The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
82d CONGRESS>
2d Session )
SENATE
ANO.
{ REPORT
1295
JOINT ECONOMIC REPORT
REPORT
OF THE
JOINT COMMITTEE ON THE ECONOMIC REPORT
ON THE
JANUARY 1952 ECONOMIC REPORT
OF THE PRESIDENT
WITH
SUPPLEMENTAL AND.MINORITY VIEWS
AND
MATERIALS PREPARED BY THE STAFF
ON
NATIONAL DEFENSE AND THE ECONOMIC
OUTLOOK FOR THE FISCAL YEAR 1953
MARCH 12 (legislative day, FEBRUARY 25), 1952.-Ordered
to be printed with illustrations
UNITED STATES
GOVERNMENT PRINTING OFFICE
96529
WASHINGTON: 1952
JOINT COMMITTEE ON THE ECONOMIC REPORT
(Created pursuant to sec. 5 (a) of Public Law 304, 79th Cong.)
JOSEPH C. O'MAHONEY, Wyoming, Chairman
EDWARD J. HART, New Jersey, Vice Chairman
JOHN SPARKMAN, Alabama
WRIGHT PATMAN, Texas
PAUL H. DOUGLAS, Illinois
RICHARD BOLLING, Missouri
WILLIAM BENTON, Connecticut
CLINTON D. McKINNON, California
ROBERT A. TAFT, Ohio
JESSE P. WOLCOTT, Michigan
RALPH E. FLANDERS, Vermont
CHRISTIAN A. HERTER, Massachusetts
ARTHUR V. WATKINS, Utah
J. CALEB BOGGS, Delaware
GROVER W. ENSLEY, Staff Director
JOHN W. LEHMAN, Clerk
It
CONTENTS
Pair
Report of the Joint Committee on the Economic Report
___-_
Congressional control of expenditures -_
-_Should taxes be increased? Can we rely on consumer savings and economy in private expenditures
to prevent inflation? -_--_--_
_
After the defense build-up, what? Summary of recommended course of action Unity on major national issues Views of the committee on the main legislative recommendations of
the President Supplemental views of Senator Douglas (Senator Benton concurring)_
1
5
8
9
10
10
11
12
17
-----
27
Staff Materials on National Defense and the Economic Outlook for Fiscal
Year 1953-----------------3-2----------in
2
Minority views -_
82D CONGRESS
2dSession
1
j
SENATE
.
REPowr
No. 1295
REPORT OF THE JOINT COMMITTEE ON TIE ECONOMIC
REPORT
Mr. O'MAHONEY, from the Joint Committee on the Economic Report,
submitted the following
REPORT
[TOGETHER WITH SUPPLEMENTAL AND MINORITY VIEWSf
The Employment Act of 1946 imposes upon the President of the
United States the responsibility for transmitting to the Congress a
comprehensive economic program for carrying out the policies of the
Government, together with such recommendations for legislation as
he mav deem necessary and desirable.
By the very nature of the legislative process, it is difficult for Con'gress to consider and act on the many parts of a comprehensive program so that at the end of each session they will fit into a coordinated
whole. The responsibility for doing so, or not doing so, however,
cannot be avoided by the Congress. When the Congress rejects or
alters a specific proposal, making up a part of an already integrated
program, it is incumbent upon the Congress to adjust the remainder of
its program to fit the altered pattern. The committee and Congress
must approach the analysis of the President's Economic Report with
this thought clearly in mind.
Reduced to simplest terms, the Economic Report of the President
together with the budget for fiscal year 1953, as interpreted by the
state of the Union message, present for the consideration of the Congress an economic.program based upon the assumption that World
War III can be avoided, and that the United States need not now
proceed to full mobilization but may prolong the program for the
military build-up over a period of 2 or 3 years. This assumption will
reduce military expenditures for fiscal 1953 and 1954 below what
otherwise would be required to enable this country to arm both itself
and the free nations in a maimer sufficient, in the judgment of the
Nation's military advisers, to meet an immediate attack by Soviet
Russia.
The preparedness program, with its requests for new obligational
authority and its estimates of expenditures, though far short of what
the armed services desire, and below what was originally thought
necessary for mutual security, is nevertheless so expensive that it
cannot be financed within the limits of the revenues estimated to be
I
2
JOINT ECONOMIC REPORT
derived from present itax laws. Assuming these expenditures to be
necessary, a pay-as-we-go program would require an increase in taxes
greater than that recommended by the President. There being no
possibility that this Congress will increase taxes as requested, the
pay-as-we-go anti-inflationary program can be preserved onlv by a
sufficient reduction of"expenditures to eliminate the cash deficit. A
reduction of'approximately $10 billion-would seem to be necessary to
accomplish this purpose.
The problem is to find the places where such reductions can be made
without injury to defense or impairment of the civilian economy and
to take the courageous congressional action necessary to make the cuts
which would be warranted.
True economy calls for a new birth of self-restraint in Congress,
as well as in the executive departments. The committee would be
delinquent if it did not point out that some of the most extravagant
expenditures in recent years have been the result of congressional decisions. Many of these have been opposed by the President and various
executive officials.
Unfortunately, Federal expenditures which have no direct war connection cannot be reduced in sufficient amount to prevent the estimated cash deficit, not because such expenditures are free from all
possibility of waste or extravagance but because all of these items
taken together would amount to only $9.9 billion, or 11.6 percent, of
the total budget. (See Staff Materials, Table VI, p. 55.) Manifestly,
it would be impossible to eliminate all or even most of these expenditures, for in the main, they provide the essential peacetime functions
of Government.
Of the total expenditures estimated for fiscal 1953 amounting to
$85.4 billion, almost one-half, or $41.9 billion, are to pay bills for
outlays authorized in previous years, the settlement of which cannot
be made until fiscal 1953. Other items which can hardly be reduced
in'the next year include those payments which the Government must
make because of legal or other implied commitments. Among these
are: Interest on thbenational debt, grants-in-aid to the States for which
provision is made in existing law, and veterans' payments and benefits
which are deteirmined in any one year solely by the number of persons
qualifying for the payments (including pensions) multiplied by the rate
of payment prescribed in existing law. Commitments of this character are estimated in the budget to amount to $14.4 billion. However, in addition to major national security expenditures included in
the $41.9 billion carry-over mentioned above, further 1953 expenditures of $24.2 billion are estimated to be made for the military services
and foreign aid programs out of the new 1953 authorizations requested
by the President.
The sum of these three.items-$41.9 billion, $14.4 billion, and
$24.2 billion-is $80.5 billion. This leaves only $4.9 billion to cover
all the non-war-connected expenditures supposedly controllable by
the Congress for the fiscal year 1953. (See letter and tables from
Budget Director Frederick J. Lawton, Hearings, pp. 467-487.)
To save the pay-as-we-go system for fiscal 1953-and the committee believes it should be saved-it is thus obvious that the Congress would have to cut most of the needed $10 billion from the major
national security program or from the non-war-connected expendi-
JOINT ECONOMIC REPORT
3
tures authorized by law which only the Congress, and not the President, can repeal or modify.
To accomplish such a reduction, the Congress must necessarily
scrutinize every dollar of military expenditure, first, by establishing
controls to prevent waste and extravagance and, second, by the most
careful review of military programs to be certain that the expenditure
projects which are undertaken are being justified by the scientific,
technological, and military facts of 1953 rather than by traditional
concepts and conventional methods inherited from past wars.
Various appropriation acts in recent years have carried specific
clauses designed to foster economy. For example, the current appropriation of the Department of Defense contains provisions requiring
the insertion of a cancellation clause in procurement contracts, the
cancellation to become effective upon a showing that gratuities were
offered or given to officers or employees of the Government to secure
the contract or favorable treatment thereunder. Other appropriation acts have had provision calling for strict austerity in the construction of particular projects. The committee believes that provisions such as these should be extended to all procurement or construction contracts.
The committee also suggests that the appropriate legislative committees look into the possible efficiencies-and economies which might
be achieved by placing the procurement of military items in the hands
of a trained civilian force. As a corollary it might prove desirable to
establish a corps of civilian reviewers to examine military specifications with a view to substituting less critical and less expensive materials where possible, and to set quality standards which would permit savings without the sacrifice of service.
The Congress must also review existing laws which authorize expenditures, for these will continue to be made unless the Congress
chooses to modify or repeal such authorizations. Into this category
fall programs which, under existing law, are not subject to annual
congressional appropriation control. For example, the ExportIrhport Bank is permitted to have outstanding loans and guaranties
not exceeding $4.5 billion at any one time. As long as the bank
operates within this limit, annual appropriations are not needed.
Loans to public agencies by the Reconstruction Finance Corporation,
mainly to meet commitments made in the past, catastrophe loans,
expenditures by the Federal National Mortgage Association, and
other similar programs, all of which have been prescribed by law,
also are actually not dependent on annual appropriations. (See
letter and tables from Budget Director Lawton, Hearings, pp. 467-487.)
The Federal National Mortgage Association well illustrates why it'
is so difficult to reduce Government expenditures. The Association,
permitted to have outstanding not more than $2,750 million of loans
and commitments at any one time, is now rapidly approaching that
limit and will very soon be unable to make any further commitments.
The secondary mortgage market, which the Association was established to provide, might quite satisfactorily be taken care of by private
banking institutions. In spite of this, it is not improbable that some
of the very persons who advocate limiting Government expenditures
in general will soon be calling upon Congress for an increase in the
Association's authorized loan limit in order that the Government
4
JOINT ECONOMIC REPORT
agency may continue to provide this secondary market for mortgages:
which private capital fails to provide.
Then there are expenditures in the form of grants-in-aid, shared
revenues, and loans and advances to States under existing legislation.
These, too, are difficult to reduce. For example, through the operation.
of the Federal Security Agency the Federal Government reimburses.
the States in accordance with a formula written into the law by the'
Congress for public assistance. The estimate this year for this purpose'
if $1,140 million. Nearly 50 other programs aggregating at least
$1,470 million are similarly in the category of cooperation with the
States and are relatively uncontrollable throuigh the annual appropriation process in any one year. (See letter and tables from Budget
Director Lawton, Hearings, pp. 467-487.)
Cuts in these and similar fields can be made only by modification of'
existing laws or by the refusal of Congress to appropriate the funds
necessary to meet legal commitments. When all of these items are
taken into consideration, however, in aggregate they do not amount
to a sum sufficient to eliminate the anticipated cash deficit.
Therefore if Congress desires to balance the cash budget by reducing
expenses it must turn to the national security expenditures. When,
in the course of the committee hearings, the Director of Defense
Mobilization, Charles E. Wilson, was asked whether he would choose
to reduce mobilization expenditures rather than incur a deficit, his
answer was that he would choose to incur the deficit.
The issue which is presented to the Congress, therefore, is whether
to abandon the pay-as-we-go policy and, if we do, how to avoid the
inflation which, sooner or later, seems inevitable if the policy 'is abandoned. This is not to say that the 'economy of the United States cannot carry a deficit for a short period -without inflation. But many feel
we are not dealing with a short period. Indeed no one can predict.
how long the preparedness program must be carried. The judgment.
which the Congress must now make, therefore, may involve militaryexpenditures over an indefinite period in the future.
This brings us face to face with the question as to whether or not in
the present cold war-and this is an economic war as well as a shooting'
war in Korea-the Congress can afford even for a short time to permit
deficit spending. The committee believes it is highly dangerous to~
indulge in this luxury.
, The Soviets are acting upon the theory that the capitalistic system
can be forced into an economic crash out of which world domination
by the Communists will arise without expenditure of Russian manpower and without the risk of Soviet defeat in a third world war."
If this be true, the economic front may well turn out to be the most
dangerous front. To run a continuing deficit now may well cause:
I The strategy of the Communists was implied in a recent article, "The Economy of the Capitalist World'
Under the Burden of Militarism," which appeared in the Moscow journal, Bolshevik (No. 24) in December1951. (Bolshevik is an official publication of the Central Committee of the All-Union Communist Party.)
It stated:
"The arms race and preparation for a new world war brought about in the year which has passed a sharp
lowering in the standard of living of the working people in the capitalist countries, a rise in price of goods:
of general consumption, an increase in the burden of taxatio,, and arisein inflation. At the same time, the
monopolies are making profits on the preparation for war and are plundering colossal profits from the working people. The masses of the people are stiffening their resistance to the militar'ization of the economy of
the capitalist countries.
"Militarization, the policy of the preparation of new military adventures, are increasingly undermining
the economy of the capitalist countries. All the internal and external contradictions in the camp of imperialism are growing sharper. The disproportionate extension of the war industry, and also of the branches:
serving this industry at the cost of the curtailment of the production of consumer goods cannot but lead.
within a short time to an economic crash."
JOINT ECONOMIC RE-PORT
5
this country to fall into the economic trap anticipated for us by the
Kremlin.
The dilemma which the Congress faces was well stated by Secretary of Defense Robert A. Lovett in his opening public statement at a
joint bearing of this committee and the Senate Appropriations Sub-committee on Defense. He testified:
I would like to emphasize that the problem confronting this committee, the
Congress, and the Department of Defense is to complete a military program
within the framework of the partial mobilization concept while at the same time
maintaining a strong civilian economy. It has never before been attempted
-in. this country.
In the same statement Secretary Lovett testified:
We have tried to bear in mind that in preparation against the dangers of a hot
wvar, we must not be trapped by our own efforts into losing the cold one.
Thus Congress faces the months immediately ahead under the neces*sityof reaching a practical judgment as to the proper balance between
immediate military strength and longer-run economic strength. To
this end, three possible programs present themselves:
First-and this is the program submitted to the Congress by
the President-accept a military build-up entailing $85 billion
total Federal expenditures for fiscal 1953, raise approximately
$5 billion of additional Federal tax revenue, and tighten the
direct control program.
Second, reduce Federal Government expenditures-which
means mainly defense expenditures-while retaining present tax
rates and direct control laws.
Third, accept the proposed level of expenditures without
raising taxes and-to offset the risk of inflation-rely primarily
upon individuals and business to restrict private spending and
to save at an unusually high rate.
CONGRESSIONAL CONTROL OF EXPENDITURES
The key factor shaping the national economy is the defense program. Of the President's $85 billion expenditure estimate for fiscal
1953, $65 billion is for major security programs. Thus sizable
reductions in the Federal budget for fiscal 1953 can be achieved only
by substantial cut-backs in the national security appropriations.
The military build-up program is recommended by the President
as a middle choice. Too slow a build-up would invite open aggression by the Communists; too rapid a build-up "could burden us with
a mass of out-of-date weapons, deplete our economy, and weaken
:public support for a program which may be needed over a long
period." 2
Secretary Lovett testified that the three armed services made
original requests for appropriations for fiscal 1953 totaling $71 billion;
-that these were reduced by the Department of Defense to $55 billion;
and thereafter reduced an additional $3 billion by the President and
-the Bureau of the Budget.
It is not the function of the Joint Economic Committee to say
whether the President's program from a military standpoint is too
large or too small, too fast or too slow. However, the evidence before
2
The Economic Report of the President,January 1952, p. 4
6
JOINT ECONOMIC REPORT
this committee indicates that the program as outlined by the President, if essential from a security standpoint, can, for the short run, be
supported by the economy. It does not follow that expenditures can
be supported indefinitely at the proposed fiscal 1953 level.
In economic terms, the burden of defense expenditures will fall
upon the American people at the time the expenditures are made.
The burden can be shared equitably only by an effective anti-inflationary program. It is shared inequitably through inflation. The
over-all burden can be lightened, and inflationary pressures eased,
by a reduction and postponement of Government expenditures whenever this can be done without jeopardizing the national security or the
strength of the economy.
Annual, or short-run, control over the rate of expenditures has been
placed by the Congress largely in the hands of the executive branch
through the granting of obligational authority in excess of amounts
actually spent in a given year. The lead time required for major
military items necessitates large appropriations well in advance of
actual delivery and payment. It appears not to be generally understood that the building of an aircraft carrier, of a long-range bomber,
or of the plants required to turn out modern weapons, is as expensive
in time and money as the building of a skyscraper. This explains
why about $73 billion of previous appropriations will be brought
forward into the fiscal year 1953, most all of which are expected to be
for major national security programs. (See Hearings, p. 92.) Thus,
even drastic reductions in new appropriation requests for fiscal 1953
would have less than dollar-for-dollar effect on total 1953 expenditures.
.Congressional control of Federal expenditures is one of the rocks
on which our system was founded but it has been difficult to maintain.
As long ago as 1921, after many abortive attempts, the Congress finally
enacted the Budget and Accounting Act of 1921. This law created
the General Accounting-Office to be "independent of the executive
departments and under the control and direction of the Comptroller
General of the United States."' Its audits have saved uncounted
millions, but only as an accounting process. There is now pending
on the calendar of the Senate a bill (S. 913) reported by the Committee
on Government Operations, to amend the Legislative Reorganization
Act of 1946 to provide for more effective evaluation of the fiscal requirements of the executive agencies of the Government of the United
States. It is designed to create a Joint Committee on the Budget
with an expert joint staff for the Senate and the House to maintain
continuous surveillance of Government expenditures, thus increasing
effective congressional control over the rate and efficiency of expenditures. In setting up such a committee and staff, care should be
taken to delimit clearly the jurisdiction of this and other committees
of the Congress.
If congressional control of expenditures is to be made effective, it
would seem to be necessary for the Congress either to enact new legislation of the kind recommended by the Senate Committee on Government Operations or to amend the Budget and Accounting Act to make.
better utilization of the services of the independent General Accounting Office. Members of Congress well know, however, that the reports of the General Accounting Office are honored more in neglect
than in study, and that the expansion of congressional staffs could
easily lead merely to the establishment. of a legislative bureaucracy to
watch executive bureaus.
JOINT ECONOMIC REPORT
7
In the adoption of the Hoover Commission recommendations for a
"performance budget" the Government has made important forward
strides in placing budgetary procedures on a more businesslike basis.
But further improvements are needed both in the structure of the budget message itself and in congressional handling of the budget.
First of all, the budget message does not, as yet, clearly and explicitly make the distinction between the "cash budget" and the
"administrative budget," a distinction which this committee has been
consistently developing for quite some time. The pioneering work
which has been done by our committee and which is supported by such
business organizations as the Committee for Economic Development,
can be used as a model for the development of an improved budget
presentation. In every annual budget message, the distinction between the "cash budget" and the "administrative budget" should be
made in simple understandable terms.
Simnlarly, the budget message should give more explicit attention
to the distinction between the money which goes for operating expenditures and the money which goes for recoverable loans and physical
assets. This is one of the most important proposals of the Hoover
Commission. Favorable action should be taken on it by the Bureau
of the Budget.
It would also be helpful if the budget message included special
sections aimed at telling where we are headed on expenditures over
subsequent fiscal years, that is, spell out the financial commitments
implied for future years under existing and proposed legislation.
Although the Government is today making commitments which call
for expenditures many years in advance, no one can obtain from the
budget message information concerning these future expenditure
implications.
All these specific questions-as well as more controversial proposals
for a carefully planned congressional schedule on appropriation measures, for "yea" and "nay" votes, for more record votes on appropriation items, and for the presidential item veto-are contained in the
proposed Economy Act of 1952. Such proposals seem to us to warrant
prompt and careful study by the committees to which they have been
referred..,
Whatever may be done about the reappraisal of present or proposed
devices for strengthening congressional control of expenditures,
results in the long run will be shaped by-what Congress, itself, determines with respect to the programs and policies it directs the executive branch to execute. Reductions in expenditures resulting from
continued congressional review of these programs should follow sound
principles. Some of these, described in greater detail in the Staff
Materials (pp. 80-82), would: (1) Put direct governmental services
wherever possible on a self-supporting fee basis when the beneficiary
of the services can be identified more or less precisely; (2) avoid
increases in Gove: nment expenditures in directions in which private
enterprise may render the services equally well with no more than
Government-enabling legislation; (3) keep assistance grants to the
States for public aid, highways, and the like from becoming so rigid
or bound by legislation that they can be varied only by progressive
changes upward, regardless of.economic conditions or needs; (4) tie,
wherever possible, desirable and necessary new demands for expenditures to reductions or shifting of costs from some other program; and
8
JOINT ECONOMIC REPORT
(5) avoid originating new programs which will mature into commitments for increased expenditures in future fiscal years.
This committee directed the staff a year ago to assemble various
specific suggestions for changes in basic statutory programs which
would result in economies. 3 The committee, of course, has taken no
position with respect to any one of these possible changes in legislation. The Budget Director stated at the committee's recent hearings
however, that this "is still primarily a good list." The list is referred
to here to emphasize again to the various legislative committees the
kind of changes in basic legislation that c6uld effect a reduction in
Federal expenditures.
SHOULD TAXES
BE INCREASED?
Setting aside for the moment the realistic judgment expressed above
that the present tax rates will not be increased, the President's tax
recommendation must be judged in the light (1) of the probable antiinflationary or inflationary effects of a further tax increase, and (2)
of the size, duration, and inflationary impact of the prospective
deficit.
There appears some upper economic limit to taxes, although not an
inflexible percentage of the Nation's income, but an area beyond which
further tax increases would aggravate inflation and- reduce initiative
and output. Some may believe this limit has been reached.
Much evidence was presented to the committee indicating that the
United States has not yet reached the economic limit beyond which
an increase in carefully distributed taxes would necessarily prove inflationary. The committee concurs with this view, although it is
concerned both with the burdens already being borne by low-income
families and with the adverse effects on incentives and deterrents to
venture capital in the high-income brackets. Not only are low-incbme families least able to defend themselves against the ravages of
inflation but they are now paying taxes out of sums which should be
spent on basic necessities of life. Families with incomes below
$3,000 a year cannot now be expected to pay higher taxes. On the
other hand, simple rate increases on incomes of faniilies earning more
than $10,000 would not produce significant additional revenue, and,
in combination with high corporate taxes, might impair initiative,
productivity, and incentives to investment in new and risky enterprises.4
3Report of the Joint Committee on the Economic Report on the January 1951 Economic Report of the President
XRept.
No. 210), 82d Cong., lst sess., pp. 86-95.
'I would like to illustrate this point. Under individual tax rates now in effect, the complete conflsca"
tion ofall income, after- present taxes, remaining to persons in gross income classes over $25,000 would be
,called for in order to raise an additional $10 billion or the amount of the estimated cash deficit for 1953.
Complete confiscation of all income, after present taxes, now remaining in the hands of persons receiving
-over $100,000 would yield only $1.7 billion.
(See Senate Finance Committee Revenue Act of 1951, Rept.
No. 781,p. 12.) Under the present system of tax exemptions and deductions much less revenue could be
obtainedby complete confiscation of all surtax net income (i. e., income actually subject to tax) in the higher
brackets. Complete confiscation of surtax net income in all surtax net income brackets above $4,000 would
yield only an additional $9 billion or less than the estimated cash deficit for fiscal year 1953.
"With further reference to the dangers of higher taxation in the upper brackets, I would like to call attention to the lack of profit inmaking risk investments. For example: If a man in the $50,000 bracket puts
money into risk investment which is successful and yields as much as 10 percent on the investment, the
Government will take half of that, in the form of corporation income taxes, leaving 5 percent tax free. It
would be unwise for the business topay out more than half of that in dividends. The investor therefore
might receive 2ydpercent on his investment but, since this is an addition to his top bracket, the Government will take 75percent of this, leaving him only five-eighths of 1 percent as a return for his investment
in the future of the country. He would not bejustified in making such an Investment and will naturally
prefer tax-free State and municipal bonds yielding a clear 2~j percent."-Senator Ralph E. Flanders.
9
JOINT ECONOMIC REPORT
We recommend tightening tax administration and the elimination of
loopholes. Such steps will provide moderate amounts of additional
revenue. We do not recommend a general increase in tax rates at this
time because we believe that even if the reductions in expenditure
discussed above are insufficient to balance the cash budget for fiscal
1953, the temporary cash deficit can be held to an amount (through
expenditure reduction in subsequent years and through tax code
tightening) where its inflationary aspects can be controlled by other
programs.
CAN
WE
RELY ON CONSUMER SAVINGS AND ECONOMY
EXPENDITURES TO PREVENT INFLATION?
IN
PRIVATE
While every effort must be made to reduce inflationary pressures
through economies in Government expenditures, nevertheless, primary
control over inflation lies with private business and consumers. In
calendar 1951, out of total expenditures for gross national product of
$327.8 billion, about $205.5 billion, or 62.7 percent., was spent by
consumers, and $59.1 billion, or 18 percent, by private business for
investment. Important as it is that Government-Federal, State,
and local-should economize, inflation can be controlled only if
business and consumers practice economy in expenditure in the same
manner that is expected of Government. It should be remembered
that it was the temporary scare buying of consumers and inventory
speculation by private business that bid up prices immediately after the
outbreak of the Korean war. Furthermore, the private inflationary
pressures were aggravated and made possible by a sizable increase in
bank credit. (See Staff Materials, pp. 85-88.) Striking price rises
occurred during fiscal 1951 despite the fact that the Government was
achieving a substantial cash surplus.
Since about 75 percent of all expenditures for gross national product
in fiscal 1952 will be made by private individuals and groups, the
course of prices during the next fiscal year will be largely determined
by the extent to which consumers and business voluntarily economize
on less essential and postponable expenditures, and on the effectiveness
of voluntary, as well as compulsory, restraints on private credit.
Consumers in recent months contributed to economic stability by
saving at a rate of approximately 9 percent of their income after taxes.
This was the highest rate since the end of World War II. There is
no certainty as to how long consumers Will be willing to continue their
voluntary restraint and to save large portions of their disposable
income. Public confidence in the outlook is paramount. A change in
psychology could turn liquid savings into inflationary demand overnight. In any event, it must be acknowledged that consumer savings
during the last 9 months of calendar 1951 constituted a powerful
anti-inflationary force.
If the Nation is to rely primarily on high levels of voluntary consumer savings and economical private spending to prevent inflation,
the Government's direct control program becomes particularly important. Furthermore, every practicable method for encouraging
Dew savings, for retaining old savings, and for encouraging postponement of less essential business investment, must be explored. The
Subcommittee on General Credit Control and Debt Management,
of this committee will consider such devices.
10
JOINT ECONOMIC REPORT
AFTER THE DEFENSE BUILD-UP,
WHAT?
According to present announced schedules and assumptions tuat
there will be no worsening in international conditions, defense build-up
expenditures should have passed their peak within the next 2 years.
Defense spending-it is assumed-should then decline toward a level
required to maintain our military forces at top efficiency. (See Staff
Materials, Table VIII, p. 59.) Admittedly there are no certain and
unequivocal answers as to what this level may be. Nevertheless, this
committee recommends that a study be made of the likely maintenance
cost of the defense program in terms of manpower, materials, and
dollars.
The long-run maintenance-cost problem is tied directly to a number
of related questions such as the opportunities for growth and development in the economy once the defense build-up is completed. The
committee has directed its staff to assemble materials on the opportunities to which the Nation can devote itself more fully when the
defense build-up has passed. The staff will give particular attention
to needed policies which will facilitate action by business and consumers to maintain dynamic growth in the economy.
SUMMARY OF RECOMMENDED
COURSE
OF ACTION
In the preceding pages the committee has pointed out the desirability of balancing the cash budget and continuing the pay-as-we-go program. The committee recognizes, however, that it is unrealistic to
expect public support at this time for an increase in tax revenues
either through the closing of all so-called loopholes or through
increasing tax rates. Furthermore, while the members of the committee individually support many specific proposals to reduce expenditures we believe that it is unrealistic to expect that a majority of the
Congress will support enough of these this session to balance the cash
budget for fiscal year 1953 by expenditure reductions.
One example will illustrate the point: An obvious and equitable
way to reduce the expected deficit would be to put the Post Office
Department on a more nearly self-sustaining basis than is indicated
by the $800 million deficit expected in the present fiscal year. But the
pressures against further increases in postal rates are so strong there
is little reason to expect the Congress at this session to enact these
increases. It should be noted that the most effective pressures against
a postal-rate increase come, as the experience of the last session of
Congress demonstrated, from quarters which most loudly demand
"economy in Government." A similar situation exists with respect
to nearly every other area where economies could be achieved without
serious loss to the Nation's strength. Groups with a special interest
in particular expenditures are able to concentrate the full weight of
their power in support of those expenditures. On the other hand, the
great majority of the people are either so disinterested or uninformed
individually about the costs of proposed expenditures that, despite
an almost universal desire for both economy in Government and lower
taxes, expenditures are voted for lack of specific public opposition to
particular expenditures..
In spite of these realities the committee recommends to the standing
committees of the Congress the following designed to achieve a balanced
JOINT ECONOMIC REPORT
11
cash budget in fiscal 1953: (1) That every effort should be made to remove all waste, to postpone less essential expenditures, and to review
carefully all basic programs from the standpoint of attaining both immediate and long-run economies; (2) that the -appropriate standing
committees should continuously scrutinize the problem involved in
the fundamental maintenance level of military expenditures; (3) that
every avenue should be explored to stimulate savings on the part of
individuals; and (4) that inequities in the tax structure should be
eliminated and tax adniinistration improved with some revenue gains.
We do not recommend a general increase in tax rates at this time. We
believe that the cash budget can be balanced in fiscal year 1953 as a
result of revenue gains from the above-mentioned measures and reductions in expenditures as previously repeatedly emphasized. A further
contributing factor is the likelihood that lags in production of military
items will result in lower expenditures than officially estimated.
While the committee feels strongly about the necessity of balancing
the cash budget, we must say that if a small cash deficit should develop
in spite of the recommended courageous steps, it nonetheless could be
managed temporarily for the single year. If international conditions
permit, expenditures in the subsequent year must be stabilized and
later reduced, permitting tax reduction.
The debt limit of the United States Government is now fixed by
law at $275 billion. The committee is strongly of the opinion that
any upward adjustment of this limit, short of all.-out war, should be
avoided. With the debt presently at about $260 billion, the need for.
rigorous economy, is underscored. If nothing is done about expenditures, the estimated deficit for the next fiscal year will bring the debt
perilously close to the present maximum.
UNITY ON MAJOR NATIONAL ISSUES
In expressing their views to this committee, representatives of
leading farm, labor, business and consumer organizations have shown
a wide area of agreement in their basic evaluation of the present
economic situation and the major problems facing the Congress.
They also agieed in many of their recommendations. (See Hearings,
pp. 414-467.)
The primary requirement of adequate national defense is taken for
granted by all. The dangers of communism are recognized and the
need for substantial militarv and economic measures to combat the
threat of aggression is accepted. It is clear that all groups in the
economy expect the necessary military programs to be carried out
as efficiently and economically as possible.
The American Federation of Labor, the Farmers Union, and the
Committee for Economic Development, among others, pointed out
that the struggle against communism is economic as well as military,
and that the strengthening of the free world economically must form
an important element in our national security program.
Second only to the recognition of the need for adequate defense
was the concern over the dangers of inflation. The Chamber of
Commerce of the United States, the Congress of Industrial Organizations, and the Consumers' Union stood side by side in their alarm
at what further inflationary price rises would mean to the functioning
of the American economy.
12
JOINT
ECONOMIC
REPORT
- Particular concern was expressed by most groups
over the inflationary dangers of impending Government
deficits. Groups as.
diverse in their economic interests as the
American Federation of
Labor, the American Farm Bureau Federation,
and the National
Association of Manufacturers were alike both
in their disapproval of
deficit financing in these times and in their
as possible toward balancing Federal receiptsadvocacy of going as far
and expenditures, with-out jeopardizing our national defense.
Such agreement upon needed policies gives
unity of purposes and programs so often emphasis to the general
diversity of disagreements about particular concealed beneath theations. Understandable as it is for each remedies for special situgroup to be partial to its.
own immediate interests, all groups evidence
a desire to strengthen
the economy and to increase the Nation's
ability to cope with the'
threat of Soviet aggression.
VIEWS OF THE COMMITTEE
ON THE MAIN LEGISLATIVE
TIONS OF THE PRESIDENT
RECOMMENDA--
The Employment Act of 1946 charges this
the Congress "with respect to each of the committee with advising
main recommendations
made by the President in the Economic Report."
The recommendations of the President as summarized in the
President, January 1952, (p. 25) are quoted, Economic Report of the
followed by the views of
the committee.
Defense Production Act renewal
President's recommendation: Renew the
Defense Production Act
for 2 years, and strengthen its provisions, particularly
to production expansion and to the control of prices those relating
and credit.
Committee's views: The Defense Production Act
was
important in
the mobilization and stabilization effort of
the past 18 months..
Powers to allocate scarce materials and to control
prices, wages, and
credit will continue to be necessary in the
mittee cannot foresee the kind and extent ofcoming year. The comcontrols needed-beyond
that time. In extending the act, the appropriate
weigh means of strengthening it, especially with committees should
the Congress relying
heavilyon economy in expenditures by both consumers
and business
and thus on high rates of voluntary private savings
to curb inflation.-"
Foreign-aidprograms
'President's recommendation: Provide continued
and
economic aid to free nations; and, as a step toward military
barriers, repeal Section 104 of the Defense Productionremoving trade
Act, which restricts our imports of certain goods which European
and
tries could export to us on mutually advantageous terms. other counCommittee's views: The Nation's economic policies
are a major
factor in the struggle against communism,
fully as important as
militarypreparedness. The details of the mutual
security program
5 "I would not agree to a 2-year
of the Defense Production Act
but would vote for a 1-year renewal.renewal
by the President,.
In extending the Act I would not wishastorequested
ignore the great impetus to
the inflationary spiral given by the reactions between
wages, costs, and
prices. I would personally recom-mend that provision for increasing wages with increases
in living costs
on
the one hand, and increasingprices with increases of production costs on the other,
should
be provided for in the new bill but with a
waiting period of at least
3 months between the appearance ofboth
the justification and the actuall inauguration
of
increased wages or increased prices authorized
There would thus be introduced a brake on
the rapidity of the inflationary mechanism. A therefrom.
of this nature was incorporated in ourcommittee's report of a year ago. (Also see Staff recommendation
Materials, pp. S990.)"-Senator Ralph E. Flanders.
JOINT ECONOMIC REPORT
13:
just transmitted by the President to the Congress, therefore, must be
reviewed from the standpoint of the economic as well as immediate.
miliitary requirements.
Posed are not only questions of economy in Government expenditures but also questions of national safety and self-interest. It is not
economy to balance the 'budget by undermining the basic program
upon which our hopes for world peace are founded. The story attributed to the late Senator from Michigan, Arthur H. Vandenberg,
seems not inappropriate. It deals with the man who was drowning
30 feet from shore. He will receive little help from a 20-foot rope.
If there is anything defective in this metaphor, it lies in the fact
that our friends in other countries who are threatened by Communist.
aggression are not the primary ones with whom we are concerned..
Our first interest is in ourselves. This is not, therefore, a question
of whether we stand by while others drown. It is a question of'
whether we continue to press for action now to prevent a situation
from developing which could involve this country in a third world
war with havoc and destruction upon the towns and countryside of'
the United States.
The committee wishes to make three specific suggestions with
respect to our mutual security program: First, in the interest ofpreserving maximum civilian goods for our own people, our foreign
economic aid should be made up of offshore procurement to themaximum possible extent. This would also have the beneficial
effect of bringing dollars to the foreign nations that need them.
Second, to the extent that military preparedness is to be fostered
abroad, the program should be so drafted as to encourage both military procurement and production by and in the countries to be aided.
At the same time, where more military items are coming off our own
production lines than this country needs for current use or essential
stockpiling-out of appropriations already made-the Congress should
consider the drafting of a formula by which such material may bemade available to foreign nations, thus avoiding both increased
appropriations and unnecessary obligational authority.
Third, the committee believes it is imperative to stress the-necessity
of expanding production and productive capacity among the free
nations associated with us as well as within the United States. Our
own progress over the last century has been founded upon the seem-ingly unbelievable increase in productivity which has taken place in
one industry after another-increases stimulated by the competitive
character of our industrial economy. Now, in Europe and elsewhere'
overseas, for the first time, under section 516 of the Mutual Security
Act of 1951, we have made it. our objective abroad as well as at hometo promote increased productivity through action to discourage cartel
and monopolistic practices.
Long-run foreign economic programs should form a consistent:
whole based on the objective of raising living standards throughout the
world,, thus getting at the causes of international conflict by: (1)
improving access to the world's physical resources; (2) increasing theknow-how, the technology and the incentives for people to makemaximum productive use of these resources; (3) increasing the freer
exchange and movement of materials in the free world markets; and (4)
facilitating freer movement of people, ideas, and capital to improve the
balance between population and resources.
96529-52
2
14
JOINT ECONOMIC REPORT
Aid to small business
President's recommendation: Aid small business by providing the
necessary funds for the Small Defense Plants Administration.
Committee's views: The mobilization program has had a damaging
impact on small producers. Because of size and limited financial
reserves, small business is especially vulnerable to the imbalances
caused by large-scale military buying, rationing of materials, price
and wage controls, heavy taxation, and a tight skilled-labor market.
Since current small-business problems stem in large measure from disruptions created by the mobilization program, the Government has a
responsibility for taking every precaution to minimize the hardships
produced for small enterprises. At its last session Congress established the Small Defense Plants Administration to meet this obligation. An appropriation was passed providing funds for initial planning and organization but not for operation. This committee feels
that adequate funds should be provided for a purposeful small-business operation and it therefore endorses the President's recommendation.
Further, the committee recommends that small-business organizations from other departments should be transferred to the Small
Defense Plants Administration with the exception of small-business
activities and organizations necessary to normal operations of the
respective departments.
At the same time, the committee maintains that congressional
efforts to assist small business cannot be limited to these steps.
The Senate and House Committees on Small Business must continue
their efforts on behalf of small business. Both committees in their
annual reports- just issued have made recommendations relating to
how small-business men can become more effectively integrated in
the defense program.
Labor-management relations
President's recommendation: Revise the basic legislation concerning labor-management relations, so that it will not hamper sound and
healthy labor relations and uninterrupted production.
Committee's views: There can be no quarrel with a goal of "sound
and healthy labor relations and uninterrupted production." Actual
experience during the past year suggests that labor-management relations have been generally satisfactory. The Council of Economic
Advisers points out that "total man-days of labor lost through work
stoppages during this period (1951) were lower than in any other
postwar year" (p. 54). Experience may call for modification of basic
labor-management legislation, however, to promote maximum productive employment.
Agricultural legislation
President's recommendation: Repeal the sliding scale provisions in
existing agricultural price support legislation; provide a workable
support program for perishable commodities; and modify the tax on
unallocated reserves of farm cooperatives.
Committee's views: High levels of food and fiber production and
fair incomes for farm families are basic national policy. It may be
possible to maintain the desirable flexibility of existing agricultural
price support legislation and still give farmers the assurance needed
JOINT ECONOMIC REPORT
15
to enlist their wholehearted support in the production effort by raising
the levels of reserves of key nonperishable farm commodities that
must be reached before the sliding-scale features go into effect.
A substantial part of the agricultural labor force today is not employed to the maximum advantage of the economy. In this connection, the committee calls the attention of the appropriate committees
to a staff study of underemployment of rural families.' In brief, this
study suggested (1) increasing the productivity on existing small-scale
farms; (2) increasing the size of the farm; (3) assisting farm families
who desire employment outside their home communities; and (4)
increasing employment opportunities of part-time farmers, rural nonfarm families, and hired farm workers.
This committee is in no position to advise with respect to perishable
commodities or the taxation of-unallocated reserves of farmer cooperatives.
Taxation
President's recommendation: Provide at least enough additional
revenues to reach the revenue goal proposed last year, by eliminating
loopholes and special privileges, and by tax rate increases.
Committee's views: Inequities in the tax structure should be eliminated as far as possible and tax administration should be tightened.
We recommend against general increases in tax rates at this time for
the reasons expressed above.
FederalReserve authority
President's recommendation: Provide powers to the Board of
Governors of the Federal Reserve System to impose additional bank
reserve requirements; and provide authority to control margins for
trading on commodity exchanges.
