And in every case that I can recall, these reports have been delayed much longer than I would like, simply because of the difficulty of extricating this type of information and this type of assent with the numbers from the parties involved. UAW's settlement, I would have to check exactly when it was released as opposed to when it was settled, but I think you will find it was released many months after the settlement, too long a period of time. We managed to get the steelworkers settlement out more quickly, and with considerable input from United Steel Workers Union. Senator SARBANES. The allegation is made in both instances that the Council was producing biased data, and erroneous data. Mr. CRANDALL. In the case of the steel and auto workers settlement? Senator SARBANES. That is right. Mr. CRANDALL. In both cases, those numbers were verified through the union, and the difference, I can recall clearly the steel settlement, the auto settlement goes back sometimes, but any differences there would be between ourselves and the steel workers on the numbers in that report, and it is primarily an analytical report, so it would be in terms of just pennies, very very small. Some provisions are difficult to cost out completely, and as a result there can be a few pennies difference in them. Mr. SCHULTZE. You are aware, Senator, what we are talking about is not a report which characterizes the goodness or badness or anything else of a settlement, but simply what its cost per hour is. Senator SARBANES. Well, I mean I can write a report that has no conclusion, but depending on what facts I used, and where I drew them from, I can make an impact on the cost of it. Now let me ask you this: In those two instances which involved two of our basic and major industries, was the Council's report reviewed by the Council? Mr. CRANDALL. The procedures followed, as I recall, in those two cases were somewhat different. Under the previous administration we typically circulated all wage and price reports to the senior economists working for each Council member, and he or a member of the staff gave us his various comments on the reports. In the case of the auto settlement, as I recall, every member of the Council's staff had a look at it. In the case of the steel settlement, as I recall, it was circulated only to Mr. Schultze prior to our final release. I think we were trying to move more quickly to try to get it out. Let me come back to Mr. Biemiller's testimony on the steelworkers. I think you will find there is a difference of opinion within the union as to the accuracy of the numbers. I believe our final position on that was that there was very little difference between the union itself and ourselves on those numbers. And the letter to which Mr. Biemiller refers was a letter which is not the official steelworkers position today. Senator SARBANES. I don't think there is any need to prolong this. I think there are two lines of concern here. One is whether you institutionally are creating asymmetry in the nature of focusing on economic problems, and your response to that is there are other departments that focus on the other side of the problem. That may or may not be adequate. The second question is that in effect apparently senior level staff are really being given a very free hand in the functioning of this agency. Mr. SCHULTZE. I don't think so, Senator. Senator SARBANES. The President, in his arms policy, said we are not going to do certain things in arms unless personally approved by the President. And shouldn't there be some comparable requirement in this area with respect to the Council? Mr. SCHULTZE. I think there ought to be and clearly in the authority in the Council itself and its chairman. There is such authority to approve or disapprove anything. Clearly the authority is there. The question is in the commonsense reasonable running of the organization, where do you draw the line. The authority is there, I have no reason to question the authority, it is clearly there. The Executive Director works for the Council, the Council can work its will. The question is a combination of commonsense of running an operation and to what extent does the Council intervene in every case, clear every case, it is just commonsense administration. Quite frankly, I think there is some advantage so long as one monitors and is careful that the work is of high quality, not to have to have every Council member in some sense enter into a big discussion and vote on whether or not in effect to approve an action, or a filing. Senator SARBANES. Why do we have the Council? Mr. SCHULTZE. Any Council member who wants to can do that, there is no question about it, right now. Any Council member who wants can call me up and say we better have a meeting, because I don't agree with what is going on. No problem. I am saying in terms of the great bulk of what is going on, would you want that? It seems to me you do not. Senator SARBANES. Well, thank you, gentlemen. We are adjourned. [Thereupon, at 1:40 p.m. the hearing was adjourned.] [The following additional statements were received for the record:] Mr. Chairman and Members of the Committee: Thank you very much for the 'opportunity to discuss the very important subject of legislation extending the authority of the Council on Wage and Price Stability. No economic subject is of greater concern to the American people and, in fact, to the citizens of most countries of the free world than the problem of inflation. The inflation which this nation has suffered for more than a decade can be properly characterized as a malignancy that is undermining our economy. It has eroded our confidence, it has severely weakened our economic policies, it has nearly destroyed our determination to achieve economic progress and sustained high levels of employment, and it has warped our allocation of resources. In the first twenty years after World War II we had a total of four recessions, all relatively mild and of limited duration. Never before at the end of a major war had we avoided a panic or a major depression. In those twenty years, suffering only minor recessions, we tended to develop confidence in our ability to design and program, in a broad sense, our economy for the well-being of the American people. We evolved a confidence that we could make the economy serve the country rather than have the country sit idly by and suffer booms and busts, inflation and deflation, and other adverse economic forces which prior to World War II had been regarded as inevitable or inherent weaknesses of the free enterprise system. Came the mid-1960's and we saw the beginning of a general and worsening inflation. With minor interruptions it became more and more serious. The 1970-71 recession the first in a decade did little more than slow the inflationary process a bit. Phase I and Phase II controls in 1971 and 1972 were more effective slowing the general price rise, but these controls were rendered impotent by disbelievers in January 1973 when they were most needed following the inflationary impacts of two dollar devaluations and the badly handled Russian Grain Deal. The disbelievers then tried to argue that the double-digit inflation of 1973 and 1974 was proof that controls did not work. Wage and price controls were actually rendered inoperative largely by the actions of those responsible for their implementation. The worst recession since the 1930's had its roots in the contractionist monetary and fiscal policies of 1973. There were two successive annual declines in the real gross national product in 1974 and 1975. The recession has in essence lasted to date. It brought only little relief from the pernicious inflation. If we were to remove the inflationary impacts of the Russian Grain Deal and the two dollar devaluations and the quadrupling of oil prices, the basic inflation rate in 1973 and 1974 may have been in the 8 to 10 percent range. Now, after four years of slow growth and recession, the basic inflation rate seems to be in the 6 to 7 percent range. That is not much progress despite the hundreds of billions of dollars of lost GNP and tens of millions of man-years of unemployment. There is one important observation to be made with respect to our economic performance in recent years. It relates to the way in which we have tried to fight inflation. We have resorted to recessions and unemployment and idle industrial capacity as the primary solution. We have patiently but not fruitfully awaited the end of inflation and the achievement of reasonable price The cost of the two recessions of the 1970's has been very great. Clearly, beneficial results in slowing inflation have been far from commensurate with that cost. The planned and programmed recession in the early 1970's brought little progress toward price stability. President Nixon needed some evidence of success on the price front so he reversed himself and resorted to a wage and price freeze and then to a succession of direct controls. More shocks and half-hearted administration of controls led to the double-digit inflation of 1973 and 1974. So Nixon applied the brakes on economic expansion in 1973 and Ford put the economy into reverse in 1974. It has been a long and harmful the worst since the 1930's. Yet, reasonable price recession stability is nowhere in sight. In any case, we are still suffering from levels of unemployment unprecedented in any post-World War II year up to this recession. The rate of unemployment in June 1977 of 7.1 percent approximated the highest levels in the nearly 30 years between the end of World War II and the beginning in 1974 of this long and deep recession. Even now, in the first half of 1977, the pace of inflation is disturbingly high. The exceptionally cold January and February had a limited price impact, but recent price increases have been too pervasive to be blamed on the weather. With some seven million workers unemployed and industrial capacity utilization around 83 percent, the present high rate of inflation is difficult to understand or explain. |