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to court and they go to court, and the issue is resolved, the information is 2 to 3 years old.

So by itself a subpena can't be used all of the time; it is a threat that you have.

The CHAIRMAN. Not all of the time, but couldn't you use it on occasions to get information you couldn't get otherwise?

Mr. BOSWORTH. Yes; so far the indication we get from the companies is that they understand that the power is there, that we could use it. They don't want it invoked against them, and they are willing to supply us with information on a purely voluntary basis. They will give you voluntarily what you are going to get with the subpena. (see p. 32).

The CHAIRMAN. Their knowing you have that power should be helpful in getting the information voluntarily.

Mr. BOSWORTH. Exactly. The difficulty they raise is that the way the law is written, there appears to be some ambiguity. If they give information to us voluntarily, it is not the same thing as giving it to us under order. Under the order they get confidentiality protection. Can they get the same protection if they voluntarily cooperate? They say they are not sure, so they say issue us an order. This creates paperwork, it is time consuming, et cetera.

The CHAIRMAN. They get a pro forma subpena to give them the protection they need?

Mr. BOSWORTH. That is right.

The CHAIRMAN. Suppose we have Mr. Crandall provide for the record the number of times you have used subpena power and the circumstances.

Dr. Rees, in your statement you clearly identified the broad set of responsibilities that the Council has, how far reaching it is. There seems to be in my view still a great disparity between the responsibilities and the small staff the Council has to carry them out.

It would seem either we should increase the staff or reduce the responsibilities, so they can concentrate in the appropriate areas, and do the job they can do with the resources they have available.

What is your reaction to that?

Mr. REES. Well, I was encouraged by Dr. Bosworth's statement that they were going to try to draw more heavily on some of the other agencies of Government. There are large staffs of economists and other analysts in some of these agencies, and if a cooperative arrangement can be worked out, I think that would substitute at least in part for an increase in staff on the Council.

It is also my view that since the Council's job is largely one of persuading people, that the quality of its work is very very important, and that the quality of the staff is going to be more important than the quantity. It is not easy to recruit really high quality economists, particularly into a temporary agency. I thought Dr. Houthakker's statement about length of life is relevant to that problem.

The CHAIRMAN. The issue before this committee in this legislation is whether we go ahead with what is in the bill, providing 10 additional positions, or we agree with the President and cut it back to the present level. What is your view on that? You say you support the legislation. Does that mean you support the 10 additional positions or not?

Mr. REES. I think I would support the additional positions. I don't know what the President's reasons were for deleting them. But if I were a member of the committee I would be inclined to vote for the bill as it was originally submitted.

The CHAIRMAN. Dr. Rees, you have had fine experience on the Council, more than any witnesses we are going to have. I think you were the first Director, were you not?

Mr. REES. Yes, I was, sir.

The CHAIRMAN. Do you think this is the right kind of organization. to bring about improvement in the structural features of the economy that contribute to inflation?

Mr. REES. Well, it can help, but I don't think that by itself the Council on Wage and Price Stability is going to make large structural changes. There have been a few instances where the Council cooperated in efforts to change the structure of collective bargaining in ways that would be less inflationary.

The CHAIRMAN. Dr. Bosworth, how do you feel about that?

Mr. BOSWORTH. I think it would be very misleading to imply that somehow the issue of whether or not there is a Council on Wage and Price Stability would solve or not solve the question. I would agree with Mr. Rees that the contributions the Council can make are marginal. Much more depends on what is done with it, what the attitude of the administration and the Congress are with respect to being willing to make some rather painful choices in many cases.

The CHAIRMAN. Well, the act specifically charges you with this responsibility, and I quote:

The Council shall work with labor and management in the various sectors of the economy having special economic problems as well as with appropriate Government agencies to improve the structure of collective bargaining and the performance of those sectors in restraining prices.

What are you doing in the area of collective bargaining, for example, that particular structure? You have a mandate from Congress, you are required to do it by law. What are you doing?

Mr. BOSWORTH. I might ask Bob Crandall to answer in more detail. Some effort was made, I believe when Mr. Rees was chairman, that had to do with trying to improve the structure of collective bargaining in some problem areas in the construction industry, trying to form employer organizations and keep those employer organizations together to try to provide a more centralized form of labor bargaining than would otherwise occur, to help prevent this leap-frogging process between different crafts in different areas of the country, and try to keep those industries a little bit more in step.

