So it has a purpose of saying that what you are trying to do is inflationary, and of trying to suggest alternative ways of doing what you want to do. Senator SARBANES. Do you think that the Council on Wage and Price Stability ought really to be a unit within the Council of Economic Advisers? Mr. BOSWORTH. No. And your question goes basically to the issue that Mr. Lugar mentioned earlier. It seems to me that there are some inevitable conflicts that arise. The Council on Wage and Price Stability is more involved in the actual day-to-day decisionmaking than is the Council of Economic Advisers. And there are some advantages, as a mainly fact-finding information type, to having the Council somewhat outside. Where you draw that line, I am not too sure. Senator SARBANES. Why wouldn't you by the same logic have a council on full employment outside the same day-to-day decisionmaking? Mr. BOSWORTH. What would that council do? Senator SARBANES. I just want what is sauce for the goose to be sauce for the gander, that is all. Mr. BOSWORTH. Well, only to the extent that you keep saying somehow if you are doing something about inflation, you are avoiding the problem of getting the unemployment rate down. Senator SARBANES. I said you ought not to in effect load the dice to some extent by running a separate operation on one side, if you are not going to run it on the other. I don't accept the notion in the developing of comprehensive economic policy, and counseling the President with respect to comprehensive national economic policy, you can slice some sort of difference between macro and microeconomics. And in particular not face the problem that you have to interrelate them. I know you teach them as separate courses, you know, economics I, and economics II. But I thought that was simply to get college freshmen or college sophomores into economics and the next level of learning hopefully came along in one's junior and senior year, when they put them all back together again. Mr. BOSWORTH. That is what I would think the reorganization of the Council on Wage and Price Stability by having it report directly to the chairman of CEA was designed to do. CEA has been criticized in the past for being an agency of micro. If you like the term microcommission or studies of industry problems in specific instances, it may be better to call them that, rather than the Council on Wage and Price Stability. But it is an agency concerned with the microeconomics integrated with the overall macroeconomic policy of the Government. Senator SARBANES. Who will give you your assignments? Mr. BOSWORTH. Most of these come from Council itself and the day-to-day operations would be under the control of the chairman. Broader questions of policy would have to go to all of the Council members. Senator SARBANES. I am not very clear on that. Maybe you could spell that out, I would be interested in how you understand you are going to function with respect to what work assignments you can take on or choose to do and then what happens to your work product. Mr. BOSWORTH. Well, there is a Council which is composed mainly of cabinet members and there is the staff and the director. We report to that Council the specific actions they ask us to take a look at, and they delegate some authority to the staff to prepare studies. Senator SARBANES. Then where does the chairman of the CEA fit into it? Mr. BOSWORTH. He is the chairman of that Council and thus is in charge of the day-to-day operation of delegation of authority. So the specific instructions most frequently come from the chairman of the Council. Senator SARBANES. As chairman of the-you mean Mr. BOSWORTH, The Chairman of the Council of Economic Advisers is also the chairman of the Council. Senator SARBANES. So you report to him, not as chairman of the CEA, but as chairman of the Council, is that correct? Mr. BOSWORTH. That is right. Sentor SARBANES. So the happy confluence comes only as a consequence of the chairman of the CEA also being the chairman of the Council under the President's proposal? Mr. BOSWORTH. That is right. Senator SARBANES. And your work assignments are given to you by the Council? Mr. BOSWORTH. Yes, and also additionally the director of the staff in particular areas that he finds potential problems in. Senator SARBANES. My time is up. I yield back to the chairman. The CHAIRMAN. Senator Sarbanes has raised a fascinating question. I don't know why this hasn't come up before. This notion of balance, if you are going to have a council on wage and price stability, why not a council on full employment. I can't understand why this wasn't raised in the past when we have gone along with the Council on Wage and Price Stability. But it hasn't been. I think it is a most constructive comment on the direction we have taken, and on our not thinking through the Employment Act of 1946. There is no question that we have a serious inflation problem, very very serious, and I think you are dead right, it is an entirely different situation than we had in the 1940's when the act was conceived. But we also have a very serious unemployment problem, very high, 2 years of recovery and we still have 7.1 percent unemployment. Appalling. We have a situation in which many people are arguing you can't have price stability if you get unemployment down below 6 percent or so. I think what Senator Sarbanes brought up is something we ought to pursue vigorously. I just don't think we have begun to consider that aspect of this problem, if we are going to go ahead and have a price control agency, with all of the force and staffing and so forth that it has, moderate as it is, too moderate, I think, nevertheless why shouldn't we have some initiative with equal force in the area of providing jobs. Mr. HOUTHAKKER. Mr. Chairman, may I respond to that and some of the things Senator Sarbanes said? Undoubtedly there are possible conflicts here, but I don't believe the conflicts in reality are that serious. I would like to emphasize something Dr. Bosworth said by implication. A lot depends on the speed at which you can achieve certain goals. In the 1960's we had a happy period in which we had price stability and we were approaching full employment, and reached it in 1964. Now this was an experience which I believe came about in part because the approach to full employment was a relatively slow one. We all lived in this period, we watched it with concern, how unemployment came down at an agonizingly slow rate. Yet, in retrospect, it appears that precisely because full employment was reached rather slowly we were able to maintain price stability for a rather long period of time, even though things fell apart around 1967. Nevertheless we had this happy period and this was due to the fact that we did not go all-out for full employment, we went about it in a cautious way. I believe as long as we do that, we have no conflicts between the two goals which I believe we all share, price stability and full employment. I might also point out that the Council which we are talking about here is the Council On Wage and Price Stability, not a council for wage and price stability. And the Council of Economic Advisers is not a council for full employment. Both of these are concerned with the execution of policies within the framework of the Employment Act of 1946. As long as we pursue these different goals in a reasonable way, they are not in conflict. The conflict only occurs when we go all-out for one or all-out for the other. The CHAIRMAN. I agree with all that, but you can't escape the fact we have done far too little constructive and imaginative work on solving unemployment problems. We just haven't moved in that direction at all in my view. We had.a recovery, but I feel that we can do a great deal more in that area. Let me ask you, Mr. Bosworth, we had a big struggle in Congress, a tough fight, and we finally won in giving subpena power to your organization. And the act provides you can issue subpenas signed by the Director for attendance, and testimony of witnesses and production of relevant books, papers, and other documents, and so on. That is subpena power considered a real tool, a real force to elicit information you couldn't previously get. I think Dr. Rees had to function without that. How much have you used that, how effective has it been? We hoped it would be able to supply the kind of information in these areas that could really give us a grip on whether some of the price increases were justified in concentrated industries. Mr. BOSWORTH. I will let Bob Crandall answer about how frequently they have used it in the past. As I see it, though, there is one problem associated with the subpena power, which doesn't mean I don't think the Council should have the power; they should have that power, as a last resort, if a company or employee group is unwilling to supply some information. But in terms of our day-to-day operations, when trying to do something in these markets, there could be too much of a difficulty. If you push this to its extreme, they say OK, go to court. By the time you go 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 PROXMIRE, Washington, D.C. EXECUTIVE OFFICE OF THE PRESIDENT, 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 |