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86TH CONGRESS

2d Sesaion

SENATE

| REPORT

No. 1152

1960
JOINT ECONOMIC REPORT

REPORT
OF THE

JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ON THE

JANUARY 1960 ECONOMIC REPORT
OF THE PRESIDENT
WITH

MINORITY AND OTHER VIEWS

FEBRUARY 29 (legislative day, FEBRUARY 15), 1960.-

Ordered to be printed
UNITED STATES
GOVERNMENT PRINTING OFFICE

WASHINGTON: 1960

For sale by the Superintendent of Documents. U.S. Government Printing Office
Wasblngton 25, D.C.. PrMe 80 cents

JOINT ECONOMIC COMMITTEE
(Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.)
PAUL H. DOUGLAS, Illinois, Chairman
WRIGHT PATMAN, Texas, lrice Chairman
SENATE
HOUSE OF REPRESENTATIVES
JOHN SPARKMAN, Alabama
RICHARD BOLLING, Missouri
J. WILLIAM FULBRIGHT, Arkansas
HALE BOGGS, Louisiana
JOSEPH C. O'MABONEY, Wyoming
HENRY S. REUSS, Wisconsin
JOHN F. KENNEDY, Massachusetts
FRANK M. COFFIN, Maine
PRESCOTT BUSH, Connecticut
THOMAS B. CURTIS, Missouri
JOHN MARSHALL BUTLER, Maryland
CLARENCE E. KILBURN, New York
JACOB K. JAVITS, New York
WILLIAM B. WIDNALL, New Jersey
JouN W. LsncMAN, Clerk and Acting EZecutive Director
n

CONTENTS
Page

Introduction
The President's budget and Economic ReportSummary of needed programs for growth, maximum employment, and
stable prices ------------------------The President's budget and Economic Report and the Nation's needsEconomic outlook for 1960General outlook
Employment and outputPrice stabilityPolicies to achieve the Employment Act objectives in 1960Fiscal policy: The 1961 budget1. Reordering priorities -10
2. Tax reform -13
3. Gains from fiscal reforms -14
Monetary policy and debt management--Needed reforms in Treasury, debt management, and monetary policy
Market structure -17
Note by Senator J. W. Fulbright -20
Committee and subcommittee activities in the past year -21
President's 1959 Economic Report -21
Study of Employment, Growth, and Price Levels -21
Subcommittee on Economic Statistics -22
Subcommittee on Automation and Energy Resources -22
Subcommittee on Defense Procurement -22
Staff participation in meetings with outside groups -23
Committee publications -23
Committee and subcommittee plans for the coming year -25
Full committee -------------------------------The relationship between monetary and fiscal policy actions in
the postwar period and the objectives of the Employment Act
Tabulation and summary of questionnaires submitted by 17
security dealers -25
Study of governmental subsidies -25
Economic implications of alternative agricultural policies -26
Subcommittee on Economic Statistics -27
Review of Economic Indicators and preparation of 1960 edition
of Supplement to Economic Indicators -27
Subcommittee on Automation and Energy Resources -27
Bringing previous hearings on automation up to date-27
Further study of energy resources -28
Subcommittee on Defense Procurement -28
Study of the impact of defense procurement -28
Supplemental views of Representative Wright Patman -29
Supplemental views of Senator Joseph C. O'Mahonev -37
Minority views --------------------Additional views of Senator Prescott Bush -53
Additional views of Senator John Marshall Butler -55
Additional views of Senator Jacob K. Javits -83
Publications of the Joint Economic Committee-January 1947-February
1960 -89-------------------------Study of Employment, Growth, and Price Levels publications
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86TH CONGRESS

SENATE

j

REPORT

No. 1152

2d Session

JOINT ECONOMIC COMMITTEE REPORT ON THE
JANUARY 1960 ECONOMIC REPORT OF THE PRESIDENT

FEBRUARY 29 (legislative day, FEBRUARY 15), 1960.-Ordered to be printed

Mr. DOUGLAS, from the Joint Economic Committee, submitted the
following

REPORT
together with
MINORITY AND OTHER VIEWS
[Pursuant to sec. 5(a) of Public Law, 304, 79th Cong.]
INTRODUCTION

This committee believes that the existing and potential skills of the
American people and the Nation's natural resources, productive facilities, and technological development can provide both for the military
defense which is necessary to national security and for the growing
needs of the economy. The needs for growth in the private sector
of the economy and the public responsibility for defense, schools,
health, resource development, slum clearance, and other public services can be met.
They can be met within the existing framework of our free political
and economic system and call for no fundamental changes in our
system. They do call, however, for greater effort and dedication to
these goals if they are to be achieved.
We believe that the economy can grow at a faster rate than in the
past, that relatively full employment can be brought about and maintained, and that this can be done with a stable price level. These
ends cannot be met without effort. We must follow correct policies
and be willing to do the right things to gain them.
The committee's extensive studies of employment, growth, and
price levels, which were recently completed, indicate in specific terms
where public and private efforts have fallen short, what our potential
is, and the things that need to be done to close the gap between our
performance and the economy's potential. It is not our purpose here
to repeat the specific details of the studies. An important conclusion
1

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19 6 0 JOINT ECONOIC REPORT

of those studies is: With the necessary will and resolution this Nation
need not fear either for its military security or for its economic wellbeing due to any fundamental deficiency in its present or potential
productive capacity.
It is not a question of whether these things can be done. It is a
question of whether we will organize our people, resources, and institutions to do them.
THE PRESIDENT'S BUDGET AND ECONOMIC REPORT

The programs outlined in the President's budget and Economic
Report will not achieve the objectives of the Employment Act in 1960.
Moreover, they do not call for the actions which, as a result of its
studies, this committee believes are necessary to raise the rate of economic growth while achieving a high and steady rate of employment
and a stable price level. The public responsibilities for schools, slum
clearance, resource development, the elimination of depressed areas,
and other functions which are among the major keys to economic
growth are either starved for funds or their programs are limited in
scope.
Furthermore, while this committee cannot pass on whether the specific parts of the defense budget are adequate for our military needs,
there is a considerable body of expert and nonpartisan opinion which
believes that much more must be done in the fields of missiles, space,
and combat strength if we are not to jeopardize our security and our
defense. If more needs to be done, we are confident that it can be
done without endangering our economy, if the proper policies are
followed.
SUMMARY OF NEEDED PROGRAMS FOR GROWTH, MAXIMUM EMPLOYMENT,
AND STABLE PRICES

The conclusions arrived at as a result of the committee's recent
investigation of the economy were:
(1) The slow rate of growth in the economy in the recent past has
been caused in large part by public policies which created instability
in the economy and brought too frequent recessions.
To meet this problem there must be both fiscal and monetary
reforms. The Government must act more quickly and more promptly
to offset declines, especially through tax policy. The automatic fiscal
stabilizers must be improved, especially unemployment compensation.
(2) In the interests of a higher rate of economic growth, we must
place greater reliance on fiscal policy. This includes larger budget
surpluses in prosperous periods than we have had, a tax structure
which is both more equitable and which will promote a faster degree
of growth, and a reordering of the priorities in Federal expenditure
programs to promote those programs which stimulate growth and to
cut back or eliminate those programs or subsidies which support
inefficiency in the economy.
(3) We need a less restrictive monetary policy within the framework of a more effective fiscal policy. Specifically, the money supply
should grow in line with the growth in output. Interest rates could
then be lower and would support a more adequate rate of growth and
investment without inflation. With a more effective fiscal policy,

1960 JOINT ECONOMIC REPORT

3

monetary policy would be more effective in stabilizing the economy
than it has been in recent periods.
In recent times the administration has relied heavily upon the
monetary authorities to carry out stabilization policy which should
properly be the concern not only of the monetary authorities but of
the Government as a whole. In turn, the monetary authorities have
limited their actions almost exclusively to only one aspect of the
problem, i.e., stabilizing the price levels, while they have largely
ignored the problems of economic growth and excessive unemployment.
(4) The problem of market power must be attacked. This is the
ability of some to set prices without relationship to the demand for
their goods or services because of their monopoly or semimonopoly
position. Various private and Government devices which protect
the ability of these groups to exercise market power should be reduced
or eliminated. Basically, there must be a more effective antitrust
policy. In addition, tariffs should continue to be lowered in order to
provide more competition; the continued lowering of tariffs should be
accompanied by vigorous bargaining on specific items to achieve in
greater degree the objective of reciprocity. This would improve the
structure of the economy.
(5) Both private and Government groups must emphasize growth
producing policies and programs. This means especially improving
the skills and education of our people through Federal aid to education without Federal control; the creation of greater economic opportunity for all of our people, especially the unskilled, women, the
aged, and minority groups whose talents are not now used to the full
and whose potential abilities and productivity are wasted; improving
the health of our people through both private and public programs;
placing major emphasis on research, including basic research; and
better programs of unemployment compensation, retraining, and the
reduction of frictional and technological unemployment through
appropriate means.
THE PRESIDENT'S BUDGET AND ECONOMIC REPORT AND THE NATION'S
NEEDS

We do not see in the budget for fiscal 1961 and the President's
Economic Report for 1960 any fundamental changes in the directions
which we think are necessary. By and large they are a status quo
budget and report. Comprehensive programs to promote improvements in the skills of our people-sc hools, health, and retrainingare not adequately emphasized.
The Economic Report does not recognize the basic changes which
must be made in our antitrust program if the sources of market power
are to be dealt with. We say this even though the specific recommendations for the antitrust program are good in general.
Monetary policy for the current and coming years is not discussed
in any constructive way.
There is no reordering of the priorities in this budget over past
ones, either for new programs which are needed or for old programs
which are wasteful.
The major tax loopholes are not mentioned and there are no recommendations concerning them, although some relatively minor changes
are proposed.

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1960 JOINT ECONOMIC REPORT

The public policies required for economic stability in 1960 are not
adequately dealt with.
The Economic Report does contain a large number of proposals
which, while appropriate subjects for consideration by the legislative
committees of the Congress, are not of sufficient importance in the
context of the broad purposes of the Employment Act to warrant
filling the pages of the Economic Report year in and year out with
their detailed enumeration.
The President's Economic Report endorses in general terms programs such as school aid or aid to depressed areas which are important for the Nation's long-run growth. But the specific legislation proposed by the President to carry out these objectives would build
almost no schools or give little aid to those who need it. Each problem is broken down into a series of minute recommendations which
give the appearance of support and action but which when added
together provide no effective program.

EcONOMIC OUTLOOK FOR 1960
GENERAL OUTLOOK

As in the past several years, the President's Economic Report avoids
any clear-cut statements in quantitative terms of the levels of employment, production, and of prices in general which are likely to
prevail in 1960. In the budget message, however, the President
explicitly assumes a gross national product of $510 billion for calendar
1960. Corporate profits of $51 billion and personal income of $402
billion in 1960 were estimated by the Secretary of the Treasury in
his press conference when the budget was released. These estimates
are in terms of the level of prices which prevailed in the middle of the
last quarter of 1959 and assume little, if any, general price increases
beyond those already realized by the end of 1959.
On the basis of the information provided in the budget and in the
Secretary of the Treasury's press conference, and by the expert
witnesses appearing before the committee during its hearings on the
President's report, the highlights of the economic outlook areA. The gross national product in current prices is likely to be
at least equal to the $510 billion which is estimated by the President in the budget and may be slightly higher.
B. Corporate profits of $51 billionmand personal income of
$402 billion, as estimated by the Secretary of the Treasury, are
in line with this estimate of the gross national product.
C. Price increases, as measured by the implicit deflators for
the gross national product, will be limited and will probably
account for not more than roughly 1 percent of the increase in
gross national product from 1959 to 1960.
D. An expected $510 billion gross national product for 1960
would be $20 billion to $30 billion below the economy's potential
output, based upon a 4 percent rate of unemployment.
E. A gross national product less than the economy's potential
implies either that1. the increase in the labor force will be less than usual,
or hours of work may be shorter, or
2. productivity increases will be less than those which
might be achieved if the economy were operating at a higher
level, or
3. unemployment will average close to 5 percent for the
year 1960 as a whole and might average as much as 452
percent or more, seasonally adjusted, even during the fourth
quarter of 1960.
F. Since the economy at the beginning of 1960 was so far from
full employment, achieving the potential output for the year 1960
as a whole would require a more rapid increase in production and
employment than would be consistent with stability in the
general level of prices. Nevertheless, it is possible to accelerate
the expansion of economic activity, without inflationary conse5

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1960

JOINT ECONOMIC REPORT

quences, in order to approach maximum employment and output
more nearly by the end of the year.
EMPLOYMENT AND OUTPUT

The outstanding fact which emerges from this analysis of the
Nation's economic prospects in 1960 is that unemployment is generally
expected to continue at a high rate compared to prosperous years in
the past.
Unemployment has averaged 4.9 percent or more of the labor force
in each month since November 1957. For 1958 as a whole, unemployment averaged 6.8 percent. In 1959, a year characterized by the
President as one of rapid economic advance, unemployment averaged
5.5 percent. This is virtually the same unemployment rate as that
experienced during the recession year 1954 when unemployment
averaged 5.6 percent. It appears, therefore, that under the policies
now being pursued, the rate of unemployment is higher both in good
periods and in recession periods than it had been previously in comparable postwar years.
To the extent that the programs proposed by the President are
consistent with the estimate of a $510 billion gross national product
for the year, they will not meet the objective of providing the conditions in which full recovery in employment and output can be
attained.
The persistent failure to achieve maximum employment and production deprives the private sectors of the economy of a major impetus
for investment in expanding and improving our production facilities.
Moreover, by failing to use the labor force and production facilities
as fully as is possible without promoting inflationary price developments, the Nation will be sacrificing output which could contribute in
important ways to discharging the public responsibilities we face.
When unemployment is as high as it has been for a period of 27
months and when production facilities are used at rates which are
significantly below their maximum efficiency, there is simply no merit
in the contention that we cannot afford the programs needed to make
the United States militarily supreme and to provide the education,
research and development activities, improvements in health standards, elimination of poverty and low productivity in depressed areas,
elimination of city blight, and the many other advances upon which
rising living standards in the United States depend.
PRICE STABILITY

Another important conclusion which emerges from a review of the
economic outlook for 1960 is that the stability in the general level of
prices which prevailed during 1958 and in 1959 will continue in 1960.
All of us welcome this prospect of a continuation of a stable price
level. We must, however, be concerned about the undue emphasis
on fighting inflation which continues to dominate the administration's
policies and those of the monetary authorities.
We do not suggest that public policy should disregard the possibility that inflationary pressures will arise. But the primary emphasis
in public policy at this time should be on promptly achieving the full
use of. the labor force and of our production facilities and on laying

1960 JOINT ECONOMIC REPORT

7

the basis for a higher rate of economic growth over the long run.
This emphasis is not found in the policies of the administration and
of the Federal Reserve, who appear to be focusing primarily on the
fight against inflation despite the fact that the price level has been
remarkably stable for many months past. The Wholesale Price
Index, for example, in December 1959 was at exactly the same level
as in January 1958; in the same 2 years, the Consumer Price Index
increased by only 1.3 percent annually. Either the built-in upward
bias of the index, because of its failure to account for improvements
in quality, or the normal statistical margin of error, could account for
this modest increase.
The administration's fight on inflation resumed in November of
1958 after a year of stable prices and continued during a period of
stable prices. The result is an unemployment rate higher than it
need have been or should have been under the terms of the Employment Act.
This stability in the price level and the absence of any noticeable
inflationary thrust in the economy today has been noted repeatedly.
The prospect for continuing price level stability was affirmed by the
consensus of the expert witnesses testifying before the committee
during its hearings on the President's Economic Report.

POLICIES To ACHIEVE THE EMPLOYMENT ACT OBJECTIVES IN 1960

If the demands which arise from our defense needs and other public
responsibilities to promote progress in the American economy are to
be met adequately, more vigorous programs than those set forth by
the President will be required in 1960. Important changes are needed
in the areas of fiscal policy, monetary policy and debt management,
and the policies affecting the structure of the American economy.
In summary, to achieve our shortrun stabilization objectives of
maximum employment and production, and stability in the general
price level, we need Federal policies which will encourage a somewhat
more rapid expansion of total demand than now seems likely. In the
interest of promoting economic growth, easier monetary and credit
conditions are needed than those that appear to be in prospect at
this time. In addition, we should begin now to make major advances
in increasing the productivity and improving the mobility of thelabor
force and in improving the structure of the economy.
FISCAL POLICY: THE 1961 BUDGET

The President's budget for fiscal 1961 envisages a surplus of $4.2
billion, based in part on a $554 million increase in postal revenues
from increasing, in the main, first-class postal rates. The surplus also
assumes that outlays for agriculture under the present programs will be
$5.6 billion, about $500 million more than is currently estimated for
fiscal 1960, but $900 million less than in fiscal 1959. (It is also proposed to increase the excise on gasoline by Mcent and to put back into
the general fund certain excise receipts diverted to the highway trust
fund. These actions would not affect the conventional budget results
for fiscal 1961.) If a more realistic estimate of the cost of the present
farm program is used and if the proposed postal rate increase does not
pass, the surplus at the estimated levels of income will amount to
about $3 billion instead of $4.2 billion.
The $4.2 billion surplus which the President gave as his estimate
would result from an automatic $5.4 billion increase in revenues
accompanying the rising levels of income, while he expected that
Federal expenditures would be about $1.4 billion above those for the
present fiscal year. The revenue estimates are based on an extension
of the present corporation income tax and excise tax rates. We recommend that these rate extensions be enacted, though possibly with
some revisions.
The proposed surplus, when translated into terms of Federal
Government payments to and receipts from the public, amounts to a
little more than $2 billion in calendar 1960, or about one-half of 1
percent of expected gross national product. For fiscal 1961, the
estimated cash surplus is $5.9 billion, slightly more than 1 percent of
the likely gross national product for the fiscal year. These are low
ratios of surplus to the gross national product by postwar standards.
. 9

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1960 JOINT ECONOMIC

REPORT

Since the levels of income upon which these budget estimates are
based are less than full employment levels, it is perhaps just as well,
assuming the President's programs were to be accepted, that no larger
surplus be achieved, uniess there were assurance that materially
easier monetary and credit conditions would be provided by action of
the Federal Reserve System.
We could, however, more fully discharge the responsibilities facing
the Federal Government, and at the same time realize a larger budget
surplus which would facilitate the easing of credit conditions, by (1)
reordering the priorities in the Federal expenditure programs, and
(2) undertaking urgent reforms in the Federal revenue system.
1. Reordering priorities
In general, Federal expenditure programs should be revised to place
greater emphasis on providing a more effective national defense and
on programs which will make important contributions, over the long
run, to the Nation's economic growth.
(a) Defense.-Military expenditures by the Department of Defense
in fiscal 1961 are estimated in the budget at $42,745 million, the same
as in fiscal 1960. This amount is $828 million less than the actual
expenditures in fiscal 1959. Moreover, the proposed fiscal 1961
outlays for military hard goods show a reduction in every major
category-aircraft, missiles, and ships.
We recognize that the mere dollar volume of purchases for the
military does not necessarily measure the adequacy of our defense
effort. The costs of military hardware, however, are rising, not
falling. A reduction in total purchases for these hardware items,
therefore, necessarily means that a smaller addition to our arsenal will
be made in the current fiscal year than in past years. There is no
objective evidence that the Soviets are reducing the rate of their
miitary buildup. Cutbacks in the real volume of our outlays, while
the Soviets continue to increase the volume of theirs, requires a more
convincing explanation than has yet been offered to assure the American public that the proposed defense program for fiscal 1961 is not to
be unnecessarily limited on the basis of budget-balancing
considerations.
The joint committee has observed repeatedly in the past, and we
repeat the assertion again, that decisions about the volume and character of defense procurement should be made on the basis of judgments
about the Nation's long-term military needs. They should be separated from short-run budgetary considerations.
A greater volume of outlays for major procurement programs of
the Defense Department and for an increase in combat strength and
efficiency does not necessarily require at this time any significant
increase in the overall defense budget. The recent hearings by this
committee's Subcommittee on Defense Procurement brought out the
fact that very substantial savings-as much as $2 billion to $3 billioncan be realized by eliminating the current wasteful procurement practices and by more effective control'over surplus stocks and stockpiles
of obsolete material. This conclusion is confirmed by the findings of
the Hoover Commission.'
I Senator O'Mahoney wishes to emphasize this point:
Military hard goods expenditures, particularly for new items, have a highly expansionary impact on the
economy. Much of this impact is likely to be concentrated
in
those sectors of the economy in which increased demands will result promptly in rising prices which will in turn raise costs
and
push prices up elsewhere in the economy. For this reason, it is essential that the utmost care be taken to prevent waste in
our military assistance programs abroad and the type of waste in defense procurement practices as revealed
in our recent
hearings.

1960 JOINT ECONOMIC REPORT

I I

These savings could be applied to the missile and space programs,
and for combat troops, and would be a major step toward improving
our defense position relative to that of the Soviet Union. If on the
basis of expert and dispassionate evidence it is determined that further
efforts are required we should not be deterred from undertaking them
by considerations of budgetary prospects.
A responsible budget policy proceeds first from the determination of
needs. If, despite savings from better procurement procedures, needs
exceed the budget totals which are estimated by the President, we arc
certain that the American people will respond unhesitatingly and
ungrudgingly to provide the additional revenues required in the
interest of military security.
(b) Foreignaid.-Since the end of World War II, the United States
has assumed the major burden of the leadership in the free world for
aiding nations in their recovery from the war, in building up their
defense capabilities against future aggression, and in providing for
economic progress in less developed nations. The discharge of these
functions continues to be a major responsibility which faces the
United States. However, economic progress of our NATO partners
should be given careful consideration in reviewing our foreign-aid
program.
With respect to defense, the NATO countries, particularly those
whose balance-of-payments situations have shown significant improvement, should be called upon to assume a larger portion of the
burden for their own and for the NATO defense effort. While the
United States will and should continue to remain the mainstay of
the NATO defense program, our contribution should be reexamined
and adjusted in the light of the expanding resources and capabilities
of our NATO partners. The patterns set in 1951, when manv of our
European allies suffered from serious balance-of-payments problems,
are no longer appropriate in 1960. It is proper that they devote more
funds to their own defense.
The second major aspect of our foreign-aid program is to assist the
economic progress of the less developed nations. The efforts of the
United States in this respect should be maintained. Additional efforts by our allies are now possible and we believe that they should
make a greater effort. Nevertheless, the demands for real resources
in the world's underdeveloped areas are so great and the returns are
so promising in terms of improvement in the living conditions and in
the political and economic stability and freedom in these areas that
we should not consider reducing our own economic contributions for
these purposes even if those of our friends in other parts of the world
increase.
(c) Education.-Despite the recognition of the fact that the Nation's economic growth over the long run depends upon improving
our education achievements, the President offers an inadequate program to assure that progress toward this goal can be made. The
committee's study of employment, growth, and price levels brought
out very clearly that the rising standards of education in the past
have made a major contribution to the Nation's economic progress.
At the present, it is clear that a rapid pace of technological advance
will demand a more highly educated and skilled labor force.
A vigorous program of Federal aid to education should be adopted
during the current session of this Congress. This program should

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219 6 0 JOINT ECONOMIC REPORT

include no Federal control over the content of what is taught, the
salaries or promotion of teachers, tenure, discipline, or any other feature of educational programs which historically have been controlled
by local authorities. The Federal Government should also provide a
national scholarship program, in addition to the present loan program, to provide the incentives and the necessary financial resources
so that the more promising high school graduates may enroll in advanced educational institutions. Far too high a proportion of students of the top quality and ability in high school do not go to college
because of the lack of motivation, financial limitations, religion, race,
sex, and other factors which should not be allowed to bear on developing our most valuable resources.
(d) Research and development.-The research and development
activities which have been supported and promoted by the Federal
Government in the postwar period have been one of the most important sources of dynamic economic growth in the United States. Although most of these activities have been associated with the defense
effort, they have yielded huge returns in civilian byproducts and in
medical advances.
The National Science Foundation estimates that in 1959-60, the
Federal Government will, directly and indirectly, supply well over
half of the total funds going into research and development activities.
It is essential for economic growth that the Federal Government
continue and expand its support of research and development activities, even if the Nation's defense needs were to be reduced by an
easing of world tensions.
Federal funds for research and development should be distributed
more broadly, particularly to smaller firms, instead of being so heavily
concentrated among industrial giants.
(e) Farm expenditures.-One of the most expensive aspects of the
present farm program is that price supports are paid on corn and feed
grains without any requirements by the Secretary of Agriculture for
production controls of any kind. In his farm message, the President
proposed the same program for wheat. Under the law, when the
Secretary of Agriculture pays out funds in price supports for any crop
he also has the authority to establish production controls. This has
not been done and under the program of open-end payments the production and surpluses of corn and feed grains has increased at a fantastic rate. In addition, a large proportion of these payments go to
a very small number of farmers.
By applying some form of production controls-either bushels,
acres, or dollar limits-this vast expenditure for these crops could be
limited. While this action would not solve the basic farm problem,
it is certainly essential in the short run to avoid unnecessary expenditures and to see that the payments which are made go to those who
need them most of all. Such production limitations could be imposed
without any legislative changes. It should be done with the emphasis
on promoting a rise in the income of the family sized farm and in the
interest of Government economy.
(U) Business subsidies.-In the present budget there is provision
for aids and special services to business of some $864 million. To this
should be added the postal deficit of $554 million. Thus, business
groups receive direct subsidies of at least $1.4 billion per year exclu-

1960 JOINT ECONOMIC REPORT

13

sive of numerous programs which guarantee many business operations
against loss.
While the President has asked that rates be increased in the main
on first class and air mail, the postal deficit is found in the second,
third, and other classes of mail. For fiscal 1959, the total post office
deficit, adjusted to show the full year effect of the postal rate changes
in 1959, was $334.8 million. First-class and domestic-air mail each
showed a surplus totaling $164.2 million, while other classes of mail
showed a deficit totaling $499 million. The-actual results for fiscal
1959 were a surplus of $156.8 million for first class and air mail and
a deficit of $726.6 million for second, third, fourth, and other classes
of mail. If the post office deficit is to be eliminated, it is evident that
rate increases should be confined to second-, third-, and fourth-class
mail and controlled circulation publications, for they are those which
now receive the subsidies. Further cuts could and should be made
in other business subsidies.
2. Tax reform
Putting greater emphasis on Government programs to promote
economic growth is not a plea for big spending or deficit spending.
On the contrary, these programs can and should occur in the framework of a much tighter fiscal policy than there has been during the
past several years.
It is quite possible that these expenditure programs, even with the
elimination of wasteful subsidies, would involve a somewhat greater
total outlay than is contemplated by the President in his budget for
fiscal 1961. In terms of the national income accounts, the expected
level of Federal outlays for 1960 represents no larger a fraction of total
output than has prevailed on the average in the post-Korean period.
The revisions in Federal expenditure programs which we suggest
would not significantly affect this relationship.
We recognize, nevertheless, that if a major start were to be made on
these programs in 1960, their effect in promoting a more rapid expansion of gross national product in 1960 and 1961 might demand a larger
budgetary surplus than that proposed by the President and certainly
more than will probably be achieved under his specific proposals. If
these urgently needed changes in Federal expenditures are provided,
and if gross national product in real terms tends to rise to a level of $530
billion to $540 billion, which would be a full employment level of total
demand for 1960, a larger surplus would be called for. A larger budget
surplus devoted to debt retirement would make possible easier monetary conditions, which would also promote a higher rate of growth.
These larger budgetary surpluses are well within our reach without
harm to the economy. Just a few of the major steps in a constructive
reform of the Federal income, estate, and gift taxes could add $4 to $5
billion to Federal budget receipts. Such reforms should aim at broadening the tax base by eliminating the most flagrant and inequitable
loopholes. These reforms include repeal of the dividends-received
credit and exclusion, provision for the withholding on interest and
dividend payments, rigorous limitations on employee expense accounts, limiting the types of income to which capital gains treatment
is given to true capital gains, progressively reducing the percentage
depletion rates allowed on oil and gas, improving the enforcement of
52028-60--2

14

1960 JOINT ECONOMIC REPORT

the income tax laws, and elimination of the numerous preferential
provisions in the estate and gift taxes. Even a modest beginning on
this tax reform progam could produce $2 billion to $3 billion in
additional revenues.
These loopholes should be closed in any event simply in the interests of having a fair tax system which interferes as little as possible
with taxpayers' decisions about how to obtain and to dispose of their
incomes. Those with equal incomes should pay equal taxes. Tax
reform is all the more urgently needed when the public responsibilities
facing the Nation are so pressing.
Further evidence of the lack of concern by the administration with
the needs of sound fiscal policy is found in the very limited recommendations for tax reform offered in the Budget and Economic Report.
While the President's Economic Report states explicitly on page 6
that we should continue to review our tax system from the standpoint
of equity, of encouraging productive effort, and of facilitating mobility
and efficient use of capital, the only reform proposals made are* * * to preclude unintended and excessive percentage
depletion allowances for mineral products * * * to make

certain corrective amendments in the tax laws applicable to
cooperatives; * * * and to tax as ordinary income any gain

realized by the sale of depreciable personal property used ill
business. * * *

We are told that tax reform is still being considered. Such reforms
are the concern of all Americans. The administration should make
a complete public statement of its proposals in this area and exert
full leadership in pressing needed reforms through the legislative
process.
By revising our expenditure programs and by providing tax reform,
Federal fiscal policy in 1960 can contribute materially toward a more
rapid recovery in employment and production and toward laying the
groundwork for a higher rate of economic growth in the long run.
Moreover, this can be done in ways which will produce a budget
surplus as large or larger than that proposed by the President.
3. Gains from fiscal reforms

If the budget priorities were reordered in a manner such as we
have pointed out and if a start were made on tax reform, we could
increase expenditures for missiles, space, and combat troops by $2
billion; add $2 billion for schools, health, depressed areas, and other
pressing social needs; commit $1 billion to reducing excises and income
tax rates (including those in the upper brackets if loopholes which
are primarily for the benefit of upper bracket taxpayers are closed),
and yet have a surplus larger than the President has anticipated.
This would also mean a larger increase in total output, an easier
monetary policy, and less unemployment. The general details of
how this could be achieved are set out in the table below:
' Mr. BOGGS. I agree that the rate of growth of the American economy is lagging and that the policies
recommended in the Budget and President's Economic Report are not adequate. However, I want to
withhold judgment on some of the recommendations contained in the majority report, particularly with
respect to tax reforms, debt management and the shipbuilding program. The tax matters have been the
subject of Intensive studies before the Ways and Means Committee, and I would not want to prejudge
these studies until that committee has had time to make its own recommendations.

