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Mr. WALLACE. I don't agree with you that this bill as drawn discriminates in any way against the nonunion man.

Mr. HOFFMAN. On its face, it doesn't. On its face, it says "all"; but you know very well when you turn over to that fair standards and the NLRB, and all that, and go into these industrial jobs, that, as a matter of practice, that man either belongs to a union and keeps his dues paid up or he doesn't hold his job.

Mr. WALLACE. That doesn't flow from this bill.

Mr. HOFFMAN. It flows from the failure in this bill and the failure in other legislation to prevent the creation of a monopoly of labor; and if I was an employer, and without heart and unscrupulous, I would be glad to have a union have a corrupt boss so that he would sell me his slave labor right across the table when I slipped him something. That is my point. That is what might happen. It may be what has happened on some cases. That is all.

The CHAIRMAN. Mr. Secretary, I know you have had full employment today, and we will take a recess. Thank you very much.

Mr. WALLACE. I appreciate the splendid hearing all of you have given us.

(Whereupon, at 6:20 p. m., the committee recessed until 10 a. m. tomorrow, Wednesday, October 31, 1945.)

FULL EMPLOYMENT ACT OF 1945

WEDNESDAY, OCTOBER 31, 1945

HOUSE OF REPRESENTATIVES, COMMITTEE ON EXPENDITURES IN THE EXECUTIVE DEPARTMENTS,

Washington, D.C. The committee met at 10 a. m., the Hon. Carter Manasco (chairman) presiding.

The CHAIRMAN. The committee will come to order. We have this morning the Honorable Fred Vinson, Secretary of the Treasury.

Mr. Vinson you may proceed.
Secretary Vinson. Thank you, Mr. Chairman.

STATEMENT OF HON. FRED VINSON, SECRETARY OF THE

TREASURY

The war has taught us many things about our economy. It showed that when the people of the United States set their minds on doing a big job, that job will be done, and the whole resources of this great country will be mobilized for its accomplishment. Winning the war was, abviously, all-important. So we did our best to call into service every human and material resource which the country had at its command and put it to use either directly for the war effort or for the maintenance of the civilian economy.

The war elso revealed the tremendous productivity inherent in our economy. Our gross national product increased from $89,000,000,000 in 1939 to $199,000,000,000 in 1944. Some of this, of course, represented an increase in prices; but the product of the country, expressed in real terms, increased by about 75 percent.

We learned other important facts about our economy, too, in winning the war. We discovered that as a consequence of our all-out effort, unemployment disappeared. There were more employment opportunities than people seeking work. The job sought the man, rather than the man the job.

We discovered that as a result of the effective use of our resources during the wartime period, the real standard of living of the civilian population was higher in 1944 than it had been before the war, despite the fact that nearly one-half of our production was for war purposes.

The No. 1 problem which confronts the people of the United States here at home right now is how to apply the economic lessons of war to the peace. Now, at first glance, it mighht appear that there would be a hopeless disagreement in this country on how this can be done. But a more careful study will convince thoughtful men that there are important fundamentals upon which all can agree.

In fact, there are two fundamentals upon which the American people already are agreed. The first is that our economic problems must be solved within our system of free enterprise. The second is that the most important of these problems is to maintain full employment. Mass unemployment is the source of most of our social and economic evils; it is the greatest menace to economic security in this country. We cannot periodically condemn 10,000,000 unemployed to bear this burden. We cannot declare these men and women industrial surplus and dispose of them in that way. That is not the American way of doing things. I do not subscribe to the pessimistic view that unemploment is inevitable and that any effort to prevent it is a threat to free enterprise. Our people want to keep the economic system under which this country achieved leadership. They know it offers the best hope of continued economic progress and higher standards of living. They will never abandon this system so long as they can cherish this hope. The only threat to free enterprise in this country can come from mass - loyment Our task is to remove this threat by meeting the problem. And let me make this clear: Unemployment is not the fault of business. Businessmen do not want to stop production or to lay off men. They know that profits come from production. So long as they can find markets, they are prepared to employ labor and to produce goods. It is only when the demand falls off, when goods cannot be sold, that they close down or reduce their force. Give Amer: ican business the markets, the demands for the output, and we will witness a new miracle of production that will surpass anything we have seen before. Unemployment is not the fault of business. On the contrary, business, like labor, is the victim of depression. It is equally clear that unemployment is not the responsibility of business. When demand falls off, businessmen have no alternative; they must cut production. If they persist in producing goods for which there are no markets, they will incur losses that may force bankruptcy. In general, when businessmen produce efficiently, when they sell at fair prices, and when they pay good wages, they have done all they can do, and they are entitled to profits from production. Business cannot assume the responsibility on unemployment. Now the fact is that somewhere there must be a responsibility on unemployment. There can be no vacuum, no void of responsibility, on the most important domestic problem confronting the American people. When we face the issue we must admit that all of us have a responsibility to see that our economic system works, to see that there are opportunities for jobs for men and women willing and able to work. This is a responsibility of all the people, and we must look to the Government, acting for all the people, to meet this responsibility. There is nothing revolutionary in recognizing this responsibility. In every deep depression the Government has found it necessary to deal will unempolyment. In 1921, during the crisis of that year, President Harding called the Conference on Unemployment which met under the chairmanship of Herbert Hoover. In 1931, in the midst of an even greater crisis, Congress passed the Employment

Stabilization Act, establishing a board composed of the Secretary of the Treasury, the Secretary of Commerce, the Secretary of Agriculture, and the Secretary of Labor. The whole experience of the 1930's is concrete evidence that the Government must deal with the problem and that it cannot abdicate this responsibility.

