erp1971 appendixes 2

Appendix B

REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THECOUNCIL OF ECONOMIC ADVISERS DURING 1970

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERS,

Washington, D.C., December 31,1970.T H E PRESIDENT:

SIR : The Council of Economic Advisers submits this report on its activitiesduring the calendar year 1970 in accordance with the requirements of theCongress, as set forth in Section 4 (d) of the Employment Act of 1946.

Respectfully,PAUL W. MCCRACKEN,

Chairman.HENDRIK S. HOUTHAKKER.

HERBERT STEIN.

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Report to the President on the Activities of theCouncil of Economic Advisers During 1970

The Council of Economic Advisers was established by the EmploymentAct of 1946 as part of the Executive Office of the President. The Councilis responsible for analyzing economic conditions and formulating policiesthat will achieve long-term goals of "maximum employment, production,and purchasing power." As advisers to the President on economic matters,the Council in 1970 devoted its professional capabilities to a wide rangeof issues.

The Council formed February 4, 1969, following a change of Admin-istration, remains intact with Paul W. McCracken as Chairman andHendrik S. Houthakker and Herbert Stein as Members. Mr. McCrackenis on leave of absence from the University of Michigan, where he is EdmundEzra Day University Professor of Business Administration. Mr. Houthakkeris on leave of absence from Harvard University, where he is Professor ofEconomics. Mr. Stein came to the Council from his post as Senior ResearchFellow at the Brookings Institution.

Below is a list of all past Council Members and their dates of service:

Name

Edwin G. NourseLeon H. Keyserling

John D. Clark

Roy BloughRobert C. TurnerArthur F. BurnsNe i lH . JacobyWalter W.StewartRaymond J. Saulnier

Joseph S. DavisPaul W. McCrackenKarl BrandtHenry C. WallichJames TobinKermit GordonWalter W. HellerGardner Ackley

John P. LewisOtto EcksteinArthur M. Okun

James S. DuesenberryMerton J. PeckWarren L. Smith

Position

ChairmanVice ChairmanActing ChairmanChairmanMemberVice ChairmanMemberMemberChairmanMemberMemberMemberChairmanMemberMemberMemberMemberMemberMemberChairman.. -MemberChairmanMemberMemberMemberChairmanMemberMemberMember .

Oath of office date

August 9, 1946August 9,1946November 2, 1949May 10, 1950August 9, 1946May 10, 1950June 29,1950September8, 1952March 19, 1953September 15,1953December 2, 1953April 4, 1955December 3, 1956May 2, 1955December 3, 1956November 1, 1958.May 7, 1959January 29,1961January 29,1961January 29,1961August 3, 1962November 16, 1964May 17, 1963September 2, 1964November 16,1964February 15, 1968February 2, 1966February 15, 1968July 1, 1968 -

Separation date

November 1,1949.

January 20,1953.

February lh , 1953.August 20, 1952.January 20,1953.December 1, 1956.February 9, 1955.April 29,1955.

January 20,1961.October 31, 1958.January 31, 1959.January 20, 1961.January 20 ,1961.July 31 , 1962.December 27,1962.November 15, 1964.

February 15,1968.August 31, 1964.February 1,1966.

January 20, 1969.June 30,1968.January 20, 1969.January 20,1969.

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ECONOMIC POLICY MAKING AND THE COUNCIL OFECONOMIC ADVISERS

RESPONSIBILITIES OF THE COUNCIL

The Employment Act of 1946 describes the objectives of national eco-nomic policy as "creating and maintaining, in a manner calculated to fosterand promote free competitive enterprise and the general welfare, condi-tions under which there will be afforded useful employment opportunities."The basic responsibility of the Council is to advise the President concern-ing Federal activities to achieve that goal. Statistical analyses of economicconditions and of the results of stabilization policies are an important partof the assignment, along with the preparation of economic forecasts, usinga variety of analytical tools. Final output of all Council activities is presentedin personal consultations with the President, in communications from theChairman to the President, in presentations to the Cabinet and Domestic Af-fairs Council, and in reports to other Executive Offices and the Congress.

While the Employment Act specifically directs the Council "to appraisethe various programs and activities of the Federal Government," this func-tion is largely an internal operation. The Council staff constantly workswith other agencies to assist the Administration in developing new legis-lative programs and in appraising existing activities. It also makes recom-mendations to the Administration concerning pending legislation. In 1970,the Council prepared responses to legislative referrals involving 180 bills. Inpreparing these recommendations the Council considers the broader view-point of the general public and the effects on the entire economy. Specif-ically, the Council helped formulate new Administration programs relatingto manpower training and development, unemployment compensation, na-tional emergency strikes, housing and community development, regional eco-nomic development, welfare and social security, health, education, consumerinterests, agriculture, trade policies, transportation systems, protection ofthe physical environment, Federal credit programs, financial institutions,and assistance to small business. In addition, the Council and its staff con-tributed to numerous interagency efforts to improve Federal Governmentprograms, policies, and procedures in such diverse areas as the regulationof financial institutions; meat and dairy import restrictions; internationalfinance; expansion of exports; foreign investment; development of naturalresources; transportation systems and their regulation; Federal procure-ment policies; use of national land; Federal sponsorship of research; pro-grams in health and education; national problems concerning energy; anti-trust; telecommunications; resource stockpiling; studies of basic industries,such as copper; environmental programs; and many others.