1,960 JOINT ECONOMIC. REPORT

15

The effects of a reordering of the priorities in the budget
[In billions]
PROPOSED EXPENDITURES

PROPOSED SAVINGS
Program

Realistic budget surplus under
present program -$3.
Postal increase for 2d- and 3dclass mail -.
Reduction in business and agricultural subsidies -1.
Closing of most urgent tax loopholes -2.
Savings on military surplus and
procurement programs -2.
Cuts in military aid Total -10.

Amount

Program It

Increase for missiles, space, and
combat troops -$2.
0
Increase for schools, depressed
areas, and social programs--6
Revenue loss from tax revision accompanying loophole closing0
5

Subtotal-

0 Payment on debt -5.
9
Total -10.
0

Amount

0
2. 0
1. 0
5. 0
0
0

As can be seen, we could achieve a greater surplus while we met our
military and domestic needs if this kind of program were to be supported actively by the administration and the Congress. This greater
surplus would be achieved at higher levels of economic activity. Such
a program is a constructive alternative to the position that we cannot
afford additional expenditures for defense, schools, elimination of depressed areas, and slum clearance.
MONETARY POLICY AND DEBT MANAGEMENT

This year's Economic Report by the President, like those of the
past several -years, offers no guides for monetary policy in 1960.
Fiscal developments, it is generally agreed, necessarily affect monetary and credit conditions. This relationship makes it essential to
consider fiscal and monetary policies together in the interest of achieving the Employment Act's objectives. The silence of the President's
Economic Report on this subject cannot be justified on the basis of
preserving the independence of- the monetary authorities. It represents, instead, a major deficiency in the administration's economic
policy formulation.
In the area of monetary policy, we offer as a general prescription
that the supply of money-i.e., currency held outside the banks and
adjusted demand deposits should increase over time at about the
same rate as gross national product, allowing for normal velocity.

This does not mean that the money supply should be adjusted to every
short-term fluctuation in the level of total demand, but rather that
over a period of years the rates of increase in both should be about
the same. Much more reliance should be placed on fiscal policy-i.e.,
on adjusting Government receipts to expenditures-as a means of
stabilizing the level of total demand in the interests of a high, steady
rate of employment and of a stable price level.
Whenever this prescription is offered, the usual rejoinder from the
Federal Reserve is that it ignores the increase in the velocity of
money-that is, the frequency with which the money supply is turned
over. But repeated expert testimony has shown that, at least up to
some upper limit, an increase in velocity results from an inadequate
growth in the supply of money and consequent rising interest rates.
A more liberal monetary policy, therefore, would result in a somewhat
lower velocity of the money supply.

16

1980 JOINT ECONOMIC REPORT

Achievement of the Employment Act's objectives in 1960 calls for
easier monetary and credit conditions.
If a budgetary surplus of the level estimated by the President is
to be achieved with the present degree of monetary restraint or that
likely to prevail under present Federal Reserve policies in 1960, it is
improbable that a level of gross national product can be realized
which would bring maximum employment.
The fiscal policy proposals offered above would make possible a
larger budgetary surplus than that proposed in the President's budget
for fiscal 1961, and larger than that which we believe will actually
occur under his specific proposals. The use of the budget surplus for
debt retirement would contribute to the easing of monetary and credit
conditions. It is important that such an impetus toward monetary
and credit expansion not be offset by restrictive action by the Federal
Reserve.
Easier monetary and credit conditions are essential to a sound
public economic policy for promoting long-term economic growth.
A tight money policy impedes economic growth by slowing the rate
of State and local government outlays for schools and other public
facilities which are necessary for an expanding population, and the rate
of private investment, particularly by small and new businesses. At
the same time, tight money and high interest rates have little if any
effect on the rate of saving. A more effective way to assure an adequate volume of total saving in the economy is to run a large budget
surplus. An easier money-tighter fiscal policy, therefore, is the proper
mix of public policies in the interests of economic growth.
Preventing inflation does not depend on tight money. In fact, we
will do a much better job of preventing inflation with an easier monetary policy and a vigorous and alert fiscal policy. At the same time,
such a policy combination will do a much better job of promoting
economic growth.
NEEDED REFORMS

IN TREASURY, DEBT MANAGEMENT,
POLICY

AND MONETARY

With appropriate changes in fiscal, monetary, and debt management policies, easier credit and monetary conditions can and should
be provided in 1960.
In summary, our major recommendations areThe Federal Reserve should(a) abandon its discredited "bills only" policy,
(b) agree to build up its portfolio of long-term bonds, and
(c) use open market operations rather than lowering reserve
requirements as the means of bringing about the secular expansion of credit which the Federal Reserve and the banks desire.
The Treasury should(a) avoid seeking advice on new issues from organized groups
of their customers who are interested parties,
(b) institute a system of callable bonds so that the public is
not saddled interminably with high interest rates,
(c) extend the auction method to other than short-term bills,
and

1960 JOINT ECONOIC REPORT

17

(d) agree to sell long-term bonds in the main when interest
rates are low.
In addition, the Federal Reserve should immediately take the steps
necessary to regate the presently unregulated New York bond market and to apply margins to its customers.
These reforms could begin now. They would bring down interest
rates, make the market more competitive, and could do this without
recourse either to "pegging" or to inflationary devices.
We do not seek a policy of pegging Government bond prices at
artificially high prices and low yields. We do seek abandonment of
policies aimed at pegging Government bonds at artificially low prices
and high yields.
It is for these reasons that, pending reforms in fiscal, monetary, and
debt management policies, we have opposed the elimination of the
present 4Y-percent statutory ceiling on the rate which may be offered
on Federal Government debt instruments with a maturity of more
than 5 years. 3 Since December 1952, the average maturity of the
Federal debt has fallen by a full year (as of January 30, 1960). Much
of this decline occurred when long-term rates were below the statutory
4k-percent ceiling and before the administration requested the elimination of the ceiling. Moreover, little has been done since 1952 to
lengthen the debt, even when long-term rates were low.
The Federal debt can be efficiently managed well within this 4Y4percent rate ceiling, if appropriate reforms are undertaken. Moreover, these reforms, which can be made effective very quickly, should
be undertaken quite apart from the question of the interest rate ceiling. Indeed, if progress is made in this direction, the interest ceiling
will again become an academic issue.'
In this area, too, we are familiar with the reply of the administration's supporters. It is that even if the proposed reforms are undertaken, they could not be achieved overnight and in the meanwhile
the enforced reliance on short-term financing is inflationary.
With respect to the first point, these reforms would begin quickly.
The second argument that is made is that short-term issues are near
money while long-term issues are not.
In fact, this is not a pertinent argument. If the total volume of
credit is fixed by the monetary authorities, then any new debt issuewhether it is long or short term-reduces the amount of credit which
may be extended ifor 'other purposes. Whether the ldebt issue is a
long-term or short-term instrument, therefore, is not a relevant question in this respect. It is relevant, however, in determining whether
high interest rates are to be paid on debt issues with a short life or on
those with long maturities. Clearly, even if high interest rates cannot
be avoided for the relatively short period of time in which the proposed
reforms in debt management are undertaken, they should not be fixed
on the economy for 10, 20, or 30 years through the issuance of longterm debt by the Treasury.
MARKET STRUCTURE

To achieve the objectives of the Employment Act, the third major
concern of public economic policy should be with the market structure
3 Mr. Bolling and Mr. Coffin: "As we have indicated in the Committee Report on Employment, Growth,
and Price Levels (S. Rept. 1043, 86th Cong., 2d sess., p. 36, footnote 66), we do not object to removing the
434 percent ceiling, if accompanied by the initiation of other basic reforms."

18

1960 JOINT ECONOMIC REPORT

of the economy. In its study of employment, growth, and price
levels, the committee noted that serious deficiencies of market structure frequently impede the prompt change in resource use essential in
a dynamic economy and that these impediments contribute to persistent upward price pressures. Inflationary tendencies and inefficient
resource use are the price paid for not mounting a much more vigorous
attack on these structural weaknesses.
The sources of these weaknesses are varied. Government programs
which subsidize uneconomic production activities include those in
shipbuilding, agriculture, and, through the use of tariffs, in a wide
array of manufacturing. A more efficient economy and one substantially less subject to inflationary pressures calls for progressive
reduction in tariffs, elimination of some business subsidies, and a
thoroughgoing revamping of the Federal Government's agricultural
program to provide such support for farm income as may be necessary
for prosperity and progress in this sector of the economy.
In addition, the Federal Government must substantially increase its
efforts to reduce the extent of market power in the business community
and to prevent the exercise of this power against the well-being of the
economy as a whole. The specific proposals of the President in the
antitrust area, while steps in the right direction, are far too limited to
be of major consequence in improving effective competition.
The basic problem which limits the curbing of market power is that
under the present statutes the courts have insisted upon some direct
evidence of collusion or concerted action to support a finding of antitrust violations. Modern pricing and other practices, howvever, even
when clearly monopolistic, do not require and do not usually involve
such direct or contractual collusion. In addition, legal delays have
been long, and the resources of the Antitrust Division and of other
agencies responsible for enforcement have been inadequate to deal with
their responsibilities and the importance of the tasks they must
perform.
Within the past few years, the courts appear to be more aware of the
broader economic meaning of size as a factor in market power, even
when this is independent of concerted action. The courts have also
become more critical of the role of mergers on the effectiveness of
competition. It is to be hoped that these trends will continue.
In addition, however, the Government should take more specific
steps to strengthen our present antitrust policy. Specifically we need
more effective application of antitrust legislation to industries in which
a high degree of market power is possessed and exercised by large
producers, even where no evidence of direct or overt collusion or
conspiracy can be shown.
The Antitrust Division should be substantially strengthened. Even
after recent increases, the funds provided to the Antitrust Division are
less than $4.5 million, much too meager an amount for the functions
it is expected to perform. The professional staff of the Division should
be expanded, and salary levels should be set high enough to prevent
the drain of experienced personnel into private industry.
The Congress should review the policies of the regulatory agencies
in those industries which are granted exemptions from the antitrust
laws. More knowledge of the effects of regulatory practices on
competition in these particular industries is needed.

1960 JOINT ECONOMIC REPORT

19

In particular the 1950 amendment to section 7 of the Clayton Act,
closing the loophole as to mergers through acquisition of assets,
should be extended to apply to bank mergers, and the Antitrust Division of the Department of Justice should continue to have jurisdiction
over enforcement of the act as to bank mergers.
Further, the Bank Holding Company Act of 1956 should be
strengthened to encourage the continuation and growth of our historic
system of independent locally owned banks. Before they approve a
bank holding company's acquisition of stock in a bank, the Board of
Governors of the Federal Reserve System should be required to determine whether the laws of the State affirmatively permit such an
acquisition.
The more serious market power as a source of inflationary strain
and economic inefficiency becomes, the greater is the urgency for
devising new techniques and methods for dealing with it. The
Federal Government should take the lead in trying to make large
industries and unions exercise this power with restraint. The Federal
Government could, for example, bring together in an annual labormanagement conference the leaders of both of these groups so that
they could be given the general economic outlook and informed of the
relation of their actions to the national economic welfare. Such a
conference could result in a useful exchange of views between business,
labor, and Government officials. Over the long run, it might have a
good effect on prices and wages in important industries. Because of
this, we recommend that such an annual conference be started.
Moreover, as we noted in Senate Report 1043, while we recognize
the difficulties and dangers of, and share the presumption against,
Government participation in the price-wage setting process, there is a
need, at least on a standby basis, for a factfinding procedure covering
key price and associated wage increases which seriously threaten
economic stability, to be invoked at the discretion of the President,
and to result in the issuance of a report and recommendations regarding the justification and desirability of such proposed increases.
The problem of national emergency disputes between labor and
management also needs further attention. Whatever emergency
legislation is adopted, it must be clearly specified that the stability of
the price level is one criterion to be applied.
In addition, there are numerous actions which the Federal Government should take to increase productivity and improve the structure
of the economy. The major steps are1. A program of assistance to chronically depressed areas
should be started. Both technical and long-term financial aid
will be required to help these areas to become self-sustaining and
to help themselves. Where necessary, retraining of workers
should be undertaken.
2. The activities of the various State employment agencies
should be coordinated into an effective national system in which
information about job opportunities and available workers will
be provided to both employers and workers throughout the
country. In addition, the financial burden of unemployment
should be reduced by encouraging a more liberal system of
unemployment insurance, particularly for workers in chronic
labor surplus areas.

20

1960 JOINT ECONOMIC REPORT

3. Besides general policies designed to strengthen the forces of
competition, special programs to promote small business must be
continued and improved. Small business has brought many
innovations to the American economy. The Federal Government must see that capital is available to small business, and
should help to protect it against predatory practices.
NoTnI.-Senator Fulbright was unable to participate in the hearings or committee meetings on this report. For that reason, the findings and conclusions

herein set forth are neither approved nor disapproved by him.

COMMITTEE AND SUBCOMMITTEE ACTIVITIES IN THE PAST YEAR

The Joint Economic Committee is directed by the law creating it
(Public Law 304, 79th Cong.) to report to the Congress on the main
recommendations of the President's Economic Report and to make a
"continuing study" of the economy. During January and February
of 1959 the committee held hearings and prepared its report on the
1959 Economic Report of the President.
Committee and subcommittee studies announced in that report provided for a broad inquiry into overall economic policies for employment, growth, and price levels by the full committee, and a special
assignment to the Subcommittee on Economic Statistics to examine
the problem of comparisons of United States and Soviet economic
growth.
Subsequently the committee also announced plans for a study of
U.S. energy resources by a Subcommittee on Automation and Energy
Resources and a study of the impact of defense procurement by a
Subcommittee on Defense Procurement.
The work of the full committee and the subcommittees, for the
period March 1959-February 1960, is summarized below.
PRESIDENT'S 1959 ECONOMIC REPORT

Hearings on the January 1959 Economic Report of the President
provided an opportunity (1) for the executive branch to indicate the
economic assumptions and reasoning underlying the President's economic program and to justify major economic policy recommendations; (2) for a limited number of outside experts to set forth their
views on the President's economic analysis and program; and (3) for
the economic interest and research groups to submit their views. The
committee's report on the President's report was transmitted to the
Congress on March 9, the March 1 deadline being extended by unanimous consent. The report included supplemental and dissenting
views of committee members, and materials on the economic outlook
for 1959 prepared by the committee staff (S. Rept. 98, 86th Cong.,
1st sess.)
STUDY OF EMPLOYMENT, GROWTH, AND PRICE LEVELS

Senate Concurrent Resolution 13, 86th Congress, 1st session, passed
March 23, 1959, charged the Joint Economic Committee with conducting* * * a full and complete study of, and investigation into,
the problems of providing maximum employment and an
adequate rate of economic growth, as well as maintaining
price stability and preventing inflation * * *.
A budget of $200,000 was provided for the study and a special staff
recruited to carry out the work, with the assistance of several members
21

22

1960 JOINT ECONOMIC

REPORT

of the permanent staff. rfhe permanent staff also provided administrative services. In the course of the study the committee heard
nearly 100 witnesses in 9 sets of hearings covering 40 separate days.
Twenty-three special study papers were prepared by outside consultants and the committee staff for use in connection with the special
study. In addition, the special study staff prepared a comprehensive
report setting forth fundamental data and technical analyses bearing
on the problems with which the study was concerned.
The committee's own report on the study of employment, growth,
and price levels, with minority and individual views, was submitted
to the Congress January 26, 1960, and printed as Senate Report 1043,
86th Congress, 2d session.
SUBCOMMITTEE

ON ECONOMIC STATISTICS

The Subcommittee on Economic Statistics is composed of Representative Richard Bolling, chairman; Representatives Hale Boggs,
Frank M. Coffin, and Thomas B. Curtis; and Senators John Sparkman, J. W. Fulbright, Prescott Bush, and Jacob K. Javits.
The subcommittee in accordance with instructions from the full
committee (S. Rept. 98, 86th Cong., 1st sess., p. 20) conducted a study
of "Comparisons of the United States and Soviet Economies." Expert
witnesses prepared 33 papers on 9 subject areas covering comparisons
between the 2 economies. These study papers were released early in
the fall and the authors then discussed their papers in a series of hearings held from November 16 to 20. The hearings began on Friday,
November 13, with testimony by the Director of the Central Intelligence Agency. The summary and policy implications of the study
were covered by the concluding panelists' papers and in the discussion
in the final session of hearings.
SUBCOMMITTEE

ON AUTOMATION

AND ENERGY RESOURCES

The Subcommittee on Automation and Energy Resources is composed of Representative Wright Patman, chairman; Representatives
Henry S. Reuss, Clarence E. Kilburn, and William B. Widnall; and
Senators Joseph C. O'Mahoney, John F. Kennedy, and John Marshall
Butler. The subcommittee held hearings October 12 to 16 on the
anticipated needs and adequacy of U.S. energy resources and the impact of technology on the production and efficient use of the energies
required for sustaining economic growth. Witnesses were heard from
research organizations, Government bureaus and the oil and coal
industries.
SUBCOMMITTEE

ON DEFENSE

PROCUREMENT

The Subcommittee on Defense Procurement is composed of Senator
Paul H. Douglas, chairman; Senators John Sparkman, Joseph C.
O'Mahoney, and Jacob K. Javits; and Representatives Wright Patman, Richard Bolling, Thomas B. Curtis, and William B. Widnall.
In announcing hearings on the impact of defense procurement which
were held January 28 to 30, 1960, the chairman explained that the
subcommittee would not be concerned with questions of military
strategy, weapons, size of forces, etc.-nor with the broad problem

1960 JOINT ECONOMIC REPORT

23

of the overall economics of disarmament-but with the purely economic and budgetary issues involved in the way the Nation spends
over two-thirds of its budget. The witnesses heard were from the
agencies of the Federal Government with primary responsibility for
procurement and disposal of defense materials, and from the Hoover
Commission task force members.
STAFF PARTICIPATION IN MEETINGS WITH OUTSIDE GROUPS

In addition to conducting formal studies and arranging hearings for
the committee, the staff participated in discussions of economic
problems and research techniques with outside groups. The following list of meetings illustrates the nature of these activities in which the
staff took part during 1959: Economic workshop, West Virginia
University, annual sessions of the National Tax Association, Investment Bankers Association, Mortgage Bankers Association of America,
the National. Burneau of Economic Research, National Industrial
Conference Board, Federal Statistics Users' Conference, American
Economic Association, American Statistical Association, the National
Association of State Tax Administrators, American Society for
Public Administration, and the National Planning Association;
conferences with groups of foreign economists brought here under
the sponsorship of the State Department and the International
Cooperation Administration; seminars of the Industrial College of
the Armed Forces; meetings of local chapters of the American Statistical Association; meetings of the Brookings Institution, the
Chamber of Commerce Committee on Business Statistics, and other
meetings of business groups, civic organizations, and university classes.
COMMITTEE PUBLICATIONS

In the period March 1959 through February 1960 the Joint Economic Committee and its subcommittees issued 48 publications.
Over 250,000 copies of current and previous committee publications
were distributed during the year to fill individual requests. Committee publications are also on sale by the Superintendent of Documents. In the past year, individual copy sales and quantity orders
of committee publications, current and past, have exceeded $30,000.
This figure does not include the 8,400 paid subscriptions for the
monthly publication of Economic Indicators. A checklist of committee publications will be found at the back of this report.

COMMITTEE

AND SUBCOMMITTEE

PLANS

FOR THE COMING

YEAR

FULL COMMITTEE

The relationship between monetary and fiscal policy actions in the
postwar period and the objectives of the Employment Act.-Chapter 8 of
the "Staff Report on Employment, Growth, and Price Levels" discussed some of the economic consequences of the postwar trend with
respect to the relative emphasis on fiscal and monetary policies.
The manner in which Federal fiscal and monetary actions are combined in seeking the Employment Act's objectives appears to be at
the heart of some of the major current issues of public economic
policy. The staff, therefore, is directed to inquire further into the
changes in the combination of fiscal and monetary policies which have
occurred in the postwar era and the consequences of such changes
for the rate of growth of the Nation's productive capacity, for stability
in the rate of employment and output, and of the price level, and for
the distribution of income.
Tabulation and summary of questionnaires submitted by 17 security
dealers.-In connection with the committee's hearings conducted as
part of the study of employment, growth, and price levels, the 17
firms dealing in Federal Government securities were asked to submit
detailed information on a number of aspects of their business over the
last 10 years. The assembly and submission of this information is
now nearly completed. The designated staff is directed to tabulate
and summarize the data from the dealers for committee consideration,
in accordance with committee rule 23, in a manner which will not reveal
the identity of any individual, partnership, corporation, or entity.
Study of governmental subsidies.-The committee will begin a broad
inquiry into the extent and impact of Federal Government subsidies,
direct and indirect. The subject is closely related to the objectives
of the Employment Act, in part (1) because of its relation to fiscal
and tax policies as they relate to economic stability and growth, and
in part (2) because subsidies are a part of the "plans, functions, and
resources" of Government which can contribute to-or through
unplanned, perverse behavior partly negate-efforts to promote
maximum employment, production, and purchasing power. The
growth of our subsidy pattern has been piecemeal and gradual and
a listing and reexamination of aggregates and priorities seems to be
in order although there is no doubt that many items will be found to
have their sufficient reasons in public policy.
The study will be carried out initially by calling upon the staff to
find out what subsidies are being granted, to estimate their amounts,
and to summarize their origins and rationale. This will be done without any attempt at appraisal of desirability or relative merits. Such
a study must rely primarily on an analysis of the budget to estimate
which subsidies are being paid but we must also be alert for items of
omission which give rise to identifiable special group benefit.
25

26

1960 JOINT ECONOMIC REPORT

Decision as to the committee's further action, including the possible
hearing of advocates and critics, will be postponed until members of
the committee have had an opportunity to study the materials gathered by the staff. The study is a long-range one and no schedule for its
progressive stages can be set at this time.
It is worth noting at this point, however, that a formidable problem
of such a study is one of differentiating or at least of arriving at a
working basis of precisely what items should be brought within the
purview of the inquiry. The directive to the staff takes notice of the
criteria set forth in the dictionary: To subsidize is "to aid or promote
as a private enterprise with public money"; a subsidy is it "governmental grant to assist a private enterprise determined advantageous
to the public." The problem and scope will be made easier if it is
recognized that the characterization of any governmental assistance
or grant as a "subsidy" is not to stigmatize but to prepare the ground
for examination of justification upon which of course opinions may
well differ. Whether a given subsidy is to be regarded as desirable
or undesirable is for the people as a whole to determine through
democratic political processes. The ultimate decision, it may be
hoped, can be made upon some more profound basis than short-term
self-interest of beneficiaries.

Economic implications of alternative agricultural policies.-Tbe last

special work by the Joint Economic Committee in the field of agriculture was the compendium, hearings, and report on "Policy for
Commercial Agriculture" done by a Subcommittee on Agricultural
Policy in 1957.

