pected until 1980, many young people will be 24 or 25 before they have any prospect of holding a full-time job.

Given the drastic unemployment situation, the Council on National Priorities and Resources believes it is important-perhaps more critical than any other endeavor-that the Congress begin to commit substantially more resources to the goal of attaining full employment. Given the multiplier effects of such stimulation and the high marginal increase in government revenues in response to a rising GNP, such expansive programs can pay off in terms of lower deficits. Last year, the Council made several urgent recommendations to the Congress with respect to programs we believe should be initiated or expanded as antirecession measures to put this nation back to work. Given the durability of the recession, these recommendations, we believe, are just as appropriate in fiscal 1977. Our program recommendations include (1) drastic expansion of present CETA public service employment programs to provide an additional one million jobs on a temporary basis; (2) enactment of a $10 billion early-implementation public works employment program. The recent public works bill passed by the Congress takes us half-way toward the achievement of this goal; (3) "emergency" counter-cyclical assistance to state and local government to help stabilize local budgets and prevent further expenditures and service cutbacks and tax increases. Specifically, we support the Muskie counter-cyclical proposal passed by the Congress last week; (4) full funding of all authorized housing programs; (5) full funding of all federal education programs, which will result in the re-employment of thousands of laid-off teachers and teachers' aides; (6) greater congressional control and oversight of interest rates and monetary policy.

To battle effectively the crisis of unemployment and recession, we believe the government must adopt a strong and balanced package of such counter-cyclical programs. Such programs, tied to leading economic variables so as to phase out with recovery, should be made a permanent part of our automatic fiscal structure, thereby ensuring future economic stability without harmful fluctuation. The Administration's argument against either temporary or permanent jobs programs is that it is preferable for the private sector to provide jobs to the unemployed than for the government sector to expand. Certainly, the government should encourage and facilitate the employment of as many workers as possible in the private sector. But at the present time, the Administration's planned recession makes the private sector incapable of providing a job to all who want to work. It is therefore both fiscally wise and humane for the federal government to redress the situation-by designing fiscal and monetary policies to stimulate hiring in the private sector and by providing jobs to those who cannot be absorbed. The very provision of public jobs will result in stimulation of private economic activity and therefore enlarge job opportunities in the private sector.

Of course, one of the major values of public service and public works programs is that we could begin to undertake construction projects and social services which are so desperately needed by the nation and which would add significantly to the nation's wealth. The rebuilding of the nation's railroads and the leveling of the railroad beds, the construction of mass transit rail systems and the production of needed city buses, the improvement of strip-mined and other exploited land, the construction of sewers, water treatment facilities and solid waste disposal plants and the provision of health care and day care services are among the many projects which could be legitimately and usefully undertaken. All of these propects have greater value than those likely to be undertaken through the stimulation of additional private investment.

We are convinced that overwhelmingly people prefer jobs to welfare and unemployment compensation. In the first ten months of 1975, unemployment benefits averaged $70 per week, hardly enough to provide a plush standard of living. More than a third of the unemployed did not receive unemployment benefits at all, despite recent extension of the system (SUA) to 12 million additional workers. Furthermore, only 18 percent of the families in which the head of household was unemployed received food stamps.

The ideological bias of the Ford Administration that every dollar spent by government is necessarily wasteful is a dangerous philosophy in the middle of the present recession. We must stop believing that private spending is always good and public spending always bad. There are many concerns and needs that can only be met by the federal government: Rapid mass transit, income for the elderly, guaranteed jobs and health care are just some of the areas in which

government funds and active federal involvement are desirable. Almost everyone would agree that it is far preferable to use public resources for education than to spend private money on cigarettes, alcohol or firearms.

In addition to the temporary, counter-cyclical programs we recommend, permanent full employment programs are also needed. Even in a healthy economy, there will be workers who need government assistance. Increasingly, the economy is facing a greater problem of structural unemployment-more and more workers who are not qualified for decent jobs in the private sector. For these marginal members of the labor force, we must establish federal training programs, provide job placement assistance and, in the last resort, actual employment opportunities.