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POLICY COORDINATION

The broad range of economic policy issues confronting the Council re-quires it to work very closely with other Government officials. There isespecially close coordination between the Treasury Department, the Officeof Management and Budget, and the Council of Economic Advisers. Ap-proximately once each week the Secretary of the Treasury, Director of theOffice of Management and Budget, and Chairman of the Council meetto discuss the economic situation, Federal budget matters, and broad eco-nomic policy issues. This is the group known as the "Troika." A secondtier consists of one of the other Council Members, the Economist for theOffice of Management and Budget, and the Assistant Secretary of the Treas-ury for Economic Policy. A third tier, consisting of senior staff economistsfrom the three agencies, meets frequently to appraise the economic situa-tion and its policy implications. The outlook is summarized in memorandawhich they prepare and clear through the second tier of the "Troika" foruse by the principals. The "Troika" meets with the President frequently.From time to time the Chairman of the Board of Governors of the FederalReserve System participates in these meetings, forming the "Quadriad."

The Cabinet Committee on Economic Policy, established by ExecutiveOrder of the President on January 24, 1969, provides for coordination ofeconomic policies within the Executive Office. Members include thePresident; the Vice President; the Secretaries of the Treasury, Agriculture,Commerce, Labor, and Housing and Urban Development; Mr. Moynihan,Counselor to the President in 1970; the Director of the Office of Manage-ment and Budget; the Deputy Under Secretary of State for Economic Affairs;and the Chairman of the Council of Economic Advisers (who coordinatesthe work of the Committee).

This Committee considers a broad spectrum of economic issues, such asinterest rate ceilings for financial institutions, national housing requirements,establishment of a commission to review Federal statistics, lumber and ply-wood resources, post-Vietnam economic planning, the copper industry, agri-cultural trade, antitrust, operation of capital markets, transportation, andFederal budgeting procedures.

Council Members participate in a number of other Cabinet and inter-agency committees. In 1970, the Chairman served as Chairman of theCabinet Committee on Construction and of the Domestic Affairs CouncilSubcommittee on the National Energy Situation. The Chairman is a mem-ber of the Domestic Affairs Council and several of its various subcommittees,the Property Review Board, the National Commission on Productivity, theRegulations and Purchasing Review Board, and the Defense ProgramsReview Committee. He also attends meetings of the National SecurityCouncil when agenda items require his attention.


The other two Council Members and the Senior Staff Economists alsoparticipate in the task forces and study groups designated by these com-mittees. The Chairman of the Council regularly attends Cabinet meetings.

The Council has a particularly close association with the Joint EconomicCommittee of the Congress, which was created by the Employment Act of1946 "to make a continuing study of matters relating to the Economic Re-port" and to contribute to the achievement of the economic objectives ofthat Act. During 1970, the Council testified three times before the JointEconomic Committee. On February 16, the Council presented testimonyfollowing submission of the Economic Report to Congress. The Joint Eco-nomic Committee is required by the Act to file a report to Congress byMarch 1, evaluating the recommendations and content of the EconomicReport. On June 15, Mr. Stein testified before the Joint Economic Com-mittee Subcommittee on Economy in Government Hearings on ChangingNational Priorities. On July 20, the Chairman reviewed economic conditionsand the outlook before the Joint Economic Committee. Council Membersalso presented testimony to Congress four other times during 1970. OnFebruary 9, the Council presented testimony to the House Committee onBanking and Currency concerning national housing objectives. The sameday the Chairman appeared before the House Committee on Appropria-tions. On March 3, Mr. Houthakker presented testimony to the NationalCommission on Product Safety. And on October 6, Mr. Stein appearedbefore the House Select Committee on Small Business, Subcommittee onSpecial Small Business Problems, to discuss the national energy situation.

At the international level, Council Members and staff are active in meet-ings of the Economic Policy Committee of the Organization for EconomicCooperation and Development. The Chairman leads the U.S. delegationto the Economic Policy Committee and serves as its Vice Chairman. ThisCommittee attempts to improve the mutual understanding and coordinationof domestic economic policies among member nations. Council Membersand Senior Staff Economists also participated in several Economic PolicyCommittee subcommittees, including Working Party III on the balance ofpayments and international financial problems, the Working Group .onShort-Term Economic Prospects, Working Party II on policies for thepromotion of long-term economic growth, the Manpower and Social AffairsCommittee considering manpower policies in member countries, and anew committee created by the Organization for Economic Cooperation andDevelopment to study environmental problems. In 1970, Council personnelattended 14 international meetings.