Since that time the Senate Agriculture Committee has arranged
for a staff analysis of probable levels of production, prices, and farm
income in 1960-65 if production controls were removed and price
supports were lowered to market levels. This report, begun last
May by the technical staff of the Department of Agriculture, with
the counsel of an advisory committee of agricultural economists from
the land-grant colleges, was published January 20, 1960, as Senate
Document 77.
Starting from this staff study for the Senate Agriculture Committee
which covers the range of what might be expected under conditions
approaching a free market, the Joint Economic Committee will
explore the economic implications for what appear to the the most
feasible alternatives to such a free market policy. The committee's
concern with the need for such a study arises from the projections
in this report which indicate production would continue to rise during
1960-65 in spite of falling prices and that realized net farm income
of farm operators by 1965 would fall about 40 percent below 1955-57
levels-46 percent from 1958 levels.
Several leading agricultural economists will each be asked to
prepare a paper on one of the alternatives proposed. These papers
will synthesize the latest research results and best professional
thinking on that particular alternative, for use of the committee in
reviewing the economic implications of agricultural policy proposals
next year.
While final decision on the exact alternatives to be studied would
await review and counsel of an advisory panel to be set up from
the agricultural colleges for that purpose, these alternatives would
probably include-

1960 JOINT ECONOMIC REPORT

27

(1) Unrestricted production' and marketing except for a
conservation reserve of about 60 million acres.
(2) Unrestricted production and marketing except for production controls on key basic crops such as tobacco, cotton, rice,
and wheat and supplementary payments to family farmers under
specified income situations.
(3) Limited Government controls and price supports for feed
grains and livestock, with improvements in existing production
controls and price supports for wheat, cotton, rice, and tobacco.
(4) Comprehensive supply management and price supports.
SUBCOMMITTEE ON ECONOMIC STATISTICS

Review of Economic Indicators and preparation of 1960 edition of
Supplement to Economic Indicators.-The staff under the direction of
the Subcommittee on Economic Statistics, and in consultation with
the Council of Economic Advisers and its staff, is directed to conduct
one of the periodic reviews of the committee's monthly publication,
Economic Indicators. These reviews are undertaken to insure the
timeliness of the indicators and its maximum usefulness to the Congress and the Executive, as well as the 8,000 persons who subscribe
to Economic Indicators monthly.
It is also time for another issue of the Historical and Descriptive
Supplement to Economic Indicators, the last one being prepared in
1957. This publication provides current descriptions of the uses and
limitations of the statistical series published in the monthly Indicators
and gives data for back years not available in the monthly issues.
The staff is asked to work with the Council of Economic Advisers'
staff and the various statistical agencies in preparing a 1960 edition
of the Historical and Descriptive Supplement to Economic Indicators.
SUBCOMMITTEE

ON AUTOMATION

AND ENERGY RESOURCES

Bringing previous hearings on automation up to date.-The Subcommittee on Automation and Energy Resources is asked to continue its
study of the impact of automation and technological change upon
economic stability and growth.
The committee, in its report to the 84th Congress (No. 1308),
pointed out that the subcommittee's investigations at that time had
demonstrated that the problems of automation are by no means
negligible or settled and that the committee considered it desirable
to review periodically the progress of technological change. The
hearings and report of October 1955 were followed by other hearings
in December 1956, November 1957, and, with a special emphasis on
energy resources, in November 1959. The plans of the subcommittee
for the coming year involve, first of all, a directive to the staff, acting
under the guidance of the chairman, to solicit, through a questionnaire
or other means, information as to developments during the interim
since earlier hearings, from the persons or organizations who appeared
at these previous hearings. The objective will be essentially that of
bringing the previous hearings up to date and getting the views of
labor leaders, businessmen, and engineering experts as to the problems
of automation and technological change in the light of developments
during the interim.

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JOINT ECONOMIC REPORT

The results of this inquiry will, it is believed, give the subcommittee
a solid foundation upon which to judge what further needs to be done
for keeping the Congress informed and keep the subcommittee in a
position to make recommendations for policy if the broad-gaged
objectives of the Employmnent Act of 1946 are to be met.
Furtherstudy of energy resources.-The hearings of our Subcommittee
on Automation and Energy Resources, under the chairmanship of
Representative Wright Patman, studied the possible conflicting
relationship and the question of whether there was lack of integration
of Government policy upon this important element in our economic
health and growth.
While the subcommittee concludedrthat there was no present
occasion for concern about an early, shortageiin the energy sources
necessary to sustain growth, testimony convinced the subcommittee
of the desirability of further study. There has been substantial
government intervention at both the State and Federal levels. The
variety and extent of government regulation, coupled with a complex
of relationships, needs considerable study. The partial regulation of
natural gas prices and transmission, interstate and intrastate; the
insulation of domestic oil prices from foreign competition through
import controls; production controls on oil and gas; the direct and
indirect subsidies being given to atomic commercial energy; and the
division of regulatory responsibility among a number of agencies all
suggest the desirability of further careful scrutiny to make sure that
the Government itself by its policies is not adding unnecessarily to the
economic complexities and uncertainties.
The subcommittee's immediate focus for pursuing the inquiry into
the adequacy of energy resources will accordingly be directed largely
to a consideration of this division of regulative responsibility as a
case study in the relationship of government to the elements involved
in promoting maximum employment, production, and purchasing
power.
SUBCOMMITTEE ON DEFENSE PROCUREMENT

Study of the impact of defense procurement.-The immediate plans
of the subcommittee call for completion by the staff of their report
to the subcommittee on the "Impact of Defense Procurement." The
staff will also compile for presentation in the printed hearings, various
tabulations and analyses requested during the hearings.

SUPPLEMENTAL VIEWS OF REPRESENTATIVE WRIGHT
PATMAN
The committee's report is, on the whole, a good one. Manifestly,
it is an extremely important document, because it points the way to
solutions of some of the gravest problems of our times. Yet there
are several points on which the report leaves me dissatisfied. Be it
said, however, that my dissatisfaction is over matters which have
been omitted, or only incompletely considered, more than with the
findings which have been made and solutions which have been
suggested.
TAXES

The committee's report gives first and foremost attention, as it
properly should, to the central problem of our time. This is to find
a reasonable and promising policy of government to be substituted
for the unsuccessful policy of manipulating credit and interest rates
in an effort to achieve a desirable degree of stability and progress in
the Nation's economic affairs, such as is described in the Employment
Act of 1946. The committee's report does an adequate job of pointing
out the unwisdom of relying upon "monetary policies" for this purpose.
Indeed, the committee's report leaves no question that these policies
have created great injustices and are leading to certain disaster.
As an alternative way of achieving when the tight money and high
interest policy has failed to achieve, the committee recommends the
use of fiscal policies, particularly flexible tax rates. I agree that this is
a most promising suggestion. Yet it is on this subject of taxation that
the committee's considerations seem most incomplete. The committee has not really explored the tax structure.
Furthermore, while it recommends several specific changes in the tax
laws, seemingly of a random sort, it has not suggested any specific way
for achieving the flexibility in tax rates which constitutes its central
program for maintaining economic stability. This omission is unfortunate in all respects. Members of Congress are not given sufficient
specificity by which they may appraise the program being recommended. Furthermore, some specifications are necessary to make
the program politically salable, and this is a matter of no small
importance. Any program the committee recommends, no matter
how manifestly sound it may be, must be sold, politically, in competition with a quite formidable sales effort being made on behalf of the
tight money and high interest policy. The vested interests supporting
this policy have much at stake, and the commercial media of
communications are highly resistant to carrying any word or fact
which tends to discredit the policy. Thus, if the committee's recommendations are to have any practical effect, they must be sufficiently
developed and in a form which the candidates for national office can
take directly to the people in the political campaigns this fall.
It would seem to me that a practical and understandable program to
accomplish the committee's recommendations must take account of
the following:
29

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19 60 JOINT ECONOMIC REPORT

First, let us consider the primary emphasis in the committee's
recommended policy, which is on reducing tax rates, temporarily,
when the first signs of recession appear. If tax reductions are to be
effective in combating recessions, such reductions must be made
promptly, which means that decisions must be reached more quickly
than the legislative processes normally permit. This being true, I
would urge that the Congress enact general legislation giving the
President discretionary powers to reduce the tax rates on the incomes
of individuals by a uniform percentage, whenever he finds that
recessionary tendencies are developing.
But what of the opposite problem? What are to be the means of
restaining inflationary pressures in boom periods? The committee's
report has taken the position that substantial reductions should be
made in the public debt at such times, and that such reductions
would provide both effective and just restraints against monetary
inflation. With this I agree. But nothing is said of raising tax rates
beyond present levels in order to accomplish substantial reductions in
the public debt. Clearly, however, such increases would be necessary
for substantial debt reductions in such times as at the present, unless
there are to be reductions either in essential public services or our
defense preparations. The committee does not recommend the latter,
nor would I.
Proposals for increased taxes are, of course, never very popular.
Yet it seems to me that the American people would readily understand the advantages of such a proposal if these facts were made
clear to them:
First, they are already paying an anti-inflationary tax. At least
they are paying what is for all practical purposes a tax-in the form of
high interest rates-on the theory that this helps to check inflation.
The theory has not been able to stand up under examination; but as
to the fact of the "tax," there is no question. At times this "tax"
is half hidden, that is true, but it is reaching very far into the pocketbooks of all except the very wealthy.
Second, the high interest "tax" which we all pay to combat inflation has very bad effects and it does not accomplish the good
effects which are claimed for it. The bad effects are these:
(a) High interest is a tax not on the fruits of economic activity
but a tax on economic activity itself. As the committee's report
clearly points out, the high interest and tight money policy causes
unemployment, causes nonuse of productive capacity, and retards
the Nation's economic growth. This is bad from the standpoint
of our present and future ranking among the nations of the
world, even if we felt that we are already so comfortably situated
that we do not need to produce more of the material things of
life. The Russian economy has been growing,
in recent years,
at a rate almost three times as fast as our growth.
(b) The high interest "tax" is a regressive tax. The burden of
it falls not on those most able to pay, but upon those least able
to pay. It thus cuts down on the consumption of the goods and
services which the Nation already has the capacity to produce.
(c) Finally, the income from the high interest "tax" is not
going to pay off any of the Federal debt. It is only going to
fatten the incomes of the financial corporations and the wealthy'
families. Actually, the high interest rates are adding to the

1960

31

JOINT ECONOMIC REPORT

Federal debt. They are increasing the Treasury's cost of meeting interest charges so greatly that the Treasury is going more
into debt to meet the interest charges.
It should be clear by now that I am not suggesting that the American
people be offered a proposal that they carry an increased burden.
On the contrary, I am suggesting that they be offered a proposal that
they pay more in taxes in prosperous times, and pay less in direct and
indirect interest charges. These interest charges actually amount to
a great deal more than we would need to pay in taxes in order to make
substantial reductions in the debt and to provide a much better restraint against inflation than the high-interest program provides.
In other words, I am suggesting that the President be given also the
power to raise tax rates on individual incomes, uniformly, and at his
discretion, as a means of combating inflation.
In order to assure that the American people would not be subjected
to both high interest and increased tax rates, however, other legislation
would be necessary to fix the responsibility of the Federal Reserve
System, and I shall discuss this at a later point. So much for my ideas
on a specific program for providing the flexibility in tax rates which the
committee has recommended as an alternative to the high-interest
and tight-money policy.
As to the specific recommendations which the committee report
makes to correct tax inequities, however, I feel that this subject of
tax inequities has not been sufficiently considered. To illustrate, the
committee's report recommends repealing the dividend-received
credit and exclusion provision, but it is silent on the notorious ways
by which corporate executives and employees escape taxes through
stock option schemes. Similarly, the committee's report recommends
reductions in depletion allowances for oil and gas, apparently only for
the reason that large amounts of money are involved, without considering the practical consequences of the depletion allowances on all
the other commodities and resources for which such allowances are
provided.
Finally, in order to recommend a program for correcting tax
inequalities, I believe that the committee would need to consider first
and foremost the impact of Federal taxes on our business structure.
There is a great deal of evidence which suggests that the giant corporations are in reality bearing little or none of the tax burden, while
the smaller and more competitive business firms are, on the other
hand, being taxed out of existence. If I am right about this, the
Federal tax structure, more than any other factor, is bringing about
the concentration of business which the committee deplores, and
bringing about the breakdown of the competitive price system which
the committee sees as the principal cause of the so-called inflation.
NEED TO PUT THE FEDERAL RESERVE'S HOUSE IN

ORDER

The committee's report strongly recommends that the Federal
Reserve adopt a less restrictive credit policy. It also makes a number of good recommendations for changes in Federal Reserve practices which would also have the effect of reducing interest rates.
These are in addition to its recommendations for "flexible" tax
rates, which, as I have discussed, seems to require an assurance that

32

1:9 6 0 JOINT ECONOMIC REPORT

the American people will not be burdened with both high taxes and
high interest rates. Yet there are no recommendations for legislation
which would assure that the Federal Reserve will not go its own
determined way, without respect to what the American people may
wish or the Congress may recommend.
The Federal Reserve authorities have assumed a posture of "independence" from the rest of the Government. Further, the President
and other administration officials have lent support to the idea that
this agency is beyond the reach of the voice of the people.
Most of the confusion arises from the fact that the member banks
of the Federal Reserve System have invested a relatively small amount
of money in what is called "stock" in the Federal Reserve banks.
This has lead many bankers to believe that they own the Federal
Reserve System. Consequently, it has led the banking community
to urge policies which are based on the premise that the Federal
Reserve System should be operated in ways that produce maximum
profits for its alleged "owners"-the banks.
This has led to confusion all around. The Federal Reserve banks
themselves write letters to the public and distribute expensive booklets
which say in one way or another that the Federal Reserve banks are
not "owned" by the Government, that their employees are not Government employees, and, boastfully, that the Federal Reserve banks
receive no support from the Government.
The Federal Reserve banks are not owned by. the private banks.
They are owned by the Government of the United States. The
so-called "stock" in the regional banks is not stock in any normal
sense of the term. As the law makes clear, it cannot be transferred,
sold, traded, purchased voluntarily, or used as collateral. It does not
represent an equity in undistributed profits, carry voting rights, or
share (beyond a fixed 6 percent) in profits.

The funds which have been invested by the banks in this so-called
"stock" should be repaid, and this so-called "stock" should be canceled. Only approximately $390 million has been invested in this
"stock" and this-is a pittance compared to the assets of the Federal
Reserve System. It has no need whatever for the money. Repaying
it would, therefore, save the U.S. Treasury an unnecessary interest
charge of 6 percent per annum or about $24 million a year. And
most important of all, canceling the "stock" would remove the basis
of confusion concerning the "ownership," and hence clarify the
Federal Reserve's responsibility for determining credit and interest
policies for the whole economy.
In the interest of further fixing political responsibility for the
Federal Reserve System's political decisions, the Federal Open Market
Committee should be abolished and its duties transferred to a board
or a committee composed entirely of members appointed by the President and confirmed by the Senate.
At present the top policymaking body of the Federal Reserve System
is not the Board of Governors; it is the Federal Open Market Committee. And 5 of the members of this 12-man Committee are
selected by representatives of the private banks. Manifestly, the
private banks should not be permitted to select members of a public
body which is to determine credit and interest-rate policies. The private banks have too much private interest in the policies to be
determined.

1960 JOINT ECONOIC REPORT

33

There are several other long overdue reforms in the Federal Reserve
System which, when made, will save unnecessary expenses and reduce
the System's burden on the taxpayers. These require legislation,
either to make the reforms possible or to make them likely. They are
as follows:
(1) The Federal Reserve System should be required to submit to
annual audits and to the normal audit control of the Comptroller General of the United States. The System receives its income-or substantially all of its income-in the form of interest payments from
the U.S. Treasury on the huge amount of U.S. bonds and other obligations which the System is holding. This provides an income vastly
in excess of what the System needs for all purposes. The System pays
its expenses out of this income-most of which are incurred in providing free services to the private banks-and then it returns what
remains to the Treasury. At least the System returns 90 percent of
what remains; it puts the other 10 percent in "surplus" funds.
In the process of meeting expenses, however, the Federal Reserve
banks assume a strange variety of expenses, and, in general, they
spend the taxpayers' money in a generous and freehanded way.
The unusual expenses include such things as providing free office
space for private associations, paying "dues" in private associations,
meeting banquet and entertainment expenses, handing out "gifts" to
nonbank employees, and paying for the college educations of youths
who may or may not become bank employees.
The Federal Reserve authorities have tried to defend such freehanded spending of public funds on the ground that these are customary practices of business firms in the areas where the banks operate.
Yet the Federal Reserve banks have no more right to spend public
funds in these ways than the local post offices have a right to spend
public funds for such purposes. A proper audit by the General
Accounting Office would promptly put a stop to such improper
expenditures. It would, moreover, provide a check and a safeguard
on the possibility of mishandling of billions of dollars of Government
funds and Government securities.
(2) At least $15 billion of U.S. Government securities which the
Federal Reserve System is holding should be returned to the Treasury
for cancellation. In order to put to rest the argument that such a
transfer of assets from one Government agency to another would put
the Government's "books out of balance" and thus "bankrupt" the
Government, I have proposed that the Secretary of the Treasury issue
to the Federal Reserve, in exchange for these interest-bearing obligations, a non-interest-bearing, nontransferable note payable on demand. This would keep the books in balance.
Cancelling $15 billion of the approximate $27 billion of Government
securities which the Federal Reserve now holds would make it unnecessary for the Treasury to pay interest charges on this amount of
debt in the first place. It would thus enable the Treasury to operate
on a lower level of debt, which would mean less cost to the taxpayers
in interest charges.
Canceling $15 billion of the Federal Reserve's securities would
serve another good purpose, in that it would safeguard against the
possibility that the Federal Reserve System may transfer a substantial share of its holdings of Government securities, on a cost-free basis,
to the private banks.

34

1960 JOINT ECONOWIC REPORT

Early in 1957, the AmericanlBankers Association made a "report"
to the Board of Governors of the Federal Reserve System recommending a program whereby the Federal Reserve would transfer to the
private banks approximately $16.8 billion of U.S. Government securities by mid-1961. The proposed transfer was to be made up of $9.8
billion of securities which the Federal Reserve already held at mid1956, plus another $7 billion which it was expected to acquire by
mid-1961, in order to provide for the normal increase in the money
supply, assuming that no part of the American Bankers Association
program was accepted. The proposal, in a nutshell, was that the
Federal Reserve issue regulations reducing reserve requirements of the
member banks, and, simultaneously, "sell" its securities in the amounts
suggested. This would have meant that the Federal Reserve would
"sell" its securities in the open market at the same time it was giving
the member banks the power to create the money needed to "purchase" the securities. The Federal Reserve authorities smiled favorably on this proposal and recommended legislation by which it could
have been carried out-all of which suggests that an additional
safeguard would not be out of order.
(3) Funds being held in the Federal Reserve's surplus account and
in its "other capital account" should be returned to the Treasury, so
that they may be used for debt reduction. The Federal Reserve
System has no more need for carrying surplus funds, either in a surplus account or in an "other capital" account, than does the Post
Office Department-in fact, considerably less so. At the end of 1959,
these items amounted to more than $1.1 billion.
Neither item serves any purpose other than to help preserve the
fiction that the Federal Reserve System is a private business organization and should, therefore: make public reports which show it in a
favorable "surplus" position, such as is expected of successful private
business organizations.
The System's authorities themselves recognize this. Since the end
of 1959 they have "voluntarily" transferred a part-$266 million-of
these unneeded surplus earnings to the Treasury Department.
TAX-EXEMPT

STATUS FOR SECURITIES

SHOULD ]BE ELIMINATED

The haven for tax avoidance which tax exempt securities provide
and the consequent loss of revenue to the Federal Government have
been neglected far too long. This committee should undertake on its
own part, or at least encourage and recommend to other committees,
that a study should be made of the alleged savings to State and local
governments from the tax exempt privilege.
It seems likely that the supposed saving in interest cost to local
governments actually does not compensate, under today's conditions,
for the tax loss suffered by all taxing jurisdictions taken collectively.
Until we have the facts which such a study would bring out, there is
of course a natural reluctance on the part of the local governments to
give up the tax exempt feature.
The immunity of State and municipal securities from Federal
taxation, it will be remembered, is not an express provision of the
Constitution. It has, indeed, become a serious problem only in comparatively recent times. The large and increasing amount of State

1960 JOINT ECONOMIC REPORT

35

and municipal bonds outstanding coupled with high Federal tax rates
on corporations and high marginal rates on individual income have
made it an increasingly serious tax loophole.
An example of questionable situations which arise in permitting the
continuance of this tax exempt feature is illustrated by the case of the
commercial banks. They now own approximately $17 billion of taxfree obligations purchased with "money" which the commercial banks
literally created out of nothing, under our fractional reserve banking
system.

SUPPLEMENTAL VIEWS OF SENATOR JOSEPH C.
O'MAHONEY
If it be true, as cannot realistically be denied, that the natural
resources of the United States have not been exhausted, and that the
skills of the inhabitants of the country as well as available and potential technological facilities are likewise still at hand, we can promote
economic growth and economic growth is our greatest goal.
Despite all the complacency that is encouraged among our people,
we cannot possibly carry the burdens which world leadership imposes
upon our shoulders unless we immediately make up our minds to
establish a new high record of economic expansion It will be destructive of all our hopes and of humanity's needs if we allow our eyes to
be blinded and our comprehension to be dulled by the false cry of
"Peace and Prosperity."
We do not enjoy peace and prosperity. Instead of peace we are
preparing for an imminent nuclear war that could mean the suicide of
mankind.

In our foolish and exaggerated estimate of our industrial capabilities, confidently imagining that, having won two world wars, no people
or combination of peoples could come within hailing distance of our
prowess, we have allowed the totalitarian Russians, whom we regarded
as a backward people, to take the lead in the production of missiles
and the exploration of space. Under the leadership of the President,
we seem tempted to brush the missile gap aside and console ourselves
with the thought that Soviet Russia has no intention to use the missiles
it has produced. There can be no safety for our people in building our
policy on anything less than bald facts which cannot be denied.
Among the facts which we know are these:
1. We are living in the 20th century with scientific tools which
were beyond imagination 50 years ago.
2. Ours is a government founded upon what the authors of the
Declaration of Independence called certain inalienable rights of
men which they had received from their Creator.
3. This Government was instituted upon the principle laid
down in the Declaration that governments among men derive
"their just powers from the consent of the governed."
4. This Government is now not only engaged in an arms race
with Soviet Russia but also in an economic struggle which the
dictator of that nation is now waging against us throughout the
whole world. Witness the travels of Eisenhower, Khrushchev,
and Mikoyan.
.5. Our military leaders are in disagreement among themselves
as to whether or not we have allowed ourselves to fall into second
place in the arms race.
6. Economically, we are carrying the greatest public debt in
history, the interest upon which, the President tells us in his
budget message, will in fiscal year 1961 rise $200 million to $9.6
billion, a payment which, he tells us, will "represent 12 percent
of budget expenditures."
37

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1060 JOINT ECON0C REPORT

7. In his Economic Report, the President tells us that the average maturity of the public debt had fallen to 4 years and 4 months
at the end of December 1959 (p. 43) and, in recognition of this fact,
has requested the Congress to remove the ceiling on Federal
securities with maturities longer than 5 years.
8. Facing this fiscal problem, the President has requested
Congress to authorize the expenditure in 1961 of over $4 billion
for foreign aid, military and economic, on the ground that for our
own security we must provide the weapons of war to peoples who
cannot arm themselves, and to promote the economic status of
underdeveloped peoples who cannot provide for themselves and
who are not receiving economic aid from our Western allies but
some of whom are being offered economic aid by Soviet Russia.
To my mind, this array of facts leaves us with only one conclusion;
namely, that even if Dictator Khrushchev has no intention of using
his capabilities to launch a military attack upon us, it is our primary
duty now to advance our own economic position. The United States
cannot carrv the international burden which it has assumed unless it
deliberately and consciously launches a program to promote its
economic status as a nation and the economic status of the people
who constitute the rank and file of our population.
This we cannot do by a policy of drift or by acting as though we
were not living in the middle of the 20th century.
We must recognize that we are living in a new era and that the
Congress must exercise the power vested in it by article I, section 8, of
the Constitution to regulate commerce with foreign nations, and
among the several States. Our commerce is not being regulated
suitably to the new era but according to the habits and forms into
which we fell in years gone by when the bulk of our commerce was
carried on by individuals.
Now individuals exercise little or no power over the commerce on
which our economy is based. Far from that, it is dominated by the
concentrated corporations created by the States from which the
Constitution took the power to regulate interstate and international
commerce.
That this concentration of economic power is the greatest obstacle
to a free government based on the consent of the governed is well
recognized both by the President in his Economic Report and by the
Joint Economic Committee in its report, for both the legislative and
executive branches of the Government recognize that the merger of
gigantic corporations promotes the concentration of economic power
in private hands. In the face of this fact, Congress has not yet passed
the little bill which has been pending before the Senate for three
Congresses, endorsed by President Eisenhower and the Department
of Justice, to require corporations to give premerger notice to the
Government.
It is folly to think that the Government can solve the economic
problem by which it is confronted so long as it fails to establish national
standards of responsibility and power for the gigantic corporations
which are, in fact, collective economic states and which have taken
over the real regulation of our national commerce.

