JOINT COMMITTEE ON THE ECONOMIC REPORT (Created pursuant to sec. 5 (a) of Public Law 301, 79th Cong.) SENATE HOUSE OF REPRESENTATIVES JOSEPH C. O'MAHONEY, Wyoming, Chairman EDWARD J. HART, New Jersey, Vice Chairm JOHN SPARKMAN, Alabama PAUL H. DOUGLAS, Illinois WILLIAM BENTON, Connecticut RALPH E. FLANDERS, Vermont WRIGHT PATMAN, Texas FRANK BUCHANAN, Pennsylvania RICHARD W. BOLLING, Missouri JESSE P. WOLCOTT, Michigan CHRISTIAN A. HERTER, Massachusetts THEODORE J. KREPS, Staff Director Letters of transmittal.. Introduction...- Part I. Economic implications of present defense-spending plans.. Methods of removing inflationary pressures The deflationary effect of taxes__. Substantial budget surplus required to curb inflation.. Existing tax burden on low-income brackets.. Suppose tax increases are delayed?... Part II. Inflation and communism__ Inflation: The enemy sixth column. Some historical examples of the relation between monetary Austria__ China Effects of inflation on the private-enterprise system. Effects of inflation on Government machinery. Appendix A. Summary of recommendations of witnesses appearing during committee hearings January 22, 24, 25, 26, 29, 31, and February 2, 1951, on the January 1951 Economic Report of the President... Appendix B. Summary of recommendations of outstanding organizations of businessmen, labor, farmers, and consumers.. Appendix C. The derivation of the estimates of the inflationary pressures in the American economy as summarized in part I.. LIST OF TABLES 1 I. Wholesale and consumer price trends, June 1950 to June 1952-_-_- IV. Business inflationary spending on the basis of present taxes, fiscal V. Consolidated Federal cash budget, fiscal years 1950 to 1952. VII. Proposed Federal Government fiscal legislation and its economic VIII. Consumer expenditures: A. Estimated distribution of consumer expenditures by B. Application of 1948 estimates to 1950 totals.. IX. 1948 tax payments as percent of income by income brackets-- XI. Estimated additional taxes and controls needed to remove inflationary pressures. XII. Estimated additional taxes and the Federal budget, fiscal year 1952- LIST OF CHARTS 1 No. 1. 1948 tax payments as percent of income by income brackets Facing-- 14 For tables and charts in appendix C, see list there. LETTERS OF TRANSMITTAL FEBRUARY 23, 1951. To Members of the Joint Committee on the Economic Report: For the information of members of the Committee and others interested. I am transmitting herewith a staff report entitled, "Economic and Political Hazards of an Inflationary Defense Economy." The basic data are drawn from the Committee's recent hearings on the President's Economic Report and from Government and private publications and staff conferences with technicians inside and outside the Government. The report attempts to present the most reliable estimates on the basic problem of inflation which can be obtained. It is now submitted to members of the Committee for consideration and such suggestions as they may wish to make. JOSEPH C. O'MAHONEY, Chairman, Joint Committee on the Economic Report. The Honorable JOSEPH C. O'MAHONEY, FEBRUARY 21, 1951. Chairman, Joint Committee on the Economic Report, United States Senate, Washington, D. C. DEAR SENATOR O'MAHONEY: In accordance with committee instructions in July 1950, the staff has endeavored to follow the effects of sudden increases in governmental defense commitments since the outbreak of the Korean War, not only on the economy as a whole, but on its various segments. I transmit herewith a staff memorandum assembling the best available data on what is perhaps the most important single result and problem; namely, inflation. In part I an attempt has been made to prepare an economic model, or what is better called a budget for the Nation, for the current fiscal year and the next fiscal year. The estimates included in this Nation's economic budget are based upon the Committee's recent hearings on the President's Economic Report, upon staff discussions with technicians in the executive branch of the Government and with nongovernmental economists, and upon a thorough canvass of all available current comments published in outstanding economic journals and business periodicals. Quantitative estimates are hazarded concerning the likely trend of defense expenditures, production, private demand, and the like. From these computations estimates are derived of the Lilationary pressures likely to be generated by excess consumer money demand and excess business spending. A corresponding quantitative praisal is made of the effectiveness of various proposed stabilization Leasures to remove or neutralize such inflationary pressures. The aggregate results are translated into a Nation's economic budget covering the period up to June 30, 1952, that is, the end of fiscal 1952. |