Committee's views: The powers of the Board of Governors of the
Federal Reserve System to regulate credit are important to the
Nation's economic stability. They are an important element of a
study now being carried out by a special subcommittee of this committee-the Subcommittee on General Credit Control and Debt
Management. In order to bring into focus the issues to be considered,
the subcommittee has directed a series of questions to Government
agencies, non-Government economists, bankers, and others, and has
published in full the replies of Federal agencies and summaries and
extracts of those received from persons outside of the Federal Government. The subcommittee began hearings on March 10. Following
the hearings, the subcommittee will report to the full committee, which
will make recommendations to the Congress.
Federal programs and assistance in housing, education, medical care,
social security and development projects
President's other recommendations:
Provide for the construction of needed housing and community
facilities in defense areas;
Authorize Federal aid to help meet school operating costs, and
increase aid for school construction and operation in critical defense
areas;
6 Underemploement of Rural Families, materials prepared for the Joint Committee on the Economic
Report by the committee staff, 82d Cong., Ist sess. (1951).
16
JOINT ECONOMIC REPORT
Authorize Federal aid to assist medical education, and provide forstrengthening. local public health services;
Raise the level of benefit payments, and make other improvements,
in our system of old-age and survivors insurance, and strengthen the
Federal-State unemployment insurance system; and
Provide for certain urgently needed development projects, particularly the St. Lawrence seaway and power project.
Committee's views: The extent to which these programs can be
initiated now is necessarily limited not only by congressional authorizations but by the availability of skilled manpower and scarce mate-rials. Only those projects which definitely advance the defense effort
or are vital for the most essential civilian needs justify approval at
this time.
However, the long-range defense effort of the Nation depends funda-mentally on well-educated and -healthy citizens. It would be falseeconomy therefore to fail to provide for the schools, the expansion of
aid to promote medical education, and the necessary public health
services which are needed now in light of the very high birth rate of the
war and postwar years. The growing proportion of aged among our
population and the rise in living costs mean that increasing attentionx
must also be given to their needs.
The determination of what public development projects should beinitiated should take into consideration the long-run need for such
projects, their cost and the availability of necessary materials. A
decision on the St. Lawrence seaway is particularly urgent in view of
the growing need by the inland steel industry for economic access toadditional sources of high-grade ore.7
*
*
*
*
*
*
*
This report of the Joint Committee on the Economic Report.
concentrates on what the committee considers the major economic
issues facing the Congress this session. In accordance with customaryprocedures, the committee, preliminary to the preparation of its.
report, sought additional facts and analyses bearing on materials.
contained in the President's Economic Report from three sources:
(1) Executive and open hearings with the heads of appropriate
executive agencies of the Federal Government; (2) panel sessions with.
non-Government technicians; and (3) questionnaire returns from
representatives of the leading economic interest groups. These
materials are published in the committee's hearings.
The materials prepared by the committee staff and attached to this
report on National Defense and the Economic Outlook for Fiscal Year
1953, provided the committee with useful information on the economic
implications of various programs.
7 "I would prefer to have the last sentence read: 'A decision on the St. Lawrence seaway is particularlyurgent in view of the expressed determination of the Canadian Government to proceed with construction.
on its own account unless we settle the matter within the next few months'."-Senator Ralph E. Flanders.
SUPPLEMENTAL VIEWS OF SENATOR DOUGLAS
(SENATOR BENTON, CONCURRING)
The committee report is generally acceptable. But in my opinion,
at is not specific enough and lacks proper emphasis. In support of
;this conclusion, I submit the following statement of supplemental
views. Senator Benton joins with me in this statement.
I. GENERAL
CONSIDERATIONS
The law establishing the President's Council of Economic Advisors
:and this joint committee had two main purposes: (1) To provide for
,an annual review and analysis of the Nation's economy so that the
~Congress, the Executive, and the People would be aware of important
*economic factors upon which policy decisions could be based, and
(2) to provide executive submission of the Economic Report early
fin the year so that the joint committee could study it quickly and
issue its report. The Economic Report and the report of this
-committee were thus expected to set the climate of opinion for later
-actions affecting the national economy.
It is because the report of this committee is such an integral part of
-this process that it should consist of a much stronger and more specific
statement.
There is no questibn but that the most dangerous economic problem
'we face todav is that of inflation-'how to carry forward our vital
-defense preparations and protect our financial integrity at the same
time.
In the first place, we should make the causes of inflation crystal
-clear. Only through a widespread understanding of these causes can
we mobilize public support to combat the distress and instability of
rising prices. If the American people understand what will probably
happen to prices when we incur huge budget deficits, we will get the
-support necessary to cut nonessential Federal spending. Otherwise,
if the problems of reducing the deficit are presented as being difficult
and probably not practical to carry out, public apathy will make it
'impossible for us to make the necessary reductions.
The plain truth of the matter is that a big Government deficit will
force the Treasury to call upon the banks for loans. The banks will
-loan by creating credit accounts against which the Government will
draw for the payment of labor and materials. Since we now have
virtually full employment, except in a few centers, this added monetary
-purcbasing power vill not cause otherwise idle labor to be put to work
-on idle resources. The added credit will therefore not increase the
'real national income; it will merely give the Government more money
with which to bid up the prices of materials and of labor and hence
will probably lead directly to inflation with all its bad effects.
These consequences should not be blinked at. The problem should
'be attacked at its source, namely the enormous deficit which the
.administration proposes.
17
18
JOINT
II.
ECONOMIC REPORT
THE ECONOMIC
REPORT
Let us look, first, at the Economic Report, and then deal with
what we should emphasize in our own report.
Faced with successive deficits of $8.2 billion in 1951-52 and $14.4
billion in 1952-53, what does the Economic Report say about the need
for reducing nonessential expenditures? It says, "True economy is
desirable at all times." Then it proceeds to a defensive argument as
to why it is virtually impossible to effect economy.
The report lists the need to cut nonessential Government spending
with the need to cut nonessential private spending. But how can we
expect the public to heed such a plea for private saving when nothing is
advanced but reasons for not reducing Government spending.
With constant references to defense needs, the report implies that
the only way to retrench is to weaken our national security. I feel
certain that the members of this committee reject such a notion.
Having talked away the need for economy except for a few, highly
qualified meaningless platitudes, what does the report say about
inflation which is bound to follow? It devotes a large part of the discussion to the role of private savings-whether the extra credit injected into the economy by budgetary deficits will be saved by the
public or used to bid up the prices on the available supply of goods.
Then it admits that "this is a precarious situation" and that if the
money is spent, something will have to be done. And what can be
done, according to the report? Taxes, restrictive credit policies, allocation and limitation orders, and price and wage controls.
No mention is made of reductions in nonessential spending levels.
Only $5 billion in new taxes is asked. The reportseems simply to say
that we must have deficits, hope, that private savings will hold down
inflationary pressures, and rely on direct economic controls to stop
inflation. The attitude of the Council of Economic Advisors toward
a big Government deficit reminds one indeed of Mr. Dooley's comment
about Theodore Roosevelt's attitude toward the trusts: "On the one
hand, I am against the trusts. On the other hand, not so fast."
This does not mean to imply that the report is bad. It contains a
good review of the economic problems facing the Nation and makes
many good legislative recommendations. But, so far as deficit spending and attendant inflationary pressures are concerned, the report
seems simply to throw in the sponge. "Let us accept the existence
of deficits" it says in effect, "and rely on direct controls to stop inflation." In other words, "Let us feed the fires of inflation and use a
medicine dropper on it when it gets too hot."
III. THE COMMITTEE REPORT
The committee report makes a much stronger case for economies,
although its advocacy of a pay-as-we-go system is rather passive.
Much more of the report is however devoted to the very definite
implication that this cannot be carried out in practice. The statement stresses the large percentage of total expenditures for defense
purposes; the large amounts of carry-over appropriations; the fact
that basic legislation would be required to make any substantial
reductions.; and how Congress is losing control over appropriations.
119
JOINT ECONOMIC REPORT
The cash budget can be balanced with rigorous economies and the
closing of tax loopholes. But we need to be specific in our words
since we must be specific in our acts. Nor does the report deal with
the fact- that, much as we dislike increasing tax revenues, this may
a lesser evil than permitting a disastrous inflation to take place.
For the Congress must adopt heroic measures if we are to save this
country from inflation. But if the trumpet gives an uncertain sound,
who, then, will summon up courage to do battle.
Finally, the report should be 0more specific with respect to the~
control of bank credit expansion.
-be
How can we balance the budget?~
This conmmittee should insist on a balanced cash budget -without
real damage to our security. Furthermore, it should do so, not with.
generalities, but with a positive program. This can be done with
drastic cut-backs not only in waste, overhead, and the favorite subsi-.
dies, projects and programs of other people, but also with reductions.
in our own favorites. Only in this way can we demonstrate to Con-gress, the administration, and the public that we really mean business.
Let us not only be for economy. Let us fight for it.
The program outlined below for balancing the pending cash deficit.
of $10 billion is made on the basis of an over-all review of the budget.'
As we move toward enacting legislative changes aid making appropriations we may modify some recommendations here and there.
On the whole, however, it is a good general program which our committee should have urged in its report.
Expenditures reductions
CIVILIAN BUDGET
Area
Saving
AGRICULTURAL PROGRAMS
$120, 000, 000'
1. Agricultural conservation program payments -------(This program is estimated to cost $269 million. It
consists of bonus payments-to farmers for carrying out
approved farming practices. Much of it goes to prosperous farmers on fertile, flat. soil who do not need it and
who would carry out these practices anyway. We should
stop most commitments immediately and allow only-those
which are needed.)
60, 000, 000'
2. Personnel-----------------------(Department of Agriculture spends about $315 million
yearly for personnel. Consolidation of county and field
offices and other overhead should 6asily permit a 19 percent reduction.)
50, 000, 000'
3. Research-----------------------(Agricultural research is just as high as it was in peacetime, namely, about $150 million a year. During present
period, this can be.cut back by one-third.)
I Senator Benton wishes to make It clear that the specific list of cuts in the budget, proposed by Senator
Douglas and in which Senator Benton Joined, are not final and definitive suggestions from his standpoint.
and will not necessarily determine his future. voting. First, there are other potential areas for cutting ex.cnditures not listed in this statement. Second. It is probable that some of the examples cited here shnuld
out, I at all, less than suggested.
This list, however, serves a most valuable purpose. It shows dramatically how bard it will be to provide
$10 billion to balance the cash budget. It shows ow many activities must give ways~-must be postponed,
eliminated om'pared. Itd~emonstat~,s the need fodrcourageous and tough leadership both by the administrative agencies and the Coniress-lifthe graie risks to the domestic economy are to be minimized.
20
JOINT ECONOMIC REPORT
Expenditures reductions-Continued
CIVILIAN BUDGET-Continued
Area
AGRICULTURAL
Saving
PROGRAMS-continued
4. Price supports
-------(During a period when rising, not falling, prices are our
main problem, we should enact legislation to reduce these
expenditures of $240 million by one-third.)
Total reductions, agricultural programs -310,
$80, 000, 000
000, 000
PUBLIC WORKS
Expenditures for rivers and harbors, irrigation, flood control,
and multiple-purpose projects, airports, and highways and
secondary roads
(Such public works programs cost us nearly $2 billion
a year. Practically all are claimed to have a defense
connection.
But we should be able to save $400 million
on all but those where defense needs are clear and compelling by (1) stopping new and substantially new starts,
(2) slowing down the rate of construction, (3) stopping
nondefense phases of multiple-purpose projects, (4) enacting legislation to apply "user" charges to navigation projects, (5) requiring local and private contributions for cost
of flood control projects, (6) scrutinizing new airports and
airport improvements and stopping those carried out because of local pressures, (7) cutting out all grants for
secondary roads Which are a local, not a national, responsibility, (8) reducing scope of Federal-aid highway program
and restricting it to those which make a positive contribution to defense needs, and (9) surveying the possibility of
financing defense-connected power projects with bonds
sold to the public. This would lessen Federal outlays and
soak up private savings at the same time. The St.
Lawrence seaway and the Hell's Canyon project-both
needed for defense purposes-should be financed by this
method.)
Total savings, public works -400,
VETERANS
Total savings, veterans' programs -425,000,
IN
000, 000
PROGRAMS
1. Mortgage program-eliminate payment of first year's interest
--------------------------2. GI education program
(Teague report shows many abuses-$250 million could
be saved primarily in farm training program and by carrying
out recommendations of Teague committee.)
73. Personnel and general overhead
(180.000 VA employees cost about $750 million yearly.
Savings from personnel and other overhead reductions.)
SAVINGS
400, 000, 000
INTEREST
75, 000, 000
250, 000, 000
0
100, 000, 000
000
PAYMENTS
1. Pay public-debt-average interest rates to all trust and insurance funds as is done in the case of OASI
'2. Pay public-debt-average interest rates on refunds(These are primarily tax refunds and 6 percent is paid.
This is such a high interest rate that it encourages overpayment for the sake of getting these high interest rates.)
40, 000, 000
50, 000, 000
21
JOINTT ECONOMIC REPORT
Expenditures reductions-Continued
CIVILIAN BUDGET-Continued
Saving
Area
SAVINGS IN INTEREST PAYMENTS-continued
3. Charge RFC for back interest(RFC owes $300 million in back interest.
be spread out over a period of years.)
Total savings, interest payments ----
$75, 000, 000
This should
-------
165, 000, 000'
EXPENDITURES FOR MISCELLANEOUS SUBSIDIES
40, 000, 000
1. Airline subsidies-
(Would have to pass a good bill to separate subsidies
from mail rates to do this. Saving would be for both
domestic and international mail.)
2. Shipping subsidies (Present contracts already provide much encouragement to merchant marine.)
000, 000
Total savings, subsidies -70,
WASTE AND
MISCELLANEOUS
30, 000, 000
REDUCTIONS
I 100, 000; 000'
1. Post Office-
(Savings in consolidating rural routes, use of "scooters"
and other increases in efficiency. Postal rates need also to
be increased and the committee should urge this. But such
increases are already included in budget estimates and therefore cannot be used to decrease estimated deficit.)
2.. Miscellaneous reduction in waste and nonessential programs ;
(By careful scrutiny of all civilian items by members of
Appropriations Committees and other Members of Congress, such savings can be made.)
Total savings, waste, and miscellaneousTotal savings, civilian budget (rounded)
300, 000, 000)
400, 000, I00
1, 800, 000, 000
MILITARY BUDGET
1. Require discharge from Reserves of those who because of
age, hardship, or essential occupation become unavailable
for duty ---------------------2. Eliminate hazard and incentive pay (No need for incentives with existence of draft law. In
fact, it causes inequities since some who are drafted do not
get it. Combat infantrymen certainly have as hazardous
duty as flyers-more so when flying is not done in combat.
Savings in pay would be $200 million. Another $200
million could be saved in gasoline and airplane expenses.)
3. Research -----------------(Savings of 10 percent from total expenditures of $1.4
billion by eliminating waste and lowest priority projects.)
$50, 000 oon
400, 000, 000
140. 000, 000'
22
JOINT
ECONOMIC REPORT
Expenditures reductions-Continued
MILITARY BUDGET-Continued
Area
Saving
4. "Expediting production"
(This is primarily Government purchases of machine
tools and other capital equipment. Nearly $3 billion
allocated for this purpose last year. Were this all the
production encouragement being offered, all would be
needed. However, in addition, lucrative, profit-guaranteeing contracts are let, fast tax amortization is granted,
and V-loans are being given. Many companies receive 2
or. more of these advantages. A 10-percent reduction
should therefore be proper.)
.5. Eliminating waste, excessive overhead, overcharges in procurement, and increasing efficiency
(Investigations of the Hardy, H6bert, Bonner, Johnson
of Texas, Johnston of South Carolina and other committees are replete with evidence of waste in overhead,
procurement, and construction. These 3 areas account for
$35.6 billion, or 70 percent of the entire military budget.
A 9 percent reduction should be possible by close scrutiny,
weeding out of waste and placing restrictions on loose
operations.)
Total savings, military budget -4,000,
$300, 000, 000
3, 110, 000, 000
000, 000
FOREIGN AID
Toreign-aid expenditures are vital to our security as well as the
security of our allies. However, the budget calls for nearly a
50 percent increase in these expenditures. This program
could advance at the same rate that we are increasing domestic military expenditures.
A $1.8 billion reduction in
foreign aid would still all6w an increase of $1.85 billion or
25 percent.
Total saving, foreign aid -$1,800,000,000
Total savings, expenditures reductions -7,
600, 000, 000
Increased revenue by separating tax subsidies and closing tax loopholes
Area
Increased revenue
___~~~
_
1. Separating subsidies on mineral production from tax allowances
----------------------------------(The percentage-depletion allowances are defended on
the basis of their need to encourage exploration for defenseneeded minerals. These caused a loss of revenue of at least
$750 million. These privileges should all be revoked and
subsidies made directly as has been advocated in the case
of air-mail subsidies by the Hoover Commission. Depletion allowances are presently out of proportion with the
need. $500 million could be saved by such a separation.)
~~~~~
$500, 000. 000
JOINT ECONOMIC REPORT
23
Increased revenue by separating tax subsidies and closing tax loopholesContinued
Area
2. Withholding tax on dividends and corporate bond interest(Since we have a withholding tax on wages and salaries,
we should also have it on dividends and corporate bond
interest. Estimates of revenue loss by not having such a
system was $323 million in 1951. It will probably be closer
to $400 million during 1952-53.)
3. Family partnerships formed for tax-avoidance purposes
(Recipients of income from wages and salaries cannot
split income with infant children to avoid higher surtaxes.
Why should anyone? Bona fide family partnerships, where
partners contribute capital, services, or control have always been permitted and this recommendation does not
affect these.)
4. Excess-profits tax(New escapes placed in 1951 Revenue Act will cause $100
million revenue loss. Excessive exemptions in original
law should be tightened.)
.5.. Estate and gift taxes(Estate and -gift taxes have not been increased since
1942. In effect, they were even reduced in 1948. Repealing the 1948 amendments, increasing these taxes by
15 percent, and cutting exemptions in one-half would
bring in $600 million more in revenue.)
6. Capital-gains tax(At least $270 million more revenue would result by increasing maximum capital-gains rates by the same proportion as we have increased individual income tax rates
since the outbreak of hostilities in Korea. Other substantial amounts of revenue would result from taking away
special privileges to the recipients of certain types of income who are permitted to apply capital-gains rates to
their income rather than regular income tax rates. Income from such sources as coal royalties, the raising of certain types of livestock and timber are now given this privi-
Increased revenue
$400, 000, 000
100. 000, 000
500, 000, 000,
600, 000, 000
300, 000, 000
-
lege.)
Total increased revenue without increasing general tax
rates ----------iPlus:
2, 400, 000, 000
Savings and expenditures reductions
7, 600, 000, 000
Total reduction of deficit -
10, 000, 001)j 000
IV.
CONTROL OF BANK CREDIT EXPANSION
In his Economic Report, at page 22, the President states the danger
that "we may face considerable pressure for excessive expansion of
bank credit." He undoubtedly refers here to pressures from private
business, and he recommends offsetting this pressure with increased
authority to impose additional bank reserve requirements. There
should be general agreement with this recommendation, and it is
hoped that the President-will transmit to the Congress specific recommendations regarding reserve requirements so that we may consider
the necessary legislation.
On the other hand, the Economic Report makes no mention whatever of the pressures which haVe been exerted upon the Federal Reserve
24
JOINT ECONOMIC REPORT
System by the Treasury and the administration to buy unlimited'
quantities of Government securities. When the Federal Reservebuys these securities,, it does so by crediting member banks with.
added reserves. These member banks can then create more credit
for. private business and can do this by about six times the increase
in their reserves. Since the banks natirally want to earn on theirassets, they normally increase loans and credit as their reserves in the
Federal Reserve Svstem rise. But this increase in bank credit, if it isnot accompanied by an increase in physical production, causes prices
to rise and hence helps the forces of inflation. The pressure from
Government to expand credit can, therefore, be a great force in creating inflation. Government should, therefore, keep its own hands
clean, both with its budget and its monetary and credit policies.
In a period of comparatively full employment, it should not run
huge deficits or force the Reserve System to expand bank reserves.
For by so doing, the Government would be the biggest contributorto the inflation which it is professing to check.
From World War II on, the Treasury put pressure upon the ReserveSystem to buy large quantities of Government securities in order to
keep up their price and keep down the interest rate. These increasesin reserves helped to cause the increase in prices which occurred from
1946 to the fall of 1948.
The last time the Treasury exerted these pressures was during the"buying spree" which followed Korea. The Reserve System yielded
to these pressures and gave a rigid support to the Federal bond market,
and bought everything that was offered at fixed prices. That policyhad the following results: Federal Reserve holdings of all Government,
securities increased by nearly $3.5 billion in the period August 16, 1950,.
to February 14, 1951; commercial bank credit expanded by $9.1 billion
during the last half of 1950; during that same period, the privatelyheld money supply expanded by $7.2 billion. At the same time(between June 1950 and February 1951) the wholesale price index roseover 16 percent and the consumers' price index over 8 percent. It isinteresting that the price level increased in about the same rate as thequantity of money and credit.
The story of the last half of 1950 is, simply, the story, of tremendous.
pressures upon the banks for loans to finance, among other things,
"scare buying" and speculation; the unloading of enormous quantitiesof Government securities by the banks in order to expand theirreserves and meet the demand for loans; and a tremendous outpouringof reserve dollars from the Federal Reserve System, as a result of its.
commitment to purchase all the Federal securities offered, into thereserves of banks.
In April 1951 the Federal Reserve System abandoned its rigid
support of the Federal bond market. Its purchases of securities fell
off markedly, and it now holds less than it did then. Almost immedi-.
ately wholesale prices started to fall.
This is not to claim any sole relationship between the slackening
of price rises and the abandonment of a rigid support policy by the
Federal Reserve System. Others factors were also involved, such as.
the advent of price and wage controls, and of real estate and consumercredit controls, and the passing of the "scare buying" psychology.
But it can be said that the new policy had a distinct beneficial effect_
JOINT ECONOMIC REPORT
25
It is true that the abandonment of the rigid support policy in March
,and April of last year resulted in a general rise of interest rates, and
there are many who would picture this abandonment as "an attempt
to control inflation through a purposeful high-interest-rate policy."
Attention should not be focused upon the interest rate, however, but
upon the flow of reserve dollars from the Federal Reserve System
into the economy at a time of full employment. Inflation cannot
necessarily be stopped or controlled solely by a flexible support policy.
IBut a rigid support policy during a period of heavy pressures for rapid
bank credit creates rapid price increases. -Ve should adopt a flexible
_and restricted support policy during such an abnormally expansive
period in order to remove thlis source of financing inflation. It is
better to have a stable price level; even if it means a rising interest
rate, than to have a stable interest rate at the cost of rising prices.
The last time we were confronted with abnormal pressures for
bank credit expansion-namely, in the months following Korea-we had to go through a precious time-consuming struggle to determine what we should do. During that struggle, literally billions of
-dollars flowed from the Reserve System into the reserves of banks, to
-be expanded and pumped into the money supply through loans. If,
-as the President says in his report, we are again to be confronted with
those pressures, we ought this time to have our policy firmly fixed.
'That policy should be to avoid another outpouring of reserve dollars
through-unlimited purchases of Government securities by the Federal
Reserve System. It is to be hoped that the Treasury has profited
-from experience and that the present agreement may be allowed to
continue.
v. SUMMARY
If we take the steps outlined in these views, we will be able to
balance the budget and prevent inflation. For if we cut expenses by
$7.6 billion, we will bring total outlays down to approximately $77.8
-billion. An increase of $2.4 billion in revenue by the methods rec*ommended will bring receipts up to nearly $73.4 billion. This would
:give us a probable deficit of $4.4 billion in the administrative budget.
But since the social security and other trust funds yield a surplus of
contributions over benefits of approximately $4.5 billion, this will
mean that the consolidated cash budget ivill approximately balance.
'This will eliminate the danger of inflation caused by a Governmenit
deficit.
If we do this, we will still. be able to defend ourselves and the free
world in a thoroughgoing manner. But in doing so, we will also
eliminate waste and the less necessary items of expenditure. As a
Tesult we will live within our income. We will, indeed, have hit a
pace which we can maintain even if the cold war were to continue
for years longer. We will have guarded our internal economy as
well as our external situation.
Such a program will, of course, excite tremendous opposition.
TMany groups will not want to make the necessary sacrifices. They
will sincerely want the Nation to be defended, but they will want
this to be done at somebody else's expense rather than at theirs.
'They, therefore, will tend to oppose the specific proposals for economy
and for increasing tax revenues. The military leaders, ignoring the
26
JOINT ECONOMIC REPORT
shameful wastes which have been revealed in their organization, will
say that if their funds are cut by a single dollar, the national safety
will be endangered. The State Department and its friends will say
that if we.qut recommended spending for foreign aid by one iota our
system of alliance will fall apart, and the world will begin to turn
toward communism. The combined barrage of high military brass
and of some journalists and administrators will be turned upon us if
we dare to make economies.
Similarly there will be great opposition to the cuts proposed in the
civilian budget. Shipbuilding and ship-operating firms and the airlines will demand that their subsidies be continued. Many farmers
will object to having subsidy and price support payments reduced.
There will be a terrific outcry over reducing appropriations for rivers
and harbors, for irrigation, flood control, and secondary roads.
Veterans' groups will attack attempts to remove the abuses from the
GI program. The full -forcoe of the Federal bureaucracy and its
friends will take the field to prevent us from dropping the excessive
number of Government employees now in such agencies as the Departments of Agriculture and State and the Veterans' Administration.
Postal employees will fight the consolidation of rural and town routes.
Newspapers and magazines, direct mail advertisers and -mail-order
houses will marshal great strength against an increase in postal rates
which would make them pay a larger fraction of the real costs of
carrying them through the mails. It will be the same in the field of
revenues.
On each and every item, Congress will be bombarded with a host of
arguments as to why the specific cut should not be made, and terrific
pressure will be exerted against us. The specific interests opposed to
a given economy or revenue measure will be vociferous and powerful.
The public interest will tend to be diffused and weak.
It will indeed be easy for Congress, as specific appropriation bills
come up, to say as did Rip Van Winkle, "We won't count this time."
But if we do this, we, like Rip, will fail in the test. We will continue
to be fiscal drunkards. The. test is whether we can make the fine
general principles of our words become real in our own concrete acts
on specific appropriation bills.
Words can be fine, but actions speak louder. And they form the
real test. If we fail, the fine vows in behalf of economy taken during
the winter months when no concrete decisions were before us will
vanish during the spring and summer before the pressures of the
specific appropriation.bills.
If we stand firm, however, and make our position clear, we will
gradually cause the public to understand what we are trying to do.
We will get more and more support. Even many of the specific
interests affected will see, the correctness of our position, and will
tacitly agree. We may be able to save our country from insolvency
and inflation. It is worth the try.
MINORITY VIEWS
The report of the majority submitted to us for consideration contains many interesting and general statements. Everyone, we
assume, agrees that extravagance and waste in Government should
be rooted out. We all want adequate national security and still
preserve our economy, avoiding further deficits and inflation in the
process. We agree that the Government, business, and the people
should exercise restraint in expenditures, and in other ways assist to
achieve these goals.
We-feel that the report sets forth many of these high*purposes, but
appears to lack both conviction and method. as to their accomplishment. For example, the report says:
A reduction of approximately $10 billion would seem to be necessary to accomplish this purpose (to eliminate the cash deficit)-
land laterThis brings us face to face with the question as to whether *
gress can afford even for a short time to permit deficit spending.
believes it is.highly dangerous to indulge in this luxury-
* the ConThe committee
*
and againFurthermore, while the members of the committee individually support many
specific proposals to reduce expenditures we believe that it is unrealistic to expect that a majority of the Congress will support enough of these this session to,
balance the cashfbudget for fiscal year 1953 by-expenditure reductions.
Thus the suggested $10 billion reduction in expenditures, to avoid
the "luxury" of a deficit, is finally termed "unrealistic" and a smaller
figure of reduction is probably expected. Perhaps that accounts for
the omission of any schedule of expenditure cuts, but instead a considerable analysis is given of the nature of various expenditure items,
which emphasizes the difficulty of cutting them.
In other respects the report introduces discussion of many items
which are scarcely pertinent or important in the basic and hard tasks
of protecting the economy from inflation and dislocation during the
indefinite period of security preparations.
Accqrdingly, we do not join in approving the report as a whole and
briefly state our position below, reserving the privilege to comment in
greater length and detail at a later date.
The majority report rejects the two major recommendations made
by. the President and his economic advisers:
(a) The high level of expenditures proposed, and
(b) An increase in taxes.
We welcome this position. It recognizes as unrealistic further increases in taxes, which have already reached the point of diminishing
returns, only to fall short of ever-growing expenditures. Under
existing law only by reducing expenditures in every possible area can
we counteract the inevitable inflation resulting from deficits. We are
convinced the cuts can and must be made if we are to maintain our
basic economic strength, the prerequisite to our whole defense program.
27
28
JOINT ECONOMIC REPORT
On the other hand, the report fails to recognize adequately the
importance of monetary and credit policy and its role as an antiinflationary force. In this we concur with the views as set forth by
Senator Douglas. These restate the position taken by the minority
in its three previous annual dissents with the President's and the
majority's reports. We believe that much, if not most, of the antiinflationary effect that might have been expected from the imposition
of taxes since Korea has been dissipated by the delay in freeing the
Federal Reserve.Board's monetary and credit functions from Treasury
domination.
Aside from the three major items to which we have referred, other
considerations and recommendations of the report could have only a
secondary, and in some cases insignificant, impact on the economic
stability and strength of the country. We prefer to stress, therefore,
the reduction of expenditures, no increase in taxes, and a firm and independent control by the Federal Reserve Board over monetary and
credit policies in consonance with responsibilities and authority prescribed by law.
ROBERT A. TAFT.
ARTHUR V.
WATKINS.
JESSE P. WOLCOTT.
CHRISTIAN A. HERTER.
J.
CALEB BOGGS.
NATIONAL DEFENSE AND THE ECONOMIC
OUTLOOK FOR THE FISCAL YEAR 1953
MATERIALS PREPARED
FOR THE
JOINT COMMITTEE ON THE
ECONOMIC REPORT
BY THE
COMMITTEE STAFF
29
96529-52-3
LETTERS OF TRANSMITTAL
FEBRUARY
21, 1952.
To Members of the Joint Committee on the Economic Report:
For the information of members of the Joint Committee on the
Economic Report there is transmitted herewith materials on National
Defense and the Economic Outlook for the Fiscal Year 1953, prepared
by the committee staff. The basic information was drawn from Government and private statements and reports, from the recent hearings
of the Committee on the President's Economic Report, and from staff
conferences with technicians inside and outside the Government.
These materials are submitted to members of the committee for
their consideration preliminary to the preparation of the committee's
report on the President's Economic Report as provided by the Employment Act of 1946. It is under ood, of course, that these materials do not necessarily represent thi views of the committee or any
of its individual members.
JOSEPH C. O'MAHONEY,
Chairman, Joint Committee on the Economic Report.
FEBRUARY
20, 1952.
The Honorable JOSEPH C. O'MAHONEY,
Chairman, Joint Committee on the Economic Report,
United States Senate, Washington, D. C.
DEAR SENATOR O'MAHONEY:
Transmitted herewith are committee
staff materials on national defense and the economic outlook, for the
current fiscal year and for fiscal year 1953. In addition, over-all
projections are made beyond 1953 on the basis of assumptions as to
economic growth and military strength. This report is built around
the basic concept of a Nation's economic budget.
These staff materials suggest the economic trends and programs of
the private and public sectors of the economy with the resulting
inflationary pressures under the President's program of military
build-up. Throughout, the projections shown are those used in
official statements or represent estimates by the staff consistent with
the guideposts contained in such official statements. Abstracts of
these official statements are shown in Appendix B. Where the staff
disagrees with official estimates such dissents are noted in the text or
in footnotes.
A spelling out of public and private programs in Part I suggests
moderate, but potentially dangerous, inflationary pressures during the
next 2 years. Alternative policies and programs for maintaining economic stabilization and growth during this period and beyond are
presented in Part II.
'The materials focus on the economic outlook and implications of
alternative economic programs. The text does not attempt to review
31
32
JOINT ECONOMIC REPORT
economic developments of the past year except insofar as necessary for
an understanding of the projections.
It is important to emphasize that the projections set forth herein
are on the basis of stated assumptions and should not be interpreted
as forecasts of what will actually happen. Furthermore, while it is
necessary to use detailed and precise figures to arrive at an economic
model which will check internally, we emphasize that the only purpose
of models, once prepared, is to show the direction and the approximate
order of magnitude of economic developments on the basis of the
stated assumptions.
Appendixes contain technical notes on the Nation's economic
budget concept, excerpts of official statements on the economic outlook and economic policy, information on the work and publications
of the committee during the past year and projects under way.
These materials are submitted as the composite views of the committee's full-time professional staff, namely, James W. Knowles,
John W. Lehman, William H. Moore, Thaddeus J. Obal, and myself.
In the development of these materials we have had the help and
cooperation of economic consultants, technicians in the legislative
and executive agencies, and others outside the Government.
Respectfully submitted.
-ROVER W. ENSLEY, Staff Director.
CONTENTS
Page
Summary -______________________________________________________
Part I. Economic trends and projections -43
-43
Chapter 1. Estimates of total output
-43
Labor force and employment
-46
Hours of work
-47
Output per man-hour
Total output -------------------------------
Chapter 2. Government
Principles of expenditure reduction
Principles of tax revision
Monetary policy -Regulatory policy
48
-51
-51
Federal expenditures
Federal receipts
State and local -------------------.
--Chapter 3. Business
New plant and equipment expenditures
-62
Inventories
-63
Net foreign investment
-63
Nonfarm residential construction
-63
Financing
-64
Business structure
--.
Chapter 4. Consumers
-67
Consumer goods and services
-68
Consumer incomes
-68
Income, expenditures, and savings
Structural changes in the distribution of income and savings--Chapter 5. Synthesis of economic projections -75
Part II. Policies and programs for economic stabilization and growth ---.
Chapter 6. The Federal Government
Fiscal policy ---.----------------
37
-
-82
56
56
61
61
67
70
79
79
80
-80
----------
__--- __-_-_-_-__-__---_-_-__-__
Chapter 7. Summary of the Nation's economic budget -_---_---------_-_-_-___-_-_Part III. Beyond fiscal 1953
Chapter 8. Long-term prospects and problems -97
-91
Economic prospects beyond fiscal 1953_---------------------Problems beyond fiscal 1953--______________________
Appendix A. Technical notes on the Nation's Economic Budget:
Development of the Nation's economic budget concept Concepts and methods Federal administrative budget, Federal consolidated cash statement, Federal category of the Nation's economic budget Ex Ante budget versus a forecast -101
Conditions for maximum use of Nation's economic budget -102
Operating procedures -102
Concepts and methods of the Joint Committee staff studiesAppendix B. Excerpts from official statements on 'national defense and the
economic outlook 33
85
88
97
97
97
99
100
100
103
106
34
JOINT ECONOMIC REPORT
Appendix C. Committee studies and publications:
Committee studies under way Pension study Regional studies-127
The effect of temporarily suspending restrictions on imports into
the United States -127
General credit control and debt management -128
Index of Joint Economic Committee publications -128
Long-term economic adjustments -128
Economic and statistical tools for policy guidance -128
The taxation of surplus corporate accumulationsEffect of military and nonmilitary government-expenditures on the
economy -129
Committee studies completed since April 1951 -129
Committee hearings held from March 1951 through February 1952Committee staff -131
Distribution of committee materials -132
Publications of the Joint Committee on the Economic Report --- _
Page
127
127
129
130
133
LIST OF TABLES
I. Selected measures of the relation of Government programs to the
National economy. Actual calendar years 1939 and 1944 and
fiscal year 1951; estimated fiscal years 1952 and 1953 II. Civilian labor force, employment and unemployment. Actual
calendar years 1929-51; estimated, 1952-55 -45
III. Derivation of estimates of gross national product in constant
dollars. Actual calendar years 1947-51; estimated 1952-55
IV. Gross national product and major components. Actual fiscal
years 1948-51; estimated, 1952-55 -50
V. Analysis of new obligational authority and Federal administrative
budget expenditures. Fiscal years 1952 and 1953 -54
VI. Federal administrative budget expenditures, new obligational
authority, receipts, and deficits. Fiscal years 1952 and 1953
VII. Federal budget expenditures, receipts, surpluses, and deficits.
Actual fiscal years 1950 and 1951; estimated, 1952-55 -58
VIII. Authorizations, total funds available, Federal administrative
budget expenditures and carry-overs, estimated fiscal years
1952-58 -59
IX. Gross national product and expenditures for goods and services by
-Federal, State, and local governments. Actual fiscal years 1950
and 1951; estimated, 1952-55 -60
X. Business spending: Gross private domestic investment plus net
foreign investment. Actual fiscal year 1951; estimated, 1952
and 1953 XI. Per capita disposable personal income. Actual calendar years
1929-50 and fiscal years 1950 and 1951; estimated fiscal years,
1952 and 1953 -69
XII. Total personal income by source, tax and nontax payments, and
disposable personal income. Actual calendar years 1929-50 and
fiscal years 1950 and 1951; estimated fiscal years 1952 and 1953
XIII. Disposable personal income, consumer expenditures and savings.
Actual calendar years 1929-50 and fiscal years 1950 and 1951;
estimated fiscal years 1952 and 1953 -70
XIV. Percent distribution of families and individuals and aggregate
money income before taxes, by total money income level, for
the United States. -Calendar years 1950 and 1941 -71
XV. Estimated excess consumer inflationary demand on the basis of
existing tax program. Fiscal years 1952 and 1953 -76,
XVI. Interest-bearing public marketable issues maturing or callable
between January 1 and December 31, 1952 -86
XVII. Summary of the Nation's economic budget. Actual fiscal year
1951; estimated, 1952 and 1953 -92
XVIII. Derivation of Federal Government sector of the Nation's economic
budget from the Federal budget accounts. Actual fiscal year
1951; estimated, 1952 and 1953
_
----
41
46
55
62
69
94
JOIT ECONOMIC REPORT
35
Page
XIX. Federal administrative budget. Actual fiscal. year 1951; estimated, 1952 and 1953 ---XX. Federal consolidated cash budget. Actual fiscal year 1951; estimated, 1952 and 1953 -96
95
LIST OF CHARTS
I. Government expenditures for goods and services in relation to gross
national product. Actual fiscal year 1951; estimated, 1952-55-II. Federal administrative budget receipts and expenditures. Actual
fiscal year 1951; estimated, 1952-55 III. Federal administrative budget expenditures, major national security
expenditures, and net new obligational authority. Actual fiscal
year 1951; estimated, 1952-58 -57
IV. Distribution of families of two or more persons with money incomes of
less than $2,000 in 1948, by age, sex, and employment status of
family head in April 1949 for the United States -73
52
53
NATIONAL DEFENSE AND THE ECONOMIC OUTLOOK
FOR FISCAL YEAR 1953
SUMMARY
The magnitude and timing of the defense program are the major
factors shaping the future of the economy. The President's program
for fiscal year 1953, as set forth in his January messages, involves
Federal administrative budget expenditures of $85.4 billion (of which
$65.1 billion are for major security programs); revenues of $71 billion
under present tax rates; and an administrative budget deficit of $14.4
billion. Taking into consideration the surplus in the trust accounts,
this would mean a consolidated cash deficit of $10.4 billion. By way
of comparison with this budget, the peak budget expenditures of
World War II-$98.7 billion in fiscal 194,5-would be equivalent to
about $160 billion in June-July 1951 prices.
Total national production, on the basis of staff analyses of the labor
force, productivity, and output, is estimated at $355 billion for
fiscal year 1953, in June-July 1951 prices.