MINORITY VIEWS
We regret that again the majority in its choice of language in setting
forth its views on the President's Economic Report for 1960 has made
it impossible for the minority to join in the areas where there is agreement and to point up clearly where there are fundamental disagreements. We believe that one of the purposes of a committee report
should be to bring out fairly where there are honest areas of disagreement and as clearly as possible pinpoint the different assumptions of
fact or argument that bring about this disagreement.
We believe that the programs outlined in the President's Economic
Report, set forth in the appendix to these minority views (p. 49), will
achieve reasonably the objectives of the Employment Act in 1960.
On this point we are in basic disagreement with the majority's views.
THE DEFENSE BUDGET

We believe that decisions about the volume and character of defense
procurement should be made on the basis of judgments about the
Nation's long-term military needs. They should be separated from
shortrun budgetary considerations. On this point we and the
majority are in agreement with the President's view.
We decry the insidious manner in which the majority throughout
its report tries to create the impression that the President has at any
time, and particularly in the 1960 Economic Report, held to a different
viewpoint.
Let the majority, inexpert in this field by their own admission, disagree with the President on whether his judgment is correct about the
adequate provision for the Nation's long-term military needs if they
wish, but there lies the issue, if any, not in the objectives. We
believe that if more' needs to be done in defense it can be done without
endangering our economy, if proper policies are followed. On this
point we and the majority are in agreement with the President,
although we believe there is considerable disagreement between the
majority and the minority overwhat qualify as "proper policies."
ECONOMIC GROWTH

We disagree with the majority's conclusion-which they reached,
it is alleged, as a result of the committee's recent comprehensive investigation of employment, growth, and price levels-that there was
a "slow rate" of growth in the economy in "the recent past." We
again call attention to the inexcusable juggling of economic figures
on the part of the majority in its recent report to try to picture a slow
rate of economic growth as measured in GNP during the Eisenhower
administration. Taking the period 1954 projected through 1960,
using the figure of $510 billion GNP for 1960, the growth rate was
3.6 percent per year, substantially above the historic annual average
of 3 percent. This period is at least a little more comparable to the
period 1947-53 which the majority selected arbitrarily to demonstrate
the growth under part of President Truman's years of part-time
89

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19 60 JOINT ECONOMC REPORT

peacetime economy. If the majority insists on continuing its nowdiscredited "numbers game," they should be reminded that from
1945 to 1946, the economy showed a loss in growth of minus 10 percent, and losses in growth for the succeeding 3 years, measured from
1945. Actually, in comparing periods in which the Nation is at peace,
years of war, such as 1945, should be excluded. Similarly, the years
1950-53 should be excluded from any attempts to judge economic
growth, maximum employment, or price stability in a peacetime
economy inasmuch as these are Korean war years.
The majority by its constant disregard of the differences between a
wartime and peacetime economy is certainly courting the charge that
it cannot distinguish between war and peace.
It is well to remind the majority that the great depression of the
1930's was overcome by the United States becoming the "arsenal of
democracy" and moving into World War II rather than through any
peacetime economic policies of the New Deal. This should make
them more cautious in trying to apply their depression economics to
the problems of the 1960's.
We agree with the majority that we should strive to better our
rate of growth, but we would warn'them and all our citizens to beware
of engaging in a numbers game based'upon GNP as an accurate measure of economic growth. Indeed, as our committee studies forcefully
revealed, GNP is a very limited measuring device of sound economic
growth, particularly short-range GNP figures. Such items as research
and development, education, increased consumer choice, and leisure
time from which spring future sound economic growth, do not show
up very stronglyjin GNPIfigurestwhile underdeveloped nations concentrating upon increasing their physical capital plant from moderate
beginnings show startling GNP percentage increases during their maturing period.
COSTS OF GROWTH

Furthermore, we point out that rapid technological advancement
(real economic growth) brings in its wake increased frictional unemployment. Itlalso bringslinuits .wakelincreased real costs resulting
from obsolescence of human skills and machinery and from the recoupment of the funds invested in the research and development which has
enabled the growth to come about.' We have an example in the increased frictional unemployment in our rural areas today which
resulted from the extraordinary technological advancement and economic growth in American agriculture. Do we indeed want to increase the already rapid rate of economic growth in agriculture until
we have been able to cope with the frictional unemployment which
has been created? Do we want to increase the already rapid rate of
technological growth rate in the field of drugs and hospitalization
until we have been able to cope with the cost problems which already
confront our citizens because of the rapid growth?
Furthermore, as we advance further in technological economic
growth the capital investment required to provide jobs for our people
increases rapidly (this is aside from the training costs involved in
preparing the worker for the new job). Testimony before our com' Senator Javits notes as follows: "I do not believe, nor do I think the minority intends to imply, that any
substantial amount of unemployment-frictional or otherwise-is an inevitable concomitant of our economic system. That amount of unemployment which will exist under full employment conditions due to
technological advances must be covered by such provision that the workers concerned will be protected
against being disadvantaged by unemployment over which they have no control. If such unemployment
is a necessary characteristic of our private economy, it must not be at the expense of the worker."

1960 JOINT ECONOMIC REPORT

41

mittee reveals that today $16,000 of capital investment is required
per new job. One of the basic factors of our recent and present unemployment is the high incidence of unemployment in the unskilled
and semiskilled sector of our work force and the strangely concomitant
labor shortage in many of the skilled areas. Also to be noted is the
increasing switch from blue collar to white collar worker in the manufacturing sector of employment, indicating a demand for new skills
as we move ahead technologically.
MORE RELIANCE ON FISCAL POLICY

We believe that in the interests of a higher rate of growth we must
place greater reliance on fiscal policy. This includes larger budget
surpluses in prosperous periods than we have had and a tax structure
which is more equitable and less a deterrent to growth. We also
believe there is continually room for re-ordering some of the priorities
in Federal expenditures programs to provide the progress which
stimulate growth and to cut back and eliminate those programs or
subsidies which support inefficiency in the economy. On these points
we and the majority agree substantially with the President's report.
However, there are obviously substantial disagreements between the
majority and the minority about what constitutes "equity" in taxation
and in evaluating Federal expenditure programs.
We believe that if we had a more effective fiscal policy along the
lines outlined in the preceding paragraph we could have and should
have a less restrictive monetary policy. We agree that the money
supply should grow in line with real economic growth. On these
points we and the majority are in agreement with the President's
report.
We believe that within this framework interest rates should be
expected to fluctuate in response to various influences, including the
evenness of growth in total demand, changes in financial institutions
and techniques of business and personal financing, and changes in
the composition of demand for both present and future goods and
services. Attempts to use public policies to prevent or offset these
fluctuations in interest rates will prevent necessary and desirable
adjustments in the economy.
Moreover, while we agree that the money supply should grow in
line with real economic expansion, we do not agree that an easy money
policy, of itself, will provide the impetus or the means for economic
growth. Economic growth depends on increasing our productive
capacity; that is, using some of today's resources for the purpose of
increasing the amount and productivity of resources which will be
available tomorrow. The necessary corollary of increasing the rate
of economic growth without inflation in a high employment economy
is increasing the rate of real saving. Accelerating the growth of
the money supply cannot substitute for this increase in the Nation's
saving rate.
Certainly the record in the respect of attaining growth without
inflation through proper management of monetary policy made by
the proponents of the majority's theory of growth and inflation when
they had the power to implement their theories from 1930 to 1940
and from 1946 to 1952 is a poor one and should make them question
their own wisdom.

42

1980 JOITB
PRICE STABILITY

ECONOAIIC REPORT
FOR ECONOMIC GROWTH

In the majority report we find the same blind approach to price
stability that led them to disaster after World War II. The majority
argues that, because there has been no recent substantial price increase
and there is now reasonable price stability, no need to worry about
inflation exists. But wisdom requires foresight. Isn't it time the
majority gave credit where credit is due for this administration's
correctly anticipating and guarding against inflationary forces? The
majority should support the wisdom of the President's 1960 Economic
Report in continuing to analyze and anticipate inflationary pressures
and to take action to neutralize them.
We believe that it is always proper to reevaluate the philosophy
upon which the U.S. central bank system is based, as interpreted by
the incumbent Federal Reserve Board. The Chairman of the Federal
Reserve Board has clearly and consistently stated his understanding
of this philosophy to be to preserve the integrity of the dollar as
constituting the greatest contribution the central bank system could
make to promote economic growth and maximum employment. 2
The issue is clear, if the majority wish to dispute it. However, the
majority refuses to draw the issue squarely and by innuendo and
misquotation distorts what it is. Does the majority believe the
Federal Reserve Board should have other basic objectives than to
preserve the integrity of the dollar? If they do, then they should
recommend amending the Federal Reserve Act to make it clear that
there should be a different underlying philosophy of the central bank.
This the majority which controls the Congress has failed to do. Failing honestly to face the issue, the majority should desist from clouding
the issue by the use of innuendo and misrepresentation. The majority
members confuse themselves in the process and to the extent that they
have power to deny the executive department the flexibility it needs
to manage the Federal debt, they damage economic growth, price
stability, and maximum employment.
The keystone to the President's Economic Report for 1960 as far
as fiscal policy is concerned is the prospective budget surplus. We
are pleased that the majority recognizes this, approves it, and believes
that a substantial surplus should be achieved. We are pleased that
the majority agrees with the basic assumption upon which the surplus
is predicated; i.e., a prosperous 1960 with a GNP of about $510 billion.
We do not know the model which the majority uses in stating that
an expectant $510 billion GNP for 1960 would be $20 to $30 billion
below the economy's potential output based upon a 4 percent rate of
unemployment. The majority certainly is not contemplating in this
model an increased amount of time devoted to education, to training.
and to research and development, which the President's report does,
Further, the majority seems to be mesmerized by a peculiar belief
that if the Federal Government does not spend the sums they consider
desirable in a particular area-health, education, research, and development, or whatever-there will be no progress or growth in those
2 Senator Javits notes as follows: "I am deeply disquieted about the apparent inability of our credit supply to keep up with our productivity requirements when the United States is operating in such economic
high gear. There is not such wastefulness in productive practices or undue diversion of production to
luxuries as to cause tight credit conditions, or to justify them. Certainly, for productive purposes like
home building, transportation, communications, education, etc., and for State and municipal government
needs, credit should be available on a reasonable basis. I do not agree with the majority that there is some
willful purpose chargeable to the Federal Reserve Board in keeping interest rates high, but I do believe
that we must find the reasons why our system cannot, consistently with the economic and productive
strength of the American economy, reflect it in more reasonable interest rates."

1960 JONT ECONOEAC REPORT

43

areas.' It almost seems that the majority ignores the fact that our
society is based upon the private enterprise system. They fail to
appreciate the constant reference in the President's Economic Report
to what the private, State, and local government sectors of the economy are doing and are being encouraged to do in these areas in addition to Federal expenditures. It is one thing to disagree with the
President's recommendations as to Federal expenditures and his appraisal of what the private, State, and local governmental sectors of
the economy will do in these areas, but it is blindness or dishonest to
say that nothing is planned and nothing will be forthcoming, in the
fields of health, housing, education, welfare, and research and development.
UNEMPLOYMENT

We agree with the majority in calling attention to the increasing
rate of unemployment which has occurred after each of the two recent
recessions. This is a serious matter and we regret that the President's
report did not give more emphasis to an analysis of it. However, the
majority method of dealing with it is certainly not analytical or objective. If we are to cope with the problem of unemployment we had
best eschew political partisanship until we know what we are talking
about. In our discussion of growth we have suggested that some part
of present-day unemployment is the result of rapid technological
growth. However, this is not a conclusive observation. Nor is
frictional unemployment the total of our unemployment. The
matter needs as thorough a study as possible.4 We are convinced that
unemployment in a rapidly growing economy is not solved by mere
increases in yearly GNP. In other words, technological growth does
create jobs but not necessailly in the geographical areas or for the
skills where the same growth has created the unemployment. Furthermore, mobility of labor is an important factor in any dynamic
economy and many of the programs advocated by the majority seem
to have a disregard for this factor. It must also be recognized that
any legislation to assist depressed areas must be designed to help
create jobs within such areas and not merely to transfer jobs from
one area to another.
The majority states that with "high unemployment" when production facilities are used at rates which are significantly below their
maximum efficiency (if this were true), there is nomerit in the contention that we cannot afford the progress
needed to make the United States militarily supreme and to
provide the education, research and development activities,
health standards, elimination of poverty and low productivity
in depressed areas, elimination of city blight, and the many
other advances upon which rising living standards in the
United States depend.
Let's be quite clear no one contends "that we can't afford the
progress." This kind of childish arrogance of suggesting that anyone
'Senator Javits notes as follows: "I believe that health care, especially for the aged, the unemployed, and
the
Indigent,
Is
urgently in need of support from the Federal Government to make a standard of health care
suitable to our standard of living and our national goals available to these groups. This cannot be done
without such help.
I do not believe that
this inevitably leads to 'socialized medicine' or Government domination of the doctor-patient relationship. On the contrary,
It
can
be
accomplished through existing
voluntary cooperative health plans, group practice units and health
Insurance plans, with full accommodation to the private doctor-patient relation."
' Senator Javits notes his comments on this problem in footnote 1, p. 40.

44

19 6 0 JOINT ECONOBEC REPORT

feels we can't afford progress is dangerous to the solution of the
problems that must be solved if we are to make orderly progress.
THE BEUDGET SURPLUS

We believe that the proposed surplus of $4.2 billion is a low ratio
of surplus to gross national product in 1960. We wish it could be
larger. We question whether the majority are sincere about their
criticism, however. There are two ways to make the surplus larger,
as the majority states: (1) Reordering the priorities in the Federal
expenditure program and (2) undertaking urgent reforms in the
Federal revenue system.
With respect to (1) the expenditure side, the majority throughout
their report advocate more, not less, spending. To pay for these
increases the majority suggest cutting expenditures. But their
proposed cuts are in such general terms as to be completely meaningless and unrealistic. For example, the majority refer to the $2
billion to $3 billion savings that could come from implementing the
Hoover Commission recommendations in military procurement and
supply. Yet powerful leaders of the Democratic Party encourage
the parochial aspirations of the three military services, resisting
unification and acceptance of the Hoover Commission reforms. A
few years ago the Democratic Congress cut the heart out of the
administration program to implement the Hoover Commission recommendations for getting the Military Establishment out of civilian
business-type operations. This was done by requiring approval of
the Armed Services Committee of each House before business-type
installations could be abandoned.
The savings suggested by reduction in business and agricultural
subsidies of $1 billion is unrealistic. The failure to itemize the specific
areas of reduction demonstrates its insincerity.
What is included in the figure of $865 million, labeled "subsidies to
business"? Are the majority afraid to itemize this figure for fear they
will have their own party colleagues jumping on them for suggesting
an elimination of what they regard as worthy projects? Why do they
avoid serious discussion of the biggest of all business subsidies-the
subsidies to commercial farms? Are the subsidies to small business
included in this figure? Undoubtedly so and yet the concluding recommendation of the majority report is this-"special programs to private
small business must be continued and improved." With one hand the
majority takes it away, with the other they give it back.
Closing of most "urgent tax loopholes" to gain $2.5 billion is
unrealistic in the face of the fact that the Democratic-controlled
Congresses for 6 years now haven't adopted even the modest tax
reforms concerning co-ops, savings and loan associations, and mutuals,
and depletion cutoff points suggested by the administration. Furthermore, is it realistic of the majority to suggest that under the present
Senate and House leadership the percentage depletion allowance for
oil is going to be changed?
The Ways and Means Committee, after holding extensive hearings
this fall with the cooperation of the Treasury Department into broad
internal revenue reform, announced through the chairman that nothing
would be done in 1960. What indeed is the majority referring to
when it says "elimination of the numerous preferential provisions

1960 JOINT ECONOliflC REPORT

45

in the estate and gift taxes"? To be realistic there needs to be some
itemization.
THE INTEREST RATE CEILING

The majority state that they oppose the elimination of the 414
percent statutory ceiling on the rate which may be offered on Federal
Government debt instruments with a maturity of more than 5 years
until certain "reforms" are effective in fiscal, monetary, and debt
management policies.
Strangely enough the majority have done nothing as a controlling
political party to implement these so-called reforms, except to talk.
Their political party has controlled the last three Congresses and their
political party has made no move to adopt any one of the proposed
reforms. Yet the majority state that "pending" these reforms they
will not do that which every economist without exception told our
committee should be done; i.e., remove the interest ceiling of 4'4
percent.' With respect to these "reforms" relating to the Federal
Reserve it must be emphasized that the Federal Reserve is essentially
a creature of the Congress and not of the executive branch of the
Government. Congress should act if the majority in Congress believe
the policies should be changed.
We will now mention the "reforms" recommended to the Treasury
Department. The Treasury has on its own initiative been extending
the auction method to test out its feasibility in other than short-term
bills. The Secretary of the Treasury gave a very detailed account of
the progress of this "reform" to our committee.
A second proposed reform is ironic: "Agree to sell long-term bonds
in the main when interest rates are low." It is ironic because this is
hardly a "pending reform." Furthermore, the Treasury has pursued
such a policy when it has been possible.
On the "reform" to institute a system of callable bonds, the majority blithely ignores the history of the use of callable bonds and the
problems involved in their use. The Treasury now has the authority
to issue callable bonds and certainly would use this method if the
climate were such that it was feasible. It is interesting to note that
the majority makes no attempt to demonstrate that the climate is
suited for issuing callables at this time.
The other "reform," i.e., "avoid seeking advice on new issues from
organize(l groups of their customers who are interested parties,"
shows such ignorance of marketplace buying ftnd selling as to warrant
raising the question whether the majority really believe in the private
enterprise (free market) system of economics.
Any prudent person offering new issues of securities, like any producer of merchandise seeking to sell a new product, would be extremely negligent if he did not sound out his market and appraise it
by discussions with those engaged in it. Under this and previous
administrations, the Treasury has wisely sought the most competent
and responsible advice in connection with its debt management, and
we uroe that it continue to do so. Moreover, it is a distortion of fact
to imply that the Treasury seeks advice onlv from its "customers,"
when it consults many sources in the financial community in seeking
to gage its market.
I S'enatr Javits notes that he cannot accept the minority's views with respect to this Issue, and calls attention to the discussion of this problem of interest rates on long-term Government bonds in his "Additional
Views.,"
52028-60 -

46

1960 JOINT

ECONOMIC REPORT

THE INTEREST RATE CEILING

It would be well if the majority presented their arguments for what
thev are worth honestlv instead of trying to win a point through
slanted verbiage. Just what the majority is trying to advise, if
anything, is hard to understand.
Now to the real issues involved in the failure to remove the interest
ceiling on long-term securities.
1. The Federal Government has had to pay unnecessary interest
inasmuch as there is no ceiling on securities under 5 years' maturity
and the Federal Government, unable to sell long-term bonds for less
than 4;1 percent coupons, has had to pay higher than 5 percent in the
short-term market.
2. Far from lengthening the maturities of the Federal debt, as all
experts advocate, the debt maturity has been further shortened for
the obvious reason that the long-term debt which matures constantly
is refinanced through the sale of short-term securities.
3. Interest rates which the general public pays have been forced up
beyond what they should have been. The general public, concerned
as it is with consumer credit, farmer and small business borrowing,
money to meet payrolls, etc., goes into the short-term market to meet
these needs. This is the very market into which the majority's
stiff-necked policy has forced the Federal Government. As Secretary
Anderson testified before our committee, the Treasury has been forced
to compete "primarily in the field where millions of little people
borrow their money." Moreover, as Mr. Anderson further testified,
"home building is hurt badly by the ceiling and will be hurt worsebecause the builders will find it increasingly difficult to obtain construction loans, which are short-term," and the supply of mortgage
money available to home buyers is being depleted because lenders are
finding short-term investments more attractive.
4. Not only have interest rates in the short-term money market
been forced up, even more serious, money in the short-term market
has become "tighter" because there is not enough money to meet
the excessive demand caused by Federal Government borrowings.
Some people are just going without. Nor will printing press money
really solve money "tightness." It will devalue the money already
in circulation and not give it to those who need it.
5. Long-term Government bonds are presently yielding over 4.25
percent though their coupons may bear only 252 percent interest.
This is because they are being bought and sold on the market at a
discount. The Government collects taxes only on the interest derived from discount at capital gain rates. If the discounted 25S percent
bonds, purchased for $96.25, are exchanged for bonds with coupons
bearing 4.76 percent coupons, for example (the same security as far
as the holder of the discounted bond is concerned), the Federal
Government would collect taxes on the interest at the full tax rate,
not the capital gains tax rate.
6. Bonds bought at discount even an hour before the death of a
wealthy person can be turned in for face value to pay Federal estate
taxes.
These two tax features are pointed out simply to demonstrate, if
it needs further demonstration, how the rich get richer and the poor
get poorer when Congress forces the Treasury to be fiscally unsound

1960 JOINT ECONOMIC REPORT

47

in the management of its affairs. When the majority profess to be
holding to their policy of denying the Treasury adequate measures
to manage the public debt in the name of low interest rates and
plentiful money and in the name of the little man they are indeed
being profane.
THE UNITED STATES IN THE WORLD ECONOMY

There should be some reference to the effect of world economics
upon the U.S. economy. There is no realism in trying to maintain
a position of economic isolationism. Yet the majority's monetary
and fiscal policy seems to be based upon just such an unreal concept.
Today the United States is to a large degree the world's banker and
how we run our monetary and fiscal affairs both affects and is affected
by the economies of other nations. Interest rates and the value of
the dollar follow economic laws operating worldwide. The impact
of these economic laws upon our domestic economy can no longer be
disregarded, if it ever could be.
We are convinced that our economic health becomes more closely
related to the economic health of other nations each year. We believe
equitable international trade, utilizing the free marketplace as much
as possible, is the best institution for promoting our own and other
nations' economic welfare. Our foreign economic policy should follow the philosophy of trade, not aid, wherever possible, and when
aid is resorted to, loans not grants, wherever possible.6 In tariff negotiations, our representatives must place increasing emphasis upon the
principle of reciprocity and the removal of unwarranted discriminations against American goods. We believe the President has followed
this philosophy in a reasonable manner in his programs.
THE ROAD TO ECONOMIC

GROWTH

One final point needs to be made. Our private enterprise system
needs to encourage more initiative and more thrift in our citizenry if
we are to have increased economic growth.
The greatest expression of thrift and initiative is gathering together
risk capital and putting it to work. For years now, instead of encouraging risk capital through a differential in our tax system we
have been discouraging it and encouraging other types of financing.
The earnings from risk capital are taxed twice-once when the corporation earns it; then when the corporation pays it to the stockholders, as the stockholder pays a Federal income tax on the same
earning. Earnings from bonds and borrowed money escape the 52
percent corporate tax because interest paid is a deductible item.
Retained corporate earnings, on the other hand, escape the full
impact of the ordinary personal income tax and at most are taxed at
capital gains rates.
The corporate form of doing business if it finances through real
risk capital-that is, new stock issues-has to compete with another
form of doing business-the big cooperative-which pays, if at all,
only one tax. The big co-op is not an example of the use of real risk
capital.
f Senator Javits notes as follows: "I do not see any reason for reluctance, or 'last resort,' in using aid as an
instrument of foreign economic policy, but consider it rather a basis in many cases for healthy economic
development where a foundation for private economic growth can only be laid by foreign aid."

48

1960 JOINT ECONOMIC REPORT

The stock dividend credit which the majority report singles out as
as example of a "loophole" is just the reverse. The real loophole is
the favored treatment given the other forms of investment. The
stock dividend credit is a very incomplete and modest attempt to
equalize the incidence of taxation on risk capital. Far from being
a break to the investing public, it would cost the investing public
more if their investments were in new capita] stocks rather than in
bonds, loans, or capital stock which splits through retained earnings.
Far from helping the wealthy citizen, the stock dividend credit is the
one small thing in our tax laws that encourages the new small growth
companies to expand.
If the majority mean business about encouraging economic growth
they should support policies that encourage thrift and initiative.
The President's report is replete with recommendations which would
further both thrift and initiative. The majority report, on the other
hand, is replete with proposals that would put further dampers on
these two important human motives.
SENATE
PRESCOTT BUSH,
JOHN MARSHALL BUTLER,
JACOB K. JAVITS.

HOUSE OF REPRESENTATIVES
THOMAS B. CURTIS,
CLARENCE E. KILBURN,
WILLIAM B. WIDNALL.

APPENDIX TO MINORITY VIEWS
LEGISLATIVE

RECOMMENDATIONS IN THE JANUARY
REPORT OF THE PRESIDENT

1960 ECONOMIC

I. Federal finances:
(a) Revenues (p. 55):
1. Extend the corporate income tax at the present rate
for another year.
2. Postpone for an additional year the reduction of
excise taxes on alcohol, tobacco, automobiles,
automobile parts, and accessories now scheduled
for June 30, 1960.
3. Postpone for a year the repeal of the tax on local
telephone service and the reduction of the tax on
transportation of persons, scheduled for June 30,
1960.
4. Amend tax laws applicable to cooperatives.
5. Preclude unintended and excessive depletion allowances for mineral products.
6. Tax as ordinary income any gain realized by the sale
of depreciable personal property used in business
to the extent of the depreciation deductions previously taken on the property.
7. Defer the taxation of income earned in less developed countries of the world.
8. Increase the aviation fuel tax to 43S cents per gallon
and impose a tax of 43' cents per gallon on jet fuel.
9. Increase the highway fuel tax by 3; cent per gallon
and continue the tax at 4% cents per gallon until
June 30, 1964.
10. Provide for an adjustment of postal rates as previously recommended to reduce the deficit on postal
operations by about $550 million.
(b) Debt management (p. 55):
1. Remove the 4% percent ceiling on the interest rate
which can be paid on U.S. Government securities
with a maturity of more than 5 years.
2. Enact a temporary debt limit somewhat higher than
the present permanent limit of $285 billion.
TT. Competition (p. 56):
(a) Require that antitrust agencies be notified when firms of
significant size engaged in interstate commerce propose
to merge.
(b) Authorize the Federal Trade Commission to seek preliminary injunctions in merger cases where a violation
of law is likely.
(c) Strengthen Federal law governing bank mergers accomplished through the acquisition of assets.
49

50

1960 JOINT ECONOMIC REPORT

(d) Grant the Attorney General power to issue civil investigative demands.
III. Small business (p. 56):
(a) Amend Small Business Investment Act to provide for
needed flexibility as to the type of securities that may
be purchased.
(b) Amend the Securities Act of 1933 to increase from
$300,000 to $500,000 the maximum amount of corporate security issue for which the privilege of simplified
regulation A filings may be accorded.
IV. Agriculture (p. 59):
(a) Extend through the 1963 crop year authority, which
expires after. the 1960 crop year, to bring additional
land into the conservation reserve.
(b) Expand the program by increasing the basic limitation
on the total payments in any calendar year from $450
million to $600 million.
(c) Authorize the Secretary of Agriculture to give special
attention in allocating conservation reserve funds to
those States and regions in which curtailment of production of wheat and other surplus commodities is
consistent with long-range conservation and production-adjustment goals.
(d) Provide new obligational authority of $10 million for the
Great Plains conservation program.
(e) The Sugar Act, which expires on December 31, 1960,
- should be extended early in the present session.
(J) Extend limitation on price support for certain crops
grown on newly irrigated or drained land.
(q) Amend the Agricultural Trade Development and Assistance Act of 1954 (Public Law 48) to make more effective the program of surplus disposal abroad.
(h) Place the loan program of the Farmers Home Administration on a revolving-fund basis and make other improvements in the laws affecting this activity.
(i) Provide that the Rural Electrification Administration
borrowings from the Treasury would be at an interest
rate not in excess of the available rate paid by the
Treasury on recently issued long-term marketable
obligations and the REA would charge that rate plus
one-fifth of 1 percent on future electric and telephone
loans.
tj) Place the Rural Electrification Administration operations
on a revolving-fund basis.
V. Natural resources (p. 60):
(a) Enact legislation establishing a consistent basis on which
non-Federal beneficiaries will share the cost of protection against floods.
(b) Strengthen the enforcement provisions of Federal legislation for control of water pollution.
(c) Enact a pending proposal for the preservation of certain
undeveloped shoreline areas for public use.
(d) Enact a long-range program to conserve helium gas.
(e) Authorize contract authority on coal research.