The Council, I think, also had cooperated with an initiative that came originally from Mr. Dunlop, in a formation of labor-management organizations in the food industry.

[The following letter was received for the record:]

Hon. WILLIAM PROX MIRE,
U.S. Senate,

Washington, D.C.

EXECUTIVE OFFICE OF THE PRESIDENT,
COUNCIL ON WAGE AND PRICE STABILITY,
Washington, D.C., August 1, 1977.

DEAR SENATOR PROXMIRE: During the hearings on the continuation of the Council on Wage and Price Stability, you asked what the Council was doing in

the collective bargaining area. As you know, the Council's mandate includes several kinds of activities directed toward wages and collective bargaining:

(1) Working with labor and management in sectors of the economy with special problems to improve the structure of collective bargaining with the objective of restraining prices;

(2) Improving the wage data base for various sectors to improve collective bargaining;

(3) Focusing attention on the need and possible approaches to increasing productivity;

(4) Monitoring wage movements.

Most of the Council's past activities in the wage area have consisted of monitoring and reporting on significant wage developments. Specifically, the Council has prepared extensive previews of major collective bargaining negotiations at the start of the past two years, and has then issued analyses of settlements as they have been reached. These analyses have included background on the structure of bargaining and past settlements in the industry, a look at compensation trends for workers, a detailed breakdown of wage and benefit provisions in the new contract, a costing of the settlement to determine its probable impact on unit labor costs in the industry, and an assessment of the agreements likely impact on the economy. In 1976 such analyses were released covering agreements in trucking, rubber, electrical equipment, and automobiles. A similar analyses of the agreement in steel was released this spring, to be followed in coming months by analyses of settlements in telephone communications, construction, aerospace, coal, and railroads. These analyses also discuss productivity trends in the major industries they cover, thereby carrying out another of the Council's legislative charges.

The Council has developed its own wage data for the industries it has analyzed in these collective bargaining reports, but general wage data for the private sector are provided by the Bureau of Labor Statistics in some detail. Data for the public sector are far less satisfactory, and a Council study made recommendations for funding the BLS to collect more comprehensive data on state and local government employee compensation. The Council has also done a special study of cost-of-living escalator clauses in collective bargaining, and plans more special wage studies in the next year (which will be a relatively light one in collective bargaining).

The mandate to work with labor and management to improve the structure of collective bargaining is the most delicate of the Council's tasks in the wage area. Bargaining in most major industries such as autos and steel is highly centralized and involves very complex issues. We are presently seeking the advice of private management and labor leaders as to the most constructive form that government involvement in this area should take.

There are other industries, however, in which bargaining is highly fragmented or decentralized. The outstanding example is construction, and the Council has been involved behind the scenes with labor and management to improve the structure of bargaining in this industry along the West Coast (the area generally acknowledged as the wage leader). These efforts have included prebargaining meetings with both sides here in Washington in efforts to establish wider-area bargaining groups and thereby end "leapfrogging" settlements, as well as trips to the West Coast to try to head off potentially inflationary settlements and-in one case- to hold a public hearing concerning such a settlement. These efforts have been possible only because of cooperation from national union and industry leaders, an important point to remember if the Council considers trying the same approach in other industries with fragmented bargaining. If I can provide any further information, please let me know. Sincerely,

BARRY P. BOSWORTH, Director.

The CHAIRMAN. Senator Sarbanes. Senator SARBANES. Thank you, Mr. Chairman. Dr. Houthakker, I really don't quarrel with the statement of the need to develop an economic policy that has the kind of balance that you have to have to get you to full employment and maintaining reasonable price stability. That is obviously the goal, and if you can achieve it, you have done a terrific job, especially in the world we live in today, in comparative terms.

The question I was really raising is you were struct tional asymmetry and are concerned because the Cour Advisers, whatever the reading of the Employment be, has by and large assumed a responsibility for in and recognizing the inflation problem and the full en lem, and is trying to reconcile those and move forward. Then you come along and structure a council wh is the inflation problem. I am really just raising a that skews perception and policy.

