I share your view that the development of electronic payment systems raises issues of concern to consumers that require careful consideration. Many of these issues are dealt with in H.R. 8387 and are also being considered by the National Commission on Electronic Funds Transfer. As you know, the Board is represented on this Commission by former Governor George Mitchell. He and other members of the Board's staff are now working with the Commission in its efforts to prepare final recommendations to Congress. In view of these circumstances, it may be appropriate to reserve final judgment on any legislative proposal concerning EFT facilities until the Commission's positions on these matters are known, and the Board has had fuller opportunity to consider its recommendations. I understand that the Commission's final report is expected to be issued early this fall.

The Board's staff, however, has reviewed the provisions of H.R. 8387 and finds the basic approach of your bill to be very similar to the position recommended in the Board staff model and the economic analysis papers given to you at our meeting. For example, both H.R. 8387 and the staff model would provide a prior review procedure and would require a degree of guaranteed access to EFT customer terminals. Matters such as confidentiality, security, and limits to consumer liability, which are covered in H.R. 8387, are also considered necessary elements of any EFT legislation. Our model and analysis have recently been furnished to the Commission's Sharing Committee.

As I indicated at our meeting, our staff would be pleased to provide additional information and assistance to you and your staff regarding H.R. 8387. Mr. Allen L. Raiken, Assistant General Counsel of the Board's Legal Division (452-3625), will be happy to provide the staff's comments on specific provisions of H.R. 8387.

Sincerely yours,

ARTHUR F. BURNS.

Ms. OAKAR. Chairman Burns, once again I have to question your remarks on women entering the job market.

Dr. BURNS. I thought you would. [Laughter.]

MS. OAKAR. Well, if I don't, I don't know who will.

On page 14, of your prepared statement, you advance the notion again that the influx of women into the job market is a revolution. Now, I would like to say that I consider it an evolutionary process, not a revolution.

Dr. BURNS. I didn't mean to imply that it's an undesirable revolution.

MS. OAKAR. Let me say, that I hope you are amenable to this evolution, because you really do dictate in many ways much of our economic policy. I hope you don't have that attitude.

Dr. BURNS. I don't have which attitude?

MS. OAKAR. I hope you don't feel that it is an evolution undesirable. Dr. BURNS. Oh, no. On the contrary. I hope I didn't convey that impression.

MS. OAKAR. Chairman Burns, you do use statements, like on page 15, where you relate new women's attitudes and birth rates to the inflation rate. Your last line is a classic. You say it cannot be foretold when the process of women's influx to the job market will wane.

You know, Mr. Chairman, this is demeaning language.

Dr. BURNS. That was honestly as far as possible from my mind. I was describing the economic facts and saying that I don't know how to predict an economic trend.

Ms. OAKAR. So that particular verb, that is "to wane." refers to economic trend as opposed to the employment of women? Is that right? Dr. BURNS. I try

MS. OAKAR. I am an old English teacher.

Dr. BURNS. Well, I am an old English student.

[Laughter.]

Ms. ÖAKAR. What were your grades? [Laughter.]

I would certainly like to have your comments about your attitude. toward women in economic processes. During World War II, for example, they went into the job market to fill a great void and America was very grateful. I think it is important we have your views clarified. Perhaps, there is some misinterpretation on my part.

Dr. BURNS. Let me say, first, that I honor women in our society; and second, that I was speaking as an economist trying to explain a set of economic facts concerning the job market.

The growth of the labor force has defied the predictions of economists. When I examine the labor force, I consider women, men, and youth separately. I tried to indicate that while our private enterprise system has shown extraordinary vitality during the past 2 or 212 years, something has happened that is not well understood. Over that period we have had an increase in employment in our country of 61⁄2 million people. This increase is unprecedented, yet the unemployment rate remains high.

Why has this happened? I said it has happened because a new trend has developed in the labor force, one that we economists did not foresee, did not predict. Then, I went into a breakdown of the labor force. I called attention to the extraordinarily rapid growth of labor force participation on the part of women. I am not passing any moral judgment; on the contrary, I welcome the change. But it is a social change, with economic implications we ought to recognize.

If I have used any language that suggests the contrary, all I can say to you is that it was never my intention.

MS. OAKAR. I am glad to know that.

Chairman Burns, another point that I just want to draw attention to is that group of individuals who have by way of appearance the largest unemployment rate. There are the young men who served in Vietnam. Yet there is no accountability for that factor in broad economic planning.

I would just hope that within your wisdom, that you might provide some economic solutions or make some recommendations to the Congress and the President as to how we do deal with what is in fact a grave problem in our labor force.

Thank you. My time has expired, Mr. Chairman.

The CHAIRMAN. Mr. Kelly.

Mr. KELLY. When my colleague, Mr. Hanley, was making inquiry of you, he mentioned something about you and the President were associated in the $50 rebate. Was the $50 rebate one of your recommendations?

Dr. BURNS. No; I don't think so. [Laughter.]

Mr. KELLY. Then apparently what Mr. Hanley meant was that you and the President were associated in the $50 rebate and the economic stimulus package on opposite sides?

Dr. BURNS. I think it would be fair to say that at one time we were on opposite sides and that at another time we were on the same side. Mr. Hanley referred to the second installment; you are referring to and concentrating on the first installment.

Mr. KELLY. All right. As I understand, you said that the President because of politics exercised extraordinary courage in the position he took on the stimulus package, meaning that he didn't really want to do that or either the devil or politics made him?