1960 JOINT ECONOMIC REPORT

51

(U)Enact legislation permitting revision of the fee schedule
for noncompetitive oil and gas leases on public lands.
VI. Education and health (p. 63):
(a) Provide a program of vocational rehabilitation for exservicemen having service-connected disabilities.
VII. Personal security (p. 64):
(a) Extend Federal-State unemployment insurance system to
employers of one or more persons, to nonprofit institutions, and to Federal instrumentalities that are not now
covered.
(b) Extend Federal-State system to Puerto Rico.
(c) Bring the provisions of the District of Columbia unemployment insurance system up to the standard recommended for all States.
(d) Take steps to provide additional funds for administration
of the Federal-State employment security system and
rebuild the Federal Unemployment Act.
(e) Allow the Secretary of Labor to make necessary interpretations of law and enforce compliance to remedy
serious defects in the legislation enacted in 1958 to
protect private pension and welfare plans.
(I) Extend the coverage of the Fair Labor Standards Act to
several million workers not now receiving its protection.
(g) Revise the outmoded provisions of the 8-hour law applying to Federal and certain federally assisted construction projects and to carry out the principle of equal
pay for equal work without discrimination because of
sex.
(h) Establish a statutory commission on equal job opportunities under Government contracts.
VIII. Area assistance (p. 66):
(a) Submit and strengthen aid to areas of persistent unemployment by providing Federal participation and loans
to business concerns, financial assistance to State and
local development groups, and for technical assistance
to local groups seeking to strengthen their regional
economies.
IX. Housing and home financing (p. 67):
(a) Make permanent the Federal Housing Administration's
program for insurance of home improvement and
modernization loans which expires October 1, 1960,
unless extended.
(b) Place Veterans' Administration home purchase financing
on the same basis with respect to maximum interest
requirements as FHA programs.
(c) Adjust maximum permissible interest rates on armed
service housing loans insured by FHA to permit such
loans at rates above the present 4Z percent ceiling.
X. Promoting economic growth with price stability (p. 71):
(a) Amend the Employment Act of 1946 to make reasonable
price stability an explicit goal of national economic
policy.

ADDITIONAL VIEWS OF SENATOR PRESCOTT BUSH
I share the minority views expressed elsewhere by my colleagues, but
wish to state more bluntly and emphatically my objections to the
majority report.
The majority have all but destroyed the Joint Economic Committee's usefulness by the extreme partisanship of their reports on the
recent study of "Employment, Growth, and Price Levels" and on the
President's 1959 and 1960 Economic Reports. At one time reports
of this committee were entitled to serious consideration by the
legislative committees of the Congress, by the Executive, and by
professional economists.
That time has passed. The majority has, during the time of my
service on this committee, followed the "party line" laid down by the
radical wing of the Democratic Party. Their specific recommendations
in this report, particularly in the fields of taxation and appropriations,
will most likely be ignored by the legislative committees which their
own party controls in this Congress-and has controlled since 1954.
Instead of a useful guide to public policies, they have written a
campaign document for the 1960 elections.
Were it not for the fact that valuable additions to economic knowledge are often made in papers prepared by contributing economists,
by Government witnesses, and by the committee's able staff, I would
recommend that the committee be abolished. It fails to discharge its
responsibilities under the Employment Act of 1946.
56

ADDITIONAL VIEWS OF SENATOR
JOHN MARSHALL BUTLER
I.

INTRODUCTION

In general, I concur with the minority's views which I have signed.
In order to develop some points of disagreement more fully, I am submitting these additional views.
The Joint Economic Committee is required to study the President's
Economic Report, hold hearings thereon, and present its views to the
Congress by March 1.
On January 20, the President transmitted his report to the Congress,
and the Joint Economic Committee started a series of hearings in
accordance with the Employment Act on February 1. These hearings
lasted for 6 days, and 22 witnesses testified. A list of the witnesses
and the days they testified follows:
Witness

Date of testimony:
February 1: Louis J. Paradiso, Assistant Director and chief statistician,
Office of Business Economics.
Martin R. Gainsbrugh, chief economist, National Industrial
Conference Board.
Dr. George Cline Smith, vice president and chief economist,
F. W. Dodge Corp.
Peter Henle, assistant director of research, AFL-CIO.
George E. Brandow, Pennsylvania State University.
Roy L. Reierson, vice president and chief economist, Bankers
Trust Co.
February 2: William McChesney Martin, Jr., Chairman, Board of Governors of the Federal Reserve System.
Raymond J. Saulnier, Chairman, Council of Economic Advisers.
February 3: Warren L. Smith, University of Michigan.
Richard A. Musgrave, Johns Hopkins University.
February 4: Stanley Ruttenberg, director of research, UAW-AFL-CIO, for
Walter Reuther, president.
Emerson P. Schmidt, Chamber of Commerce of the United
States of America.
February 4: Ralph Robey, economic adviser, National Association of
Manufacturers.
W. E. Hamilton, Farm Bureau Federation.
Angus McDonald, National Farmers Union.
Herschel D. Newsom, master, the National Grange.
A. Arthur Charous, trustee, Federal Statistics Users' Conference.
February 5: Robert A. Gordon, University of California.
Paul Samuelson, MIT.
William F. Butler, Chase National Bank.
B. U. Ratchford, Duke University.
February 16: Hon. Robert B. Anderson, Secretary of the Treasury.

The majority's report does not refer to any of their testimony, nor
does it deal in any substantial way with the material or statistical data
contained in the President's Economic Report. It is confined to a
recital of the views previously presented in the majority's views in
Senate Report No. 1043 on employment, growth, and price levels.
In fact, its report could have been written without waiting for either
55

56

1960 JOINT ECONOMIC REPORT

the President's Economic Message or the testimony of any of the
numerous witnesses who appeared before the joint committee.
The staff had completed its draft of proposed views dealing with
complex subjects, such as interest rates, before hearing the testimony
of the Secretary of the Treasury, the Honorable Robert B. Anderson,
and his associates who appeared on February 16, the very day when
the first galley proof of the majority's report was being printed for
presentation to members of the joint committee for their consideration.
The late Senator Robert A. Taft, the first chairman of this committee, in opening its initial hearings, said:
In a broader way our function is to try to develop governmental policies which may prevent the development of any
depression, and consequently at this time we are interested
in hearing from the business, labor, and agricultural interests
of the country as to whether they think there is something
which threatens the present condition of full employment,
and also whether they think there is anything the Government can do about it, and if they do, what they think the
Government should do, what powers might be granted by
Congress, or what general policies might be adopted by the
Executive.'
No legislation has been enacted to authorize any departure from the
purposes outlined by Senator Taft. Apparently, witnesses believe
that their appearances will contribute to the enlightenment of the
Congress. This is illustrated in some of their statements. For
example, Mr. Martin R. Gainsbrugh, chief economist of the National
Industrial Conference Board, in his opening testimony said:
taking a
I am delighted to be back, even though it meant
2
Angeles.
Los
from
jet at 3 o'clock this morning
The first witness was Mr. Louis J. Paradiso, assistant director-chief
statistician, Office of Business Economics. Mr. Paradiso's prepared
statement included two tables, as well as two graphs. These were
not included in the transcript of the hearings. In fact, at the conclusion of the summary of Mr. Paradiso's statement, the chairman
stated: "Your prepared statement will be printed in full in the record."
At the time that the members of the committee were confronted with
the task of examining the report prepared by the staff or the writing
of their individual views, the printed hearings were still not available.
It is ironic that in spite of these efforts by dedicated citizens who
wish to assist the committee in its work, no consideration has been
accorded to their views.
Public Law 304, 79th Congress, which established this committee
and the Council of Economic Advisers, stated that:
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
the Joint
I "Current Price Developments and the Problem of Economic Stabilization," hearings before
June 24,1947,
Committee on the Economic Report, Congress of the United States, 80th Cong., lst sess.tpt. 1,
p. 4.
Hearings before the Joint EconomicCcommittee, Congress of the United States, Feb. 1, 1960.

1960 JOMT ECONOIeC REPORT

57

nearly as may be feasible reflect the relative membership of
the majority and minority parties in the Senate and House of
Representatives.
(b) It shall be the function of the joint committee(1) to make a continuing study of matters relating to
the Economic Report; I
Regardless of any other recommendations contained in the majority's report, it has not devoted its attention to a continuing study
of
the matters relating to the President's Economic Report.
In the first report to the President by the Council of Economic
Advisors, dated December 1946, the Council said:
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 policymaking. It simply sharpens that 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 * * *." 4
In the 1960 Economic Report, transmitted to the Congress by
President Eisenhower on January 20, 1960, he said:
The report was prepared with the advice and assistance of
the Council of Economic Advisers and of the heads of the
executive departments and independent agencies directly
concerned with the matters it discusses. It summarizes the
economic developments of the year and the steps taken in
major areas of economic policy to promote the sound expansion of employment, production, and income. It also puts
forward a program for the year 1960 which, in the context of
present and prospective economic conditions, would effectively implement the purposes of the Employment Act.6
*Op. cit., "Current Price Developments and the Problem of Economic Stabilization,"
p. 3.
4 Ist Annual Report to the President by the Council of
Economic Advisers, December 1946, p. 7.
I Economic Report of the President, transmitted to the
Congress, Jan. 20, 1960, p. III.

58

1 96 0 JONT ECONoAC REPORT

In a report of the Council of Economic Advisers to the President,
which is found on pages 77 through 80 of the President's Economic
Report, there is the following statement:
For the fiscal year 1960, the Congress appropriated
$395,000 for the Council's activities, the same amount appropriated for the fiscal year 1959.8
cost
In view of the efforts made by the executive branch, and thereport
involved to the taxpayers, it is very strange that the majority's discusof the joint committee devotes only a few pages of its text to a
sion of the recommendations contained in the President's Economic
inReport. Furthermore, it is discouraging to the witnesses from and
dustry, agriculture, and labor, who have devoted their time of
expense to the preparation of statements for the enlightenmentbeen
this committee. They will readily see that their views have
completely disregarded.
The majority's discussion of the President's Budget and Economic
on
Reports is confined to a few pages. As in its previous reportfact
the
of
critical
mainly
is
it
levels,
price
and
growth,
employment,
a great
that no matter what we have achieved, and we have achievedbetter.
far
done
have
should
we
judgment,
committee's
the
in
deal,
We are living in an era when our way of life is on trial before the
wvorld. Our Government, which includes the Congress as well as the
Executive, is attempting to convince the uncommitted millions of
of
people that our way of life offers the only solution to the problems
foreign
our
to
disservice
great
a
economic growth and freedom. It is
policy to have a congressional committee, for purely partisan reasons,
engage in carping criticism of the administration, which will be used
to our detriment by the Soviets and its satellites in debates throughout
the world, as well as in the various international organizations concerned with economic development.
All of us in Government have a responsibility to abstain from unjuswho
tified partisan criticism, which can only lend comfort to those
wish to establish an entirely different w-Ai of life throughout the world.
II. GENERAL

OBSERVATIONS

ON THE PRESIDENT'S

ECONOMIC REPORT

Inasmuch as the majority's report has neglected to comment on the
many points developed in the President's Economic Report, it is
incumbent upon me to do so.
Apparently, the fact that in 1960 the U.S. economy will, for the
first time, exceed a gross national product of $510 billion is dismissed
of
lightly. Yet no people in history have ever enjoyed such a levelpromeaningless
and
futile
the
in
indulge
than
Rather
well-being.
jections of what might be done without any responsibility for accomplishment, we can take some satisfaction in our achievement.
It would seem appropriate in terms of supporting our position as a
leader of the free world to comment favorably on the substantial
progress recorded in the statistical tables presented by President
Eisenhower and his Council of Economic Advisers.
The majority's report is devoted to an extended discussion of our
failure to improve health, education, welfare, and the other services
which a free people expect from their Government. If the President's
4 Ibid., p. 80. j

1960 JOINT ECONOMIC REPORT

59

Economic Report had been carefully studied, these statements
could
not have been made. Again, in terms of our international
position,
they constitute a grave disservice.
President Eisenhower, in discussing education, said:
Notable gains have been made in education and other
cultural areas. School enrollment has risen in the
last
years from 50 percent to about 65 percent of all persons 12
the age group of 5 to 29 years. From 1946 to 1959, in
the
number of bachelor's and first professional degrees conferred
annually almost trebled, and the number of master's
and
second professional degrees showed a still greater relative
increase. To some extent, these advances represent
resumption of academic work interrupted by war, but the
the
large gains made in the past few years indicate a
rising
trend that will accelerate in the years ahead. The number
of earned doctorates conferred rose sharply after the
reaching in 1954 a new high, which has been maintainedwar.
several years. In the past decade, more than 83,000 for
doctorates have been conferred, compared with some
27 000
during the 1930's and about 31,000 in the 1940's. Marked
increases are expected also in the next several years. Another
source of satisfaction is the record of scientific achievement.
Since 1946, close to half of the Nobel awards for contributions to medicine, chemistry, and physics have been bestowed
on American citizens.7
Furthermore, the President's Economic Report for
the first time
contains statistical tables relating to the diffusion of well-being.
Per
capita income in constant dollars rose from $2,541
in
1952,
the
last
year of the previous administration, to $2,706 in 1959,
an increase of
8
1 percent compounded
In appraising this figure, it must
be remembered that perannually.
capita income ipcludes all of the newborn
children, those in school, as well as the elderly retired.
these groups have contributed to the gross national product, None of
but they
have still benefited from this increased productivity.
Civilian employment advanced from 61 million
million in 1959, an all-time high. The American in 1952 to 65.6
has created new jobs as the population and the civilian economy
labor force have
grown.'
Disposable personal income in 1959 prices, that is, income
available
to individuals after the payment of all taxes, was $1,678
in
1952, the
last year of the Truman administration, and in 1959
time high of $1,891, an increase of 12.7 percent, whichreached an allis almost 1%
percent compounded annually.'0 The per capita disposable
income
will double at this rate of increase in a period of 40 years,
in
spite
of
population growth.
Furthermore, the share of labor income and transfer
payments
compared with all personal income disbursements
73.5 percent in 1952 to 75.8 percent in 1959, an all-timeincreased from
of these important measures of well-being would be high." None
found by any
AThe Economic Report of the President, January,
'Ibid., p. 130.
' Ibid.

"0Ibid., p. 131.
11Ibid., p. 132.

1960,

p. 2.

1960 JOINT ECONOMIC REPORT

60

reader of the majority's report, including unfriendly delegations in
the Economic and Social Council of the United Nations, or similar
bodies.
There are still other statistical measures of personal and individual
satisfactions which are worthy of comment. In spite of the fact that
the impression is often given that our economy is one in which most
families do not enjoy the good things of life, in 1958 only 14 percent
of American families received 2incomes of less than $2,000 in dollars
of constant purchasing power."
In our manufacturing industries, in terms of constant 1959 dollars,
average hourly earnings have increased from $1.83 in the last year of
the former administration to $2.22 in 1959, an all-time high." Likewise, in 1959 prices, the average gross weekly earnings of workers in
manufacturing industries have increased from $74.53 in 1952 to
$89.47 in 1959.1"
The life insurance per family in 1952 was $5,300, whereas today it
is $9,300.'1 The financial assets and net equity of individuals have
also risen from a total of $372.8 billion in 1952 to $956.2 billion in
1959.16

There are many other ways to measure well-being than in monetary
terms. In 1952 our people enjoyed 58.8 million weeks of vacations,
whereas in 1959 this had increased to 77.7 million weeks. In 1959, 74
percent of all families owned automobiles, and 15 percent owned two
or more automobiles.' In 1952, 56 percent of nonfarm occupied
by the occupants. In 1959 this had indwelling units were owned
creased to 61 percent.'5
While there has been a tendency in some quarters to disparage those
who have invested their savings in the ownership of American business,
which provides employment for millions of people, it is significant that
in 1952 there were 6,490,000 stockholders, and in 1959 the number
almost doubled to 12,490,000 shareholders.'
At every level of education, great strides have taken place during
the years of the present administration, which are the subject of
partisan criticism in the majority's report. In 1952 the total kindergarten enrollment was 1,383,000. In 1959 it was 2,032,000. Elementary school enrollment in 1952 was 21,994,000. In 1959 it was
29,382,000. High school enrollment in 1952 was 7,108,000. In 1959
it was 9,616,000. College and professional school enrollment, which
in 1952 totaled 1,980,000, in 1959 has almost doubled to 3,340,000.20
The majority's report is critical of measures taken by the Government to assist older people, the unemployed, and the sick, but it has
completely ignored the statistical data which no one has questioned
contained in the President's Economic Report.
-In 1952 old-age, survivors, and disability insurance benefits paid
totaled $2,194 million. They were received by 5,026,000 beneficiaries.
In 1959, $10,300 million was paid to more than 13,800,000 beneficiaries.21

1sIbid., p.: 133Is Op. cit., p. 133.
'4 Ibid., p. 134.
"Ibid., p. 139.
"Ibid., p. 140.
I Ibid., p. 137.
'o Ibid., p. 138.
"Ibid., p. 140.
2Ibid., p. 141
21Ibid., p. 144

1960 JOINT ECONOMIC REPORT

61

Unemployment compensation, likewise, has been improved during
these years when, according to the majority's report, there was a
callousness about the needs of our more unfortunate citizens. In
1952, 76.6 percent of the nonagricultural employed were covered.
This has risen to 82.5 percent in 1959. The average weekly benefits
for total unemployed in 1952 were $22.79 as against $30.37 in 1959.22
Furthermore, in recent years many labor-management contracts provide for supplemental unemployment benefits for workers who are
unemployed.
In 1952, the last year of the previous administration, there were
1,219,000 beds in civilian hospitals. There are now 1,346,000 23
Regardless of the moneys which may be appropriated for health care,
in the last analysis more doctors with adequate training provide the
only real protection for our people. In 1952 there were 208,000
physicians. This has increased to 235,000 in the short span of 7
years.24 When it is realized that a doctor must undergo 4 years of
college training, 4 years of medical schooling, and then serve an internship, this is a remarkable gain.

President Eisenhower summarized the progress achieved by the
American economy since the adoption of the Employment Act of
1946 in his report as follows:
A few facts illustrate the ability of the American economy
to continue raising what has long been the highest living scale
in the world, while carrying a heavy defense burden and
meeting broad international obligations.
In the 14 years since the passage of the Employment Act,
employment has advanced, on the average, by nearly 800,000
a year. In real terms, the Nation's output of goods and
services, as well as its personal income, has increased by
more than 50 percent, or at a rate of 3.2 percent per year; and
the output of the private sector of the economy has advanced
at a slightly higher rate, 3.5 percent. For industrial production, the rate of increase has been 4.5 percent. The annual
increase of 3.2 percent in total national output, which corresponds to a doubling every 22 years, is roughly equivalent
to the long-term average reached in our previous history.
Thus, the American economy has sustained its long-term record of growth, despite the high level of industrial development
already achieved and despite temporary setbacks.
The increase in national output has made possible very
great gains in the well-being of American families. Evidence
of the advances made in this respect since passage of the
Employment Act is presented in the appendix on "Diffusion
of Well-Being" included in this report. Real income per
capita has increased by nearly 20 percent since 1946, and
the increase per family has been 16 percent. As incomes
have risen and as paid vacations have become longer and
more common, leisure time has increased and recreational
activities have become more widely enjoyed. The shortage
of housing, so evident immediately after World War II, has
been virtually eliminated. Since 1946, the housing supply
n Op.

cit., p. 144.

23 Ibid.,

p. 145.

24Ibid., p. 146.

52028-60

5

62

19060 JOINT ECONOMIC REPORT

has been increased by the construction of 15 million private
nonfarm dwelling units, and there have been marked im- provements in the quality of housing. At the same time,
there has been a general increase in homeownership; some
60 percent of all nonfarm dwelling units are owned by
the occupant families.
Attention to such material advances should not obscure
the accompanying gains made with respect to other components of our well-being, some of which are less tangible.
In health, there has been remarkable progress in the reduction of infant and maternal mortality; in the prevention, mitigation, and treatment of many diseases; in restoring the
physically handicapped; in making available a better balanced diet at lower cost; and in creating other conditions
conducive to longer years of life and greater efficiency:
Health services are more and more widely available, and the
great majority of Americans now have some protection under
voluntary plans of hospital, surgical, and medical insurance. * * *
The economic security of American families has been
advanced significantly in the years since World War II.
About 58 million persons-87 percent of all those in paid
employment-are now covered by the Federal Government's
old-age, survivors, and disability insurance system and related programs. More than 19 million persons are covered
by privately financed pension plans. The Federal-State
unemployment compensation system, which has proved its
worth as a defense against loss of income during periods of
economic adversity, now provides protection for nearly 85
percent of all persons on nonfarm payrolls.
But the progress made under Government programs
should not divert attention from the extensive provisions
made independently by Americans for personal and family
security. The number of life insurance policyholders, for
example, has increased by about 60 percent since 1946;
about 115 million persons were insured through legal reserve
companies in 1959. The volume of time and savings
deposits of individuals has increased by nearly $35 billion, or
more than 50 percent, since 1952. Share accounts in savings
and loan associations have also risen by $35 billion. in this
period, by nearly 200 percent.
And it is not too much to sav that we have made good
progress in moderating fluctuations in our economy. Although economic recessions, however minor, must remain a
matter of concern to all Americans, the relative mildness
and short duration of the three since the war have to be
reckoned as a major factor in the strengthening of personal
security.2 5
Because the majority's report has been singularly silent with respect
to the statements contained in the President's Economic Report, it is
necessary to quote these summaries so that they may be-made.a part
of the record in this Senate document.
25Op cit., pp. 1-3.

1960 JOrNT ECONOMIC REPORT

63

The American people have every reason to applaud the efforts of
both public and private groups in furthering our material, social, and
cultural progress.. The prophets of gloom and doom who deprecate
all that has been done, because they believe that if their untried
theories had been adopted more might have been accomplished, are
performing no useful function in terms of advancing America's wellbeing while they are giving great comfort to the enemies of all that
we cherish.
The forum on the "Prerequisites for Economic Growth," conducted
by the National Industrial Conference Board, was moderated by Dr.
Solomon Fabricant of the National Bureau of Economic Research.
He is the acknowledged leader in the field of economic growth and
productivity. While no one wants to be complacent about future
progress, it is important that certain basic facts are placed in proper
perspective. Dr. Fabricant said:
There is no question but that the level of real income in
Russia is far below ours. As a guess, I think those who know
would say a third of ours-substantially less than half of
the American level.2 6
He also stressed that economic growth cannot be achieved by merely
redistributing existing income. He said:
One reason why the problem of economic growth is so important can be observed in the history of the United States.
Suppose we were to ask by how much the average income
per capita of the poorer persons in the population could have
been increased a hundred years ago by a redistribution, or a
more even distribution, of income? How much would that
have raised income as compared with the sixfold rise that has
actually occurred from the long-term growth of average income per capita?
We don't have the income distribution of a hundred years
ago, nor may we assume that a violent redistribution of income could have avoided chaos. But any calculation of that
sort would indicate very clearly and quickly that the main
source of increase in income per capita (the main way, in other
words, to solve the problem of poverty) is by raising the average level of income per capita-making sure, of course, that
the distribution is made as reasonably equitable as possible. 27
It is also significant that in this same forum, Dr. Fabricant quoted
from a recent Russian study, which appears in "Problems of Economics," published in the International Arts and Sciences Press.
This study, "The Principle of the Personal Incentive and Certain
Wage Problems in the U.S.S.R.," a paper by a Russian economist
published in Voprosy Ekonomiki in its issue of January 1959, said:
"The many years of experience in the organization of social
labor under socialism have shown that equalitarianism is incompatible with the interests of the development of socialist
production. * * * The Communist Party of the Soviet
a0"Prerequisites for Economic Growth," National Industrial Conference Board, Inc., "Studies in Business Economics, No. 66," Sept. 24, 1959, p. 11.
27Op. cit., "Prerequisites for Economic Growth," National Industrial Conference Board, p. 13.

64

1960 JOINT ECONOMIC REPORT

Union has always conducted a consistent struggle against all
efforts to 'replace' distribution in accordance with labor by
petty bourgeois equalitarianism in the payment of labor.
* * * It is necessary more completely to utilize the * * *
principle of personal material incentive for a further upsurge
of socialist production and the hiring standards of the

people."

28

These statements were confirmed in the same forum by another
distinguished economist, Prof. Lloyd G. Reynolds, who, since 1951,
has been chairman of the department of economics at Yale University. After a trip to Russia, he summarized the attitude of Russian
industrialists as follows:
I pushed the factory managers quite hard on labor questions. Their setup in this respect is, in a way, very early
capitalistic. To find anything comparable in this country
you would have to go back to 1900, to the early days of scientific management, with not much union organization or
worker control over what the engineers were doing. This
was quite striking.
The position of the Russian factory director also seems to
be quite similar in many respects to that of a capitalist manager. It seemed to me that those fellows were working for
about the same reasons that an American corporation executive would work. If they do well, they get promoted to a
bigger enterprise, and get a good bonus at the end of the year.
Conversely, if they do not do well, presumably they will be
demoted, have less interesting work, and make less money.
Despite all the talk about working for the joy of socialist
labor, and so on, it seemed to me that these fellows were quite
like American business executives in their outlook on their
job. They are almost all engineers. In fact, they cannot
understand how we allow people to become business executives without engineering training. This they regard as the
standard way of getting into an executive position. Not
only the plant director, but the deputy director and a good
many people lower down are engineers.29
While we realize the importance of science and engineering for
the physical advancement of our well-being, we are not merely
materialistic, but we have cultural and spiritual values which have
been furthered by the policies adopted during the past 7 years.
III. GENERAL

OBSERVATIONS

CONCERNING

THE

MAJORITY' S

REPORT

The majority's report stresses the fact that unemployment was
at a relatively high level through much of 1959. Yet, at no point
does it adequately deal with the fact that much of this unemployment
was the direct result of the protracted steel strike. There is every
reason to believe that if the unfortunate stoppage of steel production
had not occurred, the forces of recovery, which were progressing
rapidly during the first 6 months of 1959, would have reduced unemployment to a very low level by the end of the year.
pp. 21, 22.
I
Ibid.,
Ibid., p. 37.

19060 JOINT ECONOMIC REPORT

65

The President, in his Economic Report, reviewed this factor in
great detail, but, once again, his analysis was ignored in the majority's
report. The President said:
* * * However, total unemployment was being reduced
at a rapid rate until the trend was reversed in July by the
beginning of the steel strike.
After some 500,000 employees in the steel industry went
on strike on July 15, nearly 100,000 other persons were soon
laid off in related industries, especially in mining and rail
transportation. Even though substantial inventories of steel
had been accumulated by many firms, stocks were being depleted rapidly by mid-October and serious imbalances were
making themselves felt. As a result, layoffs became increasingly heavy. By the time steel production was resumed on
November 7, under a Federal court injunction, employment
in steel-related industries had declined by more than 500,000
exclusive of the number on strike. In most other industries,
employment ceased to advance during this period, and in
October the rate of unemployment increased to 6 percent of
the civilian labor force.
The resumption of steel production brought an increase in
employment by the end of the year, and unemployment was
again reduced. Although the replenishment of working
stocks of steel could not be accomplished immediately, total
employment reached 66.2 million (seasonally adjusted) in
December, slightly above the record of 66 million that had
been attained in June. Unemployment in December was 3.6
million (seasonally adjusted), or 5.2 percent of the labor
force.10

No discussion of the employment situation which fails to recognize
the impact of the protracted steel strike has any meaning. The
majority is critical that the President has not fulfilled the requirements of the Employment Act in presenting a detailed blueprint
for the future.
It is easy to make glib prognostications, but the President and
the Council of Economic Advisers have fulfilled the requirements
imposed upon them in the following statements, which appear in
the President's Economic Report:
Although it is always difficult in a dynamic, free economy
such as ours to depict in advance the course likely to be taken
by production, employment, and income, present indications
warrant the expectation that the expansion now in progress
will be extended through 1960. And there are good grounds
for belief that, with appropriate public policies and private
actions, the expansion can continue well beyond the present
year.
Past developments and present conditions clearly suggest
that the demands of business concerns for capital goods and
for inventories will be especially important factors in the
year ahead. Expenditures on capital goods have been rising
for more than a year and should continue upward in 1960.
In part, and especially during the early months, the increase
s The Economic Report of the President, January 1960, pp. 12,14.

