free competitive enterprise." Likewise, it is the expressed policy of the act that the Council of Economic Advisers, which it sets up, shall be closely articulated with other agencies of the Federal Government operating in the economic area and that its work shall be cooperatively related to theirs, coordinating rather than superseding their functions.

MACHINERY OF THE ACT

We turn now from the political philosophy of the Employment Act, as embodied in its statement of purpose and of general method or range of methods, to note the governmental machinery through which this purpose is to be attained. The measure as enacted is fully within the existing frame of government. It does not set up any authoritarian board or official dictator of labor, of plant, or of production. The traditional division of function between the executive and legislative branches of the Government is fully preserved and, as already mentioned, the complementary relation between Federal and State Governments. In the machinery of the act, however, something has been added to our customary equipment for handling matters that concern the Nation's economic life. No longer is the study of the multifarious economic problems of the country and the formulating of Executive programs for dealing with national economic welfare to be merely scattered among the Federal departments and independent commissions or the still more numerous bureaus and divisions within these agencies. Instead, a means is provided for reviewing and synthesizing all these studies, conclusions, and recommendations into a single coordinated whole.

To this end, the President is called upon to send to Congress at the beginning of its session an Economic Report

setting forth (1) the levels of employment, production, and purchasing power obtaining in the United States and such levels needed to carry out the policy declared in section 2; (2) current and foreseeable trends in the levels of employment, production, and purchasing power; (3) a review of the economic program of the Federal Government and a review of economic conditions affecting employment in the United States or any considerable portion thereof during the preceding year and of their effect upon employment, production, and purchasing power; and (4) a program for carrying out the policy declared in section 2, together with such recommendations for legislation as he may deem necessary or desirable.

The new machinery set up for (a) preparing and (b) dealing with the Economic Report of the President consists of two parts: The Council of Economic Advisers to the President and the Joint Committee of Congress on the Economic Report.

The Employment Act establishes in the Executive Office of the President a Council of Economic Advisers, consisting of three economists, who, with the aid of the necessary staff, are to

assist and advise the President in the preparation of the Economic Report analyze and interpret economic developments, to appraise programs and activities of the Government in the light of the policy declared in section 2, and to formu

late and recommend national economic policy to promote employment, production, and purchasing power under free competitive enterprise.

It was clearly the intent of the framers of the act that this shall be a small coordinating agency immediately adjacent to the President and effecting liaison between him and the vast area of technical services dealing with economic matters already available within the governmental establishment. It is not itself to be a fact-finding agency or one doing original statistical or economic research.

The intent of Congress to keep this new agency within the Executive Office of the President a small top-level consultative organization is evidenced by a statutory limitation on the salaries of the members, officers, and employees of the Council to an annual total of $345,000-a limitation which the Council considers very salutary and hopes to see maintained in future. The same intent is manifest in the provision that— the Council shall, to the fullest extent possible, utilize the services, facilities, and information (including statistical information) of other Government agencies as well as of private research agencies, in order that duplication of effort and expense may be avoided.

In conformity with these evident intentions of Congress, the Council has set up a small (not to exceed 10) top staff of broadly trained economists, selected with a view to their competence to analyze the state of the Nation's business as a whole and appraise the functioning of the entire economy. Each, however, has specialized knowledge of the problems, the methods of analysis used, and materials and personnel available in some special area such as labor relations, plant capacity, agricultural problems, consumer demand, price-wage-cost relationships, money and credit factors, taxation, and fiscal problems. Together with a small secondary staff, these "specialized generalists" are utilized under the Council's direction to bring to its deliberations the best thinking of the economic and statistical profession in the Federal Government agencies, in non-Federal governments, and in the private organizations of business, labor, and agriculture. Easy and effective relations were promptly established between the Council's staff and the staffs of these many agencies.

As the deliberations of the Council and its staff lead to conclusions and recommendations at the policy level on matters concerning any agency or organization, the Council itself invites the consultation and comments of the respective agency or organization head. It seeks thus to arrive at the greatest degree of mutual understanding and agreement that is possible as to each element of the broad economic program which would be conceived as promoting the interests of the whole Nation. Such consultations at the policy level draw upon the thinking of experienced leaders of business, of finance, of labor, and of agriculture, as well as the executive heads of Government, local, State, and Federal. It is only after giving careful consideration to such views and suggestions that the Council would feel itself justified in offering its

counsel and advice to the Chief Executive as to an over-all economic program for the Nation. We are deeply gratified at the frank and cordial manner in which these various agencies have collaborated with the Council.

It is not within the province of this Council to elaborate on the functions of the other agency set up under the Employment Act, namely, the Congressional Joint Committee on the Economic Report. It should be noted, however, that the act in no way trenches on the primacy of the Congress in the field of final policy making. It simply sharpens that body's tools for evaluation of proposals made by the President as well as for the initiation of proposals of its own. Obviously, the joint committee will have at its disposal the improved facilities made available under the Congressional Reorganization Act as well as recourse to those contacts with all governmental and nongovernmental sources of facts and ideas which are the traditional prerogatives of Congress.