It has been 30 years since the Full Employment Act of 1946 was enacted, committing the U.S. Government to creating and maintaining economic conditions "under which there will be afforded useful employment opportunities including self-employment for those able, willing and seeking work." In those 30 years, the Act has been violated more than it has been obeyed.

In 1976 it is long past time for the federal government to begin guaranteeing and creating respectable jobs at reasonable pay for all Americans who want to work. The Humphrey-Hawkins bill (H.R. 50) introduced last year revived the spirit of the Full Employment Act, assuring jobs, either in the private or the public sector, to all people who want to work. The bill's commitment to a full employment economy through job guarantees is one we fully endorse. Hopefully, the revised version of this legislation, currently being developed, will spell out a procedure or mechanism for ensuring that full employment pledges will actually be implemented.

While not specifically advocating this approach, it does seem to me that there is a definite place for CETA public service employment programs, as part of a full-employment strategy. CETA can easily absorb more employees and it can do so effectively. Although established only a few years ago, CETA is already an important fiscal tool--one which offers a staff of people and an administrative apparatus specialized to individual localities and labor market areas.

Of course, to the extent that public service jobs are being substituted for existing employees, we must study the feasibility of providing large numbers of government jobs through other vehicles. CETA programs in and of themselves cannot bear the entire burden of "employer of last resort" federal policies. Therefore, in addition to expanded public service, Congress ought to coordinate public service employment, manpower training, job creation and unemployment insurance programs into a comprehensive and workable employment policy.

At the same time, various labor market policies should be pursued. The reduction of unemployment depends on the adoption of a lot of tough measures to make the national labor market more fluid and open, including the encouragement of occupational and geographic mobility and the reduction of barriers against youth and minorities, women and other disadvantaged groups. Unemployed workers should be aided in their search for employment and helped to upgrade their skills. Structural unemployment can be reduced, too, by targeting special assistance to those geographic areas of the country with chronic unemployment problems caused by failing or depressed industries, and to those groups with historically high rates of unemployment.

Thus, if the economy is to perform better, some very serious, long-range institutional changes will be needed. We urge the Joint Economic Committee and the Congress to begin to analyze which of these changes would be the most useful forerunners and components of a national full employment policy.

It is clear that the cost of the employment programs needed by this nation is immense. Clearly, an expenditure of that magnitude would require a major reordering of budget priorities.

Yet, much of the expense of putting people back to work is temporary and should be viewed as an investment rather than a loss. In the long run, we cannot afford the high cost of not putting people to work. If the economy were operating at full employment, the federal budget for fiscal year 1977 would show a surplus-a fact which conveys, simply and tellingly, the need to reach the elusive state of full employment. The high deficits of 1975 and 1976, as well as the deficit planned for 1977, are recession deficits, not spending deficits.

It is important to remember that stimulative expenditures for employment programs will over time reduce the deficits, since by putting people back to work, tax revenues are increased and unemployment expenditures and welfare costs reduced. Moreover, by reducing deficit in the future, we will begin to get

a handle on the most rapidly growing part of our budget-namely interest payments. Thus, the Council's recommendations-by planning more spending and somewhat higher deficits immediately-would help us achieve full employment and a balanced budget more rapidly, thereby freeing valuable resources for new health and social initiatives. Greater spending and investment is necessary now so as to reduce unproductive spending, on unemployment compensation and other programs in the future.

Moreover, to some extent, increased spending for anti-recession programs can be offset by reductions in other programs. Given the constraints on our resources, wasteful government programs must be eliminated to make room for more productive expenditures. We must begin seriously to promote efficiency and economy in the use of all government funds. The Administration does not endorse this concept. Few, if any, of the President's budget cuts were made for efficiency reasons. Rather, the budget policy seems to be one of arbitrary and uneven cuts regardless of the effectiveness of various social programs. We urge the Congress to analyze closely the military budget and other budgets to reduce waste and not just cut for the sake of cuts.