66

1960 JOINT ECONOMIC REPORT

will represent a catching-up on projects delayed or postponed because of shortages attributable to the steel strike.
Chieffy, however, capital investment should rise in response
to favorable underlying factors now discernible and likely to
strengthen as the year progresses. Surveys of businessmen's
intentions, and the increased volume of contract awards and
of new orders for industrial machinery, confirm this outlook.
A good demand from the farm economy for machinery and
equipment may also be anticipated.
Expenditures for residential construction, a second major
category of capital investment, are not likely to be as high as
in 1959. However, the extent of the decline should be limited,
and activity in this sector of the economy should exceed that
of most recent years. Outlays for modernization and alterations should be a steady expansive force in the building industry.
Within the aggregate of Government outlays, Federal
expenditures for goods and services should change little in
the first half of the year; but later, in line with provisions in
the fiscal 1961 budget for the development of water resources
and other public works, and for space and aviation programs, they should increase moderately. The upward trend
of expenditures at the State and local level, which reflects
particularly the provision of services needed by the growing
urban population, may be expected to continue, though
possibly at a slower rate. The construction of schools,
public service enterprises, and community facilities in general
is expected to advance moderately and to outweigh declines
in activity that occur under the Federal-aid highway program as a result of the mandatory reduction in apportionments under the present law.
Changes in investment in business inventories are likely
to be less regular during the year than the changes in final
demands. Restocking needs are clearly apparent, not only
for steel but also for many steel-using intermediate and
finished products; and further additions to inventories will
be required throughout the economy as production and final
sales increase. Inventory expenditures and the other outlays noted above should contribute to a strong expansion
in production, employment, and income. The increase in
employment should exceed that of the labor force and,
correspondingly, unemployment may be expected to fall.
Within this context, consumer incomes and expenditures
may be expected to increase substantially during the year.
Also, consumer confidence is favorable to an increasing
volume of purchases of consumer durable goods.
The financing of the investment needs outlined here,
together with a significant volume of consumer credit, will
make strong demands upon the Nation's capital and credit
markets. At high levels of income and savings, a greater
supply of investment funds may be expected. The sizable
Federal budget surplus projected for the fiscal year 1961
would be helpful in relieving pressure on the supply of funds.3"
" Op. cit., pp. 36, 37.

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1960 JOINT ECONOMIC REPORT

IV. STATEMENTS IN THE MAJORITY S REPORT WHICH REFLECT OPINIONS
CONTAINED IN ITS REPORT ON EMPLOYMENT, GROWTH AND PRICE
LEVELS

Although this report was supposedly devoted to a review of the
President's Economic Report and the statements of the witnesses
who testified thereon, it largely reflects the preconceived views which
were developed in connection with the majority's report on employment, growth, and price levels. In order to conserve space, there
are listed below some of the more significant areas which have been
quoted from Senate Report No. 1043 and are found in the majority's
views in this report. I have discussed many of them in my additional
views in Senate Report No. 1043 on pages 93 through 134. My
position is stated in that report.
Report of the
Joint Economic
S. Rept. Committee on
1043 (page) the January
1960 Economic
Report of the
President (page)
Reordering priorities ---------------.------------Taxes -- ---- ------------------------ --------- --------------------- ------Monetary policy and debt management -29-48
Market structure --Assistance to depressed areas --

24
21-24
49
54

10-13
13-15
15-17
17-19
19

All of these subjects have been discussed without any reference
to the President's Economic Report or the hearings held during the
month of February.
V. DETAILED DISCUSSION

OF VIEWS CONTAINED IN THE MAJORITY'S
REPORT

A. Prices and market structure
The majority's report stresses the need to change the market
structure of the American economy with particular emphasis on
"more effective application of antitrust legislation to industries in
which a high degree of market power is possessed and exercised by
large producers, even where no evidence of direct or overt collusion
or conspirary can be shown."
If America is to compete with the Russians, attacks on size per se
are ridiculous and have no justification other than to provide material
for partisan political activity. It should be emphasized that the
largest employer in this country is the Federal Government. Again
the remarks of Professor Reynolds of Yale University at the Conference
Board Economic Forum are worthy of comment. They are based
on his trip to the Soviet Union, in which he had the opportunity to
travel all the way from Leningrad to central Asia, visiting about 15
factories and talking to upward of 100 economists in research
institutes and universities. Professor Reynolds said:
* * * We saw everything from very large truck factories
and metalworking plants with as many as 40,000 workers
down to consumer goods factories with only 700 or 800
workers.12
s Op. cit., "Prerequisites for Economic Growth," p. 34.

68

1960 JOINT ECONOMIC REPORT

While no Member of the Congress would condone any action
which could impede the performance of our free enterprise economy
in the service of the American consumer, predicated on competition
in free markets, we must be vigilant in revising the antitrust laws
and in perfecting their enforcement not to jeopardize the efficiencies
of size and scale, which have made this country great.
Insofar as market behavior is concerned, the President's Economic
Report contains some illuminating data, which have been completely
ignored in the preparation of the majority's views. Table 2, which
appears on page 23 of the President's Economic Report, shows the
changes in the Consumer Price Index in 1959. The item reflecting
next to the largest percentage change from December 1958 to
November 1959 is used cars, where the. price index increased by 6.4
percent. If there is any market in which large firms and market
dominance is absent, the used car market is probably most
representative.
Another important factor revealed in the same table is that, as of
December 1958, services had a relative importance in the Consumer
Price Index of 34.4 percent. In almost every instance they are supplied
by small firms and not by the larger enterprises. Again, with the
exception of one commodity, namely footwear, which has a weight of
only 1.5 percent, services show the largest percentage change next to
used cars, namely 2.9 percent. With this heavy weight, this increase
accounts for a substantial amount of the rise in the All Items Index.
An examination of table 3, found on page 25 of the President's
Economic Report, shows a decline in most sectors of the Wholesale
Price Index. The All Commodities Index for the year December 1958
to December 1959 declined 0.3 percent. Crude materials for further
processing declined 3.7 percent. Finished goods declined three-tenths
of 1 percent. Steel mill products showed no change at all.
It is important in fulfilling the responsibilities of the Joint Economic
Committee that facts and figures rather than prejudices and preconceived ideas concerning subjects such as administered prices should
govern the findings and conclusions of this important Joint Economic
Committee. Prof. Stephen K. Bailey, director of the graduate program, School of Public and International Affairs, Princeton University,
at the time of the "Brookings Lectures on Research Frontiers in
Politics and Government," said:
In the kind of world in which modern decisionmakers live,
fraught as it is with bignesses, vastnesses, and statistical
drifts, the postulate of faith that the future is really malleable, that individual choices really-count, is of no small consequence. The assumption of classical economists that individual choice could have no effect on the market seems to
have carried over into a great deal of fatalistic, if not nihilistic,
20th century political thinking. The prophetic service of
Toynbee is his pointing out that history has always involved
choices of men
imperfect competition, and that the moral
of power influence the market mightily.3 3
There has been no evidence presented to the Joint Economic Committee that our antitrust laws, which have been in effect since 1890,
2) "Research Frontiers in Politics and Government, Brookings Lectures," 1965, The Brookings Institu.
tion, Washington, D.C., October 1955, pp. 12-13.

1960 JOINT ECONOMIC REPORT

69

are ineffective in preventing monopoly, and the performance of the
price indexes over the past year supports this view.

B. Defense
In my additional views in Senate Report No. 1043, I clearly stated
that I did not believe that the Joint Economic Committee had been
charged by the Congress with the problems of national defense. I
still maintain this view. The majority's report gives the American
people as well as friendly citizens in other countries the erroneous impression that our defenses are dictated by budgetary restrictions. It
states:
* * * Cutbacks in the real volume of our outlays, while
the Soviets continue to increase the volume of theirs, requires a more convincing explanation than has yet been offered to assure the American public that the proposed defense
program for fiscal 1961 is not to be unnecessarily limited on
the basis of budget-balancing considerations.
Again, a statement of this kind is a distinct disservice to our national
unity, and it demonstrates a lack of understanding of the procedures
in the defense departments. House Report No. 408, 86th Congress,
dealing with defense appropriations for the 1960 fiscal year, on page 21
estimates that unexpended balances at the end of the present fiscal
year will be more than $32 billion. In other words, without appropriating a single penny during the present session of the Congress,
there would still be $32 billion unspent in the hands of the Defense
Department as of June 30 of this year.
Furthermore, on August 4, 1959, the Congress cleared for the
President's signature H.R. 7454, the bill appropriating funds for the
current fiscal year for the Defense Department. It provided almost
$20 million less than the President requested. This was the considered
judgment of a Congress controlled by the Democratic Party.
This hardly suggests that the administration is planning our military program around the budget. On the contrary, President Eisenhower, a military expert of distinction, and the Joint Chiefs of Staff
are in a better position to evaluate what is needed than this Joint
Committee, which has held no hearings on this subject. It has been
empowered to review economic problems, but not the size and composition of our Armed Forces.

C'. Reordering of the priorities in the budget
The majority's report devotes 18 lines of text to a reordering of the
priorities in the budget in the amount of $10 billion in terms of both
expenditures and revenues. The budget document itself is a very
voluminous book. The Appropriations Committees of the Congress
devote weeks to a review of every item therein. The approach
presented in the text of the majority's views is superficial and unworthy
of any serious intellectual attention.
In discussing proposed expenditures, the majority's report provides
a nicely rounded sum of $2 billion for "increase for missiles, space
and combat troops." Without any indication as to how or where
this money should be spent, or how it should be divided among the
various categories included, it pontificates that $2 billion is the proper
additional expenditure to insure our national security.
52028-6O---e

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1960 JOINT ECONOMIC REPORT

Likewise, it again presents a convenient figure of $2 billion for
"increase for schools, depressed areas, and social programs." This
could encompass almost anything, and again there is no attempt at
explaining how this money would be apportioned or for what purpose.
The scholarly acceptance of the studies of this joint committee are
placed in jeopardy when statements are made in this cavalier fashion.
In future years the country will be faced with an ever-mounting burden
of taxes to finance expenditures authorized or proposed by this
Congress. It is impossible to examine the many measures not included
in the President's budget that would impose additional taxes on the
American people and make the surplus envisaged by the President
impossible, However, a list of only eight measures which have
received some consideration in this
ongress shows increased
unbudgeted expenditures in excess of $5.5 billion annually. A list of
these few measures is of interest.
Water pollution control (final) (H.R. 3610, Blatnik) -$90,
000,
Aid to depressed areas (passed Senate) (S. 722, Douglas et al.) - 389, 500,
Community facilities (introduced) (H.R. 5944, Spence) -1,
000, 000,
Federal aid to education (passed Senate) (S. 8, McNamara) 900, 000,
Public Health Training Act (introduced) (H.R. 6871, Rhodes,
Pennsylvania) -13,
000,
Hospitalization (introduced) (estimated) (H.R. 4700, Forand) -- 2, 100, 000,
Emergency Home Ownership Act (introduced) (H.R. 9371, Rains)
(estimated) 1, 050, 000,
Veterans benefits (passed Senate) (S. 1138, Yarborough et al.) --150, 000,
Total -

000
000
000
000
000
000
000
000

5, 692, 500, 000

D. Debt and fiscal policy
The majority's report is largely devoted to a criticism of the Federal
Reserve System and the Treasury's operation in funding and refinancing the national debt. It is noteworthy that similar views are expressed in identical language in this report and Senate Report 1043
on "Employment, Growth, and Price Levels." This likeness indicates
a completely closed mind and preconceived views which have not been
influenced by either the President's Economic Report or the testimony
of the witnesses.
Such a fact does not reflect creditably on the procedures of the Joint
Economic Committee. The majority's report proposes a number of
completely unrealistic policies. For example, it suggests that the
Treasury should "agree to sell long-term bonds in the main when
interest rates are low." It is one thing to suggest how the Treasury
should sell its bonds, and quite another to assure that anyone will
buy them. At a time when interest rates are low, investors are loathe
to acquire long-term obligations with a low yield. This basic tenet is
one which is accepted by those who are familiar with the financial
markets and have dealt in securities.
The majority's report suggests that the Treasury should "institute
a system of callable bonds so that the public is not saddled interminably with high interest rates." Again, this is an intriguing suggestion.
However, it is completely unrealistic and superficial, since investors in
a free economy will not purchase such bonds, as they have alternative
investment opportunities, and the Treasury must compete for the
savings of our people as long as we maintain a free economy.
The majority's report neglects the obvious corollary to its proposal
that, if callable bonds were issued, an even higher interest rate would
be required so as to make them attractive to investors.

1960 JOINT ECONOMIC REPORT

71

In its entire discussion of monetary policy, the majority's report
fails to indicate any understanding of the basic fact that those who
purchase short-term bonds are usually not the same individuals or
institutions as those who invest in long-term bonds. These two types
of securities are acquired for entirely different purposes, and no
amount of pontification by this joint committee will change the
investment preferences of institutional buyers, savings banks, private
individuals, and others who are purchasers of Government securities.
Throughout the discussion of debt management and monetary
policy, the majority's report attempts to present its readers with the
conclusion that high interest rates will prevent economic growth and
the full use of our resources. It implies that they add unnecessarily
to business costs, that they discriminate unfairly against small business, and that the Federal Reserve System is primarily concerned
with creating artificial and unjustifiable profits for the commercial
banks who are affiliated with it.
Those who have studied America's financial mechanism know that
nothing could be further from the truth. Actually, interest rates for
many years in America have been at an artificially low level. In
recent months, the recovery in Europe has been proceeding rapidly,
and it is noteworthy that the interest rates prevailing there are considerably higher than those here in the United States. Unless we are
to continue complacently to watch our gold reserves decline, there
has to be some balance between the attractiveness of securities and
investments in this country with those abroad. It is frequently overlooked that foreign central banks may convert their dollar balances
into gold at will, and they have been doing this at an astonishing rate
for many months.
The majority's report proposes thatIn the area of monetary policy, we offer as a general prescription that the supply of money-i.e., currency held outside the banks and adjusted demand deposits-should increase over time at about the same rate as gross national
product, allowing for normal velocity. * * *
It is perhaps helpful in placing some of these problems in better
perspective to review what has taken place in other countries. Immediately after World War II a labor government was responsible
for the destinies of the United Kingdom. Finally, the Conservative
Party came to power. In 1957 that Government appointed a
special committee known as the British Council on Prices, Productivity, and Incomes. Its chairman was Lord Cohen, a judge, who
was also the first chairman of the Royal Commission on the Taxation
of Profits. Its other two members were Sir Harold Hewitt, a past
president of the Institute of Chartered Accountants, and Sir Dennis
Robertson, retired professor of political economy at Cambridge University.
The recommendations of this Council provided the economic planning for the British recovery, and it obviously met with the approval
of the electorate since the Conservative Party, which implemented
this program, was returned to power.
In discussing monetary policy, this commission said:
"The dangers of inflation have only been scotched, not
killed, by the slackening of tempo in the last 12 months.

72

1960 JOINT ECONOMIC REPORT

We must not suppose that we have solved the problem of
getting the growth of incomes into line with that of productivity, merely because in the year 1958 increases in income
look like being distinctly lower than in previous years.
"Our balance of payments is in a healthy state, and our
foreign exchange reserves have been rising very satisfactorily:
but neither of these conditions is bound to last. Past experience suggests that any substantial revival of demand may
well be accompanied by renewed threats to price stabilit
to the balance of payments and the gold and dollar reserves."34
The First National City Bank of New York, in its Monthly Letter
for October 1958, in discussing this report made the following observations:
The measures to dampen down demand taken by the
British authorities in September 1957, under the pressure of
a sterling crisis that threatened exhaustion of its international
reserves, included an increase in the official discount rate to
7 percent-the highest since 1921-the establishment of
ceilings on commercial bank advances, a further tightening
of controls over new capital issues, and cuts in Government
outlays. * * *
Looking farther ahead, the Council squarely faces the basic
issue arising "from the conflict of two main objectives of
economic policy-full utilization of the national resources
of labor and capital on the one hand, and stable prices on
the other." * * *
The Cohen council found that the Government "cannot
afford" to allow the pressure of demand for goods and for
labor to "rise to the peak levels of the past if it wishes to
avert price inflation."
Noting that this advice will remain valid "for as far ahead
as it is useful to look," it went on to observe that if peak
levels of demand are avoided "it can hardly be expected that
the average level of unemployment over a period of years
will be quite so low as in the last decade."
The problem of local concentrations of unemployment is
likely to become "somewhat more serious"-all the more so
since the direct cause of these pockets is often some change
in the structure of industry not itself connected with the
level of overall demand. The policy of "bringing work to
the workers" has "definite limits" as long as the Government rules out "extravagantly wasteful methods." 35
In considering the request of the Secretary of the Treasury, to
remove the artificial ceiling of 434 percent on long-term Treasury
bonds, it should be remembered that in Great Britain a 7-percent
discount rate was accepted as the price to avoid inflation and insure
economic recovery.
The editorial page of the New York Times of Saturday, February
20, included an excellent discussion of the economic growth which
has taken place in Western Germany. This editorial clearly shows
31First National City Bank Monthly Letter, "Business and Economic Conditions, Full Employment
and Stable Money-A British View," October 1958, p. 118.
85Op. cit., First National City Bank Monthly Letter, p. 118.

1960 JOINT ECONOMIC REPORT

73

that price inflation and the manipulation of the money supply are
not a necessary prerequisite to growth. It said:
Is price inflation a necessary prerequisite to, or accompaniment of, a high rate of national economic growth, as one
school of thought holds? Or is it true that, as many are
firmly convinced, the process of currency depreciation,
though it may, under favoring conditions, contribute to
temporary bursts of economic expansion, is fundamentally
inimical, if not potentially fatal, to the achievement of a
state of long-term economic expansion?
Most of the discussion of this question is conducted at the
purely academic level, or in terms of U.S. historical experience. The introduction of case histories outside this country
is always a refreshing addition to the debate.
The postwar recovery of the West German economy has
been one of the most remarkable achievements of its kind,
whether judged by present standards or those of any other
period or place. Despite heavy wartime destruction and
the burden of partition, plant dismantling and its refugee
problems, Germany had regained prewar production levels
5 years after the war's end and had become a pace setter in
this respect in Western Europe. No less striking, as a study,
which appears in the February issue of the Monthly Review
of the New York Reserve Bank, reminds us, has been the
restoration of the country's position in world trade, which
has resulted in turning the Deutsche mark into one of the
world's hardest currencies.
True, Germany was the beneficiary of massive U.S. aid
in the early postwar years, but this aid might have resulted
in something considerably less than a miracle had it not been
accompanied by an early restoration of a free market mechanism. It was by this mechanism, as the bank points out,
that German efforts and resources were channeled into the
most useful employment. Moreover, it adds, "the early
adoption of a vigorous monetary policy, which helped to
contain inflationary pressures at home, insured Germany's
competitive position in world markets and helped provide
the ordinary financial setting necessary for rapid economic
recovery." 36
Its concluding paragraph clearly joins the issue which divides the
majority's views from my own. It said:
Dr. Wilhelm Vocke, one of the architects of Germany's
recovery, notes that his country's experience contains "two
principal lessons." The first is that currency stability can
be achieved and preserved even under adverse circumstances.
The second lesson-and to him a more significant one-is
that a monetary policy firmly committed to currency stability
not only does not conflict with rapid and sustained economic
growth but indeed is essential to its achievement."
" The New York Times, vol. CIX, No. 37,282, Feb. 20,1960, p. 22.
"7Ibid.

74

1960 JOINT ECONOMIC REPORT

Because there has been so much confusion with respect to monetary
and fiscal policy, it is necessary to set forth a few of the basic prerequisites for a monetary policy that will provide long-term growth.
Dr. Winfield W. Riefler, assistant to the Chairman, Board of
Governors of the Federal Reserve System, in a paper delivered at the
session of the 18th Stanford Business Conference on July 21, 1959,
said:
What can we say then of the preferred environment for
growth? I do not refer here to the resource factors essential
for growth, such as invention, education, and research but
rather to the more general type of environmental factors
touched upon in this paper.
First, among these I would emphasize the maintenance of
a market-oriented economy, sensitive to competitive forces,
in which costs and prices are flexibly responsible to the interplay of supply and demand. In such an economy, I would
expect to find quick appreciation of the advantages of essentials to growth-specialization, substitution, innovation,
efficiency, and economy.
Second, I would rely primarily upon the flexible adaptation of fiscal and monetary policies to provide both a sustained high level of output and a price behavior that did not
stimulate expectations of inflation, creeping or otherwise
Third, I would hope that the benefits of rising productivity
and growth were broadly distributed in three general directions and not overweighted in any one: (a) in the direction
of wage and income advances to the working force to encourage mobility and the ready availability of needed skills and
talents of points of innovation; (b) in the direction of lower
prices promotive of broader and expended markets for those
end products where productivity has lowered real costs; and
(c) in the direction of sufficient profit-encouragement to
those who innovate successfully to simulate initiative in
management-planning for growth. In other words, I would
favor a situation where the efficiencies of growth were
reflected in falling, not rising, unit costs.
I think it was something like this that provided the environment so favorable to the very rapid growth rates that
prevailed in this country in the last third of the 19th century. I suspect that the lowering of unit costs at that time,
made possible by the application of the new techniques of
the industrial revolution to the untapped resources of the
West, created a situation in which falling prices for final
products still left wide margins to provide higher returns for
manpower as well as investment.
Finally, I would avoid a situation where, despite a high
rate of technical innovation and rising productivity, unit
costs rise to such a degree as to press seriously on profit margins and thus bring pressure for selling prices also to rise.
That path is the path of inflation with all the evils it entails.
I do not disagree with the exponents of the economics of
creeping inflation when they say that if costs rise faster than

1960 JOINT ECONOMIC REPORT

75

productivity final prices must rise or the economy will grind
to a halt. I disagree with them rather when they say that
such a process is sustainable and constitutes an acceptable
price for growth. My complaint is that it is both cruel and
dangerous. Far from providing a firm underpinning to
growth, it will, if long continued, engender instability, increase tensions, and impair the very basis of growth.18
Mr. Woodlief Thomas, economic adviser to the Board of Governors
of the Federal Reserve System, in a paper entitled, "Strategic Factors
in the Current Business Outlook," presented at the Helen Slade
Memorial Conference of Forecasting sponsored by the New York
Statistical Society, on April 23, 1959, said:
Easy money, i.e., abundant credit availability and low
interest rates, taken alone, cannot assure sustainable growth.
Adequate credit is essential, but excessive credit, though a
temporary stimulant, in the long run will lead to unstabilizing
consequences. Where there are special weak elements in an
otherwise strong economy, easy credit is likely to stimulate
the already exuberant sectors without aiding those that are
depressed.
The role of monetary policy is to assure the maintenance
of an adequate supply of cash balances for the effective operation of the economy. There is no fixed amount relative to
gross national product or any other measure that is appropriate under all conditions. Allowance must be made for
changes in the rate of use of existing money, which may be
influenced by liquid assets other than cash and by anticipations and other attitudes of the business community.
It is most important that bank credit not be employed as
a substitute for saving at a time when investment demands
exceed the supply of savings available for lending and when
there is relatively full utilization of resources. In a broad
sense, bank credit changes should correspond to changes in
savings that are held in cash form, if economic balance is to
be maintained.
Monetary policies should be conducted so as not to contribute to instability by forcing credit liquidation or stimulating unsustainable credit expansion. Monetary policies,
however, cannot be expected to offset instability arising from
other factors. To attempt to do so would be likely to accentuate rather than prevent instability in prices and employment in the long run. There is no case-at least since the
establishment of the Federal Reserve System-in which a
downturn has been brought on by tight money. Downturns
have usually developed because of pricing policies and income
distortions or unsustainable speculative developments that
were often aided by excessive credit expansion.3 9
It is significant that a person with the broad understanding of
monetary policy and an association with the Federal Reserve System
soOp. cit., "Prerequisites for Economic Growth," National Industrial Conference Board, p. 32.
so Op. cit., "Prerequisites for Economic Growth," p. 31.

76

1960 JOINT ECONOMIC

REPORT

extending for a period of 38 years-in fact, for all but 9 years of its
existence-should categorically state that:
* * * There is no case-at least since the establishment of
the Federal Reserve System-in which a downturn has been
brought on by tight money * * *.40
Mr. Thomas was also a participant in the Forum of the National
Industrial Conference Board previously referred to. He discussed
Mr. Riefler's basic economic views and summarized them as follows:
Inflation is the enemy of growth, particularly when there is
public expectation that the purchasing power of money will
continue to decline. Inflation impairs growth:
1. Because it increases instability-high level of activity
cannot be sustained for long when inflation is expected to
prevail;
2. Because it fosters the misallocation of capital and impairs the quality of the managerial and investment decisions
on which gorwth is based;
3. Because it distorts the saving-investment process and
encourages overspeculation; and
4. Because it undermines the country's position in international trade.4 '
The recommendations contained in the majority's report would, in
time, jeopardize the entire financial stability of our economy and
result in its virtual collapse. No Member of the Congress can accept
these recommendations without great fear and concern. The Secretary of the Treasury had made a convincing argument in favor of
having the maximum possible freedom in refunding our mounting
Federal debt into obligations which would be attractive to institutional investors. The views of the majority's report not only reject
his request for the elimination of the present 4Y4 percent statutory
ceiling on these bonds, but, furthermore, proposes an additional
deterrent, namely, that "the Federal Reserve should immediately
take the steps necessary to regulate the presently unregulated New
York bond market and to apply margins to its customers." If this
step were taken, it is difficult even to begin to estimate what problems
would be generated in the orderly handling of the Federal debt.
This last suggestion is made without any explanation or supporting
evidence as to its necessity or any evidence of abuses in the New York
bond market which requires this drastic intrusion of a new Federal
regulatory power.
It is again noteworthy that the committee, in outlining its plans for
the coming year, discusses the tabulation and summary of a questionnaire submitted by 17 security dealers. It states:
In connection with the committee's hearings conducted as
part of the study of employment, growth, and price levels, the
17 firms dealing in Federal Government securities were asked
to submit detailed information on a number of aspects of their
business over the last 10 years. The assembly and submission of this information is now nearly completed. The designated staff is directed to tabulate and summarize the data
'ifbid.