PUBLICATIONS

The annual Economic Report is the major publication through which theCouncil explains economic policies to the general public. About 52,000copies of the February 1970 Economic Report have been distributed. The

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Statistical Office of the Council also prepares Economic Indicators, a monthlypublication issued by the Joint Economic Committee. The current circula-tion of Economic Indicators is approximately 10,000 copies. On August 7,the Council published its first Inflation Alert, which summarized the his-torical relationship of wages, prices, and productivity, reviewed changesin the major wage and price indexes during the first half of 1970, andevaluated several major wage and price decisions made during that timeperiod. The second Inflation Alert was released on December 1.

PUBLIC CONTACTS

During 1970, the Council continued to hold periodic meetings withgroups of academic, business, and labor union economists to exchange viewson economic policies. Many individual businessmen and labor leaders, stu-dents, educators, foreign visitors, news media representatives, and interestedcitizens have also visited with Council Members to discuss a wide range ofeconomic issues. Finally, to communicate Council viewpoints concerningcurrent economic conditions and necessary policy decisions, Council Membersand the Special Assistant to the Chairman made a substantial number ofspeeches throughout the year and participated in frequent interviews withrepresentatives of all types of news media.

ORGANIZATION AND STAFF OF THE COUNCIL

OFFICE OF THE CHAIRMAN

As stipulated in the Employment Act, as amended by ReorganizationPlan No. 9 in 1953, the Chairman is responsible for reporting the Council'sviews to the President. The Chairman fulfills this charge through directconferences with the President and reports describing current developmentsand economic policy requirements. The Chairman also represents the Coun-cil at Cabinet meetings; at congressional briefings; in U.S. delegations tointernational activities; in meetings with the Chairman of the FederalReserve System and Chairman of the Federal Home Loan Bank Board;in sessions of the "Troika" and "Quadriad" and as the chairman of numerousCabinet and interagency committees; in the coordination of professionalstaff activities; and in contacts with other Government offices.

COUNCIL MEMBERS

Specific professional activities are directed by the other two Council Mem-bers. While the Council is not departmentalized, and all three Membersfrequently work together on major projects, there is an informal division


of responsibilities by subject area. Mr. Houthakker's responsibilities includedirection of staff assignments covering such matters as international financeand trade policy, foreign aid and economic development, agriculture, trans-portation, telecommunications, industrial organization and antitrust, laborrelations, long-term economic growth, consumer affairs, natural resources,technology, and environmental problems. He also supervises the preparationof Inflation Alert.

Mr. Stein's responsibilities include forecasting and analyses of economicconditions, medium-term economic projections, fiscal policy and taxation,Federal budget concepts and reform, Federal credit programs, monetarypolicy, financial institutions, housing and urban affairs, welfare and socialsecurity problems, problems relating to education, health, manpower, andhuman resources, as well as national defense programs and the problems oftransition from a wartime to a peacetime economy.

In addition, Mr. Houthakker and Mr. Stein represent the Council at awide variety of official gatherings, including meetings of the Cabinet Com-mittee on Economic Policy, the Cabinet Committee on Construction, andthe Economic Policy Committee of the Organization for Economic Coopera-tion and Development. The entire Council meets frequently with the Boardof Governors of the Federal Reserve System. One of the Members is alwaysdesignated as Acting Chairman when the Chairman is absent.

PROFESSIONAL STAFF

At the end of 1970, the professional staff included 14 Senior Staff Econ-omists, two Statisticians, six Junior Economists, and one Research Assistant.Each member of the professional staff is responsible for economic analysisand policy recommendations in a major subject area involving Councilinterests. In addition, the staff economists carry out many different Counciland interagency assignments requiring a broad application of their generalknowledge and analytical skills. The professional staff and their specialfields are:

Senior Staff Economists

John D. Darroch Industry Problems and Prices.Murray F. Foss Economic Analysis and Forecasting.Sidney L. Jones Special Assistant to the Chairman.Marvin H. Kosters Labor Economics and Manpower Programs.Irene Lurie Welfare and Social Programs.Edward J. Mitchell Industry Problems and Natural Resources.Michael H. Moskow Labor Economics and Manpower Programs.Sam Peltzman Industry Problems, Regulation, and Environment.Rudolph G. Penner Fiscal Policies and Foreign Aid.Frank C. Ripley Economic Analysis and Forecasting.Gary L. Seevers Agricultural Programs and Policies.William L. Silber Money and Capital Markets.T. Nicolaus Tideman Urban Economics and Construction.Marina v. N. Whitman International Finance and Trade.