After making allowance for private investment, State and local
outlays, and the President's budget program, the staff estimates that
individuals could expect to have available for consumption $214 billion
worth of goods and services at June-July 1951 prices. This would
provide per capita consumption (constant prices) of $1,351 as compared with $1,327 in the current fiscal year; $1,357 in fiscal 1951;
$1,119 in 1944-the peak of World War II; and $980 in 1939.
Combined Federal, State, and local government expenditures for
goods and services under the President's program, would comprise
26.3 percent of gross national production in fiscal year 1953 as compared with 23.1 percent in the current fiscal year; 15.9 percent in fiscal
1950-just before the outbreak of the Korean war; 45.2 percent in
1944-the peak of World War II; and 14.3 percent in 1939. . Additional comparisons are shown in table I, page 41.
While aggregate expenditures contemplated for the defense effort
appear small compared to expenditures for World, War II, nevertheless the impact on many industries will be severe-particularly those
using scarce metals.
The incomes generated by a defense effort of the size contemplated
pose problems for. economic stabilization. Consumers may try to
spend during fiscal year 1953 some $5 billion more than supplies of
goods available at June-July 1951 prices.
These calculations actually minimize the inflationary risk. The
important point is not the precise magnitude of this estimated consumer inflationary demand, but rather that the analysis, on a conservative-risk basis, shows inflationary tendencies in the economy.
If consumers should attempt to spend out of their money incomes
37
38
JOINT ECONOMAC REPORT
more than the supplies available at constant prices, then prices would
tend to rise at a rate which would endanger the stability and continued
growth of the economy. Such a price rise might be further accelerated by both the operation of the cost-push mechanisms, and the
spending by individuals and business of the large volume of widely
distributed liquid assets.
These inflationary pressures may not be felt until summer or early
fall. While the budget for the current fiscal year, as set forth by the
President, suggests a cash deficit of $4 billion (administrative budget
deficit of $8 billion), the staff is inclined to believe, on the basis of
reports for the first 7 months of the fiscal year, that expenditures will
fall short of budget estimates by about $2 billion. Therefore, on a
cash basis the deficit of the Federal Government for the fiscal year
1952 as a whole may be about $2 billion. These circumstances, together with the other considerations set forth in this report, indicate
that stability may reasonably be expected during the immediate
months ahead, unless the international situation worsens.
Alternative Stabilization Programs
What are the possible courses of public and private action which
will reasonably assure continued economic stability and growth during
fiscal year 1953? The materials which follow suggest, quantitatively,
the implications of three alternative courses of congressional action
none of which alone would completely balance the cash budget.
First, raise $5 billion of additional Federal tax revenue and tighten
the direct control program to assure high rates of individual savings.
This, substantially, is the program called for by the President.
Or, second, reduce Federal Government expenditures by at least
$5 billion thereby increasing supplies of civilian goods and services
available to satisfy consumer demand.
Or, third, rely upon individuals to save nearly 10 percent of disposable personal income.
Combinations of these alternatives could be used.
Temporary Departure7FromPay-as-we-go Principle
For.the first 2 years of the Korean war, fiscal years 1951 and 1952,
the accumulated cash surplus will be about $3.6 billion; on the basis
of staff estimates. This situation has resulted (1) from enactment of
three tax bills producing some $15 billion additional revenue (annual
rate); (2) from a reduction in all other than major security expenditures by over $2 billion annually (the fiscal 1953 budget estimate for
these items is $20.3 billion compared with $22.7 billion actually
expended in 1950); and (3) from price increases which increased tax
receipts during this period to a greater extent than total Government
expenditures.
The President estimates a cash deficit of about $10 billion in fiscal
1953. If taxes were increased $5 billion (or if expenditures were
reduced $5 billion), the resulting cash deficit of $5 or $6 billion would
represent what might be called a "temporary departure from the
pay-as-we-go principle." The departure from pay-as-we-go would
be temporary on the assumption that defense expenditures can be
reduced later to a maintenance level as projected in tables VII, page
58, and VIII, page 59. The defense effort over the fiscal years 195153 would be almost paid for on a cash basis out of tax collections in
those 3 years if taxes are increased or expenditures reduced as indicated
above.
JOINT ECONOMIC REPORT
39
Analysis of the debt management problem for the next year'suggests
that the monetary system could finance a moderate cash deficit
without inflationary consequences.
The Danger of "Cost-Push" Intilation
A major inflationary force during the next 2 years will be the
"cost-push" phenomenon stressed in recent reports of this committee.'
Major economic-interest groups have obtained provisions for adjusting their money income on the basis of cost and price developments.
These largely automatic adjustments-with the present and prospective high levels of consumer and business income, accumulated savings,
and Government demand-lend themselves readily to the stimulation
of further rises in prices.
When there is considerable unemployment or unused plant capacity,
it is possible for increases in wages, in farm price support levels, or in
business profits, to draw idle resources into the production of goods and
services for the satisfaction of consumers. But, as this committee
has pointed out, operation of these mechanisms, when resources are
fully or near fully utilized, can greatly aggravate inflationary pressures. The principal usefulness of direct controls is in this area.
Congressional Control of Federal Expenditures
An examination of the Federal budget and of governmental machinery suggests that the rate of Federal expenditures during the next year
and a half will be largely determined by production rates and by military implementation of programs already voted by Congress. Of the
$85.4 billion estimated expenditures for fiscal 1953, $41.9 billion, or
49.1 percent, will result2from obligational authority which was made
Unless action is taken by the Congress to
available in prior years.
rescind or abrogate this authority already given to the executive
branch, these expenditures will be made at a rate set by the administration on the basis of executive evaluation of military risk, production
possibilities, and stabilization considerations. Even drastic reductions in new appropriation requests for fiscal 1953 would have less than
a dollar-for-dollar effect on total 1953 expenditures because of the large
carry-over of unexpended amounts of these new appropriations. In
the short run, therefore, congressional control of Federal expenditures
is limited. Substantial short-run reductions would require cancellations of contracts already entered into on the basis of authority
previously voted by Congress. Such cancellations would be costly
to the Government.
The executive branch exercises whatever Government control is
exercised over the rate of defense spending in the short run and,
hence, not only controls the military program as such, but also influences the course of the Nation's economy. While major defense
decisions in the executive branch are made by the President, with
the advice of the National Security Council, the Bureau of the Budget,
and the Council of Economic Advisers, from an operating standpoint
much of the actual exercise of this authority rests with the Secretary
of Defense and with the Director of Defense Mobilization.
I Report ofthe Joint Committee on the Economic Report on the January1951 Economic Report ofthe President,
82d Cong., Ist sess., S. Rept. 210, pp. 8 and 9; and Joint Committee on the Economic Report, Inflation &il
a Danger,82d Cong., Ist sess., S. Rept. 644, p. 20.
IJoint Committee on the Economic Report, Hearings, January 1956 Economic Report of the Plesident
(January 23, 24, 25, 26, 28, 30, 31, February 1), 82d Cong., 2d sess., February 1052, p. 467.
40
JOINT ECONOMIC REPORT
Congressional control over the amount and rate of Federal expenditures is derived much more from its power to authorize Government
programs for future fiscal years than from annual control of expenditures for the immediate fiscal year. In addition to the appropriation
review, the surveillance exercised by the Congress in its investigating
and watchdog capacity will influence the way in which the executive
branch carries out the authority granted it in basic legislation. Present control over the amount and timing of expenditures by the Congress should be thoroughly reappraised, and the possibility of annual
expenditure control for a larger portion of the budget should be explored. Government economy requires both improved congressional
machinery and the type of public expenditure principles discussed later
in this report.'
Foreign Economic Policy
United States' temporary foreign assistance authorized by the Congress should meet not only military, diplomatic, and technological
requirements but also these economic tests. (1) The aid should enable foreign countries to make a contribution to mutual security commensurately larger than would be the case without our aid, and a
contribution larger than would be achieved by spending these funds
in this country for our own defenses; and (2) the assistance should
contribute to the economic security of free nations against Communist
expansion. At any particular time the division of foreign assistance
between military and economic aid rests upon evaluations of economic,
technological, or military conditions.
Long-run foreign economic policy looking toward a solution of the
basic causes of the world's economic maladjustments would need to
deal with means for (1) improving access to the world's physical resources; (2) increasing the "know-how," the technology, and the incentives for people to make maximum productive use of these resources; (3) increasing the freer exchange and movement of materials
in world markets; and (4) facilitating freer movement of people, ideas,
and capital so as to improve the balance between population and
resources.
After the Defense Build-up
The outlook at the moment is for a long-drawn-out period of
military mobilization. Therefore, regardless of other considerations,
we must develop fiscal, monetary and' regulatory programs that encourage economic stability and growth over an indefinite period. In
part, the growth and stability of the economy over a long period rests
on the size and character of the maintenance level of the defense program after the build-up has been accomplished. The Council of Economic Advisers projects this maintenance level at $40 billion to $50
billion. Acareful study of this maintenance budget, including requirements for materials, manpower and money, might be recommended
to the appropriate congressional committees by the Joint Committee
on the Economic Report.
The staff is preparing materials on the nature and magnitude of
the problems of economic stability and growth after the anticipated
build-up hump is passed and Government expenditures can decline.
The appendix materials indicate other projects that the committee
has under way at the present time.
*See pp.80-82
41
JOINT ECONOMIC REPORT
TABLE I.-Selected measures of the relation of Government programs to the National
economy. Actual calendar years 1989 and 1944 and fiscal year 1951; estimated
fiscal years 1952 1 and 1958 1
[Billions of dollars except as noted]
Item
---Gross national product National income-300.6
Personal income-271.:0
Disposable personal income ---Personal consumption expenditures -214.0
Population (millions)2Real disposable personal income
Per capita in dollars 2---------------------------Real personal consumption expenditures 2
Per capita in dollars '
Total Government purchases of goods and services As percent of gross national productAs percent of national income
Federal purchases of goods and services -71.3
As percent of gross national product
As percent of national income -23.7
Major national security -66.4
As percent of gross national product -18.7
As percent of national incomeAll other Federal programs
As percent of gross national product -1.4
As percent of national income
State and local purchases of goods and services As percent of gross national product
As percent of national income
Federal administrative budget expenditures-85.4
As percent of gross national product -24.1
As percent of national income
Major national security -65.1
As percent of gross national product
As percent of national income -21.7
All other Federal programs -20.
As percent of gross national product -5.7
As percent of national income -6.
State and local budget expenditures -25.
As percent of gross national product -7.1
As percent of national income Taxes (total Federal, State, and local), liabilities
As percent of gross national product -28.1
As percent of national incomeFederal (liabilities, including social security)
As percent of gross national product -21.6
As percent of national income
Federal (collections basis) -71.
As percent of gross national product -20.
As percent of national income -23.
State and local (liabilities, including social
security) As percent of gross national product -6.
As percent of national income -7.6
Fiscal
1952'2
Fiscal
195312
355.0 1
237.0
158.4
237.0
1,496.0
214.0
1.351. 0
93.4
26.3
31. 1
20.1
22.1
4.9
1.6
22.1
6. 2
7.4
28.4
18.3
3
8
2
8.4
99.6
33.1
76.7
25.5
0
0
6
22.9
5
Fiscal
1951
309.5
284.0202.4
219.-0 . 239.9
215. 2
298.0
202.47
206.-5
153.1
155.6
221.8
228.0
1,450.0
1,465.0
207.7
3206.5
1,357.0
1,327. 0
331.0
Calendar
1944
213.7
183.8
161.9
147.0
111.6
138.4
204.1
1,475.0
154.8
1, 119.0
Calendar
1939
91.3
72. 5
72.6
70. 2
67. 5
131. 0
133.5
1,019.0
128.4
980.0
77.4
23.1
27.3
55.6
16.6
19.6
50. 7
15.1
17.9
4.9
1.5
1.7
21.8
6.5
7.7
70.9
21.2
25.0
49. 7
14. 8
17.5
21. 2
6.3
7.5
24. 8
7.4
8. 7
92.0
27.5
32.4
70.3
21.0
24.8
62. 7
18.7
22.1
50. 6
16.3
19.3
29. 9
9.7
11.4
26.4
8.5
10.1
3.5
1.1
1.3
20. 7
6.7
7.9
44. 6
14.4
17.0
26.4
8.5
10.1
18. 2
5.9
6. 9
23. 6
7.6
9.0
82.8
26.8
31.6
62.4
20.2
23.8
48.1
15.5
18.3
96.5
45. 2
52.5
89.0
41.6
48. 4
87.4
40.9
47.6
1.6
0. 7
0.9
7.5
3.5
4.1
97. 2
45.5
52.9
90.9
42. 5
49.5
6. 3
2. 9
3. 4
8.5
4.0
4.6
52.7
24. 7
28.7
41.6
19.5
22.6
44.3
20. 7
24.1
13.1
14.3
18.1
5. 2
5. 7
7.2
1.3
1.4
1. 8
3.9
4
5. 4
7.9
8. 7
10. 9
9. 2
10.1
12. 7
1.4
1. 5
1.9
7.8
8. 5
10.8
9.3
10. 2
12.8
16. 3
17.9
22.5
6. 7
7.
9.2
5. 2
5. 7
7. 2
21.7
6.5
7.6
20.4
6. 6
7.8
5. 2
6.0
9.8
10. 5
13. 2
' Fiscal 1952 and 1953 estimates are based upon President's estimates and recommendations in the January 1952 budget message. The staff of the Joint Committee on the Economic Report considers the 1952
estimate of total budget expenditures and of major national security about $1.9 billion too high.
For detailed explanation, see footnote I, table IV.
' Constant June-July 1951 prices.
' The fiscal 1952 estimate for real personal consumption expenditures is $1.9 billion higher than the estimate
the President's budget estimates. The estimate in this table assumes
with
of $204.6 billion that is consistent
that about $1.9 billion worth of goods and services previously estimated to be required for Federal programs
will instead be available to consumers.
Source: Actuals, Bureau of the Budget, U. S. Treasury and Department of Commerce; estimates, staff.
Joint Committee on the Economic Report.
Part I-Economic Trends And Projections
CHAPTER I
ESTIMATES OF TOTAL OUTPUT
Projections of employment, hours of work and
output per man-hour indicate that gross national
product valued in constant June-July 1951 prices
could increase from the $316 billion attained in
fiscal year 1951 to $335 billion in fiscal 1952 and
to $355 billion in fiscal 1953. By fiscal 1955
gross national product valued in constant JuneJuly 1951 prices could rise to about $380
billion.
Budgeting an economic program of "guns plus butter" requires
first an estimate of the volume of output obtainable during the next
several years from the Nation's productive plant and equipment.
Production must supply military needs, civilian requirements, and
make possible expansion of capacity for future higher levels of production. Success in meeting military and civilian requirements, as well
as in controlling inflation, depends upon the magnitude of production
and the speed and efficiency with which it is increased. .
The volume of production depends not only upon the physical
capacity of plant and equipment, the supply of working capital, and
the richness of fields, mines, and forests, but also upon the size and
of
skills of the labor force, output per man-hour, and the number achours worked per year. Underlying these factors is the whole
cumulation of technical knowledge, or "know-how," together with
the initiative and cooperative spirit of the millions of individuals
which largely provide the driving force and coordination of this free
enterprise economy. In the discussion of projections of output in this
Nation's economic budget, attention is concentrated on employment,
hours of work, and output per man-hour. These estimates were
made by the committee staff, and are consistent with the guideposts
furnished by the executive agencies in the selected excerps in
appendix B.
Labor Force and Employment
Total civilian employment which averaged 60.8
million in fiscal 1951 and 61.4 million in fiscal
1952 might reach 62.9 million in fiscal 1953 and
63.9 million by fiscal 1955, assuming a median
estimate of growth in the total labor force, Armed
Forces of 4.0 million by the end of calendar 1953
or in 1954, and an allowance for frictional unemployment.
In the first half of 1950 the total civilian labor force numbered
62,429,000, of which 58,555,000 were employed and about 3,874,000,
or 6.2 percent of the total civilian labor force, were unemployed. Just
1 year later the Nation had increased the number in the armed
43
44
JOINT ECONOMIC REPORT
services to approximately 3.5 million, the goal announced
by the
President. The total civilian labor force in the
first half of 19'51 was
about 62,255,000, or slightly less than the year
before, but employment had gone up by 1,634,000 so that unemployment
to 2,065,000, or about 3.3 percent of the total civilian had declined
labor force.
The net increase in employment resulted from
an
increase
of over
2,124,000 in nonagricutural occupations and a
agricultural occupations. In the second half decline of 489,000 in
of
employment dropped to about 2.7 percent of the calendar 1951 untotal civilian labor
force.
An examination of trends of the increase of the
of age or over and of the rate of participation of population 14 years
the
labor force indicates that, on a conservative basis, population in the
calendar 1952 the civilian labor force might reach in the first half of
by the first half of 1953 about 64.5 million. In the 62.7 million, and
reasonable expectation would be an increase in the following years, a
of about 0.4 million between 1953 and 1954 and civilian labor force
of about 0.5 million
between 1954 and 1955. This would bring the total civilian
labor force
to about 65.4 million persons 14 years of age or over
by the first half of
calendar 1955. These estimates include 1.5 million "extra"
be added to the labor force during 1952 and 1953 of which workers to
about 1.1
million are expected to remain in the labor force
by the first half of
1955.
The labor market was almost as tight in the second half
of calendar
1951 as is assumed I for the next 5 years. The number
of unemployed
may continue at.about 1.7 million in the first half
of calendar 1952.
This is assumed to represent almost the minimum frictional
unemployment, making allowance for average "turn-over" or job
shifting,
small
unavoidable economic maladjustments in individual
tween supply and demand, and regional maladjustments industries bebetween labor
supply and job opportunities. The minimum of
1.5 million might be
reached by the first half of 1953. During 1954 and
ment is assumed to rise slightly as defense requirements1955 unemploypass the peak.
On these assumptions, civilian employment might reach
63.6 million
by the first half of 1955. Of this total, on the basis of
in the economy, about 6.6 million would be employedlong-term trends
in agricultural
pursuits and about 57.0 million in nonagricultural
pursuits.
trends materialize, about 1.8 million would be unemployed If these
in the
first half of 1955,or about 2.8 percent of the civilian
labor force. (For
details of this projection, see tableII, p. 45.)
1
Certain characteristics of this projection of the labor
force,
employment and unemployment for the civilian sector of the
economy should
be emphasized.
First, it is essentially conservative, being based
on normal growth
in the labor force and a moderate allowance for extra
workers due to
the defense program. Furthermore, the rate of participation
of those
14 years of age and over in the civilian labor force might
well turn out
to be slightly higher than assumed, especially among women.
Second, the number in the armed services is assumed
level of 4 million by the end of calendar 1953 or in 1954. to rise to a
This would
provide manpower needed for contemplated expansion
of the Air Force
to 143 wings and corresponding changes in other military
services. 2
X Similar conclusions were reached by
Bureau of Employment Security, U. S. Department
of Labor, in
Manpower and Partial Mobilization, September 1951, pp. 21-23.
X See ch. 2 for detailed military assumptions.
45
JOINT ECONOMIC REPORT
Third, these projects assume only unemployment in the civilian
labor force which would result from the normal turn-over in the labor
force from one job to another, from regional imbalances between labor
supply and demand, and from temporary unemployment due to scattered maladjustments in individual industries between supply and
demand.
Fourth, these estimates assume that demand will be sufficient to
insure a market for the resulting output. These estimates give the
probable maximum employment of the projected labor force and should
not be used as a forecast of actual employment in future years. They
'make no allowance for any unemployment which might develop if
demand should turn out to be too low to- absorb the output of the
projected employment or for increases in the labor force at above
median rates.
TABLE
II.-Civilian labor force, employment and unemployment, actual calendar
years 1929-51; estimated, 1952-55
[Millions of persons, 14 years of age and over]
Civilian labor force
Jnemploy-
ment as
Employment '
Period
Total civi
Ian labor
force
1929 -----1930---------------1931--------------1932---------------51.0
1933 -51.6
19341935 -52.9
1936 -53.4
1937193819391940--------------1941 -55.9
1942 -56.4
1943 19441945 -53.9
1946-57.5
1947 -5------------1948------------------1949 -62
1950 -1951 -62.9
49.2
49.8
50.4
1950-First halfSecond half1951-First bait--------Second half 1952-First half '-62.7
Second half -64.4
1953-First half '-64.5
Second half I
1954-First half 'Second half -66.0
1955-First half -65.4
62.4
63.8
62.3
63.5
52.2
54.0
54.6
55
55.6
55.5
54.6
0.2
61 4
1
63.1
65.5
64.9
Unemploy-
Totl
Total
Agricultural
47.6
45.5
42.4
38.9
38.8
40.9
42.3
44.4
46.3
44. 2
45. 7
47.5
50.3
53.7
54. 5
54.0
52.8
55.2
58.0
59.4
58.7
60.0
61.0
10.4
10.3
10.3
10.2
10.1
9.9
10.1
10.0
9.8
9.7
9.6
9.5
9.1
9.2
9.1
9.0
8.6
8.3
8.3
8.0
8.0
7.5
7.1
58.6
61.4
60.2
61.8
61.0
62.8
63.0
64.0
63.3
64.3
63.6
7.2
7.8
6. 7
7.4
6.8
7.3
6. 7
7.2
6.6
7.1
6.6
.
Nonagricultural
°
total
civilIan lebt
force
e
37.2
39.1
32.1
28.8
28.7
31.0
32.1
34.4
36. 5
34.5
36.1
38.0
41.2
44.5
45.4
45.0
44.2
46.9
49.8
519 4
50.7
52.5
53.9
1.6
4.3
8.0
12.1
12.8
11.3
10.6
9.0
7.7
10. 4
9.5
8.1
5.6
2.7
1.1
.7
1.0
2.3
2.1
2.1
3.4
3.1
1.9
3.3
8.7
36.9
23.6
24.9
21.7
20.1
16.9
14.3
19. 0
17.2
14.6
9.9
4.7
1.9
1.2
1.9
3.9
3.86
3.4
5.5
5.0
3.0
51.3
53.6
53.4
54.4
54.2
55.5
56.3
56.8
56.7
57.2
57.0
3.9
2.4
2. 1
1.7
1.7
1.6
1.5
1.5
1.6
1.7
1.8
6.2
3.8
3.3
2. 7
2.7
2.4
2.3
2.3
2.5
2.6
2.8
' Includes part-time workers and those who had jobs but were not at work for such reasons as vacation,
Illness bad weather, temporary lay-offs, and industrial disputes.
2 Estimated; assumes: (a) sufficient demand-Government and private-to sustain projected employment; (b) normal growth in total labor force plus an addition of 1.5 million during 1951 and 1952 due to expansion of armed forces and other defense needs; (c) about 1.1 million out of extra 1.5 million increase in
the total labor force (including armed forces) will remain in labor force by 1955 because of estimated 4.0
million armed forces rather than pre-Korea 1.5 million armed forces; and (d) armed forces will reach 4.0
million by the end of calendar 1953 or during 1954.
NOTE.-Detail will not necessarily add to totals because of rounding.
Source: Actuals, (1929-39) Department of Labor and (1940-51) Department of Commerce; estimates,
(1952-55) Staff, Joint Committee on the'Economic Report.
96529-52---4
Ij
46
JOINT ECONOMIC REPORT
1
TABLE III.-Derivation of estimates of gross national product in constant dollars,
actual calendar years 1947-51; estimated, 1952-55
Calendr
year
Gross
rssGross
privat
tional overnprate
t
naonal
product',
product
product
Ind~ex of
gross
private
product
Index of
private
employment
avdexage
avrg
annual
horpe
(1947=100)
(1939 dollars (in billions))
Actual
A1947 1948-------1949--------1910-------19 Estimated
1952--1953----1954-1------1915-------
Index of
output
mans
perhour
138.6
143.5
143.5
154.3
166.0
9.8
9.7
10.3
10.5
13.2
128.8
133.7
133.2
143.8
152.7
100.0
103.8
103.4
111.6
118.6
100.0
102.7
106.2
111.7
117. 7
177.0
187.2
.7
196.0
13.4
13.6
13.8
13.9
163.6
173. 6
177. 9
182.1
127. 0
134.8
138. 1
141.4
123.3
126.7
129.9
133.1
100.0
100.8
103.0
103.9
100.0
98.6
96.6
97.0
97.0
105.6
108.6
109: 0
109.5
97. 5
98. 0
97. 5
97.0
. 102.5
I Due to past misinterpretations of similar tables in previous reports, the staff wishes to emphasize that
no projection of prices is made or implied. This table is in terms of constant prices as of the average of 1939.
The gross national product figures represent changes in physical units as near as can be determined.
2 Gross Government product is the number of Government employees, both military and civilian, Federal,
State and local, multiplied by 1939 pay roll costs per employee.
NOTE.-Detail will not necessarily add to totals because of rounding.
Source: Gross national product, gross Government product, and gross private product (1947-51): U. S.
Department of Commerce. All other data by staff, Joint Committee on the Economic Report.
Fifth, these estimates assume that there will be no war other than
the present engagement in Korea before July 1955, and make no
provision for the Korean war beyond fiscal 1952.
Hours of Work
Average annual hours per worker are assumed to
rise slightly in calendar 1952 and 1953 and then
decline by 1955 to 1951 levels.
In any year, total man-hours are affected by (1) the total employment; (2) the normal number of hours worked per week per worker;
and (3) the average number of days per year not worked because of
holidays, vacations, strikes, bad weather, temporary shortages of
materials, seasonal slack demand, changes in product design, changes
in equipment, or other interruptions to the smooth flow of production.
The historical trend toward less annual working time per workerwas taken into consideration in these projections but it seemed
advisable not to allow for further reductions of any substantial
character in the length of the work-year. Annual hours per worker
are assumed to rise slightly in 1952 and 1953 and then to decline by
1955 to 1951 levels. There will undoubtedly be some further declines
in average hours per worker due to the decline in the proportion of the
labor force emploved in agriculture. Moreover, some occupations
and industries will bring their vacation, holiday, and working hour
practices more into line with what is considered the best industrial
practice. But largely offsetting these declines will be the increased
hours of overtime required in some bottleneck industries and occupations. The requirements of the defense program may well create
shortages of particular skills, or of individuals with certain technical
training, even though, in the aggregate, thereis adequate manpower. 3
I Manpower and Partial Mobilization, op. cit., September 1951, pp. 46S50; also see recent Manpower Report
Series, Bureau of Labor Statistics U. S. Department of Labor.
0
JOINT ECONOMIC REPORT
47
Thus, we might have spotty unemployment or short hours, for
example, in the textile industry 4 while at the same time hours would
be lengthened in other industries. Even then there would be, for
example, a shortage of skilled toolmakers, electronics workers, etc.
As is pointed out below, there are indications that this problem may
become of major importance in the near future.
Output per Man-Hour
Output per man-hour is assumed to increase during
calendar years 1951 and 1952 at more than the
long-term average trend, or at about 5 percent.
Thereafter the annual rate of increase is assumed
to decline toward the long-term rate. Higherthan-average rates of increase in output per manhour are assumed because of high levels of
investment in modern plant and equipment and
changes in the relative importance in total output of products with high rather than low value
per man-hour.
Variations of output per man-hour are the net result of (1) the
influence of changing technology and the efficiency of labor and
management; (2) changes in invested capital per man-hour; (3)
changes in the percentage of the total output accounted for by products with a high average value per man-hour of labor used in production compared with products with relatively low value per manhour of labor used in production; and (4) variations in the percentage
of capacity that is in operation.
- Numerous investigations of the long-term trend of output per manhour show estimates ranging from about 1.8 percent per year to about
per year. Since 1947
2.2 percent, or an average of about 2 percent
output per man-hour in the private economy 5 has increased more than
the long-term rate. This is a result of the combined influence of levels
of operation as a percent of capacity favorable to high efficiency, exceptionally heavy investment in new plant and equipment, and the
effect of recent investment on the average age of our plant and equipment which affects its average technical efficiency.
For the years 1951 through 1955 it is assumed that fixed capital
investment will remain relatively high,' and that productive activity
will continue at levels as close as practicable to the capacity of the
economic system. Even though some industries were not operating
at full capacity and others were hampered by shortages of plant and
materials, output per man-hour apparently increased about 5 percent
between 1950 and 1951 (see table III, p. 46). The rate of increase
assumed for 1952 is slightly under 5 percent. A tapering off in subsequent years toward 2.5 percent per year is assumed.
The assumption in regard to output per man-hour is reasonably conservative. Older plants and equipment are continually being replaced
by new possessing higher technical efficiency. In a period of maximum employment and above-average investment, this process is
4 Memorandum from Robert C. Goodwin, Defense Manpower Administration, U. S. Department of
Labor, to National Labor-Management Committee, entitled, "Textile Unemployment in New England,"
November 14, 1951.
' Output per man-hour is computed only for the private sector since, in estimated gross national product,
Government product Is computed on the assumption of no change in productivity because no satisfactory
measure of productivity in Government has been devised.
4 This is also required if employment is to reach the levels assumed in table II, p. 15.
48
JOINT ECONOMIC REPORT
accelerated so that technical improvements, which would on theaverage be made in only certain industries, become effective over a
high proportion of the economy. The last two decades have been
periods of rapid- technical advances in science and in production
methods. Heavy investment, therefore, might well result in rates of
productivity-exceeding those assumed.
On the other hand, if output per man-hour does not rise as rapidlyas 'assumed, output might nonetheless reach the levels indicated.
Hours could be lengthened sufficiently to offset lower than assumed
levels of output per man-hour.
Total Output
In terms of June-July 1951 prices, gross national
product -is estimated to increase from $316
billion in fiscal 1951 to $335 billion in fiscal 1952,
to $355 billion in fiscal 1953, and to about $380
billion by fiscal 1955.
The assumptions in regard to the laborforce, employment, unemployment, hours of work, and output per man-hour in the civilian economy
vield the estimates in 19.39 ' dollars of gross private product given in thethird column of table III, page 46. The estimates for the years 1952
and 1953 might be exceeded if there were no shortages in plant capac-ity and materials in certain bottleneck areas. 8
. These bottlenecks and shortages can be illustrated in terms of
estimated steel, aluminum, and electric power requirements. In
June 1950, steel capacity was approximately 100,000,000 tons; as ofthe fall of 1951 it was about 107,000,000 tons; and by the middle of1953 it is hoped that a goal of 120,000,000 tons can be achieved..
Similarly, for aluminum capacity; the estimate for June 1950 was.
750,000 tons, which has since been increased to 800,000 tons, and agoal has been set of 1,500,000 tons by the middle of 1954. Electricpower capacity, which was 67,500,000 kilowatts in June 1950, is
scheduled to be increased by the end of 1952 to about 97,000,000kilowatts. For many materials it has been necessary for the DefenseProduction Administration and the National Production Authority
to set up allocations and a controlled-materials plan to deal with
temporary shortages.
Miscalculation in allocating materials, improper scheduling of
output beyond what is feasible and wastage of resources through im-proper allocation are compounded when there is a lack of adequatet
information. For example, we should seek to develop a bill of particulars which will show the materials, manpower and plant and
equipment necessary for various levels of output of varying composi-tion. This is necessary not only for the purpose of making over-all.
analyses of the economy, such as is illustrated by this report, but also
for successful administration of many Government programs.
I The price level utilized by the Department of Commerce in computing the historical data from which
these estimates sre made is that of the calendar year 1939. The same price level is used here in order thatComparisons can be made easily with the Department of Commerce data. The data and estimates areconverted to a fiscal year b sis and to June-July 1951 prices in table IV. p. 50.
S .he Council of 'co, omic Ad isers states that. "military requirements for the major metals will increasetU-rough most of 1952. a d at their peak s-ill absorb roughly one-fifth of the steel supply, one third of thecopper suppl'- a-rd abret half the sspri'- of alumiium. It is probable, however, that with large increases
in supplies, these pr-portions will fall substantially in 1953. Thus the main materials impact, and the main
economic is-pact, of tl e - ilitary production program probably will come during the next 12 months." TheAnnual Economic Peview, January 1952, p. 98.
JOINT ECONOMIC REPORT
49
In addition, there is a distinct danger that particular types of
.imilitary equipment may be selected for production which, whatever
their military virtues, nevertheless require materials or production
techniques which the Nation cannot possibly make available when
the military item in question goes into full mass production. In
,other cases, orders for military items with varying uses or for different
-services, while perfectly reasonable as separate items, will, if put into
:mass production simultaneously, require materials, manpower 9 or
facilities larger than existing supplies and perhaps larger than can
be procured. There seems to be evident need for better information
:and research in defense procurement and planning.
Gross Governmentproduct, in table III, page 46, is the number of
Government employees, both military and civilian, Federal, State and
local, multiplied by 1939 10payroll costs per-employee. This is based
upon the military assumption previously indicated-4,000,000 in uni'form by the end of 1953 or in 1954-plus other required civilian Gov*ernment employment.
In terms of 1939 prices,1? total gross national product, which in*creased about 7.9 percent between 1950 and 1951, could increase
about 6.6 percent between 1951 and 1952, and could then continue
to rise to about $196 billion in 1955 (at 1939 prices) which would be
.27 percent above the calendar year 1950. This would be an average
increase of about 5 percent per year for the 5 years.
If these estimates in 1939 prices are converted to the price level
prevailing in June-July 1951," the gross national product for fiscal
1952 would amount to about $335 billion, and for fiscal 1953 to about
:$355 billion. By the fiscal year 1955, ending June 30, 1955, gross
national product would be about $380 billion in terms of June-July
1951 prices." Table IV, page 50, gives the historical data in June-July 1951 prices " for the fiscal years 1948 through 1951 and the
-estimates for the fiscal years 1952 through 1955, both for the total
gross national product and for its assumed composition as to per:sonal consumption, investment, and goods and services for Federal,
State, and local governments. This distribution between the various
categories in table IV is consistent with the assumptions in chapter 2
concerning government purchases, and in chapter 3 concerning private
.investment.
* it is inevitable that the over-all demand for
t "Manpower is primarily a local problem.
workers will exceed labor supply in some communities. In other areas, more limited, but nevertheless
serious, occupational shortages have developed and will continue." From Manpower and PartialMobilizaedon, op. cit., September 1951, p. 26.
'° See footnote 7, p. 48.
.1 For detailed explanation of this price level assumption, see footnote 1, table IV, p. 50.
50
JOINT ECONOMIC REPORT
TABLE IV.-Gross national product and major components, actual fiscal years
1948-51; estimated, 1952-55.
[Billions of dollars; constant June-July 1951 prices 1]
Fiscal year
1948 -.
------1949 -285.
1950--------1951 -311.4
1952 --19531954 -370.
1955 ----
Gross priGross naPersonal
vate dotional prod- consumption mvestmet n-d
Oct
orinState
exedtrs nvestmfoegnt
~ ~ ~~~ne
276.0
2
28i. 2
335.0
355.0
0
380.0
190.3
194.8
200.5
207. 7
204.6
214.0
273
288
46.8
42.8
39.5
86.2
53.0
47.6
Government purchases of goods and
services 3
Total
38.9
47. 6
44. 2
61.6
77.4
93.4
97.0
92.0
Federal
21.8
28. 6
.23. 6
30. 3
56.6
71.3
74.0
69.0
and
local
17.1
19.0
20. 6
21. 2
21.zl
22.1
23.0
23.0
I Measured in gross national product price which is the official price deflator developed by the Office of
Business Economics, U. S. Department of Commerce, for converting gross national product in current dollars to gross national product in constant 1939 dollars. (See National Incomc, 1951 edition, A Supplement
to the Survee of Current Business.) The index differs, therefore, from both the wholesale price index and
the consumers' priceindexbecauseofdifferencesinweightsused. However, movements of the index mostly
correspond to movements in the consumers' price index of the Department of Labor because consumer expenditures are the largest segment of gross national product. The assumed level for the deflator is about
the average of the second and third quarters of calendar 1951, or about the June-July 1951 level. This is
about the level which has been assumed by the Bureau of the Budget and other executive agencies in making their estimates for fiscal 1952 and fiscal 1953. The level at the end of calendar 1951 would be slightly less
than 1 percent higher. It appears to this staff that while on the expenditures side this is a fair approximation
to the price level implied in the official estimates, there appears to be some allowance on the income side in
the official estimates for minor upward adjustments. Beyond fiscal 1953 the estimates have been made by
the staff consistent with the constant price level as measured by the gross national product deflator at the
Jone-July 1951 average.
2 Excludes expenditures other than for goods and services, e. g., transfer payments.
NoTr.-Fiscal year figures in this table are derived from quarterly figures. Hesice, they will be slightly
different from what one would get from averaging calendar year figures in table III and multiplying the
result by the deflator.
Source: Staff, Joint Committee on the Economic Report, based on 1929-11 data of U. S. Department of
Commerce.
CHAPTER 2
GOVERNMENT
During fiscal 1953, total purchases of goods and services by Federal,
State, and local governments are expected to amount to $93.4 billion
(June-July 1951 prices).' This is an increase of $16 billion from fiscal
1952 or 20.7 percent. Government purchases in fiscal 1953 are expected to amount to 26.3 percent of gross national product, compared
to 23.1 percent in fiscal 1952, to 16.3 percent in fiscal 1951 and 45.2
percent in calendar 1944. (See chart I, p. 52, and tables I, p. 41,
and IX, p. 60.)
Federal, State, and local receipts are expected to amount to 28.1
percent of gross national product in fiscal 1953, compared to 27.5
percent in fiscal 1952, to 26.8 percent in fiscal 1951 and to 24.7 percent
in calendar year 1944.
Federal Expenditures
Federal administrative budget expenditures are
estimated by the President at $70.9 billion for
fiscal 1952, and $85.4 billion for fiscal 1953. Consistent with announced programs total expenditures might be $88 billion in fiscal 1954 and then
begin to decline to $72 billion (assumed maintenance level) by fiscal 1958.
The President's recommendations to the Congress "contemplate
an Air Force of 143 wings, an Army of 21 divisions, a Navy with
408 major combatant vessels in the active fleet and 16 large carrier
air groups, a Marine Corps of 3 divisions, and essential supporting
elements for all these services." 2 The staff assumes that an Armed
Forces strength of about 4 million will be reached by the end of
calendar 1953 or in 1954.
' For detailed explanation of this price level assumption, see footnote 1, table IV, p. 60.
I Preideit'8 budget for the fiscal year ending June 30,1953; p. M12.
51
.52
JOINT ECONOMIC REPORT
Chart /
GOVERNMENT EXPENDITURES FOR GOODS AND SERVICES
IN RELATION TO GROSS NATIONAL PRODUCT
Actual Fiscal Year 1951; Estimated, 1952 - 55
BILLIONS OF DOLLARS
300
Non - Government
Purchases
200
To/al Gov't.
Purchases
of Goods and Services
Sol and Local
CAII ~~~~~~~~Other
F~ederal
to
}MjrNa
~~~
Security
1951V/
1952/
195321
Fiscal Years
1
9 542V
195521
PERCENTAGE DISTRIBUTION
Natn- Government
Purchases
30
Total Government Purchases of Goods a Services
20
State and Local
o0
19519/
19523'
4-All
d
19533'
Fiscal Years
Other Federal
Mejor
S Na/liona
.1954!/
Security
19553'
anaverage fiscal 1951 prices. ?JIn constant June-July 1951 prices; for
detailed explanation, see footnote 1, Table IV.
SOURCE: Actual, U.S. Department of Commerce; estimates, Staff, Joint Committee
on the Economic Report.
53
JOINT ECONOMIC REPORT
Choit //
FEDERAL ADMINISTRATIVE
BUDGET
RECEIPTS AND EXPENDITURES
Actual Fiscal Year 1951; Estimated 1952-550
Billions of Dollars
100 r
80
60
40
20
0
1953
Fiscal Years
I/ Constant June-July 1951 prices used for 1952-55 estimates. For detailed
explanotion see footnote 1,Table IV.
?IAssumes existing tax lows for 1953-55 and high employment levels.
