practicable
means consistent 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 promote maximum employment, production, and
purchasing power.



SEC, 3, (a) The President shall transmit to the Congress* w^Mft
sixty dftye after at the beginning of each regular session (commencing
with the year 1947) an economic report (hereinafter called the "Economic Report") setting forth (1) the levels of employment, production, and purchasing power obtaining in the United States and such
levels needed to carry out the policy declared in section 2; ( 2 ) current and foreseeable trends in the levels of employment, production,
and purchasing power; (3) a review of the economic program of the
Federal Government and a review of economic conditions affecting
employment in the United States or any considerable portion thereof
during the preceding year and of their effect upon employment, production, and purchasing power; and ( 4 ) a program for carrying out
the policy declared in section 2, together with such recommendations
for legislation as he may deem necessary or desirable.
( b ) The President may transmit from time to time to the Congress
reports supplementary to the Economic Report, each of which shall
include such supplementary or revised recommendations as he may
deem necessary or desirable to achieve the policy declared in section 2.
( c ) The Economic Report, and all supplementary reports transmitted under subsection ( b ) , shall, when transmitted to Congress, be
referred to the joint committee created by section 5.

SEC. 4. (a) There is hereby created in the Executive Office of the
President a Council of Economic Advisers (hereinafter called the
"Council"). The Council shall be composed of three members who
shall be appointed by the President, by and with the advice and consent
of the Senate, and each of whom shall be a person who, as a result of
his training, experience, and attainments, is exceptionally qualified to
analyze and interpret economic developments, to appraise programs
and activities of the Government in the light of the policy declared in
section 2, and to formulate and recommend national economic policy
to promote employment, production, and purchasing power under free
competitive enterprise. Each member of the Council shall receive compensation at the rate of $15,000 per annum. The President shall designate one of the members of the Council as chairman and one as vice
chairman, who shall act as chairman in the absence of the chairman.
( b ) The Council is authorized to employ, and fix the compensation
of, such specialists and other experts as may be necessary for the carrying
out of its functions under this Act, without regard to the civil-service
laws and the Classification Act of 1923, as amended, and is authorized,
*"at the beginning of each regular session" as amended by Legislative Reorganization Act of 1946, Public Law 601, sec. 226, 79th Gong., 2d sess.


subject to the civil-service laws, to employ such other officers and employees as may be necessary for carrying out its functions under this Act,
and fix their compensation in accordance with the Classification Act of
1923, as amended.
( c ) It shall be the duty and function of the Council—
( 1 ) to assist and advise the President in the preparation of the
Economic Report;
( 2 ) to gather timely and authoritative information concerning
economic developments and economic trends, both current and
prospective, to analyze and interpret such information in the light
of the policy declared in section 2 for the purpose of determining
whether such developments and trends are interfering, or are
likely to interfere, with the achievement of such policy, and to
compile and submit to the President studies relating to such
developments and trends;
( 3 ) to appraise the various programs and activities of the
Federal Government in the light of the policy declared in section 2 for the purpose of determining the extent to which such
programs and activities are contributing, and the extent to which
they are not contributing, to the achievement of such policy, and
to make recommendations to the President with respect thereto;
( 4 ) to develop and recommend to the President national economic. policies to foster and promote free competitive enterprise,
to avoid economic fluctuations or to diminish the effects thereof,
and to maintain employment, production, and purchasing power;
( 5 ) to make and furnish such studies, reports thereon, and
recommendations with respect to matters of Federal economic
policy and legislation as the President may request.
( d ) The Council shall make an annual report to the President in
December of each year.
(e) In exercising its powers, functions and duties under this Act—
( 1 ) the Council may constitute such advisory committees and
may consult with such representatives of industry, agriculture,
labor, consumers, State and local governments, and other groups,
as it deems advisable;
( 2 ) the Council shall, to the fullest extent possible, utilize the
services, facilities, and information (including statistical information ) of other Government agencies as well as of private
research agencies, in order that duplication of effort and expense
may be avoided.
( f ) T o enable the Council to exercise its powers, functions, and
duties under this Act, there are authorized to be appropriated (except
for the salaries of the members and the salaries of officers and employees
of the Council) such sums as may be necessary: For the salaries of
the members and the salaries of officers and employees of the Council,


there is authorized to be appropriated not exceeding $345,000 in the
aggregate for each fiscal year.

SEC. 5. (a) There is hereby established a Joint Committee on the
Economic Report, to be composed of seven Members of the Senate,
to be appointed by the President of the Senate, and seven Members
of the House of Representatives, to be appointed by the Speaker of
the House of Representatives. The party representation on the joint
committee shall as nearly as may be feasible reflect the relative membership of the majority and minority parties in the Senate and House of
( b ) It shall be the function of the joint committee—
(1) to make a continuing study of matters relating to the
Economic Report;
(2) to study means of coordinating programs in order to
further the policy of this Act; and
( 3 ) as a guide to the several committees of the Congress dealing with legislation relating to the Economic Report, not later
than* May i February 1 of each year (beginning with the year
1947) to file a report with the Senate and the House of Representatives containing its findings and recommendations with respect to
each of the main recommendations made by the President in the
Economic Report, and from time to time to make such other
reports and recommendations to the Senate and House of Representatives as it deems advisable.
(c) Vacancies in the membership of the joint committee shall not
affect the power of the remaining members to execute the functions of
the joint committee, and shall be filled in the same manner as in the
case of the original selection. The joint committee shall select a chairman and a vice chairman from among its members.
( d ) The joint committee, or any duly authorized subcommittee
thereof, is authorized to hold such hearings as it deems advisable, and,
within the limitations of its appropriations, the joint committee is
empowered to appoint and fix the compensation of such experts, consultants, technicians, and clerical and stenographic assistants, to procure such printing and binding, and to make such expenditures, as it
deems necessary and advisable. The cost of stenographic services to
report hearings of the joint committee, or any subcommittee thereof,
shall not exceed 25 cents per hundred words. The joint committee is
authorized to utilize the services, information, and facilities of the
departments and establishments of the Government, and also of
private research agencies.
*"February 1" as amended by Legislative Reorganization Act of 1946, Public Law
601, sec. 225, 79th Cong., 2d sess.


(e) There is hereby authorized to be appropriated for each fiscal
year, the sum of $50,000, or so much thereof as may be necessary, to
carry out the provisions of this section, to be disbursed by the Secretary
of the Senate on vouchers signed by the chairman or vice chairman.
Approved February 20, 1946.


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