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Statisticians

Frances M. James Senior Statistician.Catherine H. Furlong Statistician.

Junior Staff Economists

Christine H. Branson Money and Capital Markets.William R. Keeton International Finance and Trade.Robert A. Kelly Transportation, Natural Resources, and Housing.David C. Munro Economic Analysis and Forecasting.Lydia Segal Economic Analysis and Forecasting.J. Michael Swint Fiscal Policies.

Research Assistant

Joanne M. Nusrala Labor Economics and Manpower Programs.

Frances M. James, Senior Staff Statistician, is in charge of the Council'sStatistical Office. Miss James has major responsibility for managing theCouncil's economic and statistical information system. She also supervisesthe preparation of Economic Indicators for publication, the preparation oftables and charts for a wide variety of meetings throughout the year andfor the Economic Report, and the fact checking of memoranda, speeches,and testimony. Assisting Miss James are Teresa D. Bradburn, Catherine H.Furlong, V. Madge McMahon, and Natalie V. Rentfro.

The Council also conducts a student intern program, employing a limitednumber of outstanding students of economics, both graduate and under-graduate for various periods, particularly during the summer months. The1970 interns were Victoria A. Dailey (University of Virginia), Michael C.Deppler (Georgetown University), Ronald G. Ehrenberg (NorthwesternUniversity), Richard J. Herring (Princeton University), and Charles F.Revier (Massachusetts Institute of Technology). Professor Raymond G.Lloyd (Tennessee A. and I. State University) also joined the staff duringthe summer.

At the end of 1970 the list of economists serving as active consultantsto the Council included William H. Branson (Princeton University), JohnT. Dunlop (Harvard University), Ray C. Fair (Princeton University),Milton Friedman (University of Chicago), Alan Greenspan (Townsend-Greenspan & Co.), Gottfried Haberler (Harvard University), Arnold C.Harberger (University of Chicago), George W. Hilton (University of Cali-fornia, Los Angeles), George Katona (University of Michigan), Step-hen P. Magee (University of California, Berkeley), Thomas G. Moore(Michigan State University), Saul Nelson (private consultant), David J.Ott (Clark University), Ezra Solomon (Stanford University), George J.Stigler (University of Chicago), Stephen J. Tonsor (University of Michi-gan), Lloyd Ulman (University of California, Berkeley), Thomas D. Wil-lett (Harvard University), and G. Paul Wonnacott (University ofMaryland).

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SUPPORTING STAFF

The Administrative Office coordinates the activities of all supportingpersonnel responsible for preparation and analysis of the Council's budget,procurement of equipment and supplies, processing of legislative referrals,distribution of Council speeches, reports, and congressional testimony,and responding to correspondence and inquiries from the general public.Mr. James H. Ayres serves as Administrative Officer, assisted by Nancy F.Skidmore, Elizabeth A. Kaminski, Margaret L. Snyder, and Bettye T. Siegel.The duplicating, messenger, and mail department is operated by James W.Gatling, Judson A. Byrd, and A. Keith Miles.

Secretarial staff members are Daisy S. Babione, Mayme Burnett, MaryCatherine Fibich, Elizabeth F. Gray, Dorothy L. Green, Lillie M. Hayes,Laura B. Hoffman, Bessie M. Lafakis, Patricia A. Lee, Karen J. MacFarland,Eleanor A. McStay, Joyce A. Pilkerton, Dorothy L. Reid, Earnestine Reid,Linda A. Reilly, and Alice H. Williams.

In preparing this Economic Report, the Council relied upon the editorialskills of Rosannah C. Steinhoff.

DEPARTURES

The Council's professional staff is drawn primarily from universities andresearch institutions. Economists are normally selected to serve for 1 or2 years. Senior Staff Economists who resigned during the year were WilliamH. Branson (Princeton University), Phillip D. Cagan (Columbia Uni-versity), Harold O. Carter (University of California, Davis), Charles E.McLure, Jr. (Rice University), Thomas G. Moore (Michigan State Uni-versity), Saul Nelson, Robert J. Rene de Cotret (Ministry of Finance,Canada), ThomasD. Willett (Harvard University), and G. Paul Wonnacott(University of Maryland). Mr. Albert H. Cox, Jr. also resigned from theposition of Special Assistant to the Chairman. Junior Economists whoresigned in 1970 were Leslie J. Barr, Paul N. Courant, and Rosemary D.Marcuss. Research Assistants Karen J. Horowitz, Barry M. Levenson, andTimothy B. Sivia also resigned. Other resignations included Patricia C.Byfield and Betty Lu Lowry, Secretaries, and Christine L. Johnson fromthe Statistical Office.

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erp1971 appendixes 2

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