Mr. HOUTHAKKER. Well, Senator, I don't really th that the origin of the Council on Wage and Price: predecessor results primarily from the fact that the nomic Advisers is a rather small body, and should b body. At least that is my own interpretation of the there on the staff and as a member for about 4 years.

The effectiveness of the Council stems from the fac that the staff members have direct access to the memb cases they can operate on their own responsibility ar are way ahead of larger departments, where everyth and down the hierarchy and frequently it takes weeks.

Now the problems that arise in the area of wage an very detailed and it takes a great deal of time to purs was a member, we had studies of the steel industry, t try, and a few other ones, very time-consuming oper spect, maybe it would be better if the Council of Ec did not have to do this.

So in that respect the Council of Economic Advise a subsidiary, as it were, which shares the same goals, ployment, but which concentrates on those aspects of policy that arise in the area of wages and prices, and lieve that the change just announced under which CEA will be chairman of the Council on Wage and P logical one and one that should work well in practice.

It will, I believe, prevent the kind of conflict which about, Senator, and which, as I said earlier, is prin speed at which you pursue these goals. As long as v board in any one direction, we will come out all right the Council on Wage and Price Stability can operat fective manner that the Council of Economic Advise ally operated in the past, without a huge staff, but ne act quickly in situations that require immediate atten

Senator SARBANES. Let me discuss the substantive moment. I have some concern that the kind of thinki is entirely appropriate when aggregate demand is g full employment and therefore the full utilization c and plant capacity, and really requires amber lights be careful and so forth, otherwise you are going to very small increment with respect to an improvemen ment situation, with a very high increment on the with respect to aggregate questions which remains as under, for instance, current circumstances.

Professor Bosworth, you alluded to this on page 2. standing manner, where you point out attempts to 1

of inflation through deflationary fiscal and monetary policies can be extremely costly.

I go a step further and argue that in fact those kinds of fiscal and monetary policies are helping to contribute to the inflationary pressure by maintaining high cost situations in the actual production situation.

You have costs spread over many fewer units of production, because you are falling so far short of what you are capable of, and you don't gain those gains in productivity that come with increasing use of your equipment and plant and your manpower.

But that sort of thinking prevails, perhaps not within your circles, you are much more sophisticated, but it certainly prevails in general public discussions of this issue.

Generally speaking in the public mind there has been drummed into it the notion that if you do something about one problem, you are going to be losing on the other problem.

I, of course, disagree with that very strongly, until, you know, you get down to the point where you really are having direct tradeoffs because of the total utilization of your resources.

What can we do to change that? First of all, do you agree with that, and if you do, what can be done to change that kind of perception.

Mr. BOSWORTH. Well, I agree with the way you put it this timewith just about everything you say-because I do believe that many of the difficulties that come when people point to inflationary problems-for example, restrictive work practices and other things-come about because of peoples' fears of losing a job.

It is unemployment in the short run that lowers the rate of inflation. But over the longer period of time, the cancellation of plant capacity expansion, the reason we have a capacity bottleneck today, or a potential reason, is caused by the recession. Inflation destroys business confidence in the continuation of expansion, and risk to investment and it makes workers primarily concerned with protecting what they have. They don't want to let minority groups and others into the labor market, they want to curtail labor supply.

The only way to deal with that is to maintain a strong and steady expansion of the economy, where everybody has a reasonable expectation of getting a job.

I still believe that the fundamental problem with unemployment is simply that there aren't enough jobs. There are no mysterious complexities, or people that don't want to work. The reason there are not enough jobs out there is that every time we move to create those jobs, people say it is inflationary.

The purpose of the Council on Wage and Price Stability is to respond to that public concern about inflation and their fears about reduced unemployment. The Council has been established to try to offset those inflationary practices, to spot them ahead of time and avoid. them, so that next time around the expansion is not interrupted by claims that inflation is due to too high a level of employment-claims that we have to have a recession. I think we have fought this battle too many times, and rightly or wrongly, it is not enough to tell people that the inflation is not due to excess demand.

So if you want to make progress and get total support, you have to do something about the inflation rate; you have to take away that

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