4"Ibid., p. 30,

1960 JOINT ECONOMIC REPORT

77

from the dealers for committee consideration, in accordance
with committee rule 23, in a manner which will not reveal the
identity of any individual, partnership, corporation, or entity.
It is difficult to justify a sweeping proposal such as the regulation of
the New York bond market when the committee admits that it has not
yet tabulated the questionnaires received from dealers in these securities. In fact, it is appropriate to question whether any worthwhile
result can be achieved by analyzing questionnaires if preconceived
answers have been derived before their study.
It is remarkable that the majority's report of the Joint Economic
Committee can completely fail to comment on the performance of the
country's credit machinery during the past year as revealed in the
President's Economic Report. Federal Reserve policy was directed
at maintaining a stable price level. This goal has been achieved with
only a small expansion in total bank assets. Nevertheless, the economy was able to finance a record recovery.
The majority's report states:
* * * We must, however, be concerned about the undue
emphasis on fighting inflation which continued to dominate
the administration's policies and those of the monetary
authorities.
It seems far wiser to stop inflation before it starts than to clamp
controls on the economy later.
The President's Economic Report shows that the growth in both
consumer and real estate loans exceeded the high rates of 1955. He
stated thatNot only was consumer lending by banks at a record rate,
but so was the overall increase in consumer credit outstanding. * * * All major categories of installment credit
other than that extended for the purchase of automobiles
rose more than in 1955. Contrary to the developments in
that earlier year, however, there appears to have been no
appreciable liberalization in 1959 of the maximum terms on
which installment credit was made available to consumers. 42
He also said:
* * * The amount of nonfarm residential mortgage
credit in use increased by a record $15 billion, compared
with an increase of $12 billion in 1958. State and local
security issues exceeded those in any previous year, as new
authorizations of State and local securities continued to
build up a large backlog of issues.
The credit markets were also required to supply funds
associated with an increase of $7.9 billion in U.S. Government debt and to absorb outside of the banking system the
$8 billion reduction, referred to above, in bank holdings of
U.S. securities. Most of the new issues of Federal securities
were obligations of short- and intermediate-term maturity,
because the 4%-percent interest rate limitation effectively
precluded flotations of longer term U.S. Government securities after the early part of the year. Hence, the Federal
Government was forced to do much of its needed financing in
43 Op.

cit., Economic Report of the President, January 1060, p. 19.

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1960 JOINT ECONOMIC REPORT

the same maturity range in which commercial banks were
reducing their holdings of Government obligations.
Investment sources outside the commercial banking
system absorbed the new offerings of Federal securities,
as well as bank sales of short- and intermediate-term Federal
obligations, but at a substantial increase in rates. Nonfinancial corporations expanded their holdings by $5 billion
* * * mostly in very short-term securities; foreign and
international accounts, savings and loan associations, and
individuals likewise added to their portfolios.4 3
None of these statements indicate that the policies of the Feueral
Reserve System have in any way interfered with housing and home
construction, with expansion of consumer credit, or the financing of
State and local bond issues for those projects demanded by the voters
in their respective localities.
It should be emphasized that an increase in the interest rates does
not necessarily profit large institutional investors or commercial banks
since the value of their present bond portfolio is immediately reduced.
Furthermore, interest received on Federal securities in most cases is
fully taxable, and a large portion of it reverts back to the Treasury.
The majority's report continues to raise an emotional issue rather
than to deal with an economic fact; namely, how the Treasury can
best refund its obligations which are maturing at a rate of about $80
billion annually. As long as a large portion of the national debt
consists of short-term securities, the financial community will be
subject to continuing pressures which impede loans to small business
which is the object of this committee's apparent concern.
If a larger portion of the Government debt were sold to institutional
investors who are necessarily interested in long-term securities at a
competitive yield, the pressure on short-term borrowers and those
concerned with the purchase of homes and consumer goods or requiring funds for financing small business would abate. High interest
rates for these classes of borrowers are the direct responsibility of this
Congress, which has refused to take the action recommended for
their relief.
The majority's report in its discussion of monetary policy expresses
particular concern with the financing of homes. Page 209 of the President's Economic Report, table D-46, shows a continuing growth in
conventional mortgage financing which reached an all-time peak in
1959 of $77 billion, an increaseof $9.4 billion over 1958. On the other
hand, there was a decline in Veterans' Administration mortgages of
$300 million and an increase in Federal Housing Administrationinsured mortgages of only $4.2 billion.
Artificial interest rates do not build homes, and they represent a
disservice to those in the construction industry as well as to those who
are seeking new housing.
These views were reinforced in testimony before the Joint Economic
Committee by Dr. George Cline Smith, vice president and chief
economist of F. W. Dodge Corp., on February 1. He commented on
the role of interest rates as a factor in the growth of conventional
mortgages and Government-underwritten mortgages. Dr. Smith
saida

id

1960 JOINT ECONOMIC REPORT

79

* * * there are many who believe that housing should be
used as a balance for the rest of the economy, and it is obvious
that it has tended to serve in this capacity. The question has
been raised, however, whether it is (a) fair to those in labor
and management whose incomes are tied to this industry to
make use of it in such a manner, and (b) wise to interrupt the
progress that might otherwise be made in such a social necessity as better housing.
I am firmly convinced that the principal, if not the only
important cause of the cyclical movements of housing in the
postwar period is the interest-rate structure-and only in
the FHA-VA sectors of housing, at that. Demand as such
for new housing has remained steady, year after year, as far
as I can make out. Regardless of interest-rate changes,
conventionally financed housing has not shown any significant cycle. The entire roller coaster in housing starts is
accounted for by the FHA-VA-insured programs.
It is easy to deduce that the solution to the housing cycle
lies either in maintaining steady and relatively low interest
rates or in making the FHA and VA rates flexible enough to
compete in the money markets. The first solution, in my
opinion, is incompatible with our economic system. The
latter solution has been requested by the President again in
his messages to Congress.44
VI.

CONCLUSIONS

Public Law 304, 79th Congress, the Employment Act of 1946,
expressly provides that:
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 consideration 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 selfemployment, for those able, willing, and seeking to work,
and to promote maximum employment, production, and
purchasing power.45
It will be noted that all actions recommended by the Congress or
the Executive should foster and promote free competitive enterprise.
There are greater values involved than merely economic questions in
this formulation of basic policy. Our forefathers provided that
American citizens were to be afforded the maximum opportunity to
determine how they shall live their lives under God. They had just
fought a war to be free from the economic decisions imposed by a
4"Hearings before the Joint Economic Committee, Congress of the United States, Washington, D.C.,
Feb. 1, 1960.
4 Op. cit., "Current Price Developments and the Problem of Economic Stabilization," bearings before
the Joit Committee on the Economic Report.

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1960 JOINT ECONOMIC REPORT

Parliament who thought that they were more competent to determine
how the settlers on this continent could best fulfill their lives.
Free competitive enterprise embraces a freedom of choice in disposing of one's income and in maximizing one's satisfactions, as long
as it is not done at the expense of others. It embraces the freedom
to work where one wishes, to purchase what one wants, to speak, think,
and worship as one pleases. These are the basic tenets of the American
way of life.
President Eisenhower in his Economic Report said:
However, we must go further in establishing a broad public understanding of the relationships of productivity and
rewards to costs and prices. It would be a grave mistake
to believe that we can successfully substitute legislation or
controls for such understanding. Indeed, the complex relationships involved cannot be fixed by law, and attempts to
determine them by restrictive governmental action would
jeopardize our freedoms and other conditions essential to
sound economic growth.
Our system of free institutions and shared responsibility
have served us well in achieving economic growth and improvement. From our past experience, we are confident
that our changing and increasing needs in the future can be
met within this flexible system, which gains strength from
the incentive it provides for individuals, from the scope it
affords for individual initiative and action, and from the
assurance it gives that Government remains responsive to the
will of the people. 4"
The Chairman of the President's Council of Economic Advisers,
Dr. Raymond J. Saulnier, has repeatedly stated that the ultimate
purpose of the American economy is to produce more consumer goods.
He stated that the objective of everything that we are seeking is to
produce things for consumers. This philosophy is consistent with
the freedoms embodied in our basic history. On the other hand,
there are many individuals who believe that the objectives of our
economy are not merely the production of more consumer goods
which in turn is predicated on free consumer choice, but rather more
facilities provided by Government. These thoughts have appeared
in many books and papers written in recent years, which are predicated on the premise that we have become "an affluent society."
Their concept is based on Government planning rather than consumer
choice in the marketplace.
I reject this philosophy unequivocally. The policies and recommendations embodied in the majority's report, if they are ever enacted
into law, would, in time, result in the elimination of those freedoms
which Americans cherish.
The American economy is based on voluntary decisions rather than
planning by an all-wise bureaucracy. It is relatively easy to plan
an economy where living standards are low. The only consideration
is to insure that everyone shall have a basic subsistence.
Fortunately, we are living in a country where competition in the
marketplace for the patronage of consumers who are free to buy or
not to buy provides the motivating force, and our living standards
are the highest in the world. If Government spending and taxes
4i Op. cit., "Economic Report of the President," January 1960, p. 8.

1960 JOINT ECONOMIC REPORT

81

rise to a point where the collective decisions represent too large a
share of our gross national product, the incentive system which has
made this country great will be destroyed.
This committee is necessarily concerned with maintaining a rate of
growth which will not only advance the well-being of our people,
insure the maximum employment consistent with the maintenance
of free enterprise, but also insure our ability to assist other countries
in the free world to maintain their way of life free from aggression
from any source. Many attempts have been made to justify excessive Government direction of the economy on the basis of Russia's
supposed rise in productivity.
One of the most distinguished economists of this age is Colin C.
Clark, formerly of Australia, and presently director of research for
the Econometric Institute, Inc., who testified before the Joint Economic Committee on September 28, 1959. Mr. Clark, who has
contributed so much to modern economics, dealt with this subject in
his testimony before the committee, but this again was never referred
to in the majority's views in Senate Report No. 1043. The following
colloquy between the chairman and Mr. Clark is basic to an understanding of our problem:
The CHAIRMAN. In recent years the rate in Western
Europe has had a higher growth rate than we? Western
Continental Europe?
Mr. CLARK. Yes. But these figures are of their nature
misleading, because you are taking countries which have
been devastated by war, and you are measuring their rate
of recovery. I think it is a fair parallel to take a doctor
who is treating a child recovering from a serious illness,
plotting its weight on a diagram, seeing how rapidly it rises,
and saying that within a year the child will weigh more than
its father. If a doctor did that, we would regard him as
unfit to practice medicine. But economics is still a very
unsophisticated science. And a lot of these claims which
are made about the Russian growth rate are entirely wide
of the mark. The idea seems to have got general acceptance
that the Russian growth rate is two or three times the
American.
In fact, over the long period-and I submit the detailed
evidence-the Russian growth rate in product per man-hour
is very considerably below the American.
The CHAIRMAN. The Russians are undoubtedly unscrupulous at handling figures. How can you be clever enough
to detect the degree of their unscrupulousness and deflating
figures properly?
Mr. CLARK. It has taken more than 20 years of continuous
study, Mr. Chairman. I first published a book on this subject in 1939, and I have relied a good deal on other critical
work, particularly by Jasny, Nove, and Chapman. I should
also add that the work done by Professor Nutter in the
National Bureau of Economic Research comes to exactly the
same conclusion using an entirely different method, because
I have worked using figures of actual consumption and investment. He has worked by using manpower productivity in
sectors of manufacture. And he has come to just the same
conclusion.

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1960 JOINT ECONOMIC REPORT

You can understand the zeal with which Soviet and fellowtraveling propagandists tried to make their case, because the
Russian philosophy is a materialist one. The Russian
people have been called upon to sacrifice their property and
their freedom and their family life and their religious beliefs
and everything else for the sake of productivity, and it is a
bit hard to find, as they are finding, that all they have is a
very second-class improvement in productivity in return for
sacrificing everything else.
Coming back to American prospects, I should say there is
no serious prospect of the 2.3 perannum productivity growth
being increased. Or, if it is to be changed, it will only be
changed very slowly. These productivity changes in nearly
47
every country take place continuously and slowly.

To preserve the freedoms that we cherish, Government expenditures
and taxation must be curbed. This philosophy is contrary to the
entire thesis of the majority's report. It is unfortunate that Mr.
Clark's earlier testimony was not reflected in the preparation of the
majority's views. Mr. Clark testified:
You may remember, Mr. Chairman, in 1952 you presided

over a radio debate between myself and Professor Heller, who
took the view that high levels of taxation did no economic
harm. That is the view held, I am afraid, by the majority
of economists. And when we concluded the debate, we left
the matter undecided, and I said, "Well, if I come back after
a few years, I am afraid I shall find American prices very
much higher than they are now in 1952." And I am afraid
that has been the case. The rise has been persistent, even
though we have had two quite sharp business recessions during the intervening years.
I first reached this conclusion about 25 percent of the
national income's being the safe limit for taxation in an article
published in the Economic Journal in 1945. And it is an
interesting point that the editor of the Economic Journal
who published the article was Lord Keynes, and in addition
he wrote me a personal letter in 1944 in which he said that

he agreed with my conclusions. In fact, during the last
years of his life Keynes went out of his way to say that he
himself was not a Keynesian, and he did not agree with the
ideas which were being advocated in his name.41
In spite of the fact that no one has refuted Mr. Clark's conclusion
that 25 percent of the national income is a safe limit for taxation, in
1958, the last year for which total figures are available, Federal, State,
and local taxes combined to consume more than 30 percent of our
national income. Furthermore, the Federal Government was operating with a deficit of $13.3 billion. 4 9
Unfortunately, these same ideas are now being advanced by individuals far less able than Keynes to understand their full implications
to our way of life.
'7 "Employment, Growth, and Price Levels," hearings before the Joint Economic Committee, congress
of the United States, 86th cong., 1st sess., pursuant to S. con. Res. 13, Sept. 28, 1959, pp. 2455-2457.
tRTbid, p. 2459.
4' Op. cit., "Economic Report of the President," January 1960, pp. 166, 218, 219.

ADDITIONAL VIEWS OF SENATOR JACOB K. JAVITS
Government is the servant of the people, not their master. It exists
to serve their requirements, to create the climate and the security
within which they can pursue the means to achieve a high standard of
living and a creditable national destiny. Hence Government spending-additions to the gross national product by Government itselfis not the optimum way in which to achieve the highest aggregate
well-being or to increase most effectively the Nation's resources or
its productivity.
It is vital to recognize two factors:
First, our efforts in respect of slum clearance and urban renewal,
resources development, schools, aid to depressed areas in the United
States, health and medical research, and similar programs must be
directed toward facilitating and improving the people's opportunity
and capability to produce and to enjoy, rather than being considered
to constitute production in and of themselves. Second, increase of
production and growth of productivity is not in itself an absolute
objective in a private economy; such growth must be selective in
order to have the greatest and most meaningful impact on the welfare
of the people and the interests of the Nation. For example, increases
in housing, modernization of our railroads, and slum clearance and
urban renewal are far more important for meaningful growth in the
economic system than is the production of ever more expensive, complex, and extravagant luxuries. While luxuries may make our lives
more enjoyable-and we certainly value them as an essential part of
the American way of life-there must be a certain balance between
the extent of such production and other uses of our productive resources within the totality of the national balance sheet.
It is these two major points which are basic to my disagreement
with the majority, which it seems to me does not give them the weight
they deserve, in their discussion of growth and the utilization of our
national resources. It is for that reason that I feel impelled to state
my views separately. I also wish to note that I feel it is the duty of
the Joint Economic Committee, in reviewing and reporting on economic conditions to the Congress and the Nation, to narrow and point
up the divergences in our different points of view, while indicating the
wide areas where agreement exists, rather than to widen divergences
of view, which has been, I regret to state, the effect of recent reports.
Whatever else might have developed since the time of the President's
1959 Economic Report, one thing is now clear: There appears to be
general agreement that while the danger of a hot war in the struggle
between freedom and communism has diminished lately, the reality
of the economic and social struggle has grown more real and urgent.
It has also become clear that in this economic and social struggle the
final decision is going to be won "at home," considering the whole free
world as home. For the battleground of decision is seen with constantly greater clarity to be the less developed and relatively uncommitted nations and areas of the free world in south and southeast
Asia, Asia Minor, Africa, and Central and South America.
88

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1960 JOINT ECONOMIC REPORT

In this struggle two questions will decide: First, can the free world
help the people of the less developed areas attain an adequate rate of
development, leading them as quickly as they have a reasonable right
to expect toward more tolerable living conditions, and second, will the
Communists be able to persuade the peoples of these less developed
areas that the way to attain their social and economic objectives is by
accepting at one and the same time the tyranny, suppression of human
dignity, and iron discipline of communism? Upon these two questions hinges the fate of the free world, and therefore of mankind.
In the Economic Report of the President, taken together with the
President's message on foreign economic assistance which was sent to
the Congress on February 16, 1960, we are beginning to spell out
these issues and questions, and the ways to answer them.
The challenge of the free world is its own economic and social
integration. It is now clear that whatever the Communists may do,
the effective combination of free men can frustrate and defeat them
and win the epic struggle of our times for freedom.

Basic to the economy of the free world, especially of the newly
developing areas to which an active foreign trade in the primary
commodities is indispensable, is a liberal U.S. trade policy. Such a
trade policy is required in fairness to consumers in the United States
and calls, also, for the increased competitive sharpness of our domestic
production system. It calls for increased exports, particularly in the
face of our substantial balance of payments deficit, exports which are
in themselves a test of our productive capacity and competitiveness
in the struggle between free institutions and communism. It requires
that the other industrialized nations of the free world must join in
the work of economic development of the less developed areas. The
potential for this cooperation exists, the will is there, and a start has
been made at the recent Paris conference of January 1960, with the
proposals of Under Secretary of State Douglas Dillon, aimed at the
establishment of a 20-nation organization of Atlantic economic cooperation which can pursue coordinated economic policies.
In these endeavors we must also keep very much in the mind the
possibility of economic dislocation in certain segments of the economy,
which can result from increased imports-while we recognize that
exports employ eight or more times as many Americans as are adversely affected by such imports. We know we cannot sell (export)
if we do not buy (import), but we must establish machinery to assist
those economic areas which are adversely affected by the overall U.S.
foreign trade policy by making available to such industries and employees low interest loans, reconversion and retraining assistance, and,
where necessary, aid in relocation. We must never forget the impact
at home of our national policies, nor must we place ourselves in the
situation where our failure to meet these domestic needs will adversely
affect our long-range national economic policy requirements, which
have their impact on the economy as a whole.
Of great importance to the outcome of the economic struggle will
be the degree to which U.S. civilians enlist directly in the effort to

1960 JOINT ECONOMIC REPORT

85

promote peace and prosperity in the free world by working overseas
for businesses and voluntary organizations, as well as for the Government. A national drive should be launched to usher in a new era in
1960, an era of thousands of well-trained, dedicated, versatile young
Americans abroad, as businessmen, students, workers, teachers, missionaries, technicians, and doctors, together with their families, ready
and willing to teach or to train as well as to listen and learn.
Person-to-person diplomacy by 500,000 American civilians working
overseas compared to the 100,000 working overseas now is a realistic
short-range goal, if U.S. public and private overseas assistance continues to expand and grow as it should in less developed areas and
as U.S. colleges and universities equip themselves to train thousands
for overseas assignments. The great majority of these Americans
working abroad are destined to be stationed in the front lines of the
new economic struggle, for the less developed areas are the favorite
target for the Communist bloc's economic penetration.

It seems clear that an increase in productivity is essential not only
to enable us to meet the needs of our growing population, but to
improve as well our overseas position in terms of our balance of payments and to enable us to carry the leadership of the free world for
peace.
A conscious effort to increase our productivity may well be made
with help from our wartime experience, during which 5,000 labormanagement productivity councils were registered with the Federal
Government. The Department of Labor in cooperation with the
Department of Commerce and other appropriate agencies should
begin to lay plans for the development of local and regional labormanagement productivity councils. Such councils should have
representatives of the trade unions, management, and possibily local
government. They could at this time plan for improving labormanagement relations, the transition to automation, improving plant
efficiency and safety, improving job training and apprenticeship
programs, reducing avoidable absenteeism, and establishing better
mutual understanding between industry and the community. I am
planning to introduce legislation in the near future which would
promote the establishment of such councils.
I fully recognize the validity of the President's position with
respect to the Federal Government's fiscal policy, requesting favorable
action by the Congress on his recommendations for appropriations
and revenue measures contained in the 1961 budget; the use of an
expected $4.2 billion surplus for debt retirement; and action by the
Congress with respect to the interest ceiling on issues of long-term
Federal bonds. But, I must point out that none of these points are
immutable or inflexible in their specific implementation.
The financial viability of this Nation is a major element in national
security, growth and high production, employment and income, and
therefore we cannot lay aside budgetary considerations; at the same
time, it would be folly to permit them to become the primary determinants of our national policy. We must achieve the ability to

52028-60-

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1960 JOINT ECONOMIC REPORT

meet the domestic and international economic challenges which
confront us, without making a budget surplus our sole aim-yet with
the intent to balance the budget and to achieve a meaningful surplus
for the reduction of the national debt wherever possible, by a careful,
hardheaded regard for budget and fiscal necessities. The budget may
well have to yield to such exigencies as adequate aid to education and
still could show a substantial surplus-while in return, the results of
sufficient Federal assistance in this area today will result in substantially greater benefits to the national strength, income and
revenues.
A little loosening of the budget could be joined with tax revision
and tax reform. I recognize the obligation to support an adequate tax
structure, both in terms of continuing for the present the existing scale
of most excise taxes and in terms of closing tax loopholes which
presently permit large segments of the economy to escape their
responsible share of the burden of Government. That is why I favor
a reasonable reduction in the 27fi-percent oil depletion allowance, in
excessive mineral depletion allowances, and in other special tax
privileges. Also consideration needs to be given to the encouragement of foreign private investment, the retirement needs of middleincome earners, and small business.
The current red-hot debate over the existence of a U.S. "missile
gap" and the adequacy of our defenses, and the implications of these
factors for the destiny of the United States as the leading free world
power, have projected into even greater prominence the status of our
higher education system and our dependence on its capability in the
years ahead to train and develop the talent essential to free world
leadership in the space age-scientifically, technologically, and
culturally.
With respect to the importance of debt management policy to price
stability, budgetary control and the strength of the economy, there
can be little doubt. But even here there can be flexibility in meeting
the requirements of the Economic Report. For example, the President's recommendation with respect to interest rates on long-term
bonds-those with maturities over 5 years-could be met by granting
this request with respect to bonds issued during a term of yearsperhaps the next three-thus retaining residual congressional control,
with provision for a review of the operations of the Treasury while
freed from the ceiling during the intervening years. In addition, I
continue to urge that the Treasury meet at least part of its need for
long-term funds through fuller utilization of the special role of savings
bonds. The particular anti-inflationary character of these issues,
their substantially lower interest costs to the Government, and the
leeway which now exists with respect to their interest rates, set at
3.75 percent by the Treasury, but subject to a ceiling of 4.25 percent,
calls for a vast increase in their sales. Right now they are at a new
low ebb as a means of Federal Government finance with redemptions
rising and sales falling.
Irrespective of congressional action on long-term marketable bond
interest rates, I urge that there be a drive to sell to the public what we
now tcall savings bonds, but what should be renamed "peace bonds"this drive to feature a special $25 billion issue which would seek to
attract millions of new investors in a significant shift of the national

1960 JOINT ECONOMIC REPORT

87

debt into these securities. These should carry an interest rate higher
than the present 3.75 percent if that is necessary to achieve the desired
amount of sales. My colleague, Senator Williams of Delaware, has
suggested a most commendable plan for such savings bonds which
woould call for an immediate rise in their interest rates to 4.25 percent.
It should be clear that to meet our economic and production needs,
reliance cannot be on monetary and fiscal policy primarily. These
are tools and catalysts; they do not create and produce goods in themselves. It is the potentials of labor and capital, of inventiveness and
managerial skills which produce and which increase productivity. The
potentials of the United States with respect to such real productivity
increases are great and they must be achieved to make our economic
position secure. The real problems here require us to come abreast of
such specific national needs as an adequate transportation system, as
reflected in the problems of the railroads in terms of modernization,
research and development of new techniques. In this specific area,
I have just introduced legislation to establish a National Advisory
Committee on Rail Transportation, with the specific duty of undertaking and guiding research and development programs to enable this
vital industry to modernize its facilities and upgrade its operational
efficiency and services in the discharge of its present and future
responsibilities. This committee would function along the lines of the
National Advisory Committee on Aeronautics, which led in the technological development breakthrough of the aviation industry to the
healthy giant it is today.
We must not ignore the ancient maxim that man does not live by
bread alone, nor forget that a healthy and strong economy must find
a proper place for the democratic aspirations and the cultural needs
of its citizens. Purely in terms of economic welfare and strength,
these factors are vital, for the human resources of all our peoples,
regardless of race, color, religion or national origin must be equally
available to strengthen and contribute to the economic requirements
of the country. When prejudice and discrimination deprive us of the
services of one person, or deprive one person of the opportunity to
achieve, through adequate education, the ability to serve to the best
of his potential, every American suffers the consequences. Discrimination is a luxury we cannot afford; in addition, it is a drain on the
body politic which weakens it far beyond the loss to any individual
worker. A free economy depends on a free society-one in which
the opportunity of economic choice and the opportunity of political
and social choice go hand in hand.
Similarly, the morality of the Nation, as reflected in its attitude
toward minorities and in its support of cultural activities, goes not
only toward strengthening it in its productive powers, but also continues to assure that what we are fighting for in the struggle of economic and social systems between freedom and communism will be
attained at home.
In all these considerations, I think that the greatest importance
should be placed on finding the methods which will maximize the
use of the private sector of the economy to meet the needs of our people
and our Nation, both at home and abroad. We must find the areas

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1960 JOINT ECONOMIC REPORT

in which, without sacrificing the basic economic precepts of free enterprise and individual choice, we can expand our wealth, production,
and employment while, at the same time, protecting our standard of
living, our fiscal stability, and the value of the dollar. Our task is to
balance our needs, not with the thought that one goal must be sacrificed to achieve another, but with the full realization that we may be
able to achieve most or all of them through a judicious use of our
resources.
Survival is not a noble end in itself. It is meaningful only if what
survives in our Nation is our freedom, our cultural heritage, and our
standards of values and morality for which our peoples have striven
so heroically in the past, and will always strive.

PUBLICATIONS OF THE JOINT ECONOMIC COMMITTEE'

January 1947-February 1960

*Declaring a National Policy on Employment, Production, and Purchasing Power (Report of the Joint Committee on the Economic
Report), Senate Report No. 11: January 1947.

Food Prices, Production, and Consumption (Report of the Joint Committee on the Economic Report), Senate Document 113: April 1957.
*Hearings on Current Price Developments and the Problem of Economic Stabilization (June 24, 25, 26, July 2, 8, 9, 10, 14, 15, 16,
and 17, 1947): July 1947.

*Interim Report on the President's Program To Deal With the Problems
of Inflation (Report of the Joint Committee on the Economic
Report), Senate Report 809: December 1947.
*Hearings on Anti-inflation Program as Recommended in the President's Message of November 17, 1947 (November 21, 24, 25, 26,
28, December 2, 3, 4, 5, and 10, 1947): December 1947.