SOURCE: Actual, and 1952 and 1953 estimates, Bureau of the Budgei and
U.S. Treasury; estimates beyond 1953, Staff, Joint Committee on the
Economic Report.
1955
54
JOINT ECONOMIC REPORT
TABLE V.-Analysis of new obligational authority and Federal administrativebudget
expenditures, fiscal years 1952 and 1958
[Milhions of dollars]
New obligational
authority
[11
1952
Budget totals:
Table 1, 1953 budget -$70,
Table 2, 1953'budget --
------- ----- -- 9----$93,431
Deduct:
Major national security programs:
Military services --------------------------------International security --------Development of atomic energy -1,357
Defense production and economic stabilization-702
Civil defense -----------Promotion of the merchant marine-105
Expenditures
Expenditure
61,655
9,397
75
1953
92
$84, 260
52, 359
8, 238
1,255
1,145
600
73
f
881
$85, 444
39,753
7,196
1, 725
678
44
288
51,163
10,845
1, 775
811
339
164
Total, major national security programs
73,291
63,670
49,684
65,097
Remainder
20,140
20, 590
21,197
20,347
4,364
5,955
773
284
814
100--
4,006
6, 255
723
305
669
454
1,150
557
77
41
131
1,140
430
182
125
5,166
5, 955
773
133
814
-50
543
206
1,180
457
77
92
4,022
6, 255
723
133
669
-11
65
253
1,140
464
182
150
Total, major fixed and continuing charges
14, 569
13,966
IS, 346
14,005
Equals: Budget totals' excluding major national security, fixed,
and continuing charges
----------------------Existing legislation
-------------------------------------Proposed legislation
----------------------------------
5,571
(5, 571)
6,624
5,851
(S,746)
(5,851)
(878) --
6,342.
(5,697)
(645)
---
Deduct:
Major fixed and continuing charges:
Veterans' services and benefits I
Interest ---------------------------------------------Transfer of payroll taxes to railroad retirement account.
:Permhanent appropriations
---`Postal deficit I---------------------------------Reconstruction Finance Corporation
Federal National Mortgage Association
Commodity Credit Corporation
Public assistance grants '
Public roads ---------------------International Wheat Agreement
Payment of claims and reserve for contingencies
I Excludes proposed legislation.
Source: Bureau of the Budget, see Hearings, Join Committee on the Economic Report on the President's
January 1952 Economic Report, p. 56.
TABLE
VI.-Federal administrative budget expenditures, new obligational authority, receipts and deficits, fiscal years 1952 and 195M
[Billions of dollars]
Expenditures
New obligational authority
of ttalt
Amount
Expenditures and new obligational authority:
Major national security programs:
Military services:
Arm y defense - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Air Force defense
Naval defenseAircraft program OtherOther military servicesTotal military services -------International security and foreign relations IDevelopment and control of atomic energyPromotion of merchant marineOtherTotal, major national security programsMajor defense-connected programs:
Interest on the public debtVeterans' services and benefits ----------Total, major defense-connected programsTotal major national security and major defense-connected programs
All otherTotal expenditures and new obligational authorityReceipts -------------------------------------------------------Deficit-
---
(66.1)
61. 7
9.4 -8.
1.4 -1.3
I
AmountntPercent
Amount of total
-- - - - -
7 -73.3
78.5
10.3
11.0
83.6
9. 8
(89. 5)
10.5
93.4
100.0
I.
$16.8
18.9
(12.3)
3.3
9.0
3. 2
$15.0
12. 5
(10. 0)
1.8
8. 2
2.3
52.4
2 -7.
-1.
(62.2)
(66. 1)
39.8
2 -10.8.
7 -1.8
.1
-- - -- -
3
63.7
75.6
49.7
1.7 -7
-- - -- -
-
70.1
-------------------------------------------------------
(60.0)
51. 2
2 - - - - -
00
.
12.2
15.7
10.4
* 74.1
10.2
(87.9)
12.1
60.8
10.1
(85.8)
14.2
751
9.9
(88.4)
11.6
84. 3
_
--- -
100. 0
_~~~~2.
_
--
70. 9
100. 0
85.4
7-.0A
100.0
.
00
0
0
z,
0
Iti
11.1
I
68.---n---2 -1-
H
76.2
65.1
12.3
10. 4
c-1
0
1.1.
6.2
4.2-
9 .2 -
6.2 -.
4.2 -
5.9 4.4 -
AmutPercent
of total
Amount
Percent
of total
Amount
$14. 2.
20.7
(13.2)
4.3
8&9
4.3
$20.8
22.1
(16. 0)
4.6
11.4
2.8
1953
1952
1953
1952
Item
H
14.4
I Includes operations, but excludes aircraft carrier program.
'Detail for mutual security program will be transmitted later. Appropriation for economic assistance for fiscal year 1952 was $1.5 billion, of which $1.1 billion was aid to Europe,
leaving about $400 million for economic and technical assistance to non-European areas (Point 4, GARIOA, Palestine refugees, etc.).
arranged by staff, Joint Committee on the Economic Report.
Source: President's budget for the fiscal year ending June 30, 19653,
01
UV
56
JOINT E'CONOMIC REPORT
Estimates' of expenditures and receipts for fiscal years 1952 and 1953
are shown in tables V, page 54, and VIj page 55. The committee staff
estimates for the following fiscal years through 1958 attempt to spell
out the announced goals and time schedules of military expenditures.
(See chart II, p. 53, and table VII,'p.'58.)
The President's budget estimate of total expenditures amounts to
$70.9 billion I in fiscal 1952, and $85.4 billion in fiscal, 1.953. Of these
totals, major national security programs 4 account for $49.7 billion
in fiscal 1952 and $65.1 billion in fiscal 1953.
Present military schedules seem to call for a peak: of expenditures.
for major national security in fiscal 1954 at about $68: billion. ':Thereafter, expenditures could be expected to decline to a maintenance level
by fiscal 1958 unless the international situation worsens. The
Council of Economic Advisers estimates that this maintenance level
will be between $40 billion and $50 billion.
On the basis of this schedule of major security expenditures, total
Federal budget expenditures might be $88 billion in fiscal 1954, and
then decline to $72 billion by fiscal 1958. (Detailed schedules are
given in table VII, p. 58, table VIII, p. 59, and chart III, p. 5.7).
Federal Receipts
Under present tax laws, Federal receipts can inincrease in line with rising economic activity to a
level of about $71 billion in fiscal 1953 and possibly to about $82 billion by fiscal 1955, assuming continued maximum employment.
Federal budget receipts are estimated to be $62.7 billion in fiscal
1952 and $71 billion in fiscal 1953, compared to $48.1 billion in fiscal
1951. They might rise gradually'to about $82 billion by fiscal 1955
assuming the continuance of existing tax laws and rising levels of
economic activity. The President's recommendations (see table VII,
p. 58) seem to imply cash deficits (including trust fund accumulations)'
under existing tax laws for the fiscal years 1952 through 1954 and
cash surpluses thereafter.
State and Local
It is assumed that State and local expenditures will
increase slowly in accordance with the long-term
trend and that receipts under present tax laws will
increase in line with rising levels of economic
activity.
With regard to State and local programs it has been assumed that
expenditures on goods and services by State and local governments
will increase slowly in response to increasing population, increasing
numbers of children requiring school facilities, and modest increases in
expenditures to keep such physical facilities as roads more nearly in
line with the requirements of our economy. The increase that has
been assumed is less than that shown in recent years, as will be clear
from an examination of tables IV, page 50, and IX, page 60.
3 On the basis of reports for 7 months of the current fiscal year (1952), the staff believes that total Federal
expenditures may fall short of this estimate of $70.9 billion by about $1.9 billion.
4 Includes military services, stockpiling, international security and foreign relations, civil defense, atomic
energy, defense production, economic stabilization, and merchant marine.
57
JOINT ECONOMIC REPORT
Chort ///
FEDERAL ADMINISTRATIVE BUDGET EXPENDITURES,
MAJOR NATIONAL SECURITY EXPENDITURES, AND
NET NEW OBLIGATIONAL AUTHORITY
Actual Fiscal Year 1951; Estimated, 195 2 - 5 8B
Billions of Dollars
100 I
1951
1952
1953
1954
1955
1956
1957
Fiscal Years
!/ Constant June-July 1951 prices used for 1952-58 estimates.
For detailed explanation, see footnote 1,Table IV.
SOURCE: Actual, and 1952 and 1953 estimates, Bureau of the Budget;
estimates beyond 1953, Staff, Joint Committee oh the Economic Report.
58
JOINT ECONOMIC REPORT
In fiscal year 1950, State and local purchases of goods and services,
priced at June-July 1951 prices,5 were about $20.6 billion. In fiscal
1952 they are expected to be about $21.8 billion. Thereafter, it has
been assumed that State and local expenditures for goods and services
will increase to about $23 billion by 1955. This is an increase of about
$2.4 billion in 5 years against the previous increase between fiscal 1948
and 1950 of $3.5 billion. State and local revenues are likewise assumed to rise with increased economic activity, provided present tax
structures are maintained in State and local governments.
TABLE VII.-Federal budget expenditures, receipts, surpluses, and deficits, actual
fiscal years 1950 and 1951; estimated, 1952-55 '
[Note: Assumes existing tax laws for 1953-55, and maximum employment]
[Billions of dollars]
Expenditures 2
Fiscal year
Fiscal year
.
~~~~Total
receipts
Total
_____
- _ ______
Federal
1950 -37.0
19511952 -62.7
1953 3------------------------------------
1954 -Z7.
1955-82.0
48.1
71.0
0
40. 2
44.6
70.9
85.4
88.0
84.0
Major
national
security
___
Adminis____
All
other
Federal
trative
Cash
budget
surplus
or
deficit
surplus
or
deficit
17.5
26.4
49. 7
22. 7
18.2
21.2
65.1
-3.1
+3.5
-8.2
20.3
*-2.2
+7.6
-4.0
-14.4
68.0
63.0
-10.4
20.0
21.0
-11s0
-2.0
-7.5
+2.5
I Fiscal years 1952-55 in constant June-July 1951 prices. For detailed explanation, see footnote 1, table IV,
p. 50.
2 Expenditures estimates for 1953-55 include sums to cover expenditures under new legislation proposed
by the President in his 1952 budget message and for the proposed increase in the atomic energy program.
3 President's estimates and recommendations in January 1952 budget message.
Source: Actuals and 1952-53 estimates. Bureau of the Budget and U. S. Treasury; estimates beyond
1953, staff, Joint Committee on the Economic Report.
l For detailed explanation of this price level assumption, see footnote 1, table IV, p. 50.
59
JOINT ECONOMIC REPORT
TABLE VIII.-Authorizations, total funds available, Federal administrative budget
expenditures, and carry-overs, estimated fiscal years 1952-58 1
[Billions of dollars]
overrto
follrown
year 2
Budget
Total
BroughtNt e
expendiforward Netnno
tures
from prior authority available
years
Military services:3
1952
1953 -60.7
1954 -61.
1955 19566
1957 -47.01958 All other major national security:
1952 ------1953 -10.2
1954 -7.6
1955 1956 -8.0-9-5
1 76
1965
8-3
4
Total major national security:
61. 7
52.4
---
38.8
9
lot.5
113.1
45.0-
---------
---
11. 6
11.3
8.6
60.7
61.9
39.8
61.2
4.0
51.049.0
20.1
21.6
10.2
7.6
9. 9
13.9
-14.012.0---- -- -
120.6
73.3
1952 -47.3
134.6
63.7
9
1953 -70.
1954 -69.5
1955
1956---1957
195---All other Federal programs:
23.1
20.1
3.0
1952 -----------------22.6
20.6
1953 -1.9
2 -20.
1954 -2.
195 1956 -22.01957 -23.01958 Total Federal administrative budget:
143.7
93.4
.3
1952 -'6
157.1
84.3
1953 -72.8
7 -88.01954 -71.
1955 -84.01956. ---------------------------------------------- ---------- ---------- ---------1957 -75.019658-72.0-
.0
.070.9
69.6
49. 7
65.1
68.063.057.0.
2.0
48.0
1.9
2. 2
21.2
20.3
21.024.072.8
71. 7
70.9
85.4
79.0
.
I Fiscal years 1952-58 in constant June-July 1951 prices. For detailed explanation, see footnote 1, table IV.
Estimates for 1952-53 by the Staff of the Joint Committee on the Economic Report based on President's
estimates and recommendations in January 1952 Budget Message and on testimony by Director Lawton,
Bureau of the Budget, in the hearings before the Joint Committee on the Economic Report, Jan. 24, 1952
(hearings p. 92). Estimates for later years made by the Staffi vcrc consistent with programs outlined in the
Bm dget Message of the President, 1952, and the Economic Report of the President, January 1952, and assume
no worsening of the international situation.
2 Carry-overs are not adjusted for possible lapses cr rescissions.
3 Includes Defense Department military functions and other activities supporting military services.
4 Includes military services, military and economic aid. civil defense, promotion of defense production,
economic stabilization, atomic energy, and merchant marine.
5 From Combined Statement of Pdcempts. Expenditures and Balances ofthe United Slates Gorernment for the
fiscal year ended June 50. 1951, p. 12. Excludes authority to spend from public debt receipts available
July 1, 1951.
Source: Estimates, staff, Joint Committee on the Economic Report, based on Budget Mtessage of the
President, 1952; The Economic Report of the President. January 1952: U. S. Treasury, Combined Statement of
Receipts, Expenditures and Balances of the United States Gocernment for the fiscal year ended. June 30, 1951;
Joint Committee on the Economic Report, Hearings, January1952 Economic Report of the President.
60
JOINT ECONOMIC REPORT
TABLE IX.-Gross national product and expenditures for goods and services by
Federal, State, and local governments, actual fiscal years 1950 and 1951; estimated,
1952-55
[Billions of dollars]
Government expenditures for goods and services
Fiscal year
Gioss
national
Major
Total
product
1950 ---------195111952 2-335.0
1953 21954 -370.
1955 2-380.0
---------------------
------
263.5
309.5
355.0
0
41.8
50.6
77.4
93.4
97.0
92.0
All other
State and
nationalAloteSaean
security
Federal
17.4
26.4
50.7
66.4
69.5
63.5
5.9
3.5
4. 9
4.9
4.5
5.5
18.5
20. 7
21.8
22.1
23. 0
23.0
2.2
1.1
1.5
1.4
1.2
1.4
7.0
6.7
6.5
6. 2
6.2
6.1
local
Percentage distribution
1950-100.0
1951 -100.0
1952 -1953 -100.
1954 1955
---------------------------------100.0
prices.
2 Constant June-July 1951 prices.
100.0
0
100.0
15.9
16.3
23.1
26.3
26. 2
24.2
6.6
8.5
15.1
18.7
18.8
16.7
X Current
For detailed explanation, see footnote 1, table IV.
Source: Actuals, U. S. Department of Commerce; estimates, staff, Joint Committee on the Economic
Report.
CHAPTER 3
BUSINESS
Total business investment including net foreign
investment is estimated at $47.6 billion in fiscal
1953 compared to $53.-billion in fiscal 1952 and
$56.2 billion in fiscal 1951.
The Nation's ability to increase the amount of goods and services
for civilian and military uses depends in large part on private business
investment. The high rate of plant and equipment investment during recent years in this respect is gratifying.
It should be recognized, however, that business investment expenditures create inflationary pressures comparable, in the short run, to
those resulting from Government defense expenditures. Postponement of less essential private investment, as well as restraint and
efficiency in all private business spending, is important to economic
stabilization.
Variations in business spending for plant, equipment and inventory
are typically much larger proportionately than variations in activity
in other segments of the economy. Thus, between 1948 and 1949,
although gross national product in terms of constant dollars remained
unchanged and purchases by both consumers and Government increased slightly, gross private domestic investment declined by $4.9
billion, or over 20 percent. Almost all of this decline was in inventories.
Similarly, between 1949 and 1950, out of an increase of $10.8 billion,
or almost 8 percent, in gross national product, 'about $7 billion, or 65
percent, was accounted for by an increase of almost 40 percent in
gross 'private domestic investment.1
New Plant and Equipment Expenditures
In terms of June-July 1951 prices, expenditures on
plant and equipment in fiscal 1953 are assumed
to be about.8.7 percent below fiscal 1952 as compared with an increase of about 8.2 percent from
fiscal 1951 to fiscal 1952.
Scarcities of materials and some types of skilled labor may be expected to reduce business spending for new plant and equipment.
Increased taxes and credit controls are also dampening influences.
This reduction in investment is expected to affect mainly nonessential
nondefense enterprises, thus easing that portion of the inflationary
pressures which business exerted on the economy in 1950, while at the
same time making available supplies of construction materials and
producers' durable equipment for expansion of capacity in such
critical areas as steel, aluminum and electricity.
Over the next 18 months rising total output may be accompanied
by increases in corporate profits before taxes. Because of the higher
tax rates enacted by Congress since June 1950, increases in corporate
profits after taxes are likely to be small. The stimulus to invest' Data from U. S. Department of Commerce, Office of BusinesslEconomis, Nationarllncome, 1951 Edition,
A Supplement to the Survey of Current Buiness, pp. 141 and 146.
61
96529-52-5
62
JOINT ECONOMIC REPORT
ment from renewed increases in profits will be reenforced by the
Government programs aiding new investment in needed productive
capacity as well as by the expectation of long-term growth in demand
created by the Nation's rapidly increasing population.
As a result, private investment in new plant and equipment during
the remainder of fiscal year 1952 and through fiscal year 1953 will
probably be limited more by availability of materials and allocations
than by decisions of business firms to curtail spending programs. On
the basis of present information and the assumptions of the preceding
chapters, this would seem to mean in terms of constant June-July 1951
prices 2 a level of private investment in new plant and equipment 8.2
percent above fiscal year 1951 in fiscal year 1952 and about 8.7 percent
below fiscal 1952 levels in fiscal 1953.
This pattern seems to be supported by the recent McGraw-Hill survey of business plans for capital expenditures. According to this
survey, business expects to spend 13 percent more in calendar 1952
than in calendar 1951 for new plant and equipment.
Inventories
Net increase in inventories may approximate $2.5
billion in fiscal 1953 compared with an estimated
$4 billion in fiscal 1952 and $9.3 billion in fiscal
1951.
An examination of relationships between inventories and business
sales, as well as the relationship between net changes in inventories and
changes in gross national product, as measured by the Department of
Commerce national income accounts, indicates that for the fiscal year
1952 the average net increase in business inventories may be approximately $4 billion compared to an average increase of about $9.3 billion
in fiscal 1951. For the following year, fiscal 1953, the net increase in
business inventories may be in the neighborhood of $2.5 billion.
TABLE X.-Business spending: Gross private domestic investment plus net foreign
investment, actual fiscal year 1951; estimated, 1952 and 1953
[Billions of dollars; constant June-July 1951 prices 1j
Item
1951 2
New private construction -.
Residential nonfarm 3------------------------------------------Producers' plant 4'-----------------Producers' durable equipment 5 ----Net change in business inventories -----
------------------
Total gross private domestic investment -9.
Net foreign investment -------------------Total business spending -
1952
1953
23.8
20. 7
20. 0
14.7
9.1
10.9
9.8
10. 3
9.7
26.1
+9.3
28.3
+4.0
25.1
+2.95
2
-3.1
53.0
0
47. 6
0
56.1
153.0
47. 6.
I For detailed explanation of this price level assumption, see footnote 1, table IV.
2Figures for fiscal 1951 will differ from those shown in table XVII due to the difference between the average
fiscal year prices used in table XVII and the June-July 1951 prices used in this table.
3 Includes residential nonfarm and all other private construction not classified as producers' plant.
'Includes industrial buildings, public utilities, gas- and oil-well drillings, warehouses, office and loft.
buildings, garages, and farm construction both residential and nonresidential.
a Includes all producers' durable equipment, both nonfarm and farm.
Source: Actual fiscal 1951, U. S. Department of Commerce. Adjustments of fiscal 1951 to June-July 1951.
prices and estimates for fiscal 1952 and 1953, staff, Joint committee on the Economic Report.
3 For detailed explanatien, see footnote 1, table IV, p. 60.
*See Hearings,Joint Committee as the Economic Report on the President'sJanuary 1950 Economie Report,
JOINT ECON-OMIC REPORT
63
Net Foreign Investment
Net foreigh investment is assumed to be negligible
in fiscal 1953.
Net foreign investment has been quite small in recent years so that
possible errors in estimation would not seriously affect this analysis.
In fiscal year 1951, net foreign investment amounted to a minus $3.1.
billion in constant June-July 1951 prices 4 (equivalent to minus $2.1
billion in current prices); in the fiscal years 1952 and 1953 it is assumed&
to be about zero. More exact spelling out of the possible magnitude
of net foreign investment would require a more extensive investigation
than was undertaken by this staff. Such additional work did not seemi
worth while since the possible changes from the assumptions used
would be unlikely to be large enough to significantly change the
policy conclusions of this report.
Nonfarm Residential Construction
In constant prices the volume of nonfarm residential
construction put in place in fiscal 1953 is assumed
to decline about 5 percent from fiscal 1952
as compared to a decline of almost 26 percent
between fiscal 1951 and 1952.
It now appears that restrictions on residential construction will be
continued at least through 1952. Thus the volume of new nonfarm
residential construction put in -place, which increased about 13 percent
between fiscal 1950 and fiscal 1951, may decline by about 26 percent
between'fiscal years 1951 and 1952 and by about 5 percent between
fiscal years 1952 and 1953. These estimates have been made in terms
of the value of nonfarm residential construction put in place priced at
June-July 1951 levels.' The estimates seem consistent with official
forecasts of housing starts of about 800,000 units during calendar 1952.
Financing
Business spending for fiscal 1953 is assumed to be
financed largely out of retained corporate profits
of $10.2 billion and annual depreciation reserves
of $26 billion.
For the fiscal year 1951 corporate profits after inventory valuation
adjustment amounted to $41.4 billion; for the fiscal year 1952 they
are estimated at $43 billion; and for fiscal 1953 at $48 billion. The
increase over the next 18 months makes allowance for the effects
of increased volume of business. -Out of these profits corporations are
assumed to pay $9 billion in dividends in fiscal 1953 plus Federal and
State income taxes. This should leave corporations a total of $10.2
billion in retained profits.
Additional sources of corporation financing include depreciation
funds, net new issues, loans, etc. Total absorption of outside funds
by corporations plus investments by unincorporated business are
expected to approximate $12.7 billion in fiscal 1953 compared to
$21.4 billion in fiscal 1952 and $29 billion in fiscal 1951.
4 For detailed explanation, see footnote 1, table IV, p. 50.
64
JOINT ECONOMIC REPORT
Business Structure
Periods of high military spending are particularly
favorable to large-scale enterprises and to wellestablished concerns. This creates problems as
to how to attain maximum use of resources
and maintain competition through a continued
creation of new and growing enterprises.
In trying to plan a sustainable long-term program of defense
mobilization, attention has to be given to the peculiar problems that
arise out of possible unfavorable distortions or dislocations of the
business structure.' Wars and periods of heavy defense spending
are generally believed to be more favorable to large-scale enterprises
than to small firms. In both World War II and the present defensemobilization period Congress has made special provision for helping
small business under such conditions and has set up committees to
study the problems of the small entrepreneur.
The newly created Small Defense Plants Administration is designed to facilitate further contributions to the defense effort by
relatively small firms. The principal method used thus far involves
RFC loans to small business upon recommendation of this new
agency. Provision has also been made for the representation of
small firms in computing material requirements. Special emphasis
has been placed on subcontracting by the Departments of Defense
and Commerce through "prime contractor-subcontractor clinics,"
"on-the-spot" industry-assistance programs, and armed services procurement reviews. These are being pursued so as to help small
business obtain prime contracts and subcontracts that it can handle.'
Military procurement is comparable to peacetime capital investment rather than consumption. At least this is true of military
expenditures for heavy equipment such as tanks, planes, artillery,
ships, etc., the so-called "hardware" of war. The small entrepreneur
can produce many smaller or less complex items for the armed services,
either directly or through subcontracts. In addition there are wellestablished channels in some lines of business through which small
firms participate along with the larger enterprises. In fact, in some
fields the small firm is the dominant economic unit.
A quite different situation arises with heavy equipment which requires relatively large capital investment in plant and equipment. A
long leadtime elapses from the beginning of the preparations to the beginning of the deliveries. Even after the equipment has been designed
there still remains the question of production engineering; that is,
adapting the product to mass production, designing the equipment to
produce it, and then laying out the plant and equipment to do the
producing. After this, plant and equipment must be set up, labor
forces trained, inventories accumulated, and test runs made. Finally,
the product can get into production. In this process much of the plant
needed is of such character and magnitude that the minimum size of
operation is still relatively large. All these factors mean that a prime
contractor will usually have to be a relatively large enterprise, with a
large and well-trained engineering staff. Thus basic technical
'Recent attention to this problem and the associated need for adequate programing and scheduling of
mlitary procurements has also been given in Third Report of the Attorney General of the United States prepared
pursuant to section 708 (e) of the Defense Production Act of 1950, December 19, 1951, pp. 4 and 9.
4 The Battle for Preduction, Fourth Quarterly Report to the President by the Director of Defense MobiDzation, January 1, 1952, p. 25.
JOINT ECONOMIC REPORT
65
factors in the production of military "hardware" tend to favor the
large unit at the expense of the small unit. It should be noted, however, that a size of enterprise which is large in one industry may be
small in another, and vice versa. Size in the sense used here is a
relative term related to the economic characteristics of each industry.
Moreover, the graver the defense emergency the more important becomes the problem of shortening the lag between the decision of the
military to produce a certain piece of equipment and the time at
which a contract is let, and then, finally, the time at which the deliveries are made under the contract. With limited procurement
facilities and pressure to speed deliveries there is a tendency to speed
up production by concentrating contracts among a smaller number of
prime producers and to depend on the prime contractors to handle
the negotiations with the smaller firms.
A further problem in this regard is that there may not always be
a close correspondence between available skilled labor supply and the
location of small as compared to large business. The unemployed
skilled labor supply may be in a geographic area in which either large
units or small units predominate. If all of this skilled labor is to be
utilized efficiently it must be employed by the units located in the
area. Attempts to get production through a geographic shift either
of the enterprise or of all the labor supply in order to enable the small
units to handle the contracts (in cases when large units predominate
in the geographic area of labor surplus) might not only delay procurement but prove futile.
Allied with these problems is the question of procurement organization. The relatively large unit is better equipped to handle negotiations and meet requirements of the Defense Establishment than the
relatively small enterprises that may not have the diversely trained
personnel. This can be overcome, in part, through proper organization of the procurement system or through special Government agencies to aid small businesses in obtaining the kinds of contracts which
they are set up to handle. However, many types of military procurement can be efficiently handled only through making use of the engineering staffs of large enterprises. This is especially true in a
period in which engineering and technical personnel is scarce relative
to requirements. In this case, proper organization of procurement to
encourage subcontracting is of great importance in preserving small
business and in attaining maximum output through full utilization
of all facilities available.
Subcontracts should be especially aimed toward those peacetime
small enterprises that normally produce goods which may have a close
military equivalent and whose productive process is quite flexible.
Small metalworking firms are examples.
The net result of these characteristics of the defense program is
to put pressure upon business structure in favor of relatively large-'
scale units. Thus widespread concern has been voiced, both in
World War II and at the present time, that military requirements
may lead to an increase in the proportion of the economy controlled
by large units and, hence, to a suppression of competition. If the
period of maximum mobilization activity is relatively short, concern
over the suppression of competition is likely to be unfounded. The
first effect of the shift from peacetime to military production is to
create additional competition for war contracts, that is, to get needed
66
JOINT ECONOMIC REPORT
output quickly. On the other hand, such concern over the fate of
competition may be well founded if high mobilization expenditures
are continued over a long period and if effective efforts are not made
to spread defense projects directly or indirectly among numerous
firms. In this case military procurement operations may result in
a reduction in the number of business units over such a long period
as to impair competition. This could occur either through the
creation of monopolies; through the creation of barriers to the entry
of new firms into industries; or through the creation of cooperative
interconnections between the remaining relatively large scale units
that reduce competition.
Therefore, both military procurement practices and material
control regulations should be carried out so as to insure the maintenance of a healthy state of competition in the economy.' Wherever
possible, effort should be made to create conditions favorable to the
entry of additional firms.
In calling attention to the limitations imposed on small business by
a defense economy, the economics and the statistics of the situation
should be viewed with caution. It is all too easy to point to the
large reduction in the number of firms during World War II. An examination of the statistics indicates, however, that a large proportion
of the firms that disappeared were marginal retailing and nondefense
operations whose proprietors could make more money working in
defense plants than in risking their capital- in their own business or
else represent cases where owners were drafted. Both the owners
and the defense economy were better off when they worked in a
war plant rather than at lower pay, and with considerable risk of
capital, in a marginal nonessential retail or manufacturing unit. The
major reduction in the number of businesses, however, was due to a
decline in the number of new businesses formed. Bankruptcies
declined to very low levels. In addition, as soon as wartime pressures
were relaxed, there was an increase in the number of new enterprises
started. The studies of the Department of Commerce show a restoration in the postwar period of the relationship of the number of business
units to the total output of the economy.'
Better statistical information is needed to make possible analysis
of the effects of mobilization on business structure. The quarterly
series on the financial condition of manufacturing firms, showing costs
and profits for large, middle-size, and small companies, is essential to
an analysis of economic trends. It helps to show the impact of policies
on materials limitations, tax rates, price fixing, and other forces.
More current information of the same kind on other lines of economic
activity are needed. It would be desirable to have data not only on
changes in profits by size of firm but also on whether the number of
small businesses is changing because of voluntary discontinuances, or
forced closings, or because of a reduction in new entries. At the
present time statistics permit economists only to point out that different types of cases do exist and some means must be found for distinguishing between them so that programs may be designed to maintain a healthy and vigorous state of competition.
I Also see Third Report of the Attorney General of the United States On. cit., pp. 12 and 18-19.
7
See "Industrial Patterns of the Business Population", Surrey of Current Busings, May 1948.
CHAPTER 4
CONSUMERS
The budget implies consumer supply of about $214
billion in fiscal 1953 at June-July 1951 prices.
Disposable personal income for fiscal 1953 is
assumed to be $237 billion, and personal savings
about $18 billion.
In an economy in which we strive to provide as soon as possible
"guns plus butter," careful attention must be given to the balance
between the supply of and demand for consumer goods. If, in order
to meet defense production and plant expansion goals, the supply of
consumer goods is curtailed to less than consumers desire and have
incomes sufficient to purchase, an inflationary excess of consumer
demand develops and provides a means for inflationary increases in
prices. One of the national objectives is to prevent such an eventuality.
Consumer Goods and Services
The per capita real -consumption of goods and
services increased about 38 percent from calendar
1939 to fiscal 1951. A slight decline of 2.2
percent is estimated from fiscal 1951 to fiscal
1952, and in fiscal 1953 the supply is likely to be
about 1.8 percent above fiscal 1952.
Between 1939 and 1944 consumers were able to increase their purchases of consumer goods and services from $67.5 billion to $111.6
billion. Of this 65 percent increase, over two-thirds was accounted
for by price increases. The increase in real consumption (goods
and services in constant dollars) was about 20 percent. Due to
population growth, the increase in per capita real consumption was
even smaller-about 14 percent. Personal consumption increased
rapidly after the war to $193.6 billion by 1950. Although a large
part of the increase over 1939 was due to price increases, the increase
from 1939 to fiscal 1951 in real consumption was about 61 percent.
On a per capita basis this increase in real consumption was about 38
percent.
On the basis of the assumptions made'in previous chapters as to
total output and the demands of Government and business, it is
apparent that the total supply of consumer goods can increase between
fiscal 1952 and 1953 by only about 3.6 percent. On a per capita
basis the real supply in fiscal 1953 would be about 1.8 percent higher
than in fiscal 1952. Declines would be concentrated in consumers'
durables where materials would be diverted to plant expansion and
military production. On the other hand, nondurable goods and
services could show modest increases.
67
68
JOINT ECONOMIC REPORT
Consumer Incomes
In terms of June-July 1951 prices, total disposable
personal income is estimated to rise due to expansion in output from about $222 billion in fiscal
1951 to about $228 billion in fiscal 1952 and about
$237 billion in fiscal 1953. The per capita real
disposable personal income is estimated at about
$1,465 in fiscal 1952 while in fiscal 1953 a rise
of 2.1 percent to $1,496 is estimated.
Expansion in output carries with it an expansion in employment
and hence an expansion in personal incomes through wages, profits,
and proprietors' incomes. -On the other hand, two substantial increases in personal income taxes enacted in 1950 and 1951 offset
part of the incomre increases. Price increases have also offset part
of the rise in money incomes. For these reasons the real purchasing
power of consumer incomes has not kept pace with the rise in money
incomes.
Per capita real disposable personal income was about the same
in 1939 as in 1929.' By 1944 there-had been an increase of about
45 percent over 1939.. During the postwar years the average was
slightly less than in 1944 so that for the fiscal year 1951 it was about
$1,450 per capita in terms of June-July 1951 prices compared to
$1,475 for calendar 1944. About $1,465 per capita is expected for
fiscal 1952: An increase to $1,496 per capita, or about 2.1 percent,
may be realized in fiscal 1953. (See table XI, p. 69.)
The largest single source of personal income is, of course, through
wages, salaries and other labor income. Continually rising employment
over the fiscal years 1952 and- 1953, including pay for the expanded
armed services, will result in further increases in total personal inome.
However, the increase will be offset in part by the effect of increased
taxes, indicated above. As a result, total disposable personal income,
which was about $215.2 billion in fiscal year 1951, is assumed to be
about $228 billion for fiscal year 1952 and about $237 billion for fiscal
year 1953 at current tax rates. The estimates for 1952 and 1953 are in
terms of June-July 1951 prices.2 Composition of personal income by
source is given in table XII, page 69.
Income, Expenditures, and Savings
The rate of savings for fiscal 1953 is conservatively estimated at 7.5 percent of disposable personal income
One question is of chief interest in fiscal year 1953 for which personal income after taxes of about $237 billion is estimated: How much
of this income will consumers save and how much will they attempt
to spend? To a considerable extent, consumers' savings as a net
aggregate figure for all consumers are largely unplanned; that is, regardless of what individual consumers plan to save and to spend outof
their income, aggregate savings, except for such contractual savings
items as insurance, debt retirement, and the like, are likely to depend
on unforeseen economic events. Although consumers may have in
mind saving some normal proportion of their income, they are likely
I Constant June-July 1951 prices. For detailed explanation, see footnote 1, table IV, p. 60.
I For detailed explanation, see footnote 1, table IV, p. 50.
69
JOINT ECONOMIC REPORT
to actually save a different proportions Attempts to derive exact
formulas for the relation between savings and disposable personal
income applicable to the current period have so far had only partial
success. Therefore, the staff has made the best judgment it could
with the advice of other technicians as to the approximate magnitude
that should be assumed and which would carry the least policy risk if
the assumption proves wrong.
TABLE XI.-Per capita disposable personal income, actual calendar years 1929-50
and fiscal years 1950 and 1951; estimated fiscal years 1952 and 1958
[In dollars]
Current
prices
Period
536
176
285
Constant
prices'
prices
250
Calendar 1949 -1,
1950 -1347
190 -1,272
Fiscal
1951-1,406
1952 -'
1953 -
1,023
759
1,019
1,475
1, 333
1,382
678
Calendar 19291933 -360
19391944-1,062
1947-1,
1948-1,
PeidCurent
Period
Constant
prices I
1,465
1, 496
1,362
1,444
1,378
1,450
1,465
1,498
I Constant June-July 1951 prices. For detailed explanation, see footnote 1, table IV.
Source: Actuals in current prices; calendar years 1929-50, Council of Economic Advisers, 1951 Midyiear
Report of the President. Estimates in constant prices and fiscal years 1950 and 1951 actual prices, staff,
Joint Committee on the Economic Report.
TABLE XII.-Total personal income by source, tax and nontax payments, and dis-
.posable personal income, actual calendar years 1929-50 and fiscal years 1950
and 1951; estimated fiscal years 1952 and 1958.
[Billions of dollars]
Years
Wages
and
salaries
Calendar1929
1933
1939 --1944 -1947 -1948 -1949 -1950 •..--Fisca1l1950 -1951 1
1952'
1953 '
X Current prices.
Other Proprielabor trs' and
income
rental
rna
income
Dividends
ed
Total Less tax Disposable
esoa
Transfer personal and non- personal
es
interest payments income tax pay- -esos
income
incomemet
50.0
28.7
4512
114.9
119.9
132.1
131.2
142.9
0.5
.4
.5
1.3
2.4
2.8
3.0
3.5
19.8
7.2
14.7
33.5
42.4
47.3
41.4
44.0
8.8
2.0
3.8
4.7
6.6
7.2
7.6
9.1
7.5
6.2
5.4
5.9
7.9
8.8
9.5
10.1
1.5
2.1
3.0
3.6
11.8
11.3
12.4
15.1
85.1
46.6
72.6
165.9
191.0
209.5
205.1
224.7
2.6
1.4
2.4
18.9
21.5
21.1
18.7
20.4
82.5
45.2
70.2
147.0
169.5
188.4
186.4
204.3
133.1
156 6
171.9
181. 7
3.1
3.7
4.0
4.3
41.0
47.4
50.3
52.0
7.9
9.7
9.1
9.0
9.7
10.3
10.9
11.4
15.5
12.2
12.8
12.6.
210.3
239.9
259.0
271.0
19.0
24.7
31.0
34.0
191.3
215.2
228.0
237.0
' Constant June-July 1951 prices. For detailed explanation, see footnote 1, table IV.
Source: Actuals, U. S. Department of Commerce; estimates, staff, Joint Committee on the Economic
Report.
S For changes in consumer spending and savings attitudes between June 1951 and November 1951, see
Prelminary Results ofNovember 1951 Survey on Attitudes T2oard Inflation, Survey Research Center, University of Michigan, December 12,1951.
70
JOINT ECONOMIC REPORT
TABLE XIII.-Disposable personalincome, consumer expenditures and savings, actual
calendar years 1929-50 and fiscal years 1950 and 1951; estimated fiscal years 1952
and 1953
[Billions of dollars]
Year
Calendar1929---------------------1933 -45.2
1939-70.
194 1947-169.5
1948-188.4
1949------------------1950 Fiscal1950 -191.3
1951 -215.2
19521 19531 --------------------------------- _'
Disposable
personal
income
82.5
Personal consumption expenditures
Total
Durable Non durcomable cormodities modities
Savings
Services
166. 4
204.3
78.8
46.4
67.5
111.6
165.6
177.9
180. 2
193.6
9.4
3.5
6.7
7.1
21.4
22.9
23. 9
29. 2
37.7
22.3
35.3
67.1
95.1
100.9
98. 7
102.3
31.7
20.6
25.5
37.4
49.1
54. 1
57.6
62. 1
228.0
237.0
183.9
202.7
2 204.6
' 214.0
25.6
30.3
25.0
26.0
98.7
107.9
112.6
118.0
59.6
64. 5
67.0
70.0
2
147.0
3.7
-1.2
2. 7
35.4
3.9
10. 5
6. 2
10. 7
7.4
12.5
21.5
18&.0
2
I Constant June-July 1951 prices. For detailed explanation, see footnote 1, table IV.
2 $1.9 billion not accounted for shows up in table XV as consumer excess inflationary demand.
$5 billion not accounted for shows up in table XV as consumer excess inflationary demand.
Source: Actuals, U. S. Department of Commerce; estimates, staff, Joint Committee on the Economic
Report.
a
On the assumption that savings would be about 7.5 percent of
disposable personal income in fiscal 1953, the relationship between
personal income, disposable income, expenditures, and savings would
work out about as given in table XIII, 4 page 70.
Structural Changes in the Distributionof Income and Savings
The distribution of income among families and individuals has been more equal throughout the
postwar period than during any immediate prewar year. This movement toward equality cannot be expected to continue indefinitely at the
same rate due to the changed nature of the lowincome problem.