It is ironic that at the same time the Administration drastically cuts program benefits, it recommends large expenditures through the vehicle of tax subsidies. Tax expenditures are today the real "uncontrollables" in the budget, comprising nearly one-fourth of the total federal outlays each year. Certainly, the committees of the Congress must begin to analyze the social impact of tax expenditures, measuring the extent to which they overlap or counter the effect of direct budget expenditures, and eliminating these where desirable. The Council on National Priorities and Resources has analyzed the $100 billion tax expenditures budget and found that by eliminating only a dozen deductions, deferrals and credits serving no defensible national purpose, the nation could gain as much as $20-25 billion in additional revenues.

Despite reduction in wasteful expenditures and the returns to the Treasury generated by putting people back to work, there are nevertheless large expenditures associated with stimulative spending which could ignite inflationary forces. The answer to inflation lies not in running away from important expenditures but in fighting inflation while spending money for needed employment programs.

The terrible impact of inflation should not be minimized. While recession imposes hardships on the unemployed and results in a great waste of valuable resources, inflation is also debilitating. Low and middle-income workers, especially those on fixed incomes, have borne the burden of present inflation rates, watching the purchasing power of their wages decline, struggling to make ends meet, yet helpless to alleviate the problem. Thus, we must fight both inflation and unemployment.

High inflation imposes severe damages and uneven impacts on varied sectors of the economy. State and local governments, always vulnerable to inflationary increases in wages, social benefits, fuel costs and rising prices of investment outlays and interest rates, have experienced budget problems of unprecedented magnitude. At the same time that inflation has pressed the expenditure side of their budgets, the recession has resulted in a curtailment of revenues. The recession cut state and local revenues in 1975 by nearly $30 billion from what they would have been at full employment. Consequently, many states and municipalities have been forced to cut back services drastically, to lay off workers and to increase sales and property tax rates-actions which have clearly counteracted Federal efforts to stimulate the economy. The planned recession-as the antiinflation weapon-has not only undermined the financial status of state and local governments but has made economic recovery more difficult and more elusive. The most recent study of the fiscal situation of states and local governments, published by your own committee in December 1975, found that "deflationary adjustments in state and local government operating and capital funds will combine to remove $7.5 to $8 billion from the economy . . magnitude of the adjustments and their concentration in the high unemployment jurisdictions indicates that considerable hardship will be imposed upon the affected jurisdictions."

The

The housing industry has been a severe victim of inflation. Prohibitively high long-term interest rates, along with the present inflated costs of construction, have led to falloffs in housing production and a distorted pattern of resource use. Increasingly money has been channeled from savings institutions into speculative, high-interest ventures and away from more solid investments like housing.

Another area hurt by the inflation has been the public utilities sector where the regulatory process has been made more difficult. Furthermore, increases in wages and other incomes have pushed workers into higher income brackets and cut into real income.

Traditional notions about inflation/unemployment tradeoffs no longer seem to offer much basis for total reliance on fiscal policy. Of course, excess demand should be avoided through sound monetary and fiscal policies but most of our inflation cannot be attributed to excess demand, nor have we come anywhere near price stability through tight monetary and fiscal policies. The Phillips "curve" has, for policy purposes, become a "straight line": At any level of unemployment, no matter how terribly high, we experience continuing inflation. It needs to be emphasized that very little if any of the recent inflation is due to enlarged government spending relative to revenues or to money expansion leading to overstimulation of the economy. Rather, the very severe rates of inflation were aggravated by special conditions in the food and energy markets, devaluations of the dollar, productivity declines during the recession, noncompetitive and monopolistic pricing policies, and other factors. With many of the causes of inflation unrelated to excess demand, it is not surprising that the response to the "soft economy” approach has been so disappointing.