*Allocation and Inventory Control of Grainfor the Production of Ethyl
Alcohol (Report of the Joint Committee on the Economic Report),
Senate Report 888: February 1948.
*Hearings on Allocation of Grain for Production of Ethyl Alcohol
(February 5 and 6, 1948): February 1948.
*High Prices of Consumer Goods (Report of the Joint Committee on
the Economic Report), Senate Report 1565: June 1948.
Hearings on Increases in Steel Prices (March 2, 1948).
"Joint Economic Report (Report of the Joint Committee on the
Economic Report on the January 1948 Economic Report of the
President), Senate Report 1358: May 1948.
*Hearings on Credit Policies (April 13 and 16, May 12, 13, 27, 1948):
July 1948.

"Statistical Gaps, Current Gaps in Our Statistical Knowledge (materials
assembled by the staff of the Joint Committee on the Economic
Report), committee print: July 1948.
Consumers' Price Index (materials assembled by the staff of the Joint
Committee on the Economic Report), committee print: December
1948.
*Hearings on Profits (December 6, 7, 8, 9, 10, 15, 16, 17, 20, 21, 1948):
December 1948.
Profits (Report of a Subcommittee of the Joint Committee on the
Economic Report on Profits Hearings), committee print: February
1949.
Hearings, January 1949 Economic Report of the President (February
8, 9, 10, 11, 14, 15, 16, 17, 18, 1949): March 1949.
Joint Economic Report (Report of the Joint Committee on the Economic Report on the January 1949 Economic Report of the President), Senate Report 88: March 1949.
'Single copies of the publications listed may be obtained from the Joint Economic Committee except as
otherwise noted. Additional copies of committee publications may be purchased from the Superintendent
of Documents, Washington 25 D C.6 at the price given. The prices shown are for single copies. There
is a discount for quantity orders'
ut-of-print publications are denoted by an asterisk. Publications
available only from Superintendent of Documents are denoted by a dagger (t).

89

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1960 JOINT ECONOMIC REPORT

Joint Economic Report (minority views of the Joint Committee on the
Economic Report on the January 1949 Economic Report of the
President), part II of Report 88: April 1949.
*Employment and Unemployment (initial report of the Subcommittee
on Unemployment), committee print: July 1949.
*Economy of the South (the impact of Federal policies on the economy
of the South), committee print: July 1949.
Factors Affecting the Volume and Stability of Private Investment (materials on the investment problem assembled by the staff of the Subcommittee on Investment), Senate Document 232: September 1950;
reprinted from committee print of October 1949.
*Hearings, Subcommittee on Monetary, Credit, and Fiscal Policies,
Federal Expenditure and Revenue Policies, September 23, 1949
(containing National Planning Association reports prepared by
Conference of University Economists): October 1949.
*Selected Government Programs Which Aid the Unemployed and LowIncome Families (materials assembled by the staffs of the Subcommittee on Unemployment and the Subcommittee on Low-Income
Families), committee print: November 1949.
Low-Income Families and Economic Stability (materials on the problem
of low-income families assembled by the staff of the Subcommittee
on Low-Income Families), Senate Document 231: September 1950;
reprinted from committee print of November 1949.
Compendium of Materials on Monetary, Credit, and Fiscal Policies (a
collection of statements submitted to the Subcommittee on Monetary, Credit, and Fiscal Policies by Government officials, bankers,
economists, and others), Senate Document 132: January 1950;
reprinted from committee print of November 1949.
Hearings, Subcommittee on Investment, Volume and Stability of
Private Investment, Part 1 (September 27, 28, 29, 1949): November
1949.
Basic Data Relating to Steel Prices (materials assembled by the staff
of the Joint Committee on the Economic Report for use in steel
hearings), committee print: January 1950.
Highways and the Nation's Economy (materials assembled by the staff
of the Joint Committee on the Economic Report), Senate Document
145: January 1950.
*Hearings, Subcommittee on Monetary, Credit, and Fiscal Policies,
Monetary, Credit, and Fiscal Policies (September 23, November 16,
17, 18, 22, 23, and December 1, 2, 3, 5, 7, 1949): January 1950.
*Monetary, Credit, and Fiscal Policies (Report of the Subcommittee on
Monetary, Credit, and Fiscal Policies), Senate Document 129:
January 1950.
Employment and Unemployment (Report of the Subcommittee on
Unemployment), Senate Document 140: February 1950.
*Hearings, Subcommittee on Investment, Volume and Stability of
Private Investment, Part 2 (December 6, 7, 8, 9, 12, 13, 14, 15, 17,
1949): February 1950.
Hearings, Subcommittee on Low-Income Families, Low-Income Families (December 12, 13, 14, 15, 16, 17, 19, 20, 21, 22): March 1950.
*Hearings, January 1950 Economic Report of the President (January
17, 18, 19, 20): February 1950.
Hearings, December 1949 Steel Price Increases (January 24, 25, 26,
27): March 1950.

1960 JOINT ECONOMIC REPORT

91

*LowIncome Families and Economic Stability (final report of the Subcommittee on Low-Income Families), Senate Document 146:
March 1950.
Volume and Stability of Private Investment (final report of the Subcommittee on Investment), Senate Document 149: March 1950.
December 1949 Steel Price Increases (Report of the Joint Committee
on the Economic Report), Senate Report 1373: March 1950.
*Handbook of Regional Statistics (material assembled by the staff of
the Joint Committee on the Economic Report), committee print:
April 1950.
Joint Economic Report (Report of the Joint Committee on the Economic Report on the January 1950 Economic Report of the President), Senate Report 1843: June 1950.
*General Credit Control, Debt Management, and Economic Mobilization
(materials prepared by the staff of the Joint Committee on the
Economic Report), committee print: January 1951.
Underemployment of Rural Families (materials prepared by the staff
of the Joint Committee on the Economic Report), committee
print: February 1951.
*The Economic and Political Hazards of an Inflationary Defense Economy (materials prepared by the staff of the Joint Committee on
the Economic Report), committee print: February 1951.
Hearings, January 1951 Economic Report of the President (January
22, 24, 25, 26, 29, 31, February 2): March 1951.
Joint Economic Report (Report of the Joint Committee on the Economic Report on the January 1951 Economic Report of the President), Senate Report 210: April 2, 1951.
Making Ends Meet on Less than $2,000 a Year, Case Studies of 100
Low-Income Families (communication to the Joint Committee on
the Economic Report from the Conference Group of Nine National
Voluntary Organizations Convened by the National Social Welfare
Assembly), committee print: July 1951.
Prevalence of Prwe Cutting of Merchandise Marketed Under PriceMaintenance Agreements, May 28 through June 25, 1951 (study prepared for the Joint Committee on the Economic Report and the
Select Committee on Small Business), committee print: July 1951.
The Need for Industrial Dispersal (materials prepared for the Joint
Committee on the Economic Report by the committee staff), Senate
Document 55: August 1951.
*NationalDefense and the Economic Outlook (materials prepared for the
Joint Committee on the Economic Report by the committee staff),
committee print: August 1951.
Inflation Still a Danger (report of the Joint Committee on the Economic Report together with materials on national defense and the
economic outlook included in committee print mentioned above),
Senate Report 644: August 1951.
*Questions on General Credit Control and Debt Management (prepared by
staff of the Subcommittee on General Credit Control and Debt
Management of the Joint Committee on the Economic Report),
committee print: October 1951.
Monetary Policy and the Management of the Public Debt. Their Role
in Achieving Price Stability and High-Level Employment (replies
to questions and other material for the use of the Subcommittee on
General Credit Control and Debt Management): February 1952.

92

1960 JOINT ECONOMIC REPORT

Hearings, January 1952 Economic Report of the President (January
23, 24, 25, 26, 28, 30, 31, February 1): February 1952.
ConstitutionalLimitation on Federal Income, Estate, and Gift Tax Rates
(materials assembled for the Joint Committee on the Economic
Report and the Select Committee on Small Business of the House
of Representatives), committee print (sale price 15 cents): February
1952.
Joint Economic Report (Report of the Joint Committee on the Economic Report on the January 1952 Economic Report of the President together with National Defense and the Economic Outlook for
the Fiscal Year 1953, material prepared for the Joint Committee on
the Economic Report by the committee staff), Senate Report No.
1295: March 1952.
7he Taxation of Corporate Surplus Accumulations, The Application
and Effect, Real and Feared, of Section 102 of the Internal Revenue
Code dealing with Unreasonable Accumulation of Corporate Profits
(study prepared for the Joint Committee on the Economic Report
by Dr. J. K. Hall), committee print: May 1952.
*Hearings, Subcommittee on General Credit Control and Debt Management, Monetary Policy and the Management of the Public
Debt (March 10, 11, 12, 13, 14, 17, 18, 19, 20, 21, 24, 25, 26, 27, 28,
and 31, 1952): May 1952.
Monetary Policy and the Management of the Public Debt (Report of the
Subcommittee on General Credit Control and Debt Management)
Senate Document No. 163: July 1952.
Federal Tax Changes and Estimated Revenue Losses under PresentLaw
(Materials prepared for the Joint Committee on the Economic
Report by the committee staff), committee print: November 1952.
Sustaining Economic Forces Ahead (Materials prepared for the Joint
Committee on the Economic Report by the committee staff), committee print: December 1952.
tPensions in the bnited States (A study prepared for the Joint Committee on the Economic Report by the National Planning Association), committee print (sale price 30 cents): December 1952.
Index of Joint Economic Publications: January 1947 through December 1952. Committee print: January 1953.
*Historicaland Descriptive Supplement to Economic Indicators:December 1953.
*Hearings, January 1954 Economic Report of the President (February
1, 2, 3, 4, 5, 8, 9, 10, 11, 15, 16, 17, 18): March 1954.
*Joint Economic Report (Report of the Joint Committee on the
Economic Report on the 1954 Economic Report of the President),
House Report No. 1256 (sale price 30 cents): February 1954.
Hearings, Subcommittee on Economic Statistics, Economic Statistics
(July 12 and 13, 1954): August 1954.
Economic Statistics (Progress Report prepared by the Subcommittee
on Economic Statistics). House Report No. 2628: August 1954.
CongressionalAction on Major Economic Recommendations of the President, 1954 (Materials prepared by the Joint Committee on the
Economic Report by the Committee Staff), committee print:
September 1954.
tPotentialEconomic Growth of the United States Duringthe Next Decade
(Materials prepared for the Joint Committee on the Economic
Report by the Committee Staff), committee print (sale price 15
cents): October 1954.

1960 JOINT ECONOMIC REPORT

93

*Hearings, Subcommittee on Economic Stabilization, United States
Monetary Policy: Recent Thinking and Experience (December 6
and 7, 1954): December 1954.

tTrends in Economic Growth, A Comparison of the Western Powers and
the Soviet Bloc (Materials prepared for the Joint Committee on the
Economic Report by the Legislative Reference Service of the Library
of Congress), committee print (sale price $1): January 1955.
tHearings, January 1955 Economic Report of the President (January
24, 26, 27, 28, 31, February 1, 2, 3, 8, 9, 10, and 16, 1955) (sale price
$3.50): February 1955.
Joint Economic Report (Report of the Joint Committee on the Economic Report on the 1955 Economic Report of the President),
Senate Report No. 60 (sale price 30 cents): March 1955.

Historical and Descriptive Supplement to Economic Indicators: Novem-

ber 1955.
*Hearings, Subcommittee on Economic Stabilization, Automation
and Technological Change (October 14, 15, 17, 18, 24, 25, 26, 27,
and 28, 1955) (sale price $2.00):. November 1955. (Reprinted September 1959.)
Automation and Technological Change (Report of the Subcommittee
on Economic Stabilization) committee print, November 1955 (sale
price 10 cents): became Senate Report No. 1308, January 1956.
Hearings, Subcommittee on Economic Statistics Reports of Federal
Reserve Consultant Committees on Economic Statistics (July 19
and 26, October 4 and 5, 1955) (sale price $2.25): November 1955.
Hearings, Subcommittee on Economic Statistics, Employment and
Unemployment Statistics (November 7 and 8, 1955) (sale price 45
cents): November 1955.
1955 Report on Economic Statistics (Report of the Subcommittee on
Economic Statistics) committee print, November 1955: became
Senate Report No. 1309, January 1956.

*Federal Tax Policy for Economic Growth and Stability (Papers sub-mitted by panelists appearing before the Subcommittee on Tax
Policy), committee print (sale price $2.50): November 1955.
(Reprinted September 1959.)
tHearings, Subcommittee on Tax Policy, Federal Tax Policy for
Economic Growth and Stability (December 5, 6,7, 8, 9, 12, 13, 14,
15, and 16, 1955) (sale price $2.00): January 1956.

Federal Tax Policy for Economic Growth and Stability (Report of the
Subcommittee on Tax Policy) committee print, December 1955
(sale price 10 cents): became Senate Report No. 1310, January
1956.

f The Federal Revenue System: Facts and Problems (Materials assembled for the Subcommittee on Tax Policy by the committee staff),
committee print (sale price 55 cents): (Reprinted May 1959)
January 1956.

fCharacteristics of the Low-Income Population and Related Programs
(Materials prepared by the staff of the Subcommittee on LowIncome Families), committee print (sale price 60 cents): October
1955.
Hearings, Subcommittee on Low-Income Families, Low-Income Families (November 18, 19, 21, 22, and 23, 1955) (sale price $2.00):
December 1955.

94

1960 JOINT ECONOMIC REPORT

A Program for the Low-Income Population at Substandard Levels of
Living (Report of the Subcommittee on Low-Income Families),
committee print, December 1955 (sale price 10 cents): became
Senate Report No. 1311, January 1956.
Hearings, Subcommittee on Foreign Economic Policy, Foreign Economic Policy (November 9, 10, 14, 15, 16, 17, 1955) (sale price
$1.75): December 1955.
Foreign Economic Policy (Report of the Subcommittee on Foreign
Economic Policy), committee print, December 1955 (sale price
15 cents): became Senate Report No. 1312, January 1956.
Hearings, January 1956 Economic Report of the President (January
31, February 1, 2, 3, 6, 7, 8, 9, 14, 15, 17, and 28, 1956): March 1956.
tJoint Economic Report (Report of the Joint Committee on the Economic Report on the 1956 Economic Report of the President):
Senate Report No. 1606 (sale price 35 cents): March 1956.
*Hearings, Subcommittee on Economic Stabilization, Conflicting
Official Views on Monetary Policy: April 1956 (June 12, 1956)
(sale price 20 cents): June 1956.
Hearings, Subcommittee on Foreign Economic Policy, Defense
Essentiality and Foreign Economic Policy (June 4, 5, 6, and 7,
1956) (sale price $1.50): July 1956.
Defense Essentiality and Foreign Economic Policy, Case Study: Watch
Industry and Precision Skills (Report of the Subcommittee on
Foreign Economic Policy), Senate Report No. 2629, Parts I and II
(sale price 15 cents with Part II): July 1956.
Hearings, Subcommittee on Economic Stabilization, Monetary Policy:
1955-56 (December 10 and 11, 1956) (sale price 45 cents): January
1957.
Hearings, Subcommittee on Foreign Economic Policy, World Economic Growth and Competition (December 10, 12, and 13, 1956)
(sale price 45 cents): February 1957.
tHearings, Subcommittee on Economic Stabilization, Instrumentation
and Automation (December 12, 13, and 14, 1956) (sale price 75
cents): February 1957.
*Employment Act of 1946, as Amended, and Related Laws, and Rules
of the Joint Economic Committee (prepared by staff of the Joint
Economic Committee) committee print: January 1957.
tHearings, January 1957 Economic Report of the President (January
28, 29, 30, 31, February 1, 4, 5, 6) (sales price $2.25): February 1957.
*Joint Economic Report (Report of the Joint Economic Committee
on the 1957 Economic Report of the President): House Report
No. 175: February 1957.
Fiscal Policy Implications of the Economic Outlook and Budget Developments (Report of the Subcommittee on Fiscal Policy), House Report
No. 647 (sale price 10 cents): June 1957.
Hearings, Subcommittee on Fiscal Policy, Fiscal Policy Implications
of the Economic Outlook (June 3, 4, 5, 6, 7, 13, and 14, 1957) (sale
price $1.00): June 1957.
tProductivity, Prices, and Incomes (Materials prepared for the Joint
Economic Committee by the committee staff), committee print
(sale price 70 cents): June 1957.
Soviet Economic Growth: A Comparison with the United States (A study
prepared for the Subcommittee on Foreign Economic Policy of the
Joint Economic Committee by the Legislative Reference Service of

1960 JOINT ECONOMIC REPORT

95

the Library of Congress), committee print (sale price 40 cents):
September 1957.
1957 Historical and Descriptive Supplement to Economic Indicators
(Prepared for the Joint Economic Committee by the Committee
Staff and the Office of Statistical Standards, Bureau of the Budget),
committee print (sale price 40 cents): September 1957. (New
edition late 1960.)
tFederalExpenditure Policyfor Economic Growth and Stability (Papers
submitted by panelists appearing before the Subcommittee on Fiscal
Policy), committee print (sale price $3.25): November 1957.
Hearings, Subcommittee on Fiscal Policy, Federal Expenditure Policy
for Economic Growth and Stability (November 18-27, 1957) (sale
price $2.00): January 1958.
FederalExpenditure Policiesfor Economic Growth and Stability (Report
of the Subcommittee on Fiscal Policy), committee print (sale price
10 cents): January 1958.
tPolicy for Commercial Agriculture: Its Relation to Economic Growth
and Stability (Papers submitted by panelists appearing before the
Subcommittee on Agricultural Policy), committee print (sale price
$2.25): November 1957.
Hearings, Subcommittee on Agricultural Policy, Policy for Commercial Agriculture: Its Relation to Economic Growth and Stability
(December 16-20, 1957) (sale price $1.00): January 1958.
Policy for Commercial Agriculture: Its Relation to Economic Growth
and Stability (Report of the Subcommittee on Agricultural Policy),
committee print (sale price 15 cents): February 1958.
tHearings, Subcommittee on Economic Statistics, The National Economic Accounts of the United States (October 29 and 30, 1957)
(sale price 75 cents): December 1957.
Hearings, Subcommittee on Economic Stabilization, Automation and
Recent Trends (November 14 and 15, 1957) (sale price 30 cents):
December 1957.
Automation and Technological Change (Reprint of S. Rept. 1308 of the
Joint Committee on the Economic Report, January 1956) (sale price
10 cents): January 1958.
International Economic Statistics (A Memorandum prepared for the
Subcommittee on Economic Statistics of the Joint Economic Committee by the Office of Statistical Standards of the Bureau of the
Budget), committee print (sale price 25 cents): February 1958.
Hearings, January 1958 Economic Report of the President (January
27, 28, 29, 30, February 3, 4, 5, 6, 7, and 10) (sale price $1.50):
February 1958.
Joint Economic Report (Report of the Joint Economic Committee on
the 1958 Report of the President): House Report No. 1409 (sale
price 20 cents): February 1958.
MThe Relationship of Prices to Economic Stability and Growth (Papers
submitted by panelists appearing before the Joint Economic Committee), committee print (sale price $2.00): March 1958.
Hearings, Relationship of Prices to Economic Stability and Growth
(May 12, 13, 14, 15, 16, 19, 20, 21, and 22, 1958) (sale price $1.25):
July 1958.
The Relationship of Prices to Economic Stability and Growth (Commentaries submitted by economists from labor and industry appearing before the Joint Economic Committee), committee print (sale
price 65 cents): November 1958.

96

1960 JOINT ECONOMIC REPORT

Hearings, Relationship of Prices to Economic Stability and Growth
(December 15-18, 1958) (sale price $1.25): February 1959.
Hearings, Subcommittee on Fiscal Policy, Fiscal Policy Implications
of the Current Economic Outlook (April 28, 29, 30, and May 1,
1958) (sale price 55 cents): July 1958.
Frequency of Change in Wholesale Prices: A Study of Price Flexibility
(A study prepared for the Joint Economic Committee by the U.S.
:Department of Labor, Bureau of Labor Statistics), committee print
(sale price 30 cents): January 1959.
Economic Policy Questionnaire (Tabulation of replies submitted to the
Subcommittee on Economic Stabilization of the Joint Economic
Committee), committee print (sale price 15 cents): February 1959.
*Hearings, January 1959 Economic Report of the President (January
27, 28, 29, 30, February 2, 3, 4, 5, 6, 9, 10, 1959): March 1959.
Joint Economic Report (Report of the Joint Economic Committee on
the 1959 Report of the President): Senate Report No. 98 (sale
price 25 cents): March 1959.
IEconomic Policy in Western Europe (Report based on conferences on
economic policy matters held in seven countries of Western Europe
late in 1958 together with selected materials assembled by the
committee staff), committee print (sale price, $1.25): July 1959.
Comparison of the United States and Soviet Economies (Papers submitted by panelists appearing before the Subcommittee on Economic Statistics), committee prints.
tPart I (sale price, $1.00): October 1959.
tPart II (sale price, 45 cents): November 1959.
tPart III (sale price, 25 cents): November 1959.
Hearings, Comparison of the United States and Soviet Economies,
hearings before Subcommittee on Economic Statistics, November 13, 16, 17, 18, 19, and 20 (sale price $1.25): November 1959.
tHearings, Automation and Energy Resources, hearings before the
Subcommittee on Automation and Energy Resources, October 12,
13, 14, 15, 16 (sale price, $1.25): November 1959.
Employment Act of 1946, as Amended, and Related Laws, and Rules
of the Joint Economic Committee (prepared by staff of the Joint
Economic Committee), committee print: November 1959.

ECONOMIC INDICATORS

Economic Indicators (a monthly publication of the Congress under
Public Law 120, 81st Cong., 1st sess.) (sale price 20 cents a copy,
$2.00 a year): Issued monthly.

REPORTS,

HEARINGS, AND STUDY PAPERS FROM THE STUDY OF
EMPLOYMENT, GROWTH, AND PRICE LEVELS

tStaff Report on Employment, Growth, and Price Levels (committee
print) (sale price $1.50): December 1959.
tEihployment, Growth, and Price Levels (Report of the Joint Economic
Committee, pursuant to Senate Concurrent Resolution 13, 86th
Congress, 1st session): Senate Report No. 1043 (sale price 50 cents):
January 1960.
tPart 1. The American Economy: Problems and Prospects, March 20,
23, 24, 25, 1959 (sale price 60 cents): April 1959.
tPart 2. Historical and Comparative Rates of Production, Productivity,
and Prices, April 7-10. 1959 (sale price $1.00): May 1959.
tPart 3. Historicaland Comparative Rates of Labor Force, Employment,
and Unemployment, April 25, 27, and 28, 1959 (sale price 35 cents):
June 1959.
tPart 4. Influence on Pricesof Changes in the Effective Supply of Money,
May 25, 26, 27, 28, 1959 (sale price 75 cents): July 1959.
tPart 5. InternationalInfluences on the American Economy, June 29,
30, July 1, 2, 1959 (sale price 50 cents): September 1959.
tPart 6A. Government's Management of its Monetary, Fiscal, and Debt
Operations, July 24, 27, 28, 29, 1959 (sale price $1.25): September
1959.
tPart 6B. Government's Management of its Monetary, Fiscal, and Debt
Operations, August 5, 6, 7, 1959 (sale price 75 cents): November
1959.
tPart 6C. Government's Management of its Monetary, Fiscal, and Debt
Operations, Replies to Questions on Monetary Policy, and other
materials (sale price 65 cents): November 1959.
tPart 7. The Effect of Monopolistic and Quasi-Monopolistic Practices
Upon Prices, Profits, Production, and Employment, September 22,
23, 24, and 25 (sale price $1.25): November 1959.
tPart 8. The Effect of Increases in Wages, Salaries, and the Prices of
Personal Services, Together With Union and Professional Practices
Upon Prices, Profits, Production, and Employment, September 28,
29, 30, October 1 and 2 (sale price 75 cents): November 1959.
tPart 9A. Constructive Suggestions for Reconciling and Simultaneously
Obtaining the Three Objectives of Maximum Employment, an Adequate
Rate of Growth, and Substantial Stability of the Price Level, October
26, 27, 28, 29, 30, November 2, 3, 4, 5, and 6 (sale price 70 cents):
December 1959.
tPart 9B. Same title as 9A. (Materials submitted by 12 organizations at the invitation of the Joint Economic Committee) (sale
price 45 cents): December 1959.
tPart 10. Additional Materials Submitted for the Record (sale price 60
cents): January 1960.
tNo. 1 Recent Inflation in the United States by Charles L. Schultze
(sale price 40 cents): September 1959.
97

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1960 JOINT ECONOMIC REPORT

Nos. 2 and 3 Steel and the PostwarInflation by Otto Eckstein and Gary
Fromm; An Analysis of the Inflation in Machinery Prices by Thomas
A. Wilson (sale price 25 cents): November 1959.
Nos. 4 and 5 Analysis of the Rising Costs of Public Education by
Werner Z. Hirsch; Trends in the Supply and Demand of Medical
Care by Markley Roberts (sale price 30 cents): November 1959.
No.6 The Extent and Nature of Frictional Unemployment by the Bureau
of Labor Statistics (sale price 25 cents): November 1959.
tNos. 7, 8, and 9 The Incidence of Inflation: Or Who Gets Hurts by
Seymour E. Harris; Protection Against Inflation by H. S. Houthakker; The Share of Wages and Salaries in Manufacturing Incomes,
1947-56 by Alfred H. Conrad (sale price 45 cents): November 1959.
Nos. 10 and 11 Potential Public Policies to Deal With Inflation Caused
by Market Power by Emmette S. Redford; A Brief Interpretive Survey of Wage-Price Problems in Europe by Mark W. Leiserson (sale
price 25 cents): December 1959.
Nos. 12 and 13 The Low Income Population and Economic Growth by
Robert J. Lampman; The Adequacy of Resources for Economic
Growth in the United States by Joseph L. Fisher and Edward Boorstein (sale price 25 cents): December 1959.
Nos. 14 and 15 Financial Aspects of Postwar Economic Developments
in the United States by John Gurley; Profits, Profit Markups, and
Productivity: An Examination of CorporateBehavior Since 1947, by
Edwin Kuh (sale price 35 cents): December 1959.
No. 16 InternationalEgfects of U.S. Economic Policy, by Edward M.
Bernstein (sale price 30 cents): January 1960.
No. 17 Prices and Costs in Manufacturing Industries, by Charles L.
Schultz and Joseph L. Tryon (sale price 20 cents): January 1960.
No. 18 National Security and the American Economy in the 1960's
by Henry Rowen (sale price 25 cents): January 1960.
No. 19 Debt Management in the United States by Warren L. Smith
(sale price 40 cents): January 1960.
No. 20 The Potential Economic Growth of the United States by James
W. Knowles (sale price 20 cents): January 1960.
No. 21 Postwar Inflation by Harold M. Levinson (in press): January
1960.
No. 22 An Evaluation of Anti-Trust Policy: Its Relation to Economic
Growth, Full Employment, and Prices by Theodore J. Kreps (sale
price 20 cents): January 1960.
No. 23 The Structure of Unemployment in Areas of Substantial Labor
Surplus by the Bureau of Labor Statistics (sale price 15 cents):
January 1960.
0