The distribution of income among families and individuals has
changed since 1941. (See table XIV, p. 71.) In i950 about 26 percent of the Nation's families and individuals received no more than
$2,000 annually in money income. This 26 percent divided between
them only 7 percent of the aggregate money in the country. In contrast, in 1941 about 41 percent received less than $1,207, or the equivalent in purchasing power of $2,000 in 1950.
Because of the increase in price level since the end of the war, many
families, although now in higher income brackets, are relatively no
better off than in 1941. Those whose incomes are less than $2,000
today are undoubtedly in worse financial shape than those whose
prewar incomes were in this bracket. Fixed-income families in
these and other income groups are worse off than prewar. Despite
these exceptions, however, the standard of living of families in general
has increased considerably since prewar. In real terms consumers in
IReliable information on the consumer market Is limited. The Government now provides a number
of series on consumer expenditures and consumer credit, but a consistent integrated set of data to tell
promptly and reliably what consumer incomes are, how they are spent at each income level, what their
savings are and just who pays the taxes is lacking.
71
JOINT ECONOMIC REPORT
1950 were enjoying on the average about 39 percent more goods and
services per capita than in 1939. Moreover, available evidence indicates that the distribution of aggregate money income was more equal
during the postwar period than in the immediate prewar years. That
is, a more abundant supply of- goods and services was more widely
distributed among the population.
This more equal distribution can be attributed chiefly to the high
employment levels which have been maintained almost consistently
through the postwar years and to the higher cash incomes of the farm
population. Also, the increases in income taxes with progressive rate
structures have tended to affect higher income brackets more than
lower ones, so that incomes become more equalized as regards "after
tax" purchasing power. Since these conditions are expected to continue to prevail during the defense build-up period, the question becomes: How, will a limited supply of consumer goods affect the real
standard of living of families?
Expressed in June to July 1951 prices, 5 per capita personal consumption expenditures in fiscal 1951 exceeded those made in 1944 by 21
percent but in fiscal 1952 will exceed 1944 expenditures by about only
19 percent. In fiscal 1953, supplies will be adequate to permit consumers, on the average, to increase their per capita consumption about
1.8 percent over fiscal 1952.
TABLE XIV.-Percent distribution of families and individuals and aggregate money
income before takes, by total money income level, for the United States, calendar
years 1950 and 1941
[1941 classifications have the same purchasing power as the corresponding 1950 classifications]
1941
1950
Percent
of
families
Money income before taxes
Under $1,000
$1.000 to $1,99
$2,000 to $2,999
$3,000 to $3,999
$4,000 to $4,999 --$5,000 to $7,499
$7,500 and over
-11
-18
15
16
13
-18
-9
Total ---------------
-
100
-Percent
of
income
1
6
10
16
14
26
27
100
Money income before taxes
Under $603 ---------------21
$603 to $1,207 $1,208 to $1,810 -$1,811 to $2,413-11
$2,414 to $3,017$3,018 to $4,525-$4,526 and overTotal -100
Percent
of
families
20
19
15
9
6
Percent
of
income
4
9
15
17
15
16
24
100
Source: 1950 data from 1951 Surve, ef Consumer Finances, pt. III, Distribution of Consumer Income in
1900, Board of Governors, Federal Reserve System. See: Federal Reserve Bulletin, August 1951.
1941 data: J. A. Pechman, "Distribution of Income Before and After Federal Income Tax, 1941 and 1947,"
Appendix A,. Studies in Income and Wealth, volume 13, National Bureau of Economic Research, New
York: 1951. Money income levels for 1941 deflated by Department of Commerce 1950 index for personal
consumptionexpenditures. See: U.S. Departmentof Oommerce, Aational Income, 1951 edition, A Supplement to the Survey of CurrentBusiness.
These averages, however, conceal the effect on the lower-income
groups of a constantly rising price level. During the war and postwar
years families rose to higher income levels as the hitherto unemployed
or intermittently employed breadwinner and other members of the
family were able to obtain regular work. Contrary to prewar conditions the bulk of the families who now make up the under $2,000
group, to select an arbitrary line of demarcation, owe their financial
situation to permanent rather than temporary causes.
5For detailed Information, see footnote 1, table IV, p. 00.
72
JOINT ECONOMIC REPORT
The majority of the present low-income families are headed by
retired persons, housewives, and farm operators. (See chart IV, p.73.)
The low-income farm group would probably be the least adversely
affected by further inflation since the majority raise a substantial
portion of their own food which for low-income families is the most
important expenditure. Other low-income families headed by retired
persons and housewives would suffer a further decrease in their
standard of living during an inflationary period. For the most part,
these families are dependent upon past savings, workmen's compensation, public aid, and pensions.
To the extent that families and individuals now remaining in the
low-income group contain workers within the usual working ages,
the problem is largely one of finding ways to increase their output
per hour of work so that their incomes can be raised. Some of these
suffer from physical or family circumstances which would prevent
full-time, normal work. In many cases, however, the low incomes
are the result of low investment per worker. This low investment
may consist of low amounts of plant and equipment per worker, such
as an inadequate farm, or it may be inadequate social investment in
education, training, and health services over a long period of years.
This latter factor means that in all too many cases substantial numbers of the labor force have education and training which would
have been adequate in an earlier and simpler day, but which does
not equip them for full participation in the present highly technical
economy.
As is pointed out elsewhere in this report, the rapid changes in
technology of recent decades have created a situation in which there
is a danger. that our labor force will not have the training and education-necessary to operate and maintain our technological system. To
the extent that appreciable numbers of our families have such low
incomes that education and training necessary under modern conditions of technology cannot be obtained, the Nation is being deprived
of output which it might otherwise produce. There is therefore a
necessity for programs and research aimed at finding ways of increasing: (1) The amount of plant and equipment per worker among
those of our labor force having a low output per man-hour; and (2)
the social investment in education, training, and community services
which are essential to producing a labor force capable of high output
per man-hour under modern conditions.
Since physical or family circumstances in many cases, nevertheless,
preclude present participation in the labor force, many of the existing low-income families can expect lower standards of living, loss of
their small savings, and a reduction in the value of fixed incomes, if
further inflation of the price level continues.
73
JOINT ECONOMIC REPORT
Chrt /V
DISTRIBUTION OF FAMILIES OF TWO OR MORE PERSONS
WITH MONEY INCOMES OF LESS THAN $2,000 IN 1948
By Age, Sex, and. Employment Status of Family Head
in April 1949 for-the United States
BOTH
8.1%
.5%
16.3%
SEXES, AGE 65 of OVER
Employed (47% as Form Operators)
Unemployed
Not in Labor Force
.4
FEMALES, AGE 21-64
5.9 % Employed
.4% Unemployed
7.6% Not In Labor Force
__mT
1.0% Both sexes
*. under age 21
MALES, 21 - 64
30 I % Employed in Nonform Jobs
16.6% Employed as Form Operators and Managers
4.1 % Employed as Form Laborers and Foremen
3.4 % Unemployed
6.0 % Not in Labor Force
SOURCE: Staff, Joint Committee on the Economic Report and the Dureau of the Census
CHAPTER 5
SYNTHESIS OF ECONOMIC PROJECTIONS
Potential inflationary excess consumer demand in
fiscal 1953 may be about $5 billion. The "costpush" mechanisms and spending of new or accumulated liquid assets could aggravate this inflationary excess consumer demand and drive
prices upwards.
Previous chapters reviewed possible developments in the various
sectors of the economy-Government, business, and consumers-as
well as possible total levels of output that could be attained with
prospective plant, equipment, materials, labor force and levels of efficiency. Are these programs and possibilities consistent with one
another and in balance? Or are there inconsistencies that render
doubtful the attainment of all the objectives simultaneously under
expected conditions and present policies?
The major question arises in the consumer sector of the economy:
Will consumer supplies be sufficient to satisfy effective consumer demand, or will there be an excess demand which will feed a further
inflationary price rise? The potentialities of the situation are summarized in table XV, page 76, the estimates for which are drawn from
the preceding chapters.
For the fiscal year 1952 excess consumer demand over consumer
supply appears to be about $1.9 billion on the basis of the President's
estimates of Federal receipts and expenditures. This implies that the
rapid increase in prices during fiscal 1951, the increase in taxes under
the Revenue Acts of 1950 and 1951, the additional direct controls,
and private restraint leading to sharply higher savings brought about
economic balance in the early part of fiscal 1952. By the latter half
of this fiscal year there is at least the possibility that there will be
some slight inflationary excess of demand over supply, if the estimates
of Federal receipts and expenditures in the President's budget turn
out to be correct. This would be particularly true if the recent
exceptional rate of savings were to decline; or, alternately, if wage
rates were increased without corresponding offsets through increased
personal savings, increased taxes, increases in consumer supplies, or
narrowing of profit margins.
75
76
JOINT ECONOMIC REPORT
TABLE XV.-Estimated excess consumer inflationary demand on the basis of existing
tax program, fiscal years 1952 and 1958
[Billions of dollars]
f
Description
Gross national product -335.0
Less:
Capital-consumption allowances -24.
Indirect business tax and nontax liability-26.5
Business transfer payments-.
Plus:I
Subsidies less current surplus of Government enterprise minus
statistical discrepancy -+0.3
Equals: National income-284.
19521
*
355.0
0
8
Equals: Personal income ------------
8.8
12.0
9.1
.8
t
---
-
300.6
48.0
8. 7
0
I.8
5.5
9.0
.8
259.0
271.0
27.9
3.1
30.8
3.2
Less:
Personal tax and nontax payments -31.0
Federal -----------State and local
26.0
28.1
.8
+0.5
0
Less:
Corporate profits and inventory valuation adjustment -43.0
Contributions for social insurance Excess of wage accruals.over disbursements-0
Plus:
Government transfer payments Net interest paid by Government -4.9
Dividends ---------'Business transfer payments-
19531
34.0
-
-
Equals: Disposable personal income -228.0,
Less: Personal savings-21.5
237.0
18.0
Equals: Consumer demand -206.5
219.0
Supply:
Expenditures for gross national product -335.0
Less:
Gross private investment
-53.0
Federal Government purchases of goods and services -55.
State and local government purchases of goods and services --
355.0
6
21.8
47.6
71.3
22.1
Equals: Consumer supply -204.6
214.0
Consumer excess inflationary demand; excess of consumer demand over
supply -+1.9
+5.0
I Constant June-July 1951 prices. For detailed explanation, see footnote 1, Table IV.
2 Methods for removing the inflationary excess demand are indicated in Table XVII. These consumer
excess inflationary demands are measured in constant June-July 1951 prices. To the extent that prices rise
above this level, as in fact they have so far this fiscal year by about I percent, the excess demand would be
larger, when measured by the difference between monetary demand in current prices and supply in prices
existing at the beginning of the period. The policy conclusions are unaffected by the method of measurement in this instance.
Source: Staff, Joint Committee on the Economic Report.
For the fiscal year 1953 the possible consumer inflationary pressure
would be about $5 billion, or about 2.3 percent of the estimated consumer demand. This would reflect, in part, an excess of cash expenditures over receipts in the Federal budget and, in part, the fact that
rising military requirements for scarce materials reduce supplies of
durable consumer goods.
This excess demand assumes a rate of savings of about 7.5 percent
in fiscal 1953 compared to 5.8 percent in fiscal 1951 and 9.4 percent
in fiscal 1952. It is widely believed that curtailments of supplies of
durable goods, combined with credit controls, would induce such a
savings rate under the budget assumptions. It should be- noted,
however, that a price-wage spiral might develop if--these primary
inflationary pressures are allowed to result in price rises. Such a spiral
JOINT ECONOMIC REPORT
77
would be intensified by a possible flight from liquid assets to physical
assets.
As has -already been pointed out, wholesale prices declined after
February 1951 but began to show signs of stability or even slight rises
in the autumn. From the foregoing analysis it would appear that
if the Federal budget reached $85.4 billion in fiscal 1953 there would
be further upward pressure upon prices. Price increases might not
be as great as occurred in the 8 months following June 1950. On the
basis of past experience this upward pressure on prices would result
in larger increases in wholesale prices than in retail prices. During
the period of wholesale price declines in 1951, consumer prices remained stable on the average or rose slightly. The magnitude of price
changes cannot be foreseen with precision but it appears possible that
both at retail and wholesale levels the prospective price changes would
be more moderate than during fiscal 1951.
It, should be emphasized that if a further spiral of wage increases
accompanied by price increases were allowed to develop, inflationary
forces would be greater than these tables indicate.
96529-52--
6
i
PART 1I-POLICIES AND PROGRAMS FOR ECONOMIC
STABILIZATION AND GROWTH
CHAPTER 6
THE FEDERAL GOVERNMENT
Economic stabilization and growth could be
encouraged in fiscal 1953 by one or a combination of these alternative policies: (1) accept the
President's program; or (2) reduce expenditures mainly in the major national security
category; or (3) rely on a high rate of consumer
savings.
From the analysis of Part I it is possible to draw certain conclusions
-as to desirable Federal policies and programs in order better to insure
*economic stabilization and growth.
For the present fiscal year (1952) the inflationary excess demand
roughly measured at $1.9 billion is not likely to develop because
reports for~the first 7 months of the fiscal year indicate that Federal
expenditures are likely to fall below the President's estimate.of $70.9
billion by about $1.9 billion. This would mean administrative budget
receipts of $62.7 billion and administrative budget expenditures of $69
'billion, while the cash budget deficit, because of accumulations in
trust accounts, would be about $2 billion.
The estimates in this report imply an excess consumer demand of
;at least $5 billion for fiscal 1953. as shown in chapter 5. This excess
:demand might be neutralized by any one or a combination of three
types of policies:
1. The President's recommendations could be followed. This would
.involve budget expenditures in fiscal 1953 of $85.4 billion combined
with: (1) additional tax revenues to reach the President's tax recommendations of 1951-roughly $5 billion; (2) a strengthening of the
-provisions of the Defense Production Act relating to control of prices,
wages and credit; (3) the authorization of margin control for trading
*on commodity exchanges; and (4) additional powers for the Board of
'Governors of the Federal Reserve System to impose additional bank
reserve requirements
2. Federal expenditures might be reduced by $5 billion below estimates in fiscal 1953 as a result of direct congressional action mostly
in major national security programs or of failure of military production to meet the President's estimates. Such reductions would
reduce inflationary pressures by making approximately equivalent
ailnounts of goods and services available to consumers. Such reductions would involve military risk considerations which must be
weighed against the economic benefits involved.
See The Economic Report of the President,January 1952,p. 25.
79
80
JOINT ECONOMIC REPORT
3. If expenditures are not reduced or taxes raised, then prevention
of inflation would rest almost entirely upon individual consumers.
The excess demand would not appear if consumers maintain a high
rate of personal savings amounting to 10 percent of disposable personal income.
Obviously there is also the possibility of some combination of these
alternative policies. The policies and programs to carry out the
alternatives fall into three categories: fiscal, monetary, and regulatory (including direct price, wage, etc. controls).
Fiscal Policy
The economic forces are likely to be-on the inflationary side so that the question of suitable fiscal
policy is largely one of how much tax revenues
can be raised and of how low expenditures can
be held.
The impact of Federal fiscal policy upon economic stability and
production cannot be avoided. This places upon Government the
responsibility of using this tool to the best possible advantage. The
high level of defense expenditures expected during the next years
makes the control of expenditures doubly important.- It is imperative
not only that nondefense expenditures be reduced wherever possible
but that the maximum effective defense be obtained from every dollar
of expenditure.
Principles of expenditure reduction.-In the short-run, it is difficult.
for the Congress to, alter the rate or the amount of Federal expenditures. The soundest approach to budget balancing by way of reducing outgo seems to lie in the development and acceptance of principles
to be used as each program and item of the budget is reviewed. The
following have been formulated as illustrative of. the attack by way of
principles.
1. Consideration should be given to putting direct Government
services as nearly as possible on a fee basis adequate to cover the costs.
Where the beneficiary of Government services can be identified more
or less precisely-that is, where the personal nature of the services.
predominates above the social interest-this is often possible. Most.
obvious, and incidentally a proposal upon which.many observers agree,.
is the desirability of reducing the postal deficit. Even with the
changes in the postal rates recently enacted, the postal deficit for 1952.
is likely to be some $800 million.
Similar fee-basis considerations apply at other points throughout.
the Government budget. The possibilities in this field have been
noted previously by the Committee Staff. 2 At the request of Congress,
the Bureau of the Budget is currently seeking information from the
various agencies of Government to. determine how far the self-sustaining principle may be extended.
2. So far as possible, efforts should be made to avoid increasing
Government expenditures in directions in which private enterprise
may render the services equally well with no more than Government
sponsorship and encouragement. The place of the Federal Govern2 JointCommitteeontheEconomicheport,Inflation.StillaDanger,
82d Cong., Istsess., S. Rept. 644, p. 25.
JOINT ECONOMIC REPORT
81
ment in lending or supplying capital to private business is a case in
point. Studies of the Investment Subcommittee of the Joint Committee on the Economic Report substantiated evidence from many
sources that devices facilitating the flow of private equity capital to
small business would do much to advance the interests of small business and economic stability without use of Government funds for
direct loans or guaranties. The encouragement of new channels
such as the proposed regional system of capital banks is one way in
which the Government with a minimum of expenditures may aid
private sources to satisfy a need which, if neglected, would result in
an additional burden on the Government budget. Several State
governments, New Hampshire and Maine specifically, have recognized this need by passing enabling legislation which has already encouraged private capital in establishing specialized lending institutions. The Industrial Development Bank of Canada, is another attempt on the part of a government to encourage private capital to
meet more fully the demands of small private businesses. The possibilities of keeping down the size of Government by enabling and
encouraging aggressive private business to do the job required is
almost unlimited.
3. Assistance grants to the States for public aid, highways, etc.,
should not become so rigid or so bound by advance planning that they
can be varied only by progressive changes upward, regardless of economic conditions or needs. In this connection, attention is called to the
comment of the Joint Committee on the Economic Report in its annual
report 3 years ago on the January 1949 Economic Report of the
President. At that time the committee stated:
It appears desirable that, at least as a first line of defense, some of our regular
grants-in-aid programs should provide a certain degree of flexibility. This could
be accomplished by provisions in suitable grants-in-aid legislation that would permit an increase in the Federal share during times of adverse economic conditions
and a decrease in times of favorable economic conditions. The ability to make
these adjustments promptly is an important stabilization tool, and in keeping with
the objectives of the Employment Act of 1946. It might operate with noticeably
beneficial results in the case of aid to slum-clearance and urban-redevelopment
programs. 3
4. To the extent possible, desirable and necessary new demands for
expenditures should be tied to reduction or shifting of costs in the same
or other general areas of activity. Many new channels of expenditures are called for, the merits of which must be constantly weighed
against the needs for continuing old programs. Agricultural policies,
for example, might be reexamined to determine if' desirable new expenditures for expanding agricultural production might not be financed
out of savings in programs begun under different circumstances. A
recent staff report prepared for this committee, Underemployment of
Rural Families, indicated that certain expenditures to increase the
productivity of underemployed farm families might under present conditions actually prove anti-inflationary. Any measures which can be
taken to improve farm management practices or to raise marginal or
underemployed labor to higher levels of productivity may well result
in substantial increases in the total national output and effectively
add to the available labor force.
* Report
of the Joint Committee on the Economic Report on the Economic Report ofthe President, January 1949,
81st Cong., Ist sess., S. Rept. 88, p. 38.
82
IJONT ECONOMIC REPORT
5. Budget economy cannot be successfully met by the indiscriminatecurtailing of what may be called the "overhead" or normal expenses
of Government. The Government must continue to perform itsaccepted functions in such areas as (a) its general regulatory activities.
such as the restraint of monopolistic tendehcies in business; (b) gathering of statistics upon which intelligent understanding and programingare based; and (c) the pursuit of research where the benefits are too
generalized to be privately financed. Relatively small savings accru-mg from the abandonment of statistical series or from curtailingregulatory functions are almost certain to prove illusory. The Joint
Committee on the Economic Report, charged by law with an important role in maintaining economic stability, has repeatedly stressed
the dangers of inadequate information on what is taking place in theNation's economy.
Assurance that the Government is getting the utmost out of each
dollar of expenditure is as sure a way to economy as outright budget-cutting. When expenditures on programs designed to spur economic
recovery in bad times give way to considered expenditures forincreasing national output in boom periods, the effect, paradoxical asit may seem, may even be anti-inflationary. Government expenditures which tend to increase production, assuring the better use of
human and natural resources by adding to the national product, maybe more anti-inflationary than inflationary.
It should be remembered, however, that major economies in the
Federal budget will probably have to come in the defense area. Asthe Council of Economic Advisers points out:
However, the nondefense areas do not contain the "fat" often attributed tothem. Federal expenditures for all programs except national security, veterans'
benefits, and interest on the national debt will be about 65 percent higher in thecurrent fiscal year than in the fiscal year 1940. In comparison, the index of
wholesale commodity prices is nearly 130 percent higher, and the Consumer's.
Price Index almost 90 percent higher. Despite a rapidly expanding population
and a great increase in the total product of the economy, Government programs,
which are directed toward servicing the general4 needs of the people and buildingup our natural resources have been held down.
Principles of tax revision.-Precisely as the problem of expenditurereduction is best approached by a well-considered integrated policy
rather than by random slashing and expediency, the problem of added
Federal revenues should no longer be approached by patchwork
additions or blanket percentage increases in existing rates. The need
for extraordinary revenues, the risk of impairing production incentives,
coupled with the desirability of restricting consumption at this partic-ular time, must all be considered along with the usual goals of equity
and justice. The specific requirements of the mobilization economythus call for extraordinary care in the formulation of a tax program.
Some have suggested that a critical point exists beyond which.
taxation may not go without generating inflationary forces and, uponi
the basis of empirical evidence, have set this point at about 25 percent
of the national income.5 The percentage which total Federal, State,
and local taxes bear to national income will exceed this level in fiscal
years 1952-53 (table I, p. 41) as it did in fiscal year 1951. The critical
point. of taxes varies from time to time, as well as from country to-4 The Annual Economic Review, January 1952, p. 1Si.
I The proposition stated by Mr. Colin Clark of a critical point near 25 percent found no support among,
a panel of 8 university economists at a roundtable conducted by the Joint Committee on the EconomicReport, January 31, 1952. See its Hearings, p. 358.
JOINT ECONOMIC REPORT
83
country. The important issue lies in the size of governmental expenditure rather than in the level of taxation. The proportion of national
output taken by Government and the purposes for which that output
is being withdrawn from the amounts available for private consumption are the critical questions. Many Government expenditures
covered by taxation are, for example, services which not only constitute important parts of the standard of living but could not be successfully performed by private individuals or enterprises. In these cases,
the covering taxes are more fees or prices for services requested and
rendered than burdensome taxes. Police protection, public roads,
public health facilities, and the post office are examples of such
services. On the other hand, the amounts of resources and product
used for defense purposes constitute an unfortunate evil and economic
waste which is burdensome to all. The American people can and will
make necessary sacrifices of resources and output for defense.
No matter how much some would like to think of taxes as being
levied for revenue purposes only, the fact is that no tax is without its
effect-good or bad-on the economic behavior of individuals and
businesses. Today's tax structure has grown up largely under conditions of depression and war. Now the revenue needs of a new
defense build-up have been superimposed upon this hybrid. At the
same time it seems probable that the revenue needs of defense will
continue to be a dominant factor in fiscal affairs for some years to
come.. This makes it all the more necessary that the tax system be
continually reexamined in order best to adapt it to the needs of the
present and immediate future. For these and similar reasons it is
important to develop some principles which illustrate the fundamentals underlying expansion or much needed revision of the tax
program.
1. It should be realized that even though revenue needs and budget.
balancing considerations must always weigh heavily in tax reductions
and increases, nevertheless, taxes have economic impacts which'should
be recognized so that the tax structure can be kept consistent with the
Government's program for economic progress and stability. The timing and amount of funds which the Government takes from or adds to
the Nation's income flow are matters equal in significance to the Government's purely revenue needs. With the Government budget and
the tax burden taking a fifth or more of national product, the aggregate
taxes collected are inevitably an important influence on the behavior
of the economy.
2. Details of tax programs as well as total collections have important
economic implications. Under current conditions not only the
aggregate of taxes but the detailed features should be expressly
designed to assure the maximum stabilizing effects per dollar of
taxes collected. Considerable use has been made of the accelerated
depreciation program as a device for encouraging the construction of
defense plants. Whatever may be said about particular cases, the
effectiveness of the program seems to have been demonstrated by the
use made of it. Another example of adapting tax programs to over-all
Government objectives might, if feasible in this country, follow the
so-called deferred capital cost allowance system in use in the Dominion.
of Canada. In the Dominion the current over-all policies are similar
to ours in the desire to control inflation and direct investments into
channels contributing most to national defense. To this end the cur-
84
JOINT ECONOMIC REPORT
rent deduction for tax purposes of depreciation allowances on new
investments is permitted only in the case of eligible projects contributing to defense or defense-supporting industries. The deductibility of
depreciation for tax purposes may thus be turned to a negative control discouraging nondefense building, as well as being used, as in the
United States; as a positive incentive to encourage selective types of
investment.
3. In view of the large revenue needs and the inevitable high rates
of taxation which they call for, the utmost equity among existing taxpayers must be provided by the statute and in its administration.
Specific tax "loopholes" 6 have been pointed out on various occasions
before the committees of Congress but the pressures for the prompt
enactment of new revenue-producing provisions have led to the postponement of the seemingly less urgent problem of removing inequities.
The policy of postponement cannot be followed indefinitely without
seriously impairing the public attitude toward the payment of today's
high rates.
4. With the demands for revenue on the part of the Federal Government at extraordinarily high levels, the integration with State and
local taxes likewise becomes increasingly important. Traditional
patterns of taxation left to each of the various levels of Government
tend to break down as expenditures at all governmental levels increase. With cities, States, and the Federal Government levying
income, inheritance, sales, excise taxes, etc., layer upon layer, it falls
upon the Federal Government, in cooperation with State and local
-agencies, to study the combined effect and not treat its own imperative
needs as* though they represented the only levy on the taxpayer's
pocketbook.
5. While the income tax may serve as the chief reliance of both
the States and the Federal Government in peacetimes, it must be
accepted that there are limits beyond which income taxation may
not be pressed, without repressive effects. Tax policy under today's
conditions should systematically seek to discover what these practical
or theoretical limits are in terms of the national income and the
various income classes. Particularly, attention should be given to
increasing progressivity below the $10,000 income level.
6. Sovereign governments should proceed cautiously in placing
limitations on taxing-powers in the Constitution. The current attempt
to limit the rate of Federal income, estate, and gift taxes to 25 percent
is illustrative.'
6 The President has recommended that most of the additional revenue requested should be derived from
closing such "loopholes" and reducing special tax privileges. See The Economic Report of the President,
January 1952,pp. 21, 25, and 135.
7 See Constitutional Limitation 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 by the committee staffs, February 1952.
JOINT ECONOMIC REPORT.
85
Monetary Policy
While the unusually heavy refunding requirements
of 1951 have now been passed the refunding
task for the next 12 months, together with the
prospect that the Treasury will have to raise
some new money adds to the current importance
of monetary policy. To a considerable extent
the fiscal situation and the monetary problems
are complementary and each must, therefore, be
solved in the light of the other.
The interdependence of monetary, credit, and fiscal policies in
promoting the ends of the Employment Act of 1946 has seldom been
more convincingly demonstrated than during the fiscal year 1951.
Though the Federal Budget showed a consolidated cash surplus of
$7.6 billion for fiscal year 1951, the year as a whole witnessed one of
the most rapid and pervasive inflationary movements in recent American history. Whatever deflationary effect the cash withdrawal on the
Government account might have had was offset by expansion in
various types of private credit. During the fiscal year business loans
of commercial banks increased by nearly $7 billion; consumer loans
increased $1.7 billion; while expansion in other types of credit, particularly real estate mortgages, was similarly large.
The ineffectiveness of the governmental cash surplus, normally a
deflationary force, was, in large part, attributable to anticipatory
forces on the inflationary side arising from the current or expected
placement of orders for future deliveries. Even though these "anticipatory"-forces must be given due weight in explaining the price rises
which did occur, the nullification of the normal deflationary effects of
the budgetary cash surplus by a simultaneous expansion of commercial
bank nongovernmental loans points to the necessity for coordinating
monetary and fiscal policies if they are to promote the purposes of the
Employment Act. Monetary policy which permits the substitution of
private deficit financing, in the form of bank borrowing, for governmental deficit financing, may have merits on other scores but is hardly
a consistent Government policy if the objectives are to dampen inflationary forces.
The great reliance which must be placed upon the monetary and
fiscal tools available to Government and the obvious need for utmost
coordination in their use has prompted the Joint Committee on the
Economic Report to continue its study of how these devices may best
be organized and employed. A Subcommittee on General Credit
Control and Debt Management is, therefore, following up earlier
committee studies evaluating recent monetary and credit policies. In
due course a report by this subcommittee will consider these questions
in more detail.
At the beginning of the calendar year 1951, the Treasury faced the
enormous task of refunding $32.3 billion of marketable certificates,
notes, and bonds maturing within the year, exclusive of bills. These
maturing issues, together with those reaching their first call date
during the year, aggregated more than $44 billion, or nearly one-third
of the total marketable debt, again exclusive of bills. The task of
dealing with such heavy maturities in so short a time has now been.
accomplished.
86
JOINT ECONOMIC REPORT
Of the $32.3 billion maturing within the year, only $2.1 billion were
turned in for cash by investors although substantial additional
amounts exchanged by the Federal Reserve had undoubtedly been
disposed of by investors in anticipation of maturity. In addition,
more than $13.5 billion out of $20 billion long-term bonds, at the time
neither due nor callable, were exchanged by their owners in accordance
with the Treasury offerings. For the most part these refunding
transactions have gone forward in the period since March 4 when the
"accord" between the Treasury and the Federal Reserve was announced and the rigidly supported market for Government securities
abandoned. During the period, yields on Government bonds of
15 or more years' maturity, which had stood at about 2.40 percent
for the month preceding the accord, rose to 2.74 percent in the week
ending December 29. At the same time, the rate on "3 months' bills"
moved upward from 1.39 percent in February to 1.86 percent at the
end of the year.
The refunding task in sight for 1952 in large measure grows out of
the 1951 situation. Of the $30 billion of fixed maturity, non-bill,
issues falling due in calendar 1952, all but $1 billion are certificates of
indebtedness issued in connection with the refunding operations of
1951. (See table XVI.) Further refunding of these certificates will,
of course, depend upon market conditions as, the securities mature.
In addition $2.5 billion of tax anticipation bills mature, one-half in
March and one-half in June 1952. For the most part, the $24.5
billion of bonds callable during the calendar year 1952 are issues the
first call dates of which have already been passed over, or further
issues carrying similar coupons.
TABLE XVI.-Interest-bearing public marketable issues maturing or callable between
Jan. 1 and Dec. 31, 1952 1
[Millions of dollars]
1952
Security
Fixed maturity issues
March2 percent bond March 15, 1952-54 1,024
April---1 certificate April 1, 1952-9,524
-June----2 percent bond December 15, 1951-55
-510
2 percent bond June 15, 1952-54
-5,
2Y4percent bond June 13, 1952-55---------------July ---14 certificate July 1, 19525,216August--certificate August 15, 1952 -583
September Iy certificate September 1, 1952 -1,
832
2 percent bond September 15, 1951-53
-7,
-October-13ycertificate October 15, 1952-10,
861
December. 2 percent bond December 15, 1952-54
Iy certificate December 15, 1952 -1,061
Total -------------------------------
30,101
Dec. 31, 1951,
price-yield
basis to maturity (percent)
Callable
issues
...- -
-
.
825
1,501
.
-1.
986
8, 662
1.71
1.80
2.16
2. 16
4'2.11
1. 82
1. 82
84
2. 04
1.85
2.19
1.88
24, 485
' Exclusive of approximately $11 billion in 3 months' bills and $2.5 billion in tax anticipation bills.
' Called for redemption on Mar. 15, 1952. Yield taken to that date.
3 Callable on 4 months' notice on June 15, 1952.
'Yield to earliest call date.
&
Callable on 4 months' notice on Sept. 15, 1952.
Source: Office of the Secretary of the Treasury, Tremur BulIetin, January 1952.
The problems of Government debt management for 1952 involve
not only the refunding of these maturing items but will almost certainly involve the raising of some new money. According to estimates
elsewhere in this report, a cash deficit of the order of $10 billion
JOINT ECONOMIC REPORT
87
seems probable for the next fiscal year unless' adequate additional
taxes are enacted or expenditures reduced.
If the rate of expenditures and receipts follows the President's
budget estimates, a substantial amount of additional borrowings
may be needed for a short time. On the other hand if taxes are increased or expenditures are reduced, the smaller new money needs may
well be handled with a minimum of inflationary effect. In any case
the precise forms which the Treasury may employ in meeting the
new money needs (just as in the case of refundings) will depend upon
money market conditions at the time. The more or less regular flow
of maturing issues permits the Treasury to adjust its offerings so as to
take advantage of available market conditions even though the immediate needs for new money may be of a short duration on the
assumption that a budget surplus in the nearby years will be obtainable.
The general tone of the money market under which these operations
are likely to be carried out will be influenced by factors discussed
elsewhere in this report. Total personal savings during fiscal 1952
:and 1953 will exceed or at least equal fiscal 1951 levels. This will be
true whatever the rate of military build-up. While personal savings
are thus expected to run at high levels, expenditures for plant and
equipment by business are likely to be the same or less in fiscal 1953.
The limitation of materials is almost certain to slow down the expansion of plant and equipment on the part of business and local governments. If profits, after taxation, reach the levels suggested in chapter
3, retained profits and depreciation funds will be high enough to
permit a substantial reduction in the amount of new capital which
corporations will be called upon to raise through the market. With
(1) private savings expected to continue at high levels and (2) the
demands for private industrial and residential construction held down
by nonfinancial considerations, the year 1952 should be characterized
by a relatively large amount of funds seeking outlets, even if temporarily. It may be hoped that the direct expansionary borrowing
from banks can in large measure be avoided.
With the prospect of a somewhat easier balance in the supply of
real savings and demand for investment funds, the major concern of
monetary policy for the immediate future should be to forestall further
major expansion of bank loans or credit for nondefense purposes.
While general credit control offers attractive opportunities for
general inflation control, the supplemental use of selective credit
controls 8 is necessary in restricting by regulation the expansion of
credit in specific directions most serious from the defense standpoint.
Restraint on certain housing credits may be expected to be increasingly
effective in the curtailment of the rate of expansion in mortgage loan
credit and, what is even more important, in the demand for building
materials.
Regulation of credit for consumer durables has likewise been effective in decreasing credit expansion and in bolstering the enforcement
of materials allocations. According to the Department of Commerce,
the restraints under regulation W during the first three quarters of
1951 directly inhibited purchases of consumer durables to the extent of
8These controls are allied as to purpose to selective Investment controls and materials allocation which also
~aim to discourage nonessential investment and plant expansion.
88
JOINT ECONOMIC REPORT
$2.5 billion or $3 billion annually. 9 It is still too early to judge the
effect of the easing of the requirements and maturity limitations under
the regulations which were put into effect at the end of July.
Any easing of the selective monetary controls requires a compensatory strengthening of the program for voluntary action to help curb
inflation. The voluntary credit restraint program must be regarded
as a supplement, however, rather than as a substitute for measures
directed at general credit restraint or selective restraints influencing
the demand for specific types of credit. Credit restraint committees
formed to forward this voluntary program have already recommended
postponement of capital outlays for nonessential and postponable
capital outlays. It would be wrong, of course, to expect the program
to direct or control expenditures on plant expansion or inventory
buying when they are financed from retained profits or from funds
already on band.
Regulatory Policy
The regulatory policies of the Federal Government,
including those relating to allocation, priorities,
wages, prices, and antitrust, should be adapted
to the requirements of the mobilization economy.
Changes to be made depend on the size, timing,
and duration of the defense program.
The Federal Government affects economic stability, growth, and
the composition of total output not merely through fiscal and monetary policies, but also through regulatory policies. Some of these
regulatory policies are of long standing peacetime character, such as
the antitrust statutes; the fair trade laws; regulations of production
standards, such as the Pure Food and Drug Act; and regulations
involved in administering agricultural price supports. However, in
the present mobilization period, as in World War I and World War II,
additional regulatory policies have been adopted covering such fields
as materials allocations and priorities, direct control of wages and
prices, inventory controls, and regulations as to investment. In this
mobilization period it may be necessary to shift the emphasis somewhat in administering these regulatory policies so as to adapt them
to the changing circumstances of a mobilization economy.
In general, the principal problems will be: (1) To insure that these
peacetime regulations do not prevent the military from obtaining
procurement in the volume and at the time needed; (2) to insure that
these regulatory policies do not contribute to but rather restrain
inflation during a period of relative shortage of consumer goods;
(3) to maintain during the mobilization period protection against
unfair competition and restraint of competition which might result
from the character of military procurement; and (4) to maintain a
balance within the economy between various types and sizes of enterprises which will be sustainable over a long period without impairing
military preparedness or the free private enterprise system. Briefly,
the problem is to prevent the requirements of a program for defending
freedom from destroying that very freedom.
This danger is particularly relevant to a long gradual build-up.
In this connection, the policies under both the antitrust statutes and
' Survey of Curratd Busines8, November 1951, p. 7.
JOINT ECONOMIC REPORT
89
the Defense Production Act should be directed toward expanding
capacity in the hands of new enterprises wherever this is economically
feasible. It might be well to adopt a standard that expansion of the
plant and equipment of existing large-scale firms should only be
undertaken when there is no alternative procedure for developing a
new healthy young enterprise to build, maintain, and operate this
new capacity.
The President's recommendations as to regulatory policies to accompany an $85 billion budget include: (1) extension of the Defense
Production Act for two more years with its provisions strengthened
as to production expansion and the control of prices and credit; (2)
repeal of section 104 of the Defense Production Act which restricts
our imports of certain goods which other countries could export to us
on mutually advantageous terms; (3) revise the basic legislation conauthority to
cerning labor-management relations; and (4) provide
0
control margins for trading on commodity exchanges.'
Regulatory policies, in particular, must be framed in the light of
the fact that present mobilization may either continue for a long
period of years with a consequent prolonged strain on the economy or
be changed suddenly into an all-out war program at the option of the
Communists. There is a serious need for a well-coordinated longterm analysis of policies to insure that the programs are consistent,
sustainable, and favorable to the health of free private enterprise over
the long term.
The principal challenge to economic stabilization and, in fact, to
the direct control program provided by the Defense Production Act
in the near future is the cost-push phenomena discussed in recent
reports of this committee. Competitive pressures to keep prices down
such as normally exist in a peacetime buyer's market are weakened
while those that push prices up are strengthened during periods of
mobilization. In ordinary times consumers have a margin of transfer.
They can buy from any one of several suppliers. Manufacturers
similarly have choice when incurring their costs. Both exert pressure
to keep prices down. Consumers resist price increases at the retail
level and merchants and manufacturers constantly strive to keep costs
down at earlier stages of production.
But the big Government demand for output to meet its military
requirements offsets and nullifies virtually all restraints on the demand
for productive resources, especially in -the case of materials used both
for military "hardware" and consumer durables. Indeed, consumers
and manufacturers rush in to compete with the Government for
physical goods.
In the resultant seller's market the merchants and manufacturers
relax their normal controls on costs. In order to get volume productiou on the market fast they spend less time and effort bargaining ov r raw material prices and wages. The competitive forces of the
markeb become less intense throughout the economy. The brakes
which usually moderate the constant and persistent efforts of suppliers
of farm products, raw materials, and labor to get more are lifted
somewhat.
As a result these resource prices push upward, and thereby increase
the incomes of farmers, sellers of raw materials here and abroad, and
labor. Such increases in income become additional fuel under the
19See
The Economic Report of the President, January 1952, p. 25.