Dr. BURNS. I did not mean even remotely to describe or to speculate on or to infer anything about the President's motives. All that I meant was that the political atmosphere in the Congress being what it was, I did think at the time-and I still think now-that the President showed courage in making the rather modest recommendation concerning the minimum wage that he did. I would repeat that I would have liked it better if he had made a still more modest recommendation.

Mr. KELLY. You mean more courage?

Dr. BURNS. Let me just say a still more modest recommendation. I don't know whether that means more or less courage.

Mr. KELLY. All right. Then, in the last page of your statement, you said the President's timetable for eliminating a deficit in the Federal budget deserves earnest support in Congress. Now, my recollection is that in January when the President came forth with his budget, he provided $864 million for the commodity portion of the-of the farm bill.

We now have passed a farm bill in the House that is going to provide for about $4 billion. So, I don't know whether the difference is a lot of money in Washington, but back in Zephyrhills, it is a bunch. What I would like to inquire of you about is how can you consider that the President or the administration is heading toward any kind of a budget balancing when they are going in this direction, because the difference between $864 million and $4 billion is between a 400and 500-percent increase just on that one item; is that not so? Dr. BURNS. I can't question your arithmetic.

Mr. KELLY. Good. What about my direction?

Dr. BURNS. You are asking me to comment on a political question on which I can't claim any expertise. I do have an impression, and I will tell you what it is. My impression is that the President and the Members of the Congress are not on the same track at the present time. As far as the Federal budget is concerned, I don't know that I can say anything else on that subject.

Mr. KELLY. This business about trying to give us more money in the budget so that we can have more financial progress and activity and prosperity short range seems to serve a particular philosophy, but I noticed that you said that the hour is late and this type of activity will hurt the young and the poor and the very people that are trying to help them."

What I am wondering is, if the more stable, long-range growth doesn't help the poor and the young more than trying to just simply have these explosions of prosperity that will carry us past the next election?

Dr. BURNS. I do think that what we need in our country is a sustained prosperity. I don't think that we will achieve it if we continue to run large budget deficits, or if we fail to keep adequate control over the money supply. I am reasonably confident that we will do the latter; I am less confident that we will do the former.

Mr. KELLY. Mr. Chairman, I have one additional question. I ask unanimous consent.

The CHAIRMAN. The gentleman's time has expired but he may put the question in the record.

Mr. KELLY. At the top of the page on 25 you say:

The shock of abupt adjustment after so many years of drug-like abuse of our economic system would be excessively risky.

I ask you, is the growth between the $864 million for a farm program in January and $4 billion in July the kind of abrupt adjustment that you have reference to on that page?

The CHAIRMAN. The time of the gentleman has expired.

Mr. Blanchard?

Mr. BLANCHARD. Thank you, Mr. Chairman.

Yesterday, Dr. Burns, Albert Sindlinger stated a number of times in testimony before this committee that the Fed is making a grave error in using seasonally adjusted figures to make decisions in setting the seasonally adjusted figures of M. He feels the Fed has overreacted and been an obstacle in bringing about economic recovery. I had not heard this suggested before.

I don't intend to pass judgment on the merits of that position, but it would be interesting to hear your response.

Dr. BURNS. I am aware of the criticism. I have had my staff examine that matter very thoroughly, and I have looked into it myself to some degree. I have had, if I may say so, a good deal of experience in making seasonal adjustments. Years ago, I did a great deal of work in that area, and I can tell you that seasonal measurements are difficult to make. I have had the staff study and restudy the problem using various plausible techniques and their results vary. But there was an explosion in the money supply in April; that is quite clear no matter which method of seasonal correction you use.

I can't say our seasonal measurements are perfect; I don't think anyone can say that. The art of seasonal measurement hasn't reached that point. But I assure you that we looked at the original data as well as seasonally adjusted data, and that we test our techniques. So I cannot accept the criticism.

If you are interested in that question, I would be glad to give you a more technical and precise response.

Mr. BLANCHARD. Perhaps you could do that for the record.

Dr. BURNS. I would be glad to do that. I think it would be useful. [Chairman Burns submitted the following information at the request of Congressman Blanchard on technical procedures in the seasonal adjustment of the money stock:]

The Board of Governors of the Federal Reserve System publishes several money stock measures on both a seasonally adjusted and a not seasonally adjusted basis. The seasonal adjustment method used by the Board is based on the widely known X-11 method developed by the Bureau of the Census. Seasonal factors for both the currency and demand deposits components of M are computed by the Census X-11 program, with judgemental modifications made to computed seasonal factors in some instances when it is clear that the mechanical seasonals incorporate the effects of random disturbances or policy-induced changes. The X-11 program is a ratio-to-moving-average procedure that provides considerable flexibility for identifying seasonal characteristics and for tailoring seasonal adjustment to individual series. X-11 options employed in adjusting M1 include computation of multiplicative seasonal factors and use of moderately flexible moving averages to take account of moving seasonality.

of

Charts 1 and 2 show the currency and demand deposits components My for the period 1972 to date. These two charts clearly depict the pattern of seasonal movement in the series. For example, the demand deposits component declines sharply in February of each year following the buildup in deposits associated with Christmas holiday spending.

1/ See Bureau of the Census Technical Paper No. 15, "The X-11 Variant of Census Method II Seasonal Adjustment Program, November 1965, for a description of the options available.