In the words of the act:

It shall be the function of the joint committee—(1) to make a continuing study of matters relating to the Economic Report; (2) to study means of coordinating programs in order to further the policy of this Act.

When the President's Economic Report is presented to the Congress at the opening of its session, it is to be referred to this joint committee. After study of the proposals embodied in the President's economic program and in the light of such studies as the committee may already have conducted into the economic problems which it considers pertinent, it will prepare

its findings and recommendations with respect to each of the main recommendations made by the President in the Economic Report

and submit them to the two Houses of Congress by February 1. This congressional report is designed to be—

a guide to the several committees of the Congress dealing with legislation relating to the Economic Report.

The outstanding feature of this procedure is that it tends to unite the President and Congress through mutual consideration of national economic policy as a coordinated whole instead of proceeding in an unrelated piecemeal fashion. It guards against the danger that economic legislation shall be incomplete, inconsistent, or directly conflicting, much as the creation of the Bureau of the Budget 25 years ago undertook to remedy the haphazard process of estimating fiscal needs and allocating public revenues.

Besides its February 1 report, the joint committee may also

from time to time make such other reports and recommendations to the Senate and House of Representatives as it deems advisable.

THE COUNCIL A CONSULTATIVE AND ADVISORY BODY

A final point as to the political science aspect of the Council of Economic Advisers is that, although set up as an arm of the Executive Office,

the Council as such does not have any administrative powers or responsibilities. It is purely a consultative and advisory agency. Besides its duty to

assist and advise the President in the preparation of the Economic Report—

it is to

developments and trends

analyze and interpret * appraise the various programs and activities of the Federal Government in the light of the policy

of promoting maximum employment, production, and purchasing power, and make interim and supplementary studies either on its own initiative or at the request of the President. Thus it is designed to serve as a continuous agency of counsel to the President on the professional plane in regard to administrative decisions as well as his approval-or even veto of legislative proposals.

The Council of Economic Advisers does not reallocate basic public responsibilities; it merely puts improved professional techniques and resources at the disposition of those who make national policy. Since the President must formulate his policies and shape his program within his own evaluation of the most varied and comprehensive political and social, as well as economic influences and considerations, it is not to be expected that his Report to Congress will merely reflect the conclusions and recommendations of his Economic Council. He will simply use as he deems wise such economic analyses, appraisals, conclusions, and recommendations as they prepare for him. What is said here is intended—as subsequent annual reports and perhaps interim reports will be to serve as a general explanation of the purposes of the act and the nature of the Council's work. It sketches also the general setting of economic philosophy and policy-determining considerations within which our specific conclusions and particular recommendations to the President are developed.

II. The Economic Philosophy of Sustained Employment

I

N examining the Employment Act of 1946 from the standpoint of political science, we have of necessity given some intimation of the economic philosophy with reference to national employment and production which it embodies. Quite naturally, this theory or approach to the problem of the Nation's business and how it may be made most healthy and vigorous is not set forth formally or in detail in the act. It may, however, quite readily be inferred, in part from provisions which

were explicitly rejected by Congress during the drafting of the law and in part from the character of the provisions that were included.

Nowhere in the Employment Act can one find the expression "business cycle" or even such familiar and harmless single words as "prosperity" and "depression." And yet, no sooner had the Council been set up than the Man-on-the-Street began referring to us as having been assigned the task of "taming the business cycle” and the Inquiring Reporter pressed us for an opinion on the prospect for a postwar "boom and bust." This is only natural. For if, through constructive economic policies, the Nation were enabled to come closer to the attainment of "maximum employment, production, and purchasing power," business depressions would, to that extent, have been filled up and the turns of the cycle would have lost their former power to work hardship on the people. The passing of the Employment Act by Congress would have been no more than a senseless gesture if it did not express a considered belief that, by mobilizing our capacity of economic reasoning and the brains and experience of business management, labor leaders, and others, we could moderate in the future the devastating periods of business depression.

The three appointees who make up the initial membership of the Council, though no one of them had so much as met either of the others at the time of his selection, have found themselves in a gratifying state of like-mindedness on this matter. All of us believe wholeheartedly in the basic purposes of the act. We believe its broad enabling powers provide a device through which practical action can be suited to the demands of changing circumstances. In our judgment, too, there has come to be a broader understanding of the basic relationships among production, purchasing power, and employment, and an actionable degree of willingness to meet the requirements of better sustained general prosperity in the future.

All that this claims is that the American people really are smart enough to organize themselves in groups of sufficient size for high efficiency and yet keep the necessary flexibility of action under free enterprise and democratic government. But if such efforts are to be practically successful, they must be based on or guided by sound understanding of what really happens when our economic arrangements get so tangled up that production is held up, forced unemployment appears, and purchasing power ebbs away from the market. Businessmen, union officials, and organized farmers as well as economists have given an increasing amount of attention during the past generation to the ups and downs of business activity, employment, and market demand. Three major steps mark the progress of this thinking. By reviewing them briefly we can see the significance of the action taken by Congress in the Employment Act of 1946.