90
JOINT ECONOMIC REPORT
inflation boiler. Unless there are substituted for the normal restraints.
that operate in a buyer's mark-et effective, even if abnormal, direct
Government controls, such cost pressures will spiral the price level
upward to higher and higher cost plateaus. This, in brief, is the costpush mechanism of inflation.
It is clear that need exists for private restraint in efforts of each
group to shift the burdens of national security to other groups in the'
economy. This cost-push mechanism reinforces the statement of theJoint Economic Committee on April 2, 1951:
Thus a challenge is presented to the Congress to modify, by legislation enactment,
this engine of inflation which will continue to press constantly upward on prices
unless we find the way to stop the inflationary spiral so that a just stabilization
ratio may be attained between agricultural prices, wages, industrial prices, and
profits. All must be stabilized on a just basis by the removal of every factor
contributing to the inflationary spiral.
To permit administered prices to be maintained in some important industries.
with undiminished force, to allow the resultant corporate profits to continue at
present extraordinary levels, to try to keep farm prices by Government pricesupport programs on a parity calculated from such industrial prices, to allow
escalator clauses to continue in force in wage contracts tying wages to the cost of
living, to make price-ceiling adjustments on the basis of increases in materials:
and labor costs and therebv to raise further the cost of living-is merely to set
up an unbeatable mechanism of built-in inflation that, however endurable for a.
short war, could prove disastrous during a long preparedness period. As a
minimum a waiting period of 3 or 6 months might be established before automatic
adjustments are allowed to take place, such as that between increases in the cost
of living and wage rates, thereby bringing somewhat greater stability and less
frequency of change into the price-wage-cost picture."
11Report of the Joint Committee on the Economic Report on the January1951 Economic Report of the President,
82d Cong., Ist sess., S. Rept. 210, p. 9. Since the joint committee made this statement, the proposal for a
waiting period before automatic adjustments are allowed to take place was also made by the Committee
for Economic Development in its statement on national policy, Price and Wage Controls, December 1951.
CHAPTER 7
SUMMARY OF THE NATION'S ECONOMIC BUDGET
An illustrative balanced Nation's economic budget
is shown for fiscal 1953 in table XVII. Three
policy alternatives are shown: (1) The President's recommendations; (2) a reduction in
expenditures of $5 billion; and (3) a high rate
(nearly 10 percent) of personal savings.
The policies and programs outlined in the preceding chapter, together with the economic assumptions spelled out in Part I, can be
summarized in quantitative terms in a Nation's economic budget
statement. Table XVII, page 92, shows such a summary of the
Nation's economic budget for the fiscal years 1951 and 1952 and as it
might appear under alternative programs for economic stabilization
for fiscal 1953.
The Nation's economic budget for fiscal 1953 could be balanced
by any one of the three methods indicated in the preceding chapter.
Each policy is illustrated in table XVII.
Under the President's budget recommendation of $85.4 billion for
fiscal 1953, the Nation's economic budget would apparently be
balanced by an increase in taxes of $5 billion plus additional personal
savings due to tighter direct controls under the Defense Production
Act which he is requesting.
The items in the Federal categories of this Nation's economic
budget can be derived from the Federal administrative budget. Such
a derivation is given in table XVIII, page 94. Tables XIX, page 95,
and XX, page 96, show a summary of the administrative and cash
budgets, respectively. In fiscal 1953 the administrative budget
deficit ranges from $9.4 billion to $14.4 billion, and the cash deficit
ranges from $5.4 billion to $10.4 billion, depending on the assumptions
as to expenditures and taxes.
91
TABLE
XVII.-Summary of the Nation's economic budget, actual fiscal year 1951; estimated, 1952 and 1958 (as calculated under alternative
methods of removing excess demand)
c
I
[Billions of dollars]
1953'
ncomes from national
1tual1
1By
D inomales
ersomnat
inalme.
2151.
212
production actual
2
is
B
19532
redusc- By high
0
of
rate
Fderlyo
inrae edperdi
personal
tures 3
aig
Expenditures for national
pduodcprducionlctalBy
1951X
30. 3
192Bt
92 30
ofc By high
0 By r0 of0
of
tax
rateraf
increase 4 Fdrlpereonal
expendi-saig
tures Avig
INDIVIDUAL CONSUMERS
Dispoable perednal tincoe
Personal savings (-)
Net additional savings --
-
215.2...228.0
-12.5
-21.5
232. 0
-16. 0
2. 0
237. 0
-18. 0
237. 0
-18. 0
-5. 0
206.5
214. 0
219. 0
214.0
Total -202.7
-
Durable goode-1------Nondurable goods -107.9
Services ------Total --------------
0.13
64.5
202.7
125.0
313.5
68. 0
20. 0
118.0
70.0
29. 0
120.0
70.0
26 0
118.0
70. 0
206.5
214. 0
219.0
214.0
-
0
BUSINESS
Corporate undivided profits -13.3
Inventory valuation adjustment
plus statistical discrepancy Capital consumption allowances ---Dissavings (+) or savings (-) Total -
---------------
8.1
10. 2
10.2
10. 2
-8. 5
22.4
+29. 0
-. 5
24. 0
+21. 4
-1.3
26. 0
+12.7
-1. 3
26.0
+12.7
-1. 3
26. 0
+12.7
56.2
53.0
47.6
47:6
47.6
New construction -23.
Producers' durable equipment Change in business inventories -Net foreign investment --
3
25.7
9. 3
2.1
20. 7
28.3
4.0
0
20. 0
25.1
.2. 5
0
20. 0
25.1
2. 5
0
20. 0
25.1
2
0
--------------
.2
53. 0
47. 6
47. 6
47. 6
Purchases of goods and service----
20. 7
21.8
22.1
22.1
22.1
20.7
21.8
22.1
22.1
22.1
Total -
STATE AND LOCAL GOVERNMENT
Personal tax and nontax receipts---Business tax and nontax liabilities-Contributions for social insurance--Payments other than for goods and
services (-) --.
Dissavings (+) or savings (-)
Total -20.7
2.8
16.5
1.1
3.1
17. 4
1.2
3. 2
18. 5
1.2
3. 2
18.6
1.2
3. 2
18. 5
1. 2
1
+.4
-.1
+.2
-2
-.6
-.2
-6
-.2
-6
21.8
22.1
22.1
22.1
Total --------------
0
S
t51
'd
0
FEDERAL GOVERNMENT
Personal tax and nontax receiptsW Business tax and nontax liabilities.
'cn Contributions for social Insurance.-E3 Payments other than for goods and
T services (-) -l Dissavings (+) or savings (-) T
Total -----------lGrand total
-
21.9
33.8
6.7
27. 9
34.8
7.6
35.8
38.4
7.5
30.8
38.4
7.5
30.8
38.4
7.5
15.6
-16.5
- 1
-16.3
-16.3
-16.3
-16.9
+5.9
+5.9
29.9
53. 7
71.3
66.3
71.3
309. 5
335. 0
355. 0
355.0
3.0
Purchases of goods and services:
Major national security -26.4
All other -3.5
48.8
4.9
66.4
4.9
61.9
4.4
66.4
4. 9
+10. 9
Total
--
Grand total
-- ----------309..
29.9
53.7
71.3
66.3
71.3
0 30
355.0
355. 0
355. 0
I Current prices.
2 Constant June-July 1951 prices. For detailed explanation, see footnote 1, table IV.
3 Assumes Federal expenditures to be about $1.9 billion less than official estimate.
4 Implies $5 billion increase in Federal taxes falling on consumer income, net of effects on yield of existing taxes. Tax effective July 1, 1952; $4 billion collections out of $5 billion
additional liabilities. (Estimated deflationary effect on consumer demand of $3 billion; remaining $2 billion coming out of individual savings.) The tax increase has been assumed
to fall solely on consumers, pending a more detailed spelling out of the President's tax program.
3 Assumes $5 billion reduction in Federal expenditures. Such reduction might be achieved by congressional action or might result from lags in the production of military items
which would lower expenditures in fiscal 1953 below the official estimates in the President's budget.
6 Assumes voluntary savings rate of nearly 10 percent.
Source: Actual, Bureau of the Budget, U. S. Treasury and Department of Commerce; estimates, staff, Joint Committee on the Economic Report.
0
y
W
z
0
X
0
94
JOINT ECONOMIC
REPORT
TABLE XVIII.-Derivation of Federal Government sector of the Nation's economic
budget from the Federal budget accounts, actualfiscal year 1951; estimated, 1952
and 1953
[Billions of dollars]
1953 1
Item
1951
lost
Ite m
__
1952
19521I 2I
~~~B
By
ytion
reduc-By
rat high
ofg
yB
of
tax inFeder,,,
rteo
crease 3 expendi- personal
tures ' psavings a
I
___
I
RECEIPTS
Personal tax and nontax payments:
Direct taxes on individuals (administrative
budget)Plus: Nontax receipts
Less: Excess (+) or deficiency (-) of tax receipts
over tax liabilities
Tax refunds
24.1
.1
30. 1
37. 0
.1
.1
33.0
.1
33. 0
.1
20
2.4
-1. 3
2.6
-.3
2. 6
-. 3
2.6
Equals: Personal tax and nontax payments (Nation's economic budget)
21.9
27.9
35. 8
30.8
30.8
Business tax and nontax liability:
Direct taxes on corporations (administrative
budget)Plus: Excise taxes (administrative budget)
Customs (administrative budget)
Nontax receipts
Less: Excess (+) or deficiency (-) of tax receipts
over tax liabilities
Tax refunds
14.4
8.7
6
.3
22.9
9.0
6
3
27.8
9.7
.6
.3
27.8
9.7
6
.3
27.8
9.7
36
3
_9
+1. 4
-1
-1
.-.
Equals: Business tax and nontax liabilities (Nation's economic budget)
33.8
34.8
38.4
38.4
38.4
7.8
8.8
8.8
8.8
8.8
.9
1.0
1.1
1.1
1.1
6.7
7.6
7.5
7.5
7.5
Purchases of goods and services (major national
security):
Total major national security (administrative
budget)
Less: Excess of expenditures over liabilities. Adjustment for budget expenditures for other
than currently produced goods and services--
26.4
47.8
65.1
60.6
65.1
0
-1.0
-1.3
-1.3
Equals: Purchase of goods and services (major
national security) (Nation's economic budget)
26.4
48.8
66.4
61.9
66.4
4.2
9.8
Contributions for social insurance:
Trust account receipts
Less: Interest on trust accounts investment
Miscellaneous receipts
Equals: Contributions for social insurance (Na4
tion's economic budget)
+.3
.1
.. 2
-.1
.1
.2
.1
.2
.1
.2
.1
.2
EYPENDITURES
-1.3
Purchases of goods and services (all other Federal):
Veterans (administrative budget)
Civil functions (administrative budget)
Less: Excess of expenditures over liabilities. Adjustment for budget expenditures for other
than currently produced goods and services-
5.3
7.2
5.2
10.0
4.2
9.8
4.2
9.3
+9. 0
+10.3
+9. 1
+9.1
Equals: Purchases of goods and services (all
other Federal) (Nation's economic budget)---
3.5
4.9
4.9
4.4
4.9
2.4
527
2.7
6.0
3.0
6.3
3.0
6.3
3.0
6.3
.3
3. 7
.2
4.8
0
4. 2
0
4.2
0
4.2
2. 5
25-
2.7
2.7
2.7
.1
.2
.3
.3
.3
2.0
.5
1.4
.5
.7
.6
.7
.6
.7
.6
Payments other than for goods and services:
Grants and aid to State and local government
(administrative budget)
Interest payments (administrative budget)
Subsidies less current surplus of government
enterprises
.
Benefits from social insurance funds
Military pension, disability, and retirement
payments
----..----- ------.-----Adjusted compensation benefits, mustering-out
payments to discharged servicemen and terminal leave benefits.
Readjustment, self-employment, and subsistence allowances to veterans
Other
See footnotes at end of table, p.95.
+9. 1
95
JOINT ECONOMIC REPORT
TABLE XVIII. 'Derivation of Federal Government sector of the Nation's economic
budget from the Federal budget accounts, actual fiscal year 1951; estimated, 1959
and 1958-Continued
[Billions of dollars)
1953 1
1952 It
1951
Item
reducBy
Bytion
By
of
ratehigh
of
tax inFederal perpnial
crease a expendi- savings I
EXPENDITUREs-continued
Payments other than for goods and services-Con.
Less: Interest received and interest not paid out
to public -1.6
Equals: Payments other than for goods and services (Nation's economic budget) -15.6
1.8
1.5
1.5
1.5
16.5
16.3
16.3
16.3
June-July 1951 prices. For detailed explanation, see footnote 1, table IV.
' Assumes Federal expenditures to be about $1.9 billion less than officia l estimates.
X Constant
3 Implies $5 billion increase in Federal taxes falling on consumer income, net of effects on yield of existing
taxes. Tax effective July 1. 1952: $4 billion collections out of $5 billion additional liabilities. (Estimated
deflationary effect on consumer demand of $3billion; remaining $2billion coming out of individual savings.)
I Assumes $5 billion re:luction in Federal expenditures. Such reduction might be achieved by congressional action or might result from lags in the production of military items which would lower expenditures in fiscal 1953 below the official estimates in the President's budget.
I Assumies voluntary savings rate of nearly 10 percent.
Source: Actual, Bureau of the Budget, U. S. Treasury, and Department of Commerce; estimates, Staff,
Joint Committee on the Ezonomic Report.
TABLE XIX.-Federal administrative budget, actual fiscal year 1951; estimated,
1952 and 1958
[Billions of dollars)
1953
Item
Receipts:
Direct taxes on individualsDirect taxes on corporations
Excise taxes and customs
Others (net of refunds)---------Total budget receiptsExpenditures:
Major national security:
Military services
International security
Atomic energy------------------------------OtherTotal major national security
Past wars:
--------------------Veterans -InterestTotal past warsAll other programsTotal budget expendituresExcess of administrative budget receipts
Excess of administrative budget expenditures
1951
1952 "2
By
tax in
crease 3
X
By reduction of
by thigh
Federal
rate of I
exoendi- persona
tures '
62.7
37. 0
27. 8
10.3
- 1
75.0
33.0
27.8
10.3
-. 1
71.0
33.0
27.8
10.3
-.I
71.0
20. 5
4. 7
.9
.3
26.4
38.6
6.5
1.7
1.0
47.8
51.2
10.8
1.8
1.3
65.1
49.0
8.7
1.8
1.1
60.6
51. 2
10.8
1.8
1.3
65.1
5.3
5.7
11.0
7.2
5.2
6.0
11.2
10.0
. . A^ |
4.2
6.3
10.5
9.8
Ot j |
PA
4.2
6.3
10.5
9.3
OA,
Wu.4
4.2
6.3
10.6
9.8
I
14.4
24.1
14.4
9.3
4+.3
48.1
30.1
22.9
9.6
44
6
+.1
--- bU1---r
6.3
10.4
.
0.4
9.4
~~~O.
14.4
For detailed explanation, see footnote 1, table IV.
I Assumes Federal expenditures to be about $1.9 billion less than official estimates.
3 Implies $5billion increase in Federal taxes falling on consumer income, net of effects on yield of existing
taxes. Tax effective July 1, 1952; $4 billion collections out of $5 billion additional liabilities. (Estimated
deflationary effect on consumer demand of $3billion; remaining $2billion coming out of individual savings.)
4 Assumes $5 billion reduction in Federal expenditures. Such reduction might be achieved by congressional action or might result from lags in the production of military items which would lower expenditures in fiscal 1953 below the official estimates in the President's budget.
AAssumes voluntary savings rate of nearly 10 percent.
Source: Actual, Bureau of the Budget and U. S. Treasury; estimates, staff, Joint Committee on the
Economic Report.
I Constant June-July 1951 prices.
96
JOINT ECONOMIC REPORT
TABLE
XX.-Federal consolidated cash budget, actualfiscal year 1951;
estimated, 1959 and 1958
[Bilions of dollars]
19531
1951
Item
Receipts from the public:
Direct taxes on individuals -24.1
Direct taxes on corporations -14.4
Excise taxes and customs--.3
Others (net of refunds)-
1952''
Total major national security -26.
Past wars:
Veterans ---Interest -
----------------
Total past wars ---All other programs -9.5
Total cash payments -45.8
Excess of cash receipts -7.6Excess of cash payments -2.1
Btyreduc- By high
Federal
rate of
e pendi- personal
tures4 savingsI
30.1
22.9
9.6
6.0
37.0
27.8
10.3
5.7
33.0
27.8
10.3
5.7
33. 0
27.8
10.3
5. 7
68.6
80.8
76.8
76.8
3
38.7
6.7
1. 7
1.0
51.2
11.0
1.8
1.3
49.0
8.9
1.8
1.1
51.2
11.0
1.8
1.3
2
48.1
65. 3
60. 8
65. 3
6.0
4.1
6.2
4. 2
4.9
4.8
4.9
4.8
4.9
4.8
10.1
10.4
12.2
9.7
12.2
9.7
11.7
9. 7
12. 2
70.7
87.2
82.2
87.2
6.4
5.4
10.4
5.6
Total cash receipts -53.4
Payments to the public:
Major national security:
Military services-20.6
International security-4.4
Atomic energy -9
Other -.
By
tax increase
I Constant June-July 1951 prices. For detailed explanation, see footnote 1, table IV.
I Assumes Federal expenditures to be about $1.9 billion less than official estimates.
3 Implies $5 billion increase in Federal taxes falling on consumer income, net of effect on yield of existing
taxes. Tax effective July 1, 1952: $4 billion collections out of $5 billion additional liabilities. (Estimated
deflationary effect on consumer demand of $3 billion; remaining $2 billion coming out of individual
savings.)
4Assumes $5 billion reduction in Federal expenditures. Such reduction might be achieved by congressional action or might result from lags in the production of military items which would lower expenditures in fiscal 1953 below the official estimates in the President's budget.
AAssumes'voluntary savings rate of nearly 10 percent.
Source: Actual, Bureau of the Budget and U. S. Treasury; estimates, staff, Joint Committee on the
Economic Report.
PART III-BEYOND FISCAL 1953
CHAPTER 8
LONG-TERM PROSPECTS AND- PROBLEMS
The analyses in Parts I and II contain implications for the period
beyond fiscal year 1953. While the urgency of the present defense
build-up program and the uncertainty as to international developments dwarf, for the foreseeable future, the economic problems which
may arise when major reductions in Government expenditures are
possible, nevertheless some of these are of sufficient importance that
they should be summarized. They may be divided into two categories: economic prospects and economic problems.
Economic Prospects Beyond Fiscal 1953
On the basis of the assumptions stated in Part I, the following tendencies may develop beyond fiscal year 1953:
(1) After fiscal 1954 the military expenditures may decline
toward a maintenance level tending toward the upper limit of a
$40 billion to $50 billion range so that a growing cash budget
surplus seems likely unless taxes are reduced or employment falls
below the assumed levels. (See table VIII, p. 59.)
(2) As the defense program reaches a stand-by or maintenance
basis, increases in the labor force and rising productivity (in part
due to unusually heavy investment programs and a high proportion of very modern equipment in the capital structure) could
lead to an increase in unemployment and a demand for shorter
average annual hours of work if demand by consumers and
business should fail to expand with the rise in total capacity.
(3) Shortages of consumer and investment goods are unlikely
to be sufficiently great during the period of peak military expenditures to create a large backlog of deferred demand by consumers
and business such as helped sustain economic activity following
World War II.
(4) The supply of consumer goods and services can be increased
rapidly as soon as the peak in Government military requirements
is passed in fiscal 1954.
(5) Changes in products and in production techniques seem to
imply that high volume production in future years may require
either new sources of certain raw materials or new research to find
ways of substituting plentiful for scarce materials.
(6) Accumulated liquid savings will be large but proportionately smaller than after World War II.
Problems Beyond Fiscal 1953
The analysis presented in this report suggests that certain problems
may arise beyond fiscal 1953. -Some of these might bear investigation
at an early date. It is assumed that the military build-up program
97
98
JOINT ECONOMIC REPORT
will pass its peak rate of expenditures during fiscal 1954. If this assumption proves-correct, Federal expenditures could then decline to a
stand-by or maintenance level substantially below the peak rate.
When this occurs, new problems will arise.'
The first group of problems concerns government expenditure and
tax policies. Among the questions that arise are:
How much can worth-while and desirable civilian activities,
curtailed during the peak expenditure period, be resumed or
expanded to take care of the needs of the growing population;
for example, schools, roads, playgrounds, irrigation projects, etc.?
How much and in what way will it be possible to reduce
Federal taxes below present rates in order to foster economic
stability and growth?
To what extent, if any, will controls over wages, prices, credit,
investment and allocations be needed on a stand-by basis as
part of military preparedness?
What changes will be needed in monetary and credit policies
to assist in maintaining economic stability and growth?
The second group of problems relates more directly to the private
economy. Among these are the following:
What will be the requirements for private investment after the
hump?
Will actual private domestic investment expenditures be sufficient to offset the decline of military expenditures?
How can needed private investment be stimulated?
What will be the demand for housing? What kind of financing
will this require?
Will there be a sufficient supply of industrial raw materials to
enable the economy to operate at high levels?
What will consumer demand for goods and services be? Will
it be sufficient to support high employment and high levels of
investment?
To what extent can the economic and political interests of this
Nation be served advantageously by international programs?
Of what type and scope?
Will research, technology, new industries and new enterprises
go forward at the pace necessary for stable economy at maximum
employment? How will these be affected by present standardization of defense items and the lack of materials, manpower
and credit during the emergency?
What implications does the very high rate of utilization of
scarce resources during the defense period have for both the
long-term conservation and the development of resources?
What problems are raised by the fact that the United States is
becoming increasingly dependent upon access to other regions
for necessary materials to sustain, let alone expand, the industrial machine which will exist when the present program has
been achieved?
* What wage policies are most conducive to long-term economic
growth and maximum employment without inflation?
I Some of these problems were raised in this staff's report to the Joint Committee on the Economic Report in Insfltn s Stfi A Danger, August 1951. See the section"After the Hump," pp. 28and 29.
Appendixes
APPENDIX A
TECHNICAL NOTES ON THE NATION'S ECONOMIC BUDGET
DEVELOPMENT OF THE NATION's ECONOMIC BUDGET CONCEPT
An economic budget for the Nation is a tool for synthesizing data
and for providing a methodology for seeing in perspective the operation
of all segments of the economy-consumer, business, and Government.
An attempt is made (1) to express these combined plans in ex ante I
form; (2) to measure the inconsistencies or imbalances that are revealed by the synthesis of these plans; (3) to evaluate quantitatively
the likely economic impact of alternative programs for removing the
imbalances and thus for maintaining economic stability and growth;
and (4) to express the plans of the several categories as adjusted by
such actions and as they might be expected to look ex post 2 if the
underlying assumptions are borne out during the budgeted period.
It seems safe to assume that it is no longer a question as to whether
responsible policy agencies-public or private should build such
models and analyze quantitatively economic imbalances. Every
person with administrative responsibility-public or private-knows
that such procedures are necessary, whether primitive or scientific,
implicit or explicit. The real caution to be observed is that these
procedures are not relied upon too naively.
The repeated use of such methods is more important than any
particular set of answers because repetition. of orderly processes of
getting answers compels economic analysts increasingly to improve
methodology, economic information, and their judgments.
At the outset, it should be stated that use of the Nation's economic
budget procedures in no way implies or justifies a "planned economy"
in the sense usually associated with the term-an economy directed by
central authority, either democratic or autocratic. Rather, the
procedure provides a method or a tool whereby economic data may be
made available and used by individuals, businesses, and governments
in improving their own programs, and thus the general welfare.
The idea of the Nation's economic budget approach as herein set
forth was developed in the Fiscal Division of the Bureau of the
Budget during the early part of World War II. The economic models
prepared in the Fiscal Division were never published as official
Government documents, but rather used internally. One of these
models, however, was published in a professional journal covering the
Federal fiscal year 1944: "A Budget for the Nation," Social Research,
I Used in the sense of plans or anticipations as they exist or are formed prior to actual events.
2Used
to refer to estimates of how events work out after the event; in this study, used to refer to an estimate of how the Nation's economic budget might work out with the imbalances between the ex ante plans
and the various sectors corrected.
99
100
JOINT ECONOMIC REPORT
September 1943. Other materials setting forth the concept and use
of a Nation's economic budget as a tool for policy making were: The
Ten Billion Dollar Question (The Winning Plans in the Pabst Postwar
Employment Awards), May 1944, and National Budgets for Full
Employment, National Planning Association, Washington, D. C.,
Pamphlets Nos. 43 and 44, April 1945. A comprehensive statement
of the use of the Nation's budget device is: The Nation's Budget and
the Federal Government's Budget, 1947, a typewritten doctoral dissertation by G. W. Ensley, available at New York University Library.
Presidential reports since 1945 have arranged historical economic
data in budget form similar to that employed here. See, for example,
the budget message for fiscal year 1946 transmitted to the Congress
in January 1945, and "The Nation's Economic Budget" appendix attached to the periodic reviews of the Council of Economic Advisers.
While the Council of Economic Advisers prepares projections, they
are primarily for internal use only; and the published reports of the
Council, the President, and other executive agencies of the Government contain only guidelines of the most general character.
& comprehensive Nation's economic budget projection was preseDted to the Joint Committee on the Economic Report in July 1950.
This projection, prepared for the confidential use of the committee by
the committee staff, suggested substantial inflationary pressures in the
immediate months ahead. The committee immediately and unanimously recommended substantially higher taxes, curtailment of nonessential Government expenditures, and credit restrictions.
A second comprehensive model of the Nation's economic budget was
prepared by the committee staff and published in a committee print
in February 1951, entitled Economic and Political Hazards of An
Inflationary Defense Economy. This report showed the inflationary
pressures likely to result from three alternative levels of Federal spending during fiscal 1952.
In August 1951 the staff submitted a revised Nation's economic
budget model for fiscal 1952 which was published along with the
report of the committee,. Inflation Still a Danger, Senate Document
644. Unfortunately, official projections by those responsible for
economic mobilization still have not been publicly presented in the
detail needed for congressional action on major economic policies.
Fragments of projections that have appeared recently from official
administration sources are summarized in appendix B.
CONCEPTS AND
METHODS
The technical notes which follow set forth briefly certain concepts
and methods which are basic to the construction and use of a Nation's
economic budget.
Federal Administrative Budget, Federal Consolidated Cash Statement,
Federal Category of the Nation's Economic Budget
The Federal administrative budget, or the regular or traditional
budget, includes receipts and expenditures of the general and special
accounts of the Treasurv and the net expenditures of wholly owned
Government corporations. It does not include operations of the
Government trust accounts, unless reflected as receipts or expenditures
in the above-included accounts.
JOINT ECONOMIC REPORT
101
The Federal consolidated cash statement shows a-total of all receipts
from and payments to the public. It reflects all Federal receipts of
money from the public, not merely tax receipts but also social-security
contributions and other trust-fund receipts. On the payment side,
it includes not merely administrative budget payments to the public
but also social-security benefits. It excludes all items of receipts or
expenditures which are merely bookkeeping transfers within the
Government, such as, for example, interest on trust-account investments in United States securities.
The Federal category of the Nation's economic budget shows, on
the expenditure side, the amount of the Nation's total production
of goods and services purchased by the Federal Government for its
own use; and, on the receipt side. total revenues from taxes and socialsecuritv contributions on a liability basis. Deducted from the receints side are amounts representing payments other than for goods
and services, e. g., transfer payments to individuals, interest paid to
individuals, grants-in-aid to State and local governments, and subsidies net of the current surplus of Government enterprises. These
economically significant items are shown as a deduction in the Federal
category to avoid double accounting since they are already included
in the accounts of other categories. The method of classification, of
course, does not in any way reduce the opportunity for analyzing their
economic effects.
Ex Ante Budget Versus a Forecast
The Nation's economic budget procedure starts with the development of an ex ante projection of private and public programs and
attempts to measure their probable economic consequences upon
the basis of stated assumptions. In other words, on the basis of past
experience and the known or assumed intentions of consumers, businesses, and governments, the most probable consequences of private
and public programs are spelled out in quantitative terms.
The budget procedure, then, should indicate a set of policies (or
changes in programs), both private and public, to achieve stated objectives of employment, -production, and purchasing power. This is
not the same as a forecast. A forecast would involve predicting what
the policies, behavior, and actions of individuals, business firms, and
Government bodies will actually be ex post. A forecast would involve predicting how inconsistencies between ex ante plans will actually be removed by adjustments as the budget period unfolds. The
budget only shows how the inconsistencies could or should be reconciled into a consistent program. The forecast and the budget would
be identical in their quantitative magnitudes only (1) if the assumptions as to output and methods of reconciling ex ante imbalances which
are used in constructing the budget coincided with the forecast, and
(2) if the programs suggested in the budget are actually carried out as
assumed. If this were to occur, then the budget in fact would turn
out to be a forecast.
The principal value of the Nation's economic budget procedure is
that it (1) helps insure a consistent projection of the magnitudes,
kinds, and directions of economic forces with which Government and
private plans and programs will have to deal; and (2) aids in developing a suggested set of well-balanced and consistent procedures most
likely to make possible the achievement of certain stated goals under
the conditions set by current economic forces.
102
JOINT ECONOMIC REPORT
Conditionsfor Maximum Use of Nation's Economic Budget
The Nation's economic budget is most needed when Government
programs-particularly spending programs-are of such magnitude
and importance that they dominate changes in the economy; in other
words, when Government spending and tax plans are the main forces
making for changes in the economy. The tool is therefore particularly useful in periods of war or high national defense operations, such
as the present. At other times, its main benefit is in identifying
conflicts between programs of Government and private economic
groups or individuals and in pointing out areas in which adjustments
are necessary to reconcile these conflicts.
Operating Procedures
The preparation of an economic model, whether it be a Nation's
economic budget, such as the one presented in this report, or a forecast,
involves several different operations.
First, there is the matter of definition or standards. For example,
a set of social accounts, such as those of the Department of Commerce, can be set up which define the various categories into which are
classified incomes and expenditures of all individuals and groups.
These are computed and published regularly showing 'a complete
account of all expenditures and incomes of individuals, businesses, and
Government.
Second, measurements must be made. Here arise problems concerning the accuracy and consistency of the measures of the magnitudes of each of the classifications laid out in the system of accounts
with reference to consecutive time periods. This is the same problem
as is involved, for example, when a standard length known as a yard
has been established, and then measurements are made of distance in
terms of so many of these yards. Errors may arise because (1) of
inaccuracies in the ruler compared to the standard yard; (2) of physical or other conditions affecting the stability of the ruler (for example,
expansion or.contraction with changes in temperature); and (3) inaccuracies of observation in using the ruler.
The third operation is that of analysis, which refers to the determination of relationships between various categories in the accounts
as a result of the analysis of the historical data that have been derived
from the first two steps. An example would be the relationship
between consumer expenditures or savings and disposable personal
income. Pertinent here is the question of whether or not the system
of analysis can successfully include all of the significant interrelationships between the categories so that all the factors which may effect
the validity of the budget as a policy tool can be considered.
Fourth, the analyst must-be concerned with the assumptions which
have to be made so that, on the basis of defined standards, measurements, and analyses, an ex ante budget will show how present policies
and programs of the various economic groups will work out under the
assumed conditions and what imbalances will appear. At this stage
it is particularly pertinent to take into consideration changes in
military, technical, economic, or other circumstances which can reassrnably be expected. This is particularly important if such changes
s'iould shift the ex ante economic budget expectations from what they
would be on the basis of relationships derived from historical data.
JOINT ECONOMIC REPORT
103
Lastly, there is the aspect of developing a strategy for the future
budget period in terms of a set of consistent private and public programs, which, on the basis of the standards, measurements, analyses
and assumptions would yield a balanced program for achieving in the
economic sphere the objectives of the Nation. The problem is not
so much one of forecasting as it is one of constructing an ex post economic budget, indicating magnitudes and mutually consistent policies
such that (1) the objectives will be achieved if the most probable series
of events occurs; and (2) reasonable protection and insurance will be
provided in the budget against economic uncertainties and surprises..
The most certain thing about budget making is that there are many
uncertainties about the future. Any budget must be sufficiently
flexible to deal successfully with departures from the assumptions on
which it was constructed. As an example, in a period of short supply
relative to income, inflationary pressures can be sharply reduced by a
rapid increase in the ratio of personal savings to disposable personal
income. In the ordinary course of events, in periods of high employment this ratio has a fairly narrow range of variation. A risk of runaway inflation is run if policies for controlling inflation in a period of
defense mobilization are based upon the assumption that consumers
will save unusually high proportions of their incomes. Consumers
may actually save the more normal proportion or less. Thus, a conservative policy would call for measures to offset inflationary pressures
that would arise if consumers save only average or less than average
proportions of their incomes. If consumers, in the aggregate, do in
fact save unusual proportions of their incomes, these measures could
be relaxed.
Concepts and Methods of the Joint Committee Staff Studies
From these general observations on concepts underlying the
derivation of the Nation's economic budget, we turn to a description
of the methods used by the staff of the Joint Committee on the
Economic Report.
First, most of the classifications and definitions, utilized are those
underlying the system of social accounts set up by the National
Income Unit of the Office of Business Economics of the Department
of Commerce. These concepts are set forth in the National Income,
(1951 edition), A Supplement to the Survey of Current Business.
Similarly, the considerations* as to reliability and accuracy of the
budget fundamentally turn upon the methods of measurement of
these concepts and magnitudes as explained in this same supplement.
Of the remaining classifications and definitions used in the report,
the majority are those of the Bureau of the Budget which are utilized
in the Federal budget submitted to the Congress by the President in
January of each year. The few remaining are standard statistical
series whose definitions have been published by the respective Bureaus
responsible for them, and these are indicated as sources in various
tables.
Second, the estimates and projections in these reports are made on
what is regarded as, a conservative basis, making due allowance for the
peculiarities in the various statistical~series that were utilized. Perhaps different projections would be made if data differing in quality or
104
JOINT ECONOMIC REPORT
definition were available, but these projections can be interpreted only
in terms of the statistical materials currently available. It may seem
that this is laboring the obvious; but projections, for example, of gross
national product or industrial production that have been made in the
past may have been in error not because of an error in assumptions
or in technique, but because the underlying data and methods of
measurement of these series changed between the date on which a
projection was made and the period which it covered. Some of these
differences are of significant magnitude, as analysts have discovered in
the past.
Third, these projections are not based upon any rigid mathematical
system of equations. Projections based on correlation between various parts of gross national product might be seriously in error in a
period in which the major factor is a displacement of the economy from
a normal free system toward an economy dominated by defense
requirements. There is the further fact that as yet no mathematical
technique and no statistically derived set-of projections can be trusted
without detailed investigation of the possible deviations from normal
relationships.
Fourth, it must be made clear that these projections, both as to
gross magnitude and direction, as well as the detailed calculation of the
different segments of the budgets, have been influenced by considerations of risk; that is, to the danger that errors in estimating probable
economic forces might lead to the design of programs not suitable to
the economic conditions that actually develop.
For example, in The Economic and Political Hazards of an Inflationary DeJense Economy, published last February, and in the report
of August, Inflation Still a Danger, both published by the Joint
Economic Committee, it was assumed that personal savings would
amount to 5 or 5.5 percent of disposable personal income. Some
analysts pointed to a savings rate of over 9 percent for the second
quarter of 1951 and asked why a higher rate was not assumed in
August. Various reasons had been advanced earlier in 1951 as to
why savings would be higher than 5 or 5.5 percent. Under some
circumstances the assumption of a higher savings rate would be the
only defensible position. But in the case of an economic budget for
the Nation, which is to be transmitted by the staff of the Joint Committee on the Economic Report to the members of the committee,
consideration must be given to the policy risk involved if such an
assumption is substantially in error.
If a higher savings rate had been assumed, and consumers in fact
saved normally, then considerable inflationary pressure would have
developed. Since these inflationary pressures would be unexpected,
controls probably would not have been adequate to handle them. On
the other hand, if a lower savings rate were assumed, which seems more
normal in times of high employment, and in fact consumers do save
more than this proportion, then the result would be price stability or
possibly some price declines. To the extent that policy is based on
such a conservative assumption as to savings that a deflationary pressure develops, the situation can be relieved by legislative and administrative relaxation of some of the anti-inflationary controls.
Other examples could be cited. In making assumptions, whichever
assumption carried the least risk, if used as a basis of policy, was
chosen as the basis for these projections. This is a crude way of
JOINT ECONOMIC REPORT
105
attempting to insure that any errors made in the analysis will reinforce rather than contradict the conclusions. As this committee has
previously pointed out, economic projection is not yet an exact
science. For this reason, economic budget making involves unavoidable hazards. Whenever possible these should be minimized by the
method used and by consultation with other analysts and technicians,
both in and out of Government.
Fifth, the economic budgets. prepared by this staff are based,
insofar as can be determined, on generally agreed upon public policies.
No attempt is made to formulate such political, military, or diplomatic
decisions, nor to recommend them. These reports limit themselves to
the analysis of the economic consequences of existing and~proposed
policies.
These projections should not be interpreted either as a recommendation or disapproval of any policy or program. The purpose of these
projections is to show, on the basis of the best available advice,
whether or not economic policies and programs are reasonably consistent with each other, and to show the general magnitudes of the
adjustments that might be considered by the Congress.
One final word of caution: While it is necessary to use detailed and
precise figures to arrive at an economic model which will check internally, it must be emphasized that the only purpose of a model, once
prepared, is to show quantitatively the general order of magnitude
and direction of possible major economic developments on the basis
of stated assumptions.
96529r-52
8
APPENDIX B
EXCERPTS FROM OFFICIAL STATEMENTS ON NATIONAL
DEFENSE AND THE ECONOMIC OUTLOOK
The following excerpts from official documents and from testimony by officials
of the executive branch of the Government have been selected because of their
bearing to the committee staff materials. The excerpts have been arranged to
relate as closely as possible to these materials. Testimony by non-Government
witnesses and statements by economic interest groups will be found in the printed
hearings of the Joint Committee on the Economic Report on the January 1952
Economic Report of the President. Page references to testimony refer to these
printed hearings.
ESTIMATES OF TOTAL OUTPUT
LABOR FORCE AND EMPLOYMENT
The Economic Report of the President,January 1952
During 1952, we can and should lift employment by another 1% million. Some
further reduction in unemployment may be possible, despite the fact that additional defense-created unemployment in some local areas appears inevitable.
(Page 3.)
The Annual Economic Review by the Council of Economic Advisors, January 1952
Defense and defense-related production will require about 2% million more
workers in the fourth quarter of 1952 than in the fourth quarter of 1951.
Some of these essential workers will be provided by cut-backs in the output of
civilian durable goods and nondefense construction.
Allowing also for some
lengthening of working hours, and a modest increase in productivity, it seems that
an increase in total civilian employment of about l>s million would be required to
service the primary defense effort, and to provide an adequate labor force for such
increases in production in other sectors of the economy as might be expected in the
light of probable increases in incomes and demand. The small possible addition
of workers through further reducing unemployment is about counterbalanced by
the probable withdrawal of manpower to enlarge the Armed Forces. (Page 106.)
The Battle for Production, Fourth Quarterly Report by the Director of Defense
Mobilization, January 1, 1952
The objectives that guided our manpower policies in 1951 have proved sound,
and will continue to be followed in 1952. These objectives are1. To utilize more of the present labor force on defense jobs and meet the additional needs of defense production by expanding the labor force as needed from
among women, older and retired workers, and handicapped persons.
2. To provide needed skills by training more workers and by utilizing existing
skills-including those of minority groups-more efficiently.
3. To maintain labor standards at their current high level and strengthen industrial health and safety programs.
4. To provide sufficient.military manpower without stripping defense industries
of irreplaceable skilled manpower or depriving the country of trained and educated manpower in the future.
5. To minimize migration of workers by placing defense contracts in areas where
labor is already available.