With so much manpower and plant capacity idle and given the nature of present inflation rates, efforts to create jobs and stimulate the economy should not result in higher inflation rates. In fact, recessions, by reducing efficiency and productivity below what they would otherwise be, tend to contribute to higher unit costs and thus may aggravate inflation. Restrictive fiscal policies seem to bring lower inflation rates only after high and persistent unemployment. After three years of both less than normal GNP growth rates and costly deep recession, it is clear that fiscal restraint is not the viable solution to presentday inflation. This does not mean that aggregate monetary and fiscal measures are unrelated to inflation, but that they are not the sole solution nor are they adequate for the current situation.

What all of this says is that it is a total oversimplification to maintain, as does the President and so many of his advisors, that spending more for employment and recovery programs will automatically trigger a new wave of inflation. It is more likely that a positive fiscal program to promote a vigorous recovery will contribute to the fight against inflation, not aggravate it. It will increase supplies of goods and services. It will stimulate more investment in new capacity. It will improve productivity. It will bring an earlier end to recession-related budget deficits. Recovery will not overcome structural deficiencies in the marketplace, but prolonged recession and unemployment will not help either.

When the solutions to inflation do not lie in traditional fiscal tools, we must seek to understand the causes and formulate appropriate prescriptions. One of the problems repeatedly encountered in attempting to fight inflation is the lack of information we have about pricing behaviors of corporations and about monopolistic and oligopolistic practices in key industries and sectors of the economy. To make the marketplace function more effectively we must know more about how it functions. It has been 40 years since the Temporary National Economic Committee analyzed the economy, magnificently studying-without the aid of computers and without today's abundance of data-competitive and non-competitive practices. Given the price rigidities that exist in today's economy, it is time for the Congress to establish a new bipartisan blue ribbon TNEC to help us understand the causes of today's inflation, with a view toward improving the functioning of markets. We must stop the collusion that allows corporations to set prices without regard to market demand-and then to cut production and lay off workers when they have priced their products beyond the ability of consumers to pay.

In a more immediate time frame, we must begin selectively to restrain prices and costs through the establishment of firm guidelines and by tough intervention by the President and other appropriate leaders-essentially the reinstitution of the practices followed in 1960-1964.

The inflation has now become so enduring and so deeply embedded in our pricing system that traditional measures are simply inadequate to correct the problem. More and more economists are in agreement that we cannot relv totally on the marketplace for relative price stability. We should act resolutely to strengthen the functioning of the marketplace and supplement it, where needed, by direct measures. Without some kind of government intervention to

delay or discourage unjustified price increases, we doom ourselves to continued high inflation.

We are not advocating across-the-board wage and price controls or price freezes, but rather, an incomes policy that exerts public pressure on those who unreasonably push up prices and costs. It is essential that such efforts be firm as well as fair and that the officials in charge believe in what they are doing. Controls under President Nixon were not well administered, nor were wage and price controls administered evenhandedly. Although wage increases are important elements in any direct stabilization program, we should recognize that the present spiral of inflation has not been caused by excessive wage increases. Labor will continue to resist Government intervention unless that they know that price increases will be restrained.

Federal Reserve policies must serve to accommodate the credit needs for a strong and sound recovery. High long-term interest rates will continue as long as high rates of inflation prevail, but selective measures can help meet the requirements for enlarged housing programs and other important sectors that depend on access to capital at reasonable rates. Without appropriate expansionary monetary policies, it will be impossible to restore economic growth and put people back to work. Such policies need not be inflationary.

There are other measures that can contribute significantly to the lessening of inflation. Outmoded regulations that impede competition and result in higher prices in some industries should be changed so as to better serve the needs of the public, and so as to result in reasonable prices. Antitrust laws must be strengthened and strictly enforced so as to root out administered pricing abuses and break up inefficient and harmful concentrations of market power. Longterm national food policies must be developed to increase agricultural production, build up food reserves and supervise the trading of U.S. firms with monopoly governments like the Soviet Union. A greater commitment of resources to research and development, especially to energy R&D, is essential. Decontrol should not be blindly pursued because it may do little to increase supplies but can result in much higher prices. Carefully considered moves toward deregulation and decontrol can pay off, but more