During depression we are conscious of the need for Government action, but as soon as we have prosperity we seem to forget it. In 1928, in the midst of the great boom, Senator Wesley Jones, of Washington, introduced a bill for a reserve of public works to be constructed during depression. The bill was killed, according to the Senate committee report on S. 380, because it was deemed unwise to mention depression before a Presidential campaign. That same year Senator Wagner introduced the employment-stabilization bill. It was a bill to provide for the advance planning and regulated construction of public works, for the stabilization of industry, and for aiding in the prevention of unemployment.

This bill, which could have been so helpful when the crash came in 1929, lay dormant for 3 vital years. It was only in the midst of the deepest depression of our history, when it was too late to take measures that might have prevented the catastrophe, that we realized what should have been done. When the bill was finally passed in 1931, it was in emasculated form.

The Employment Stabilization Act did not provide for a comprehensive program on unemployment. It was not concerned with many types of measures that can be taken to prevent a great depression. It dealt exclusively with the planning and timing of public works as a means of providing employment during depression. It was enacted during a great crisis when public works could do no more than alleviate the mass unemployment that already existed. This could be done under the act, and this was done as far as possible.

As a matter of fact, John Garner put through a bill in 1932 authorizing expenditure of $2,200,000,000 for public works. This bill followed the principles established in the Employment Stabilization Act. The money was to be used only for the construction of public works previously approved by Congress or the Executive, except for $70,000,000 for post offices in the smaller communities. The bill was vetoed by President Hoover. In 1933 Congress passed another bill authorizing 3.3 billion dollars for public works. The construction so authorized was undertaken through the PWA.

The Employment Stabilization Act never contemplated the submission of a national budget with recommendations to deal with prospective depressions. It only provided for plans to arrange the construction of public works in a manner which would assist in the stabilization of employment. The timing of public works is a useful part of a program for dealing with prospective unemployment. But by itself, it is entirely inadequate. Under any circumstances, it would not be possible to do anything now under this act, for these functions which had been consolidated with those of the National Resources Planning Board were abolished by Congress in 1943.

The full-employment bill is a logical development of the act of 1931. It recognizes the continuing responsibility of Government to see that there are enough job opportunities. It provides for a national budget that will show the amount of production necessary to

maintain full employment, and it requires estimates to be made of the [...". demand for this production. Such a national budget will e transmitted by the President to Congress each year and will be considered by a joint congressional committee which will report to the Senate and the House of Representatives its findings and recommendations with respect to the national budget. This procedure seems to me the common-sense and dollarwise way to deal with the problem of unemployment—through prevention rather than through relief. The first step is to get the #! and place them before those who have the responsibility for dealing with the problem. The argument has been made that if the national budget calls attention to a prospective deficiency or excess of demand, depression or

prosperity will start at once. The evidence does not bear out this

view. We don't get prosperity or depression merely by predicting it. If we could, we would never have had the crisis of 1929 to 1933. Businessmen were assured time and time again that prosperity was just around the corner. Businessmen act on the prospects for demand for their products from their customers. When demand falls off, they stop production. A national budget that recognizes a deficiency, in opportunities for employment and carries a recommendation for dealing with the problem can give increased confidence to businessmen to continue with their investment, their production, and their employment. In spite of the oft-repeated statement that the Government cannot make accurate estimates of the type required by this bill, I want to go on record as stating that the §. is in a position to make reasonably good estimates. In dealing with the tax and savings program during the war we had to make estimates of prospective income and expenditure. From these estimates we developed a program to reduce and limit over-all expenditure to the available supply of consumer goods. Nobody claims that the statistical data we new have are perfect. They can and will be improved under this bill. Estimates of the national budget will be made after consultation with business on the basis of data provided by business. I have seen some doubt cast as to the competence of the Government to prepare a national budget on the grounds that the Government has not done very well in estimating its expenditures and receipts. I should like to comment briefly on the receipts side of this criticism, since the estimate of receipts is a statutory responsibility of the Treasury Department. In the 6 years before the war, from 1935 to 1940, the average error between estimated and actual tax receipts averaged about 6 percent. In 4 of these 6 years, the error was 5 percent or less. Now, this is not a bad record, because it is more difficult to estimate tax receipts than it is to forecast business conditions. We estimate tax receipts by starting with an estimate of business conditions. An arror of 6 percent in tax receipts is probably comparable to an error of 3 percent on national income. It is the estimate of national income and its components that is significant for the purposes of the proposed national budget. An error of 3 percent would represent a difference of not more than 1,500,000 jobs from the number actually employed. In dealing with the problem of preventing mass unemployment, an error of 3 percent could not

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