6. To provide adequate housing and community facilities and services in
localities where needed to accommodate defense workers, military personnel,
and their families. (Page 28.)
106
JOINT ECONOMIC REPORT
107
During the coming year, as further cut-backs in civilian goods take effect, more
men and plants may become temporarily idle. I urge defense industries to locate,
shift their work, or subcontract in areas where skilled manpower and plant capacity are available. (Page 31.)
From the standpoint of the civilian manpower supply, military manpower procurement will continue to limit the direct flow of young men from school into the
labor market. However, this loss will be compensated to a considerable extent
in the coming months by the return movement of older and generally more
experienced men from uniform into civilian jobs, particularly frcm the ranks of
the reservists. (Page 32.)
It is our hope that most labor needs may be met from local labor supplies in
1952, but it is evident that more migration will be necessary to fill the requirements
of atomic energy plants, mining, and other activities at relatively isolated locations.
;
(Page 33.)
OUTPUT
The Annual Economic Review by the Council of Economic Advisers, January 195-0
Military requirements for the major metals will increase through most of 1952'
and at their peak will absorb roughly one-fifth of the steel supply, one-third of.tha
copper supply, and about half the supply of aluminum. It is probable, however,
that with large increases in supplies, these proportions will fall substantially in
1953. Thus the main materials impact, and the main economic impact, of the
military production program probably will come during the next 12 months.
(Page 98.)
* * * it should be feasible within the year to lift the annual rate of total
output, for defense and civilian purposes combined, by at least 5 percent, or
about $15 to $20 billion. About two-thirds of this increase, or at least $10 billion;
(Page
should be a net gain in the area of durable goods, including construction."
113.)
The Battle for Production, Fourth Quarterly Report by the Director of Defense
Mobilization, January 1, 1952
With a total of approximately $1.3 billion in unfilled orders for machine tools
on the books, new orders are still coming in faster than tools are being shipped.
However, shipments are now at the annual rate'of about $800 million and are
expected to rise to a level of approximately $1.25 billion in the third quarter of
1952.
At the current rate of production, the backlog of unfilled orders amounts to 22
months of work. On some of the individual tools that are most urgently needed;
however, delivery schedules extend as far as 3 or 4 years into the future. (Pages
9-10.)
Steel scrap is today in critically short supply. In most cases, steel producers.'
inventories are down to the level of a few days' consumption.
To support steel production at capacity, 3 million tons of scrap a month must be
supplied to the steel mills. (Page 13.)
The United States has now reached the point where its supplies of high-grade
domestic iron ore must be supplemented by increased imports and expanded
production of our lower-grade ores.
Approximately 116 million gross tons of iron ore were consumed in 1951, and
this will rise to about 127 million tons in 1952 and 139 million tons in 1953. While
domestic supplies of high-grade iron ore are ample for the immediate future, they
will begin to decline not later than 1956. (Page 14.)
The huge new sulfur deposits discovered near New Orleans in 1951 should yield
500,000 tons per year, an addition of almost 8 percent to the total current output,
by late 1953. (Page 16.)
In expanding domestic sources, we are using the powers granted by the Defense
Production Act to contract with prospectors and mine operators to explore for new
mineral deposits * * *.
108
JOINT ECONOMIC REPORT
More contracts have been approved for lead and zinc exploration than any
other commodity group, with tungsten next in number. (Page 16.)
Government aid to the copper industry during 1951 * * * will bring
results by 1953 and 1954.
*
*
*
Unassisted domestic supply of copper rose by 40,000 tons during 1951, but a
significant rise in unassisted domestic supply is not expected in future years,
because of the exhaustion of mines now in production. (Page 16.)
Supply of magnesium in 1952 is expected to be sufficient to meet defense requirements and permit some additions to the stockpile, but will fall short of civilian
needs. (Page 17.)
The domestic tungsten mining industry, which closed down almost completely
after World War II, is now being revived through Government-guaranteed floor
price arrangements. (Page 17.)
These measures should yield an additional 50,000 tons of zinc in 1952 and, in
1953, a further increase of 150,000 tons beyond the 1951 production of over 1
million tons. (Page 17.)
Production of titanium in 1951 reached about 600 tons, and is scheduled to
reach 2,500 tons in 1952 and over 5,000 tons in 1953. (Page 17.)
The supply of uranium, the raw material which basically limits the size of the
atomic energy establishment, has shown a substantial improvement. (Page 17.)
Increased production of domestic ores cannot possibly solve all of our metal
supply problems. Many critical metals such as tin, manganese, cobalt, and
nickel, are obtained primarily from foreign sources. Despite our substantial
domestic production of copper, lead, and zinc, foreign supplies of these metals
are essential to meet defense and minimum civilian needs. (Page 17.)
Robert A. Lovett, Secretary of Defense, testimony before the Subcommittee of the
Senate Committee on Appropriations, February4, 1952
One notable and uncomfortable difference between fiscal year 1953 and fiscal
year 1952 and 1951 circumstances should be mentioned. Whereas in the previous
2 years the impact of the recently started rearmament program had not noticeably
affected industry as a whole, it was apparent, in the case of the fiscal year 1953
military budget, that the test of feasibility of the program in the light of the
shortages of certain essential basic raw materials become of cardinal importance.
*
*
*
In fiscal year 1953 requests, however, we come up against the hard realities that
the requests from the military would, in some instances, be unrealistic because of
the lack of materials within the compressed period of time. In other cases the
requests of the military departments would result in total military expenditures
which would be excessive in the judgment of other competent agencies of the
Government and which, in their opinion, would jeopardize the economy or financial
stability of the country to a degree which was unacceptable and unwise.
Frederick J. Lawton, Director, Bureau of the Budget, January 24, 1952
Actually, the major determinant on this rate of expenditure, the major question
in connection with the hard goods procurement, which is a substantial part of the
military, is the materials allocations. That will have more effect on it than any
other single factor. (Hearings, p. 97.)
Elmer B. Staats, Assistant Director, Bureau of the Budget, January 24, 1952
If I might add this: The actual procurement schedules have to be approved by
Mr. Wilson. That is the real legal control that you have as to the spread which
will be made of this available obligational authority in terms of expenditures.
(Hearings. p. 97.)
JOINT ECONOMIC REPORT
109
GOVERNMENT
FEDERAL RECEIPTS AND EXPENDITURES
Budget Message of the Presidentfor Fiscal 1958
Expenditures are estimated at 85.4 billion dollars, an increase of 14.5 billion
dollars over the current fiscal year and 45.3 billion dollars over 1950, the last
full fiscal year before the attack on korea.
Receipts under present tax laws are estimated at 71 billion dollars, an increase
of 8.3 billion dollars over the current fiscal year, and 34 billion dollars over 1950.
The increase in receipts will fall short of meeting the increase in expenditures.
In the absence of new revenue legislation, a deficit of 14.4 billion dollars is
in prospect for the fiscal year 1953, 6.2 billion dollars greater than the estimated
deficit for the current fiscal year. (Page M5.)
The Economic Report of the President, January 1952
We can and should lift our total output by at least another 5 percent, or by
$15 to $20 billion. (Page 3.)
Total budget expenditures by the end of the fiscal year 1953, ending on June 30,
1953, will be running at an annual rate between $85 and $90 billion. The security
effort, together with veterans' services and benefits, and interest on the national
debt-both, in the main, resulting from World War IT-will comprise roughly 85
percent of total expenditures in the fiscal year 1953. (Page 12.)
For the fiscal year 1952, the total of Federal expenditures is estimated at
approximately $71 billion, and receipts at about $63 billion. . While the resulting
deficit is undesirable, it has not prevented effective economic stabilization during
the past 10 months. But with expenditures for security programs rising sharply,
a dangerously large deficit of close to twice that size is estimated for the fiscal year
1953, if there is no additional taxation; Even with the additional taxes that I am
recommending, the deficit will remain large, until the security program has passed
its peak and tapers off, as we hope it can do in about 2 or 3 years. (Pages 12-13.)
A budget deficit of about $8 billion is expected for the current fiscal year ending
June 30, 1952. This is expected to be followed by a budget deficit approaching
twice this size for the fiscal year 1953, unless further vigorous action to raise taxes
is taken very soon. (Page 21.)
The Annual Economic Review by the Council of Economic Advisers, January 1952
The nondefense areas do not contain the "fat" often attributed to them.
Federal expenditures for all programs except national security, veterans' benefits,
and interest on the national debt will be about 65 percent higher in the current
fiscal year than in the fiscal year 1940. In comparison, the index of wholesale
commodity prices is nearly 130 percent higher, and the consumers' price index
almost 90 percent higher. Despite a rapidly expanding population and a great
increase in the total product of the economy, Government programs which are
directed toward servicing the general needs of the people and building up our
natural resources have been held down. (Page 131.)
As a result of the expected further increase in national security expenditures,
the annual rate of total Federal expenditures will rise to between $85 and $90
billion by June 30, 1953. For the fiscal year 1953, under existing revenue legislation, a budget deficit approaching twice the size of the current year's budget
deficit is indicated. (Pages 132, 134.)
John D. Clark, Council of Economic Advisers, January 28, 1952
If the peak of expenditure reached at the end of this year runs through calendar
1953 and most of calendar 1954, and is 65 billion dollars, and we find one stage of
our work completed and we drop back to a maintenance basis, if it is 20 billion
dollars less, that still leaves 45 billion dollars a year that we are spending on the
military machine and on the related security programs. If total expenditures have
risen to 95 billion dollars-by another 10 billion dollars, which would be 75 for the
security program-and then it drops back to 45 billion, the drop is 30 billion, and
I do not think we need spend time figuring just which of those is the most likely
110
JOINT ECONOMIC REPORT
because the problem is created by either. It is created by a drop of 20 billion
dollars in Government spending or in a more aggravated form, of course, by a drop
of 30 billion dollars. (Hearings, pp. 59-60.)
Frederick J. Lawton, Director, Bureau of the Budget, January 24, 1952
[Expenditures for 1954] will be at least as high as this year's $85 billion. It
[the $71 billion estimated receipts] is based on calendar year 1952 personal income
of $265 billion and corporate profits before taxes of $46 billion. That represents
national income for the fiscal year 1952 between $280 billion and $285 billion
and in the fiscal year 1953 between $295 billion and $300 billion. July 1951
prices were the basis upon which we made our estimates. (Hearings, pp. 99, 101.)
The very sharp rise in deliveries and expenditures for hard goods and construction, especially during the current fiscal year, with a continuing rise at a
slower rate in 1953 and a slight decline indicated late in 1954. In a program of
this size, it should be recognized that a lag or speed-up in anticipated deliveries
of hard goods might cause a shift of several billion dollars of expenditures from
one year to another. The timing of the increase and of the later possible decrease
is, therefore, peculiarly difficult to forecast, but the peak level .shown represents
our best current judgment.
(Hearings, p. 110.)
I On all going programs which are subject to budgetary control, two primary
tests have been applied: (1) Contribution to the defense effort, and (2) adequacy
of present staff to handle the minimum prospective workload. Increases have
been allowed for certain programs contributing directly to the defense effort,
although they are not major programs.
In addition to the electric power and the defense housing programs which I
already mentioned, these include aid for schools in defense areas, the port security
program of the Coast Guard, the internal security program of the FBI, and
several smaller programs. In some other cases where the Congress had made
arbitrary percentage reductions in the 1952 appropriations, the demonstrated
workload made it necessary to recommend at least a partial restoration of the
previous cut in order to furnish the minimum level of services required for orderly
government.
* * *
As the President indicated in the budget message, reductions have been made
in programs which could be deferred-for example, in flood control, reclamation,
and river. and harbor works not involving urgently needed power facilities.
Expenditures for rural electrification and rural telephones have been further
reduced. All major housing and community development programs, except those
in critical defense housing areas, have been held far below the annual levels
authorized by the basic legislation.
Expenditures for these and many other
programs will be considerably less than those which would be clearly justifiable
in more normal times. (Hearings, p. 112.)
Charles E. Wilson, Director of Defense Mobilization, January 26, 1952
The program we have adopted as reflected in the proposed 1953 budget, calls
for $65.1 billion for major national security programs, of which $51.2 billions is
for the military. -By projecting production schedules on this basis, I believe
that by the end of calendar 1954 we will have passed the peak of expenditures needed
for the -program.
At the same time we will have obtained very substantial
increments of military strength. Unless the situation of the world with respect
to possible aggression changes considerably, we should be able to cut back the
programs substantially from that time forward because we will have a good
position of defense. (Hearings, p. 156.)
DEFENSE SPENDING
President's State of the Union Message to the Congress, January 9, 1952
Our objective is to have a well-equipped, active defense force large enough-in
concert with the forces of our allies-to deter aggression and to inflict punishing
losses on the enemy immediately if we should be attacked.
This active force
must be backed by adequate reserves, and by the plants and tools to turn out the
tremendous quantities of new weapons that would be needed if war came. We
are not building an active force adequate to carry on a full-scale war, but we are
putting ourselves in a position to mobilize very rapidly if we have to.
I This year I shall recommend some increases in the size of the active force we
JOINT ECONOMIC REPORT
111
are building, with particular emphasis on air power. This means we shall have to
continue large-scale production of planes and other equipment for a longer period
of time than we had originally planned.
Planes and tanks and other weapons-what the military call "hard goods"-:
are now beginning to come off the production lines in volume. Deliveries of hard
goods now amount to about a billion and a half dollars worth a month. A year
from now we expect this rate to be doubled.
We shall have to hold a high rate of military output for about a year after that.
In 1954 we hope to have enough equipment so that we can reduce the production
of most military items substantially. The next 2 years should therefore be the
peak period of defense production.
The Econiomic Report of the President, January 1952
If the world situation stabilizes so that we can after 2 or 3 years taper off the
defense program, we will then be producing enough to remove many unpleasant
controls without risking inflation, and to have a higher standard of living than we
had even in 1951. (Pages 3-4.)
But the defense program is still in the build-up stage; the main effort lies
ahead. (Page 8.)
Government outlays for the major security programs are estimated to rise
from a current annual rate of 45 billion dollars to almost 65 billion by the end of
this calendar year. As a proportion of total output, the increase will be from
14 percent to more than 18 percent. (Page 8.)
Though the major expansion will take place this year, the program which I am
submitting will call for a further increase in the rate of security outlays during
calendar 1953. We cannot hope that security program expenditures will start
declining toward a lower rate until 1954. (Page 8.)
The military program which I am submitting to the Congress calls for steady
increases in military output during the next 18 months, and for continuance at a
high level for at least an additional 12 months. (Page 15.)
The Annual Economic Review by the Council of Economic Advisers, January 1952
Since the aggregate demand for resources is expected greatly to exceed their
supply, achievement of the goals of national economic policy requires that resources
be allocated and used as efficiently as possible. If this is to be accomplished, it
is of major importance that the definition of the military program-whatever its
substance-be as clear and firm as feasible. Otherwise, with such a considerable
portion of the total economic effort going to basic defense, it would be virtually
impossible to keep the other components of the effort consistent with the military
program and among themselves. It would be. impossible to determine the portion of resources that would be available for the expansion of basic productive
facilities, or to design policies needed to restrict private consumption and less
essential private and public investment.
From the viewpoint of general economic policy, the speed of the military build,up is of similar interest. If the rest of the economy is to keep in step with basic
defense and serve it properly, it is necessary both to know what the schedule of
the defense program is and to achieve the goal on schedule. (Pages 39-40.)
The security program now being submitted by the President calls for a further
increase in total security expenditures for goods and services from the present
annual rate of $45 billion to a rate of almost $65 billion by the end of 1952. Under
present plans, the maximum rate of expenditures under this program would be
slightly higher, and would probably be reached late in 1953. (Page 95.)
A large element of uncertainty exists regarding the future development of
Our present planning is based on a.
expenditures under the defense program.
program which would build up strength to the required level, and continue the
maintenance and modernization of our defensive equipment at that level. This
may require expenditures in the fiscal year 1954 at least as high as those proposed
for fiscal 1953. Thereafter, it is anticipated that expenditures will gradually
decline to a substantially lower "maintenance" level. (Page 134.)
112
JOINT ECONOMIC REPORT
The current defense effort will be building up new backlogs for housing, for
other durables, and for some types of industrial expansion, which are now being
deferred to make way for the expansion of the industrial mobilization base. There
is no reason to accept the gloomy hypothesis that we would do a worse job of
adjustment when defense spending declines than we did after World War II
particularly since the reduction of defense outlays in the future would be far
smaller in proportion to the Nation's economy than the reductions which took
place between 1944 and 1947. (Page 150.)
The Battlefor Production,FourthQuarterlyReport by the Director of Defense Mobilization, January 1, 1952
In the long-lead-time items which are the heart of the military program-the
complex new aircraft and tanks-little of this activity in military production is
yet reflected in delivery figures. Much of the work now being done will not appear
in the delivery column until late 1952, 1953, and even later years.
But, even at this point in the program, we have completed the job of accelerating
the production rates of a number of our major military items-including two aircraft that have been in production longest, the "superbazooka," and several types
of radar-as well as a variety of minor and easier-to-get items. Production of
these items is now being leveled off or in some cases reduced.
By the end of 1952, we should have reached the leveling-off point in all of our
major items of military equipment except aircraft. For aircraft, 1952 will see
,the putting in place of the tools, facilities, and materials which will guarantee the
peak periods to come later. (Pages 7-8.)
Federal expenditures for. national security will increase during the next 12
months to an annual rate about $20 billion higher than at present. Although
revenues will increase at the same time, as the new tax laws come fully into
effect and as income expands still further, we will have to cope with the inflationary
impact of a growing cash deficit unless adequate amounts of new taxes are enacted. (Page 35.)
Third Report of the Attorney General of the United States Prepared Pursuantto
Section 708 (e) of the Defense Production Act of 1950, December 19, 1951
Procurement planning and scheduling require that the Armed Forces determine
essential military needs and the order of priority in which such needs shall be met.
This information should then be presented to the appropriate civilian officials
for a review based on the latter's knowledge of the present and potential ability
of our economy to produce and of the effect which such defense production will
have on the competitive economy. Only by this interplay and correlation of
military and civilian needs and availability of resources will it be possible to
eliminate the imbalances which otherwise will dominate procurement. Only
in this manner will it be possible to carry out the military program without
unnecessary strain upon the civilian economy. (Page 8.)
The very magnitude of our current military program and the uncertainty of its
duration or tempo warn us that our civilian economy faces fundamental dislocations in production, distribution, and employment. Many of these dislocations
can be prevented entirely and the effects of others can be minimized if adequate
programing andscheduling of military requirements are undertaken now. (Page 9.)
The impact of military procurement upon raw materials, semifinished products,
machine tools, labor supply, and other essentials of production and distribution
will determine in many cases whether large numbers of producers in particular
industries remain in business, or whether they must close down and withdraw
from the Nation's production potential. The dependence of both military and
civilian requirements upon the same materials, tools, labor, and other necessities
of production and distribution necessarily will create stresses within our economy
which can be dealt with effectively only through informed planning and scheduling
of military procurement. (Page 12.)
JOINT ECONOMIC REPORT
113
Robert A. Lovett, Secretary of Defense, testimony before the Subcommittee of the
Senate Committee on Appropriations, February 4, 1952
* * * the Department of Defense expended, on its own account, $19.2
1952, the Debillion in fiscal year 1951; during the first 7 months of fiscal year by
next June
partment has expended over $20 billion. It is anticipated that
be
expenditures during fiscal year 1952 for the Department of Defense will
approximately $40 billion. These figures are exclusive of expenditures for the
military portion of the foreign-aid funds:
As of January 31, 1952, approximately $75 billion has been obligated of the
the
$108 billion appropriated for fiscal year 1951 and fiscal year 1952. Part of
items
unobligated $33 billion represents funds for aircraft, ships, and other major
of procurement for which contracts will be let and funds obligated during the
second half of the year. Another part of the unobligated balance also represents
month; for
current operating expenses that are normally obligated month by camps,
and
example, military and civilian pay, contracts for services at posts,.
for substations, and similar items. Except for accounts necessarily reservedprior-year
sequent engineering changes, substantially all fiscal year 1952 and
money will be obligated by the end of this fiscal year. * * *
The initial budget requests submitted to my office by the three armed services,
based on military requirements and early readiness dates, totaled approximately
foreign-aid
$71 billion, exclusive of the requirements of the military portion of theSecretary
of
program. As a result of the review conducted by the Office of the
Defense with the three military departments, and as a consequence of the screening
process at that stage of budgetary development, the original estimates in their*
* *
rough form were reduced to a finished budget of approximately $55 billion. and
the
Subsequent to our budget submission to the Bureau of the Budget
President, certain further adjustments were made both in terms of new obligational authority and in terms of expenditures. As a result of these adjustments,
primarily a stretch-out of the period in which readiness is to be developed, the
in
funds being requested in the budget submission before you call for $52 billion
fiscal year 1953, rather than the $55 billion figure in our initial submission to the
Bureau of the Budget and the President.
Karl R. Bendetsen, Assistant Secretary of the Army, testimony before the Subcommittee of the Senate Committee on Appropriations, February 5, 1952
InA major postwar development is the world-wide Army rebuild program. scatleft
augurated to rehabilitate the countless tons of equipment and supplies fruit
with
tered about the earth after World War II, this program has borne full
Europe.
the exigencies of the Korean conflict and the return of our troops toeach
field
Carefully prepared estimates from each technical service and from returned
command show that their activities under this program have actually less
than
about $9% billion worth of equipment to the supply line at a cost.of for every
$1% billion. This means about $7 saved in terms of new equipment
dollar spent.
With this background in mind, I now turn to the major programs for which
proour 1953 budget has been prepared. First, in the field of procurement andbillion
$6.4
duction, the appropriation requested totals $3,685 million-some rate
less than in fiscal year 1952. We now expect that the volume and andofa prohalf
duction will become satisfactory sometime this spring, or about a year
suppleafter the Army's procurement effort went into high gear with the secondprevious
mental appropriation for fiscal year 1951. This period confirms our
a
experience in mobilizing industry and also confirms the importance of achieving
readily expandable production base to save many critical months of time should
global war be thrust upon us.
Second, the funds requested for military personnel, $4,485 million, will support
an average strength of 1,552,000 in fiscal year 1953, or somewhat less than the
average of 1,565,000 expected for fiscal year 1952.
to
Third, I should like to add together the much smaller items in the budgetNaand
support programs such as research and development and the Reserves asked
for
tional Guard, all of which total some $1,210 million. The amounts provide
these items, we believe, represent the least that can be safely allocated to
minimum essential support. But rather than dwell on the details of these programs, each of which will be discussed at length in later hearings of the committee,
I should now like to turn to the last and largest single item in the budget, the re-
114
JOINT ECONOMIC REPORT
quested appropriation of $4,820 million for maintenance and operations. Despite
the fact that the Army has increased its size and strength over last year and has
maintained a substantial force in combat in Korea, we are able to reduce our
request for appropriations to cover our maintenance and operations by over $1
billion, or nearly 20 percent. * * *
Thomas K. Finletter, Secretary of the Air Force, testimony before the Subcommittee of
the Senate Committee on Appropriations, February5, 1952 4
The Secretary of Defense has said to you that, after the recommendations of the
Department of Defense to the Bureau of the Budget and the President, certain
further adjustments were made for the purpose of keeping expenditures for the
military departments and for military end-items financed under the Mutual Security Program below the figure.of $60 billion during fiscal vear 1953. The result
was a stretch out in the period in which readiness is to be attained. * * * This
affects all three of the Air Force's front-line operations of which I have spoken.
The stretched-out program does not attain the number of units with modern
equipment as early as the military chiefs of the services, from a purely military
point of view, consider desirable. However, as the Secretary of Defense has said
to you, the budget before you represents a judgment by the executive branch of
the Government which takes into consideration all the factors involved-not just
the military factors-and arrives at a balance which appears best for the long term
security of the nation. * * *
I want to emphasize next that a large part of this build-:up of the Air Force is on
capital account. We are asking for money to get going on an increase of about
50 percent in the Air Force's combat wing strength.
It follows that the level off period, once the force is built, would be at a lower
annual cost than that asked for during the capital build-up period.
Leon Keyserling, Chairman, Council of Economic Advisers, January 23, 1952
The projected size of the defense program is fairly clear, at least, for the next
calendar year, rather independent of the exact size of the appropriations for the
fiscal year 1953.
The computation is that the now projected defense program will lift the level
of spending or take the economy for that purpose by about $20 billion between
the annual rate now and the annual rate at the end of this year. (Hearings,
pp. 10-11.)
FrederickJ. Lawton, Director, Bureau of the Budget, January 24, 1952.
We have no control directly over expenditures. Our controls are over obligational authority and over the entering into of contracts under the apportionment
system for most agencies.
The problem is in the long-lead-time items. For example, in the case of aircraft the average lead time, based on a recent study that the Defense Department
has made, is 24 months. That means that to get deliveries by a date in the future
you have to provide the obligational authority in the form of an appropriation
now in order that you may let your contracts, so that the suppliers can begin work
and, ultimately, deliver that 2 or 3 years from now. (Hearings, p. 93.)
For.the military and military-assistance programs together, expenditures in
the fiscal year 1953 are estimated at $58 billion. Of this total, slightly more than
half will be spent from funds authorized in 1952 and earlier years.
One significant aspect of the budget this year is that while expenditures for
these two programs will rise by about $15 billion over the 1952 level, new obligational authority will decline by about $9 billion. This reflects the fact that with
funds already appropriated we expect to reach peak production rates for most
major military items by the end of the fiscal year 1953. (Hearings, pp. 109-110.)
As soon as mention is made of a "peak" military production, the question
arises as to the long-range cost of our military program on a maintenance and
replacement basis. You recognize, of course, that we will not be operating on
such a basis as soon as we pass the peak, because procurement of some hard
goods, such as aircraft, will still be rising as we build toward 143 wings. The
other will be offset by a greater decline in hard goods expenditures. Even after
we complete our build-up, the size of the military budget is almost impossible to
JOIN9\T ECONOMIC REPORT
115
predict at this time, because it involves so many military and strategic decisions
which cannot now be evaluated.
The-level of active military strength will depend on two things: (1) the international situation at the time with the resulting necessity of deploying men in
various spots around the world; (2) the possibility of decreasing the number of
active forces because of a well-trained reserve resulting from universal military
training and the present rotation policy.
Given an assumption on the level of military strength, personnel costs might be
estimated fairly closely. Procurement costs for this strength, however, cannot be
estimated as closely for two reasons: (1) the expenditures for fuel, lubricants,
spare parts, et cetera, will depend on the extent of use of military equipment;
which can vary considerably depending on the duration and type of military training for both active members of the Armed Forces and reservists; (2) the variation
of possible costs for modernization and replacement of equipment can be very
large-for example, how much shall we spend for modification of ships, planes,
and tanks to keep them up to date with the newest technical development, both
offensive and defensive, or if we are unable to modify existing equipment, how;
often will we have to replace it? Obviously expenditures can differ greatly if we
replace every 2 years or .every 10 years-or if new weapons permit economies.
(Hearings, p. 110-111.)
Roger L. Putnam, Administrator, Economic Stabilization Agency, January 25, 1952.
This coming year is going to be difficult. It is going to be a very difficult one
for inflation controls, because we are going to be pumping into this economy,
billions upon billions of dollars more for defense purposes than was spent last year.
The annual rate of defense spending a year from now will be almost $30 billion
more than the rate in the last half of 1950. Let's look at what $30 billion represents-it's more than this country spent in 1950 or 1951 for all consumer durable
goods, including automobiles.
The increase in actual defense expenditures in 1952 over 1951 will be somewhere
in the neighborhood of $20 billion, and we are adding that whole thing extra into
the economy this year. That is a great deal, and that is why I don't think we
have seen the full pressure of inflation. (Hearings, pp. 122-123.)
I think that our military aid abroad is helping. The attempts of our allies too
impose their own military spending on their own strained economics-strained
much more than ours-that is causing them more inflationary pressures than we
have.
Every bit of aid that we can give them-I get this impression from his report
and from some other things, too-helps them to manage their own inflationary
problems and thus to get along on this common program of defense. Their
inflationary problems, particularly in France, are much worse than ours because
their economies were more strained to begin with. Trying to add on military
preparedness made the pressure worse. Anything we can give to them is a help
to them to rearm. I get that impression very definitely. (Hearings, p. 143.)
We have got to strengthen the whole free world, and we have got to strengthen.
them economically, which is just as important as strengthening them militarily.
If our economy goes to pieces, the Kremlin gets what it wants without having to
do anything else. (Hearings, p. 144.)
Charles E. Wilson, Director of Defense Mobilization, January 26, 1952
I just do not believe you can effectively spend more money on modern weapons
[than is being done now] unless you plan for it for a considerably longer period,
of time than this Nation has planned for it. (Hearings, p. 153.)
The rate of delivery to the military, including construction, has tripled since
Korea to a figure of about $2 billion a month. That rate will have to be doubled
over the next year to close to 4 billion a month. It will not be easy, nor can it
be done without consuming vast amounts of materials, most of them scarce at
the present time. (Hearings, p. 167.)
I think we have taken a pretty much of a middle-of-the-road course, and
that it is a road that we can go down and still have a sound economy, if we watch
our step. I believe that.
I do not believe if you go any faster, much faster, you can have that. I do not
believe if you go much slower you can have the security that the people have a
right to expect. So I think this is a middle-of-the-road course. (Hearings, p. 170.)
116
JOINT ECONOMIC REPORT
BUSINESS
NEW PLANT AND EQUIPMENT
EXPENDITURES
The Economic Report of the President, January 1952
Steelmaking capacity, already above 108 million tons, is to be expanded to more
than 120 million by 1954, with related expansions of iron, coke, and ore-producing
facilities. The aluminum program should double the mid-1950 rate of output
by 1954. Electric power capacity is scheduled to expand 13 percent this year,
and a 40-percent expansion by the end of 1954 is proposed. Petroleum refinery
capacity is scheduled to expand about 14 percent between now and the end of
1953. These and the other high-priority Government-assisted industrial expansion programs will absorb this year about a quarter of the supply of copper available for civilian uses, and about one-third of the civilian supply of steel.. (Page 10.)
The total of private investment in construction and producers' equipment, which
was close to $50 billion in 1951, should be held in the neighborhood of $42 to $44
billion in 1952. (Page 10.)
The Annual Economic Review by the Conncil of Economic Advisers, January 1952
To meet war preparedness objectives, and to work toward the substantial
elimination of basic shortages by 1954-when, so far as can now be judged, military production will have passed its peak and be on the way toward a substantially
lower maintenance level-investment in Government-aided industrial expansion
programs will have to increase further. (Page 108.)
Although some reduction in highway expenditures has to be made in the immediate future, higher levels of construction and maintenance activity should be
resumed as quickly as possible. (Page 110.)
It seems probable that the major factor limiting the size of business investment
will not be the desire of business concerns to-expand, but the availability of scarce
materials and machine tools. Material shortages may force business investment
in plant and equipment to contract somewhat by the latter part of 1952. Commercial and residential construction also is being reduced. (Page 139.)
The Battle for Production, Fourth Quarterly Report by the Directorof Defense Mobilization, January 1, 1952
The steel industry, which was already expanding when the mobilization program
began, has been producing at the rate of 108 million ingot tons compared to a rate
of less than 100 million ingot tons at the time of Korea. Additional capacity now
under construction will enable the industry to produce at a sustained level of 120
million ingot tons by 1954.
In order to support this amount of steel capacity, the target for blast furnace
capacity is being raised to 85 million net tons by the beginning of 1954-an increase of 3.1 million net tons over the capacity in operation or under construction
at this time. Still further expansion of blast furnace capacity may be necessary,
depending upon our ability to sustain the collection of scrap at a high level.
.The expansion program for byproduct coke ovens is set at 84 million net tons by
the end of 1953, an increase of 10 million net tons over the pre-Korea capacity.
(Page 13.)
Aluminum production has now reached an annual rate of 860,000 tons a year,
compared to the 735,000-ton rate of June 1950. By 1954, the aluminum expansion program will result in production at over twice the annual rate of mid-1950,
and 12 times the rate of 1939. (Page 15.)
The total expansion of power facilities proposed for the next 3 years is aimed
at an increase of 40 percent over the capability at the end of 1951. This would
bring the capability up to 105 million kilowatts by the end of 1954.. The schedule
calls for adding 9.6 million kilowatts during 1952 at an estimated cost of approximately $4 billion. (Page 15.)
An expansion goal for nitrogen production of 2.9 million tons in 1954-55 has
been set, primarily to provide the additional fertilizer needed to increase farm
production.
The new goal is 80 percent higher than the 1.6 million tons produced in 1950-51.
(Pages 15-16.)
JOINT ECONOMIC REPORT
117
We are aiming to increase refining capacity from 7 million barrels a day to 8
million barrels a day by the end of 1953. (Page 16.)
Charles E. Wilson, Director of Defense Mobilization, January26, 195g.
Mass production plants are being finished up, many have been finished, others
are being finished up, and I think by the end of this year the most important to
the security of the country will be pretty well in place. * * *
That does not apply to all our raw material expansion, Senator. Some of
the raw material, or rather some of the metallics, those shortages will not be
overcome until late 1953 in the case of aluminum; some of them will not come in
until then; 1954 in the case of copper expansions; but for the building of some of
the new equipment, many of the plants are beginning to come and will continue
to come in this year. (Hearings, pp. 155-156.)
The completion of this program will increase the annual output of steel by
an additional 12 million tons; of aluminum by an additional 700,000 tons; of
power capacity by an additional 30 million kilowatts, with corresponding increases
in production of other materials. (Hearings, p. 159.)
NONFARAi RESIDENTIAL CONSTRUCTION
President's State of the Union Message to the Congress, January 9, 1952.
I think most workers understand that decent housing and good working conditions are not luxuries, but necessities if the working men and women of this
country are to continue to outproduce the rest of the world. * * *
We must move right ahead this year to see that defense workers and soldiers
families get decent housing at rents they can afford to pay.
The Annual Economic Review by. the Council of Economic Advisers, January 1962
Although 6 million new houses have been produced since the end of World
War II, demand remains at a high level because of backlog requirements, high living
standards, and a high rate of family formation. Credit restrictions introduced in
1950, which were relaxed by Congressional action in September 1951, plus a
stringency of funds for Government-insured mortgages in the latter part of 1951,
helped to reduce the number of starts of nonfarm housing from 1.4 million in 1950
to about 1.1 million units last year.
In 1952, a large net migration will be needed to meet the labor requirements of
areas containing defense establishments or military installations. New housing
accommodations will be required for a large proportion of these workers, and a
Federal program for aiding private construction of about 200,000 units is in operation. In addition. sufficient defense housing can be provided only if the Government assists in financing necessary community facilities and actually builds houses
in some areas. Besides the unusual strains on housing capacity arising from
movements of defense workers, there is a need for new housing to take care of the
600,000 to 700,000 new families which will be formed next year. Although part of
these families can be housed in units vacated by families moving to defense
areas, it is estimated that, for the economy as a whole, 800,000 to 850,000 new
nonfarm dwellings would be needed in 1952 merely to maintain present housing
standards.
It is hoped that this number of units can be produced in 1952. The outlook
for materials supplies indicates that substantial further economies in the use of
scarce materials in housing construction will be required if this goal is to be
(Pages .118-119.)
reached.
Leon Keyserling, Chairman, Council of Economic Advisers, .January2S, 1952"
Consequently, our estimates of housing demand, for that matter, in most of the
years between 1947 and 1950 were higher than the estimates of the industry,
because the industry's computations were made mostly upon two things-backlog
demand and prewar norms. Our estimates placed more stress upon the current
productive power of the economy, the reasonably good distribution of income, and
demand as a reflection of the people's standards of living at that level of production and income.
In 1947, when we first projected our housing estimates-and they envisaged
one million to a million and a half new nonfarm units per year for a decade-.
tremendous dissent went up. Strangely enough it went up from the building
industry, which said that this would satiate the market, and that any figure over
a million was out of this world.
18
JOINT ECONOMIC REPORT
Now, after having built as high as a million and a quarter houses in 1 year,
when housing was cut back to 850,000, which was higher than the highest level
ever made before World War II, they regarded that as phenomenally low.
(Hearings, pp. 68-69.)
BUSINESS STRUCTURE
The Annual Economic Review by the Council of Economic Advisers, January 1952
A mobilization effort necessarily creates serious problems for small business as a
class. Small business firms are more vulnerable to material shortages than larger
firms, because their profitability is generally more severely affected by reductions
.in their operations, their output more narrowly specialized, and their financial
position weaker. The industries in which a mobilization effort calls for major
increases in output and capacity are, in large part, those in which small-scale
production is the exception rather than the rule; and, in general, the facilities of
-small firms are less easily adapted to defense production.
The increased stringency of materials supply in 1952 will intensify the need for
many firms, particularly smaller ones, either to get into defense production or to
redesign their products in such a way as to make much less use of scarce materials.
-It will no longer be possible on so extensive a scale to allot such materials to
nonessential production in cases where the only justification is that it permits a
firm to continue operations.
Quite aside from the need to alleviate distressed conditions caused by material
cut-backs, it is obviously in the national interest that there be a greater diffusion
'of defense production in our industrial structure. It is advantageous to spread
arms production experience. Small plants have a production potential which
should be preserved against the day when it would be needed to support total
mobilization.
Production bottlenecks may be eliminated by a more effective
utilization of small manufacturing facilities. Moreover, the mobilization program
should not be permitted to impair competition. (Pages 115-116.)
The Battle for Production, Fourth Quarterly Report by the Director of Defense Mobilization, January 1, 1952.
The newly organized Small Defense Plants Administration has started a program to increase further the contribution to the defense effort by small business.
Procedures have been developed jointly with the RFC to expedite loans to small
business where recommended by the Small Defense Plants Administration. In
addition, arrangements have been made to represent the interests of small business in computing requirements of materials in short supply. (Page 25.)
Third Report of the Attorney General of the United States Prepared Pursuant to
Section 708 (e) of the Deofense Production Act of 1950, December 19, 1951
The burden which will be imposed upon our economy and upon our people
during the coming years will, in important respects, be greater than that of wartime. For, in a nation at war, definite determinations can be made concerning
:goals of production and the extent to which civilian production and supplies need
be curtailed and rationed. In wartime, enterprises can make decisions and guide
-their production efforts into well-defined channels.
During a period of partial mobilization, small-scale enterprises are least equipped
to adjust themselves to the curtailment of vital materials and to the accompanying
allocations, priorities, and price and wage controls. As more and more basic
materials are diverted from the civilian market to military uses, the small enterprises whose operations are not diversified and who do not hold defense contracts
will shut down and disappear from our economy unless great care and intelligent
planning are exercised. (Pages 17-18.)
Mobilization decisions made on an unplanned and uninformed basis necessarily
weigh the scales heavily on the side of large-scale business. It is enterprises of
:that type which have assured sources of basic materials, skilled labor forces, machine tools, finances, and the variety of operations which make it possible for them
to survive when one or more products can no longer be produced. As a result, the
unplanned decisions of Government affecting procurement for defense tend to
foster monopoly and concentration and to destroy the small and medium-sized
business firms which are the bulwark of our competitive economy.
(Pages 18-19.)
JOINT ECONOMIC REPORT
119
CONSUMERS
CONSUMER GOODS AND SERVICES
The Annual Economic Review by the Council of Economic Advisers, January 1952
With the security program Dow scheduled, and reasonable increases in total
production, consumer supplies will be adequate to meet essential needs in 1952.
Since there will be cut-backs in the output of metal-using durable goods, any
increased demand arising from a higher income total will be manifested mainly
in increased production of nondurable goods and services.
The output of textiles, food, and many other products can be expanded without interfering with the defense program. Judging from peak rates of output in
1950 and 1951, production of textiles, apparel, shoes, and furniture could be raised
by over 25 percent from recent levels, and production of carpets could be doubled.
The food outlook also is relatively good and should permit some rise in food consumption, with the largest increases in the more expensive items such as meats
and frozen fruits. The capacity for synthetic fibers is being increased, which will
further supplement the supply of cotton and wool in 1952 and 1953.
In major metal-using consumer durables, the outldok is quite different. Production of passenger cars in the first quarter of 1952 will be between 900,000 and
1,000,000 units, or a little more than half the average quarterly rate in 1950.
Allocations for steel and other metals for use in major household appliances, such
as ranges, washers, and refrigerators, and for radio and television sets, are also
being reduced to 50 percent or less of the rate in the base period, which in most
instances is the first half of 1950. However, absorption of stocks of materials and
substitutions will temporarily permit somewhat higher rates of production. (Pages
117-118.)
INCOME, EXPENDITURES, AND SAVINGS
The Economic Report of the President, January 1952
Consumer spending is the most uncertain factor determining the general inflationary outlook for 1952. While it is possible to make a reasonably satisfactory
estimate of the volume of new business investment in plant and equipment
this year, since it will be limited by the allocation of scarce materials, there is
no certainty at all in any estimate of consumer spending. For the last three
quarters of 1951, consumers have voluntarily elected to buy at a level no higher,
in total physical units, than in the period before the initial attack in Korea.
Instead, they have added to their personal saving much of the large increases
which have taken place since that time in their income after taxes.
The exceptionally high rate of personal saving has not been due to any general
lack of goods available to consumers. Even in the case of durable goods which
have been cut back in production by allocation orders, such as automobiles and
major household appliances, no market pressure has been noticed since the first
quarter of 1951. Textiles and some other types of soft goods have been produced at a rate well below capacity, not on account of any shortage of labor ormaterials, but because consumer demand has fallen off in many lines. Manufacturers and retailers have been struggling with overlarge inventories, which in
many cases have not vet been brought down to the levels they desire.
It is impossible to foresee how long this extraordinarily high level of personal
saving will continue. It is not even certain that it may not be raised. But
national economic policy may safely be based upon these assumptions: the
,progress of the security program will bring an increase in personal incomes and
enlarge the potential inarket demand of consumers; the longer consumers elect
to save rather than to buy goods, the larger will become the accumulated fund
of liquid assets; and the fund of liquid assets, when coupled with the higher
current income of consumers, will add greatly to the potential consumer demand,
and may increasingly tend to turn potential demand into abnormally active
buying. (Page 20.)
The Battle for Production, Fourth Quarlterly Report of the Director of Defense Mobili-*
zation, January 1, 1952
No one can predict how consumers will divide their money between spending
and saving in the coming months, but the present rate of saving is unusually high
and a sudden rush of dollars into the market, from whatever cause, could bring
about the renewal of inflationary pressures that we have feared. (Page 5.)
120
JOINT 'ECONOMIC REPORT
John D: Clark, Council of Economic Advisers, January 23, 1952
If we drop controls today, we are putting ourselves in a position where, if the
consumer attitude changes, if consumers, having increasing income, as they are
bound to have as Government expenditures expand, decide that they are going
to begin to buy goods rather than hold funds, you are going to have an immediate
impact of vigorous inflationary pressure upon the markets that will cause those
prices to spurt forward, and you will come along weeks later trying to catch up
with that. Perhaps once again we will be under the delusion that we can get
some rollbacks when we do get under way, although I do not know how anybody
now thinks a rollback is possible. The only safetv in a situation where we know
that many of the most important consumer durable goods are going to be restricted
in output is to maintain the series of controls which we now have. If the markets
are permitting prices to drop away from under them, be happy about it, but do not
use that as an excuse for discontinuing the system and leaving us helpless if there
should be another sudden resumption of what you call just normal buying by our
consumers.
(Hearings, pp. 72-73.)
POLICIES AND PROGRAMS OF THE FEDERAL GOVERNMENT
FISCAL POLICY
Budget message of the Presidentfor fiscal 1953
A pay-as-we-go tax policy is difficult to regain once we fall behind.
We cannot now undertake, on a strict pay-as-we-go basis, the dual job of making
up for the inadequate revenue legislation last year and meeting -the increases in
expenditures immediately ahead. However, there is still time to insure more
nearly adequate financing for the defense program as a whole. In my judgment
this calls, at the very least, for the amount of additional revenue by which last
year's legislation fell short of my recommendations.
The need for improving the equity of the tax system gives me as much concern
as the~need for revene.
The tax laws should not be used- as a means of granting
special favors or hiding special subsidies. Glaring injustices in our tax laws
should be eliminated before those with modest means are asked to shoulder
additional burdens. (Page M10.)
Prudence demands that we return to a pay-as-we-go policy as quickly as
practicable. In the meanwhile, we must be continually alert to threats to economic
stability and be prepared to deal with the situation as it develops. (Pages
M1b-Mu .)
The Economic Report of the President, January 1952
I urgently recommend that the Congress, as a minimum, provide additional
revenues in the amount by which last year's legislation fell short of my recommendations. This can be achieved bv eliminating loopholes and special privileges,
and by some tax rate increases.- While new tax legislation along these lines could
scarcely affect the deficit for the current fiscal year, and would not restore a
balanced budget in the fiscal year 1953, it would make a major contribution to the
Government's budgetary position and to the stabilization program. The additional tax revenue will help to minimize borrowing by the Government from the
banks. Borrowing from banks, more than borrowing from any other source,
tends to enlarge the spending stream and thus to increase inflationary pressures.
(Page 21.)
The Annual Economic Review by the Council of Economic Advisers, January 1952
Provided the national security programs follow the pattern now indicated,
rate increases in existing tax sources and the proposed improvement in the tax
structure would be adequate at high levels of employment to yield a surplus in
budgets designed to support the ordinary Government functions, plus the cost of
the expanded Military Establishment wheni it-reaches maintenance levels.
With the additional revenue which might be obtained from carrying through the
above suggestions, the margin of excess- of budget expenditures over receipts
would be reduced to about 10 billion dollars a year during the period of 1-to
JOINT ECONOMIC REPORT
121
2 years when budget expenditures will be at the peak Ievel now contemplated.
A considerable portion of this deficit, however, would not result in an addition
to the debt held by the public, but would be absorbed by the excess of some 4
to 5 billion dollars of cash receipts over disbursements in a number-of trust
accounts. (Page 136.)
Third Report of the Attorney General of the Vnited States Prepared Pursuant to
Section 708 (e) of the Defense Production Act of 1950, December 19, 1951
It is recommended that the responsible military and civilian agencies introduce
into procurement for our Armed Forces the planning and scheduling which will
insure that we obtain all of our military requirements as we need them and at
the same time preserve the health of the competitive structure of the Nation's
economy. (Page 1.)
Roy Blough, Council of Economic Advisers, January 2£, 1952
I think the point of view that I was trying to express, which I think is the
point of view of the Council, is that we would like to see this paid to the largest
extent possible currently through taxes; that under the circumstances covering
expenses completely by taxes each year does not seem to be a feasible thing to
do because of the speed of increases and the magnitude of increases that would
be necessary, and the fact that the increases would be followed by decreases as
we come down from the peak of expenditure; that we think the tax program which
was asked for last year, or the amounts asked for, at any -rate, ought to be provided, and we believe would largely save the Government from the necessity of
borrowing additional sums from the banks; and that this program would have
the highly desirable result of strengthening the tax system to the point that it
could carry the longer load with a balanced budget, and possibly with a surplus.
So we feel that it is highly desirable to have some increases in taxes at this
time, but that, for the reasons mentioned, it is not either necessary or desirable
to try to cover the whole increase in expenditures that is scheduled to take place,
(Hearings, p. 56.)
if the President's budget becomes effective.
REGULATORY
POLICIES
President's State of the Union Message to the Congress, January 6, 1952
This year we ought to make a number of urgently needed improvements in
our social-security law. For one thing, benefits under old-age and survivors
insurance should be raised $5 a month above the present average of $42. For
another thing, the States should be given special aid to help them increase publicassistance payments. By doing these things now, we can ease the pressure of
living costs for people who depend on those fixed payments.
President'sMessage on Unemployment Insurance to the Congress, April 6, 1950
On several occasions in recent years, I have recommended that the system
be improved so as to extend protection to many workers not now covered; to
provide, in every State, benefits for 26 weeks ranging up to $30 a week for single
persons, with additional benefits for dependents; and to increase the financial
stability of the system. * * *
First, I recommend that coverage be extended to about 6,000,000 workers not
now covered. The first major deficiency in the present Federal-State system of
unemployment insurance is that it excludes large numbers of workers. * * *
Second, I iecommend the establishment of Nation-wide minimum levels for
amounts and duration of unemployment benefits, in order to correct the second
major deficiency in the present insurance system-the inadequacy of benefits.
* * * Benefits for single persons should approximate 50 percent of normal
earnings, up to a maximum of at least $30 a week. Additional allowances should
be granted for individuals with dependents. The proportion of previous earnings
replaced would vary with the number of dependents, up to a maximum of 70
percent of wages, or $42, whichever is lower, for an individual with three or
more dependents.
*
*
*
Third, I recommend that adequate methods should be required to provide
benefits for workers who move from one State to another. * * *
Fourth, I recommend that both Federal and State laws concerning fraud and
disqualifications should be revised and improved.
96529-52-9
122
JOINT ECONOMIC REPORT
President's Defense Production Act Message to the Congress, February 11, 1952
The potential pressures toward inflation are now greater than they were when
the price upsurge took place a little more than a year ago. The reason that
inflation was checked early in 1951, and why considerable price stability was
maintained during most of the year, is not that the -inflationary danger disappeared. It is rather that the inflationary danger was counteracted and contained by tax increases, by credit controls, by price and wage stabilization, by
allocation measures, and by increasing the supplies of some vital lines of production. The inflationary upsurge was halted, not by inaction, but by action.
In particular, we need stronger controls over credit. Last year, the Congress seriously weakened the Government's powers to limit the availability
of credit to finance purchases of consumer goods and real estate. In periodswhen supplies of goods are necessarily restricted, the dangers. implicit in relaxed
credit controls are great. We dare not take the risks involved in a loose policy
on consumer and real-estate credit. The Congress should close this inflationary
loophole by-restoring full authority for flexible administration of credit controlsso that they can be expanded or contracted quickly to meet any eventuality.
The production features of the act appear to be generally adequate at the present
time. A few amendments are needed, two of which I should like to call specifically
to the attention of the Congress.
-First, the law now permits the Government to make a variety of loans, guaranties, and purchase commitments where essential to help expand production of
critical materials at home or abroad, or to develop high-cost sources of supply
without forcing increases in general price ceilings. At present, the law sets a
limit of $2.1 billion outstanding at any one time for these purposes. In allprobability, this will not be adequate for programs which will be needed, and I recoinmend that it be raised to $3 billion.
I Second, a legislative rider, was included in the act last year which unnecessarily
restricted imports of certain agricultural commodities. This rider, the so-called
cheese amendment, needs to be' repealed quickly. Otherwise, the friendly countries who are being hurt by this amendment may retaliate-a s they have a right
to do-against American exports of apples, tobacco, and other products.
So much for the production side of the present law. On the anti-inflation side,
a great deal more needs to be done.
First of all, I renew my urgent recommendation that the Congress repeal last
year's three principal weakening amendments to our price-control authority.
These amendments are the Capehart amendment, the Herlong amendment, and
the Butler-Hope amendment.
The Annual -Review by the Council of Economic Advisers, January 1952
In the current situation, it is necessary to turn also to controls Which will directly
prevent the inflationary forces from producing their normal effect upon market
prices. It is incorrect to say that these controls treat only the symptoms, and
hot the fundamental causes, of inflation. In practical effect, they restrain the
growth of inflationary forces, besides helping to hold the price line against such
forces. It is seriously misleading to think in terms of two distinct categories
one of policies which will restrain forces leading to price increases, and the other
of policies which will hold down price increases despite the upward trend of the
market.
Wage control is a good example of a policy which combines these objectives.
Wage advances mean higher costs of production, and higher costs of production
are a powerful force in iaising prices. Wage increases also expand consumer
buying power, which is equally potent in its effect upon market prices. But
wage control, while directed to restraining these forces which directly influence
prices, is also designed to break an inflationary spiral already under way, by
holding the line on wages which would normally rise in response to conditions of
a tight labor market and a rising cost of living.
Price control policy, although usually thought of as a measure to prevent
price increases which would otherwise be caused by other forces, also has the
purpose of restraining the inflationary spiral itself. The interaction of prices
is obvious. A rise in one price affects -many others, and the stabilization of
any one price limits some of the force which is pressing upward the price of
other goods. Price control also has the purpose of limiting the increase in incomes,
which is the normal result of advancing price levels.
(Pages 140-141.)
JOINT ECONOMIC REPORT
123
John D. Clark, Council of Economic Advisers, January 23, 1952
We expect that with the leveling off or the dropping off of the securities programs, the inflationary pressures will be reduced enough to make it possible to
eliminate a good many controls.
We think that you could certainly have a free market in building materials
which would enable more than a million and a quarter houses to be built without
any Government orders needed to authorize it. We think the automobile production would be able to step up again.
The shortages in copper will be the more disturbing problem for that long a
period. The steel situation ought to be remedied by the end of 1954 certainly
and perhaps much earlier. The aluminum situation will be very much improved
by 1954. Copper is the one that they worry most about.
Let me mention a couple of other needs which we will be wanting to fill as soon.
as the opportunity arises. These are on the Government side. Our highway
system is deteriorating rapidly.
Equally important.and praiseworthy would be our attention to public-school
buildings. Hospitals are also going to present somewhat the same kind of problem. (Hearings, pp. 69-70.)
Roger L. Putnam, Administrator, Economic Stabilization Agency, January 25, 1952
I have not meant to emphasize decontrols as much as I seem to have done,
because I do not think we should talk about decontrol for another year or year and
a half. Right now we have got to think of how to hold this additional pressure
we all know is coming.
It is not 5 or 6 billion, it is 20 billion more than last year. * * *
Certainly, the less that is spent the less the pressures are. There is no question
about that, of course. But I would not like to make any categorical answer about
how much quicker it would bring the question of decontrols. I think that would
depend where the spending was cut out.
Some things would still be very scarce and would perhaps require to be controlled, both pricewise and wagewise. And if you control wages in any area it is
pretty hard not to control wages in other areas.
Prices can be decontrolled more selectively and easier, I think, than wages can
be decontrolled. (Hearings, p. 127.)
I would hope that within 2 years we could begin to decontrol some areas,. but
the control powers, many of them, would be definitely needed all during the 2
years, in my opinion. (Hearings, p. 132.)
. It is very hard for me.to see how the removal of a ceiling that happens to be well
above the demand price would increase the demand. I have no feeling that
ceilings should be pushed down to a depressed level. They should be at a fair
and equitable level. But my reason is not compelled to follow the thought that
removing the ceiling will help the industry, although I know many industry people
often feel that, but I think that is often a desire to blame something somewhere
that they cannot control at all. If they could feel that it is a ceiling that keeps
their market low they would much rather talk about that, rather than about a
lack of demand. (Hearings, p. 132.)
I feel first and foremost it [the Defense Production Act] should be extended,
definitely, and for 2 years, because I think that is as quickly as we can-any of
us-envision getting out of these woods.
I think it should be strengthened in about four places very definitely, too.
First and foremost I think the credit control authority should be restored-the
so-called regulations X and W-the authority to impose selective credit control
should be restored. I think that is one of the most important possible amendments. That is one of these so-called indirect anti-inflation controls.
I also think that both the Capehart and the Herlong amendments should be
nullified in some way or other if possible. Changing Herlong won't have tremendous effect, since the basic controls over wholesalers and retailers will be under
regulations envisioned by the Herlong type of amendment anyway. But I hate
putting into the law an absolute freeze and allowing no administrative leeway.
I think there are cases where there should be administrative leeway. Then
I think that in order to control meat prices and to protect the legitimate producers
and packers, we should be restoring some form of slaughter-quota authority.
With the demand for beef so high, there is a tremendous black-market tendency.
124
JOINT ECONOMIC REPORT
The quota controls were intended to make sure that the legitimate people gotthe beef, and it wasn't channeled off into the black market. (Hearings, p. 141.)
Charles E. Wilson,. Director of Defense Mobilization, January 26, 1952
The crucial test of our determination to curb inflation and to carry out ourprogram to the end is just ahead. It will be during the next year that supplieswill be shortest. After that we may expect a period of increasing improvement
as we get closer and closer to the accomplishment of the objectives of the mobilization program. But we must push forward vigorously with the mobilization program, in order to achieve this security and end the period of shortages. Delays..
in the program will both impair our security and prolong the period of shortages.
In order to continue the programs, we need continued statutory authority..
Without the powers contained in the Defense Production Act achievement of our:
objectives will be impossible. (Hearings, p. 173.)
PRICE AND WAGE CONTROL
President's State of the binion Message to the Congress, January9, 1952
On the executive side of the Government, we intend to hold the line on prices
just as tightly as the law allows. We will permit only those wave increases
which are clearly justified under sound stabilization policies and we will see to it;.
that industries absorb cost increases out of earnings wherever feasible, before they
are authorized to raise prices. We will do that, at any rate, except where the recent amendments to the law specifically require us to give further price increases.
The Annual Economic Review by the Council of Economic Advisers, January 1952'
Wage advances mean higher costs of production, and higher costs of productionare a powerful force in raising prices. Wage increases also expand consumer buy-ing power, which is equally potent in its effect upon market prices. But wage con-trol, while directed to restraining these forces which directly influence prices, is
also designed to break an inflationary spiral already under way, by holding the
line on wages which would normally rise in response to conditions of a tight labormarket and a rising cost of living.
Price-control policy, although usually thought of as a measure to prevent pricencreases which would otherwise be caused by other forces, also has the purpose of
estraining the inflationary spiral itself. (Pages 140-141.)
A firm price policy does not mean that price control should continue indefinitelyin every sector of the economy and for every item. If the international situationdoes not worsen, a rising production trend should make it feasible at a later dateto reduce substantially and progressively the area of coverage of price control.
The Council has never been impressed with the argument, which seems to prove'
too much, that no prices can be controlled unless all prices are controlled. ' After'
we get over the production hump, for the long period ahead we must be prepared
and ready to use selective price controls geared to strategic areas. In that situation, we should rely for general stabilization upon other anti-inflation weapons..
(Pages 146-147.)
The Battle for Production, Fourth Quarterly Report by the Director of Defense
' Mobilization, January 1, 1952
Price control will be made more difficult also by the amendments to the Defense'
Production Act-particularly the requirement that increases in all costs to,
July 26, 1951, shall be allowable in unit prices of manufactured and processed'
goods, the provision that distributors' percentage margins should be maintained,.
and the repeal of slaughter quotas. It is important that the price-control legisla-tion be improved by the Congress.
At the same time, wage stabilization is entering a critical stage, as negotiations
for large wage increases are under way or about to get under way in key industries.
Effective price stabilization of course demands effective wage stabilization.
(Page 35.)
The objective of price control is to achieve and maintain price stability at the7
lowest levels that are fair and that can be held firmly.
JOINT ECONOMIC REPORT
125
Price control by itself, however, cannot hold a firm line against inflation.
-'If we should prove unable to hold down demand for goods-through curtailing
;investment, controlling credit; increasing taxes, and encouraging savings-then
-prices would be bound to rise regardless of the policies of price-control authorities.
-(Page 38.)
-John D. Clark, Council of Economic Advisers, January 23, 1952
The anti-inflationary measures available in a democratic society are thoroughly
standardized. We do not feel that there is any call upon us to be inventing new
-ones.. The old ones are, in our opinion, well buttressed by experience, and we
-come forward with them once more.
This morning you discussed taxation as one of the principal elements in an
-anti-inflationary program. We have direct control of prices and wages. They
-are far more successful than is generally credited.
(Hearings, p. 70.)
Michael V. DiSalle, Director, Office of Price Stabilization, January 28, 1952
We are not allowing an automatic pass-through. We are using the earning
-standards on those cost increases incurred after July 26, 1951. We are requiring
*that we measure those cost increases against the earning standard and requiring
,absorption where it is possible. The earning standard given to us by Mr. John-ston in April 1951, said that no price increase may be granted if the earnings were
in excess of 85 percent of the best 3 years from 1946 to 1949. (Hearings, p. 195.)
Nathan P. Feinsinger, Chairman, Wage Stabilization Board, January 28, 1952
The immediate objective of wage stabilization is to help combat the threat of
inflation in a defense economy. Increases in wage rates may add to inflationary
pressures in two ways: By adding to purchasing power and by adding to business
-costs. I refer specifically to wage rates because our primary task is to stabilize
,rates rather than earnings. Today the Nation is interested in maximum production. This means increased earnings through increased employment, increased
hours, increased output through incentive systems, and the like. The advantages
-derived through such increased earnings obviously outweigh any possible infla.tionary effects. (Hearings, p. 197.)
A flexible program must not be confused with a program of steady retreat under
-pressure. On the other hand, "a firm price policy and a firm wage policy," in the
words of the President, does not mean a frozen price policy or a frozen wage policy
or wage stabilization policy. (Hearings, pp. 197-198.)
Since our basic policy is to gear changes in wages to changes in the cost of living
which have already occurred, obviously to a large extent the lifting of ceilings
-on prices results in automatic wage increases.
Now, I want to be fair to the price people in saying that unquestionably some
-of the wage increases, cost-of-living wage increases, although they followed
previous price increases, to some extent contribute to the next price increase.
We recognize that. (Hearings, p. 202.)
I think that for the foreseeable future the lifting of price controls, with a tight*ening market for labor and goods, would result in virtually automatic price
-increases, which in turn would result in automatic wage increases, and a demand
*on the part of workers for a new wage formula because this must be pointed out:
-the Board's cost-of-living policy does not guarantee the worker that he will
maintain his standard of living. It merely maintains that he will preserve his
real wage rate. His standard of living may be down in many ways even though
his wage rate remains constant.
Payment of higher taxes and all of the other burdens of a defense economy must
be met by the worker just like the rest of us. (Hearings, pp. 202-203.)
126
JOINT ECONOMIC REPORT
Without suggesting that that be the limit of adjustments, because there are all
sorts of special inequities, as a basic factor in any wage policy maintained by the
Government, I would recommend very strongly the use of the so-called escalator
clause -because it is simple, it is understandable, it is uniform, and everybody
knows in advance just what is going to happen. I want to emphasize I am not
suggesting that as of the sole or exclusive measure, but certainly a measure of
determining general wage movements. The employees understand it, Government understands it, it is easily administered. (Hearings, p. 209.)
APPENDIX C'
COMMITTEE STUDIES AND PUBLICATIONS
COMMITTEE STUDIES UNDERWAY
Pension Study
A study of the effects of public and private pension programs on the
national economy, which was recommended by the Subcommittee
on Low-Income Families, has been completed to the writing stage.
Preliminary drafts of the materials for the final report are now being
reviewed by the National Planning Association, which organization
is undertaking the study on invitation of the Joint Committee on the
Economic Report. The study will attempt: (1) to find out what is
known at the present time about private and public pensions and their
effects; (2) to report on the kind of research being undertaken which
ean help guide future policy, and who is conducting it; and (3) to point
up the problems and explore informed views in order to discover broad
areas of agreement, if any, on what should be done.
Regional Studies
In response to the request of the committee, the National Planning
Association has organized and is sponsoring a Committee of New
England which has as one of its early objectives the preparation
of an analysis of the impact of Federal policies on the economy of that
region. The Committee of New England has 91 members and is
composed of leading representatives of New England business, finance,
labor, agriculture, and the professions. Its chairman is Dr. Leonard
Carmichael, president of Tufts College.
The Committee of New England is organizing its study under seven
working panels which will cover the problems of management and
research, capital and credit, human resources, natural resources, tax
and fiscal policies, transportation and communication, and information
and education. Several panels have completed preliminary drafts of
their sections of the report and all have developed extensive working
outlines. The Committee of New England has available for guidance
and assistance in the preparation of its reports a 32-member research
advisory committee composed of leading New England social scientists.
The Effect of Temporarily Suspending Restrictions on Imports Into the
United States
This study, which will involve a commodity by commodity analysis,
is designed to suggest the effect on the flow of goods into this country
and the relationship of this flow to domestic production if restrictions
on imports were suspended, either on individual commodities or for
all imports on which there are now restrictions. The report will cover
the effect of removing such barriers on achieving maximum production
and on fighting inflation here and abroad.
IComplete to March 10, 1952.
127
128
JOINT ECONOMIC REPORT
General Credit Control and Debt Management
This study is being undertaken by a subcommittee composed of
Representative Wright Patman, chairman; Senators Paul H. Douglas
and Ralph E. Flanders, and Representatives Richard Bolling and
Jesse P. Wolcott. The inquiry is focusing on the current problems
and relationships of the Government agencies responsible for general
credit control and debt management-the Federal Reserve System and
the Treasury Department.
The subcommittee, which has published Monetary Policy and the
Management of the Public Debt, began a series of public hearings
March 10, 1952. It will report to the full committee before the
Congress recesses.
Index of Joint Economic Committee Publications
As the number of publications of the Joint Economic Committee
grows it becomes increasingly difficult to turn quickly to committee
statements and materials on a given subject, or to be sure that any,
list of citations to committee studies and hearings is complete. A
consolidated index is under preparation which will make it possible
for committee members and staff, and researchers generally to overcome these difficulties. The initial index, which will be supplemented periodically as necessary, is expected to be completed by
December 1952.
Long-Term Economic Adjustments
This study will attempt to provide materials on the needs and
opportunities to which the Nation can devote itself once the defense
build-up is completed. The analysis will center upon the role to be
played by business, consumers and Government in the period of readjustment. Private investment in plant facilities is always a substantial item on the Nation's economic budget and will be particularly
important in the readjustment period. Courses of action open to
Government include the lowering of taxes, the financing and encouragement necessary of public works, housing, roads, etc. The study
will undertake to answer such questions as:
What will private investment requirements be after the period
of major defense expenditures?
How is such private investment stimulated?
What will the demand for housing be?
Will there be a sufficient supply of industrial raw materials to
enable the economy to operate at high levels?
Will the labor force grow faster than economic expansion can
provide jobs?
Will research, technology, new industries and new enterprises
go forward at the pace necessary for a stable economy at maximum employment?
What will be the nature and size of accumulated public needs?
Materials assembled for use in the study of the flexibility of tax
and expenditures programs which were described in the committee's
1951 report will be incorporated in this broader study.
Economic and Statistical Tools for Policy Guidance
The staff of the Joint Committee on the Economic Report has from
time to time attempted to present the economic implications of alternative economic policies of the Federal Government. The current
129
JOINT ECONOMIC REPORT
study proposes to review the statistics and techniques used in these
analyses with a view to determining their appropriateness for policy
guidance, and means of improving both the techniques and the
statistics.
The Taxation oJ Surplus Corporate Accumulations
In response to a recommendation made by the Subcommittee on
Investment in 1950, arrangements were made for an intensive study of
the application and effect of section 102 of the Internal Revenue Code
dealing with accumulations of corporate undivided earnings. Questionnaires were submitted to a number of businesses and much original
information obtained from the Bureau of Internal Revenue. The
study has been completed and will be issued soon as a committee print.
Effect of Military and Nonmilitary Government Expenditures on the
Economy
In response to a. proposal that the committee should undertake a
thorough study of the effect on the economy here and abroad of military and nonmilitary expenditures, a subcommittee consisting of
Representative Richard Bolling and Senator Ralph E. Flanders was
appointed to prepare a statement outlining the general scope and
nature of such a study.
The plan is to have a staff review of the broad effects of military and
nonmilitary expenditures for consideration in connection with steps
that should be taken to mobilize the moral as well as the military
forces of the United States and the world to win the peace. This will
include, of course, expenditures here and abroad for mutual.
security.
COMMITTEE
STUDIES COMPLETED
SINCE APRIL
1951
The Joint Committee on the Economic Report, in addition to its
report on the January 1951 Economic Report of the President (S. Rept.
No. 210, 82d Cong., 1st sess.) issued six committee prints and one
committee report from March 1951 through February 1952.
The first of these studies was a committee print of materials prepared
by the staff on The Need for Industrial Dispersal which was issued
June 13, 1951. This study reviewed the effect of current Government programs on industrial location and suggested certain standards
for use in determining the location of future industrial expansion,
from the point of view of security in the event of war emergency
and of making the maximum use of our human and natural resources.
The second study issued by the committee was Making Ends Meet
on Less than $2,000 a Year. This was a collection of materials
received by the Joint Economic Committee from the conference
group of nine national voluntary organizations convened by the
National Social Welfare Assembly. The materials submitted, which
were issued in the form of a joint committee print, present 100 case
studies of individual families receiving less than $2,000 in annual
income. These case studies were prepared in response to a request
for illustrative material to supplement studies conducted during 1949
and 1950 by the Subcommittee on Low Income Families. No attempt
was made to provide a statistical sample; the objective of the study
being rather to go behind the abstract problem to the human realities,
130
JOINT ECONOMIC REPORT
showing the kind of essentially human adjustments which families
have to make in order to live within such incomes.
On July 23, the Joint Committee on the Economic Report and the
Select Committee on Small Business, United States Senate, issued a
committee print, Prevalence of Price Cutting of Merchandise Marketed Under Price-Maintenance Agreements. The study summarizes
the results of a survey made by Dun & Bradstreet on the extent to
which price cutting, which began in New York City following the
Supreme Court decision in Schwegemann Bros. v. Calvert Corporation,
was being followed throughout the country. The survey also attempted to determine the areas in which price cutting of items covered
by the Miller-Tydings Act was taking place, the number of stores in
,each community involved, and the lines of merchandise in which
reductions were being made.
The Joint Committee on August 15, 1951, submitted to the Congress a unanimous report, Inflation Still a Danger (S. Rept. No. 644,
82d Cong., 1st sess.), in which the committee indicated its concern
lest the combined effect of a cease-fire in Korea, a budgetary surplus
for the fiscal year just ended, and a temporary easing of inflationary
tension would lull the country and the Congress into complacency
regarding the threat of further inflation. The report also includes
materials prepared by the committee staff suggesting quantitatively
the inflationary pressures likely to be generated by excess money
demand and excess business spending-and the potential effectiveness
of various proposed stabilization measures to remove or neutralize
such inflationary pressures.
* As a convenience to committee members, the press, and other interested persons the Joint Economic Committee issued as a committee
print, Questions on General Credit Control and Debt Management,
which the Subcommittee on General Credit Control and Debt Management directed to various Government agencies, economists, bankers,
and others.
Replies to these questions were released February 29, -1952, under
the title Monetary Policy and the Management of the Public Debt.
These materials reproduce in full the replies of key Government
agencies and present a summary and abstract of the answers received
from individuals and organizations outside the Government.
The Joint Economic Committee staff, in cooperation with the staff
of the Select Committee on Small Business of the House of Representatives, has prepared a review of the proposal to put a 25-percent
limit on Federal income, estate, and gift tax rates by constitutional
amendment. This was published February 22, 1952, under the title
Constitutional Limitation on Federal Income, Estate, and Gift Tax
Rates.
COMMITTEE HEARINGS HELD, FROM MARCH 1951 THROUGH FEBRUARY 1952
Hearings were held January 23, 24, 25, 26, 28, 30, 31, and February
1, 1952, in connection with the committee's review of the 1952
Economic Report of the President. Members of the President's
Council-of Economic Advisers and the Director of the Bureau of the
Budget appeared before the committee in executive session on the
first 2 days of the hearings; these meetings were followed by a series
of public hearings and three panel discussions. Representatives of
JOINT ECONOTMIC REPORT
131
the agencies directly concerned with administering the Government's
economic stabilization program made individual presentations before
the committee and were followed by panel discussions with outstanding technicians on the nature and magnitude of the problem of
mobilization and economic stabilization, Federal fiscal policy, and
Federal direct controls. At the invitation of the Armed Services
Subcommittee of the Senate Committee on Appropriations, the
Joint Committee joined in a hearing on the military budget, February
4 and 5, 1952.
COMMITTEE STAFF
Public Law 330, Eighty-first Congress amended the Employment
Act of 1946 by increasing the appropriation authorization for the
joint committee from $50,000 to $125,000. This increased authorization, which does not represent actual expenditures but only the amount
of appropriation allowable upon adequate justification of programs
made annually to the Congress, was provided in order that the committee might have a sufficient staff to enable it to carry out the functions set forth in the Employment Act of 1946. It was pointed out
in the report of the Senate Banking and Currency Committee, which
accompanied the amending bill (S. 2085) thatThe joint committee should be staffed with a number of top economists capable
of analyzing and relating fiscal, monetary, and regulatory policy. It should be
equipped to appraise and relate international and foreign-trade policies to our
domestic economy and continually study national product, and national income
including resources, plant capacity, and price, wage, and profit relationships, and
the like. It would be contemplated that this enlarged staff, functionally organized,
would not engage in duplicating research, but rather devote its attention to bringing to the committee information and independent objective advice on these
related economic problems.
*
*
*
Several of these fields of specialization were covered by members
already on the staff when the legislation was passed. A recruiting
program has added to the original group of technicians and provided
generally for the fields which were not covered. The committee staff
now includes an economist specializing in studies of employment, production, and purchasing power; an associate economist who is trained
in agricultural economics and also assists in general economic analyses;
an economist on monetary, credit, and fiscal policies; and a research
assistant concentrating on studies of low-income families and welfare
programs. In addition to the full-time professional staff consisting of
these technicians, the clerk of the committee, who also serves as
economist on regional development studies, and the staff director, the
committee has a small, statistical and secretarial staff of seven trained
persons. An additional economist has been designated as the minority
representative and, as such, reports to the ranking minority member.
All other members of the staff are under the immediate supervision of
the staff director and are available at all times to assist any member
of the committee.
In order to limit the size of its full-time professional staff to the
essential minimum, the committee has made a practice of borrowing
personnel from other Government agencies on a reimbursable basis
whenever its special studies are of a magnitude sufficient to require
such action. The economist currently working with the Subcommittee on General Credit Control and Debt Management has been
borrowed from the International Monetary Fund. Additional special-
132
JOINT ECONOMIC REPORT
ists have been borrowed from time to time from the Legislative
Reference Service of the Library of Congress.
In addition to authorizing the appointment of its own staff, the
Employment Act of 1946 authorizes the Joint Committee on the
Economic Report to* * * utilize the services, information, and facilities of the departments and,
establishments of the Government * * *.
In keeping with this provision and the general attitude of the Congress.
as expressed in the Senate Banking and Currency Committee report,.
the staff has carefully avoided engaging in duplicating research but
has devoted its attention to providing the committee with information
and objective analyses on a wide range of economic problems. Fre-quently this has involved organizing information already existing in
the executive agencies in a way to make it of maximum use to thecommittee. Conferences are held with informed Government tech-nicians in the field and the experience of the various agencies brought
to bear through cooperative research projects stimulated and sometimes organized by the Joint Economic Committee staff. This has.
involved working not only with the staff and members of the Council
of Economic Advisers, the committee's executive branch counterpart,
but with all agencies which have some contribution to make to the
problem at hand. This approach has served to minimize the duplication of work but has in no way affected the independence of operation.
and thinking of the Joint Economic Committee staff.
DISTRIBUTION OF COMMITTEE MATERIALS
The last report on the distribution of the Joint Economic Committee
materials covered the period between April 1950 and March 1951.
Since March 1951 and through February 1952, the Joint Committeeon the Economic Report has released or re-issued a total of ninestudies in the form of committee prints, reports, or documents, and
one hearing. At the same time the committee still had available a.
small stock of its earlier studies. Total distribution of the e new and
prior publications totaled 48,000 copies for the period all of which
were distributed only on request. The committee also issued during
the year, the monthly statistical publication, Economic Indicators;
Over 1,000 copies a month of Economic Indicators were distributed to
Members of Congress, congressional committees, the press, depository
libraries, and the Council of Economic Advisers.
Nineteen of the joint committee's reports were on sale by the Superintendent of Documents for varying lengths of time during the period
March 1951 through February 1952, with total sales amounting to approximately 7,000 copies. Both the subscription sales and individual
sales of Economic Indicators made a steady increase from 2,500 a
month at the beginning of the period to over 3,000 in February 1952-
PUBLICATIONS
OF THE JOINT COMMITTEE
REPORTl
JANUARY 1949-FEBBUARY
ON
THE ECONOMIC
1952
Joint Economic Report (Report of the Joint Committee on the Ecconomic Report
on the January 1949 Economic Report of the President), Senate Report 88:
March 1949.
Joint Economic Report (minority views of the Joint Committee on the Eeconomic
Report on the January 1949 Economic Report of the President), part II of
Report88: 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. (Sale price, 60 cents): September 1950; reprinted
from committee print of October 1949.
Hearings on 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 Low-Income
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 lowincome families assembled by the staff of the Subcommittee on Low-Income
Families) Senate Document 231. (Sale price,35 cents): 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. (Sale price, $1): January 1950; reprinted from committee
print of November 1949.
Hearings, Subcommittee on Investment (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. (Sale
price 20 cents): January 1950.
Hearings on 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. (Sale price 15 cents):
January 1950.
*Employment and Unemployment (Report of the Subcommittee on Unemployment), Senate Document 140. (Sale price 30 cents): February 1950.
Hearings, Subcommittee on Investment (December 6, 7, 8, 9, 12, 13, 14, 15, 17,
1949): February 1950.
Hearings, Subcommittee on Low Income (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.
Superintendent of Documents, Govern1Publications marked with an asterisk (') are on sale at the
practice of the Joint Economic Committee
ment Printing Office, Washington 25, D. C. It is the general
and to arrange
to make available a limited supply of single copies of its publications for free distribution
orders.
for the sale of its studies through the Superintendent of Documents to take care of quantity
distributed to
are
and
hearing,
Printed reports of hearings are available only on special request for each
depository libraries throughout the country.
133
134
JOINT ECONOMIC REPORT
Hearings, December 1949 Steel Price Increases (January 24, 25, 26, 27): March
1950.
*Low-Income Families and Economic Stability (final report of the Subcommittee
on Low-Income Families), Senate Document 146.
March 1950.
(Sale price 15 cents):
*Volumeand Stability of Private Investment (final report of the Subcommittee on
Investment), Senate Document 149.
(Sale price 15 cents): March 1950.
*December 1949 Steel Price Increases (Report of the Joint Committee on the Eco-
nomic Report), Senate Report 1373.
(Sale -price 20 cents): March 1950.
*Handbook of Regional Statistics (material assembled by the staff of the Joint
Committee on the Economic Report), committee print. (Sale price $1):
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.
(Sale price 35 cents): 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. (Sale price 25 cents): January 1951.
*Underemployment of Rural Families (materials prepared by the staff of the Joint
Committee on the Economic Report), committee print. (Sale price 20 cents):
February 1951.
*The Economic and Political Hazards of an Inflationary Defense Economy (ma-
terials prepared by the staff of the Joint Committee on the Economic Report),
committee print. (Sale price 30 cents): 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 Report of the President), Senate Report 210. (Sale price
30 cents): 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. (Sale price 35
cents): July 1951.
Prevalence of Price Cutting of Merchandise Marketed Under Price-Maintenance
Agreements, May 28 through June 25, 1951 (study prepared for the Joint Committee on the Economic Report and Select Committee on Small Business),
committee print.
*The Need for Industrial Dispersal (materials prepared for the Joint Committee
on the Economic Report by the committee staff), Senate Document 55. (Sale
price 30 cents): August 1951.
National Defense 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. (Sale price 15
cents): August 1951.
*uestions 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. (Sale price 15 cents):
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).
(Sale price: Part I, $1.75; Part II, $2.50): February 1952.
*Hearingst January 1952 Economic Report of the President (January 23, 24, 25,
26, 28, 30, 31, February 1). (Sale price $1.25): 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 January 1952
Report of the President together with National Defense and the Economic
Outlook for the Fiscal Year 1953, materials prepared for the Joint Committee
on the Economic Report by the Committee staff): March 1952.
*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): monthly.
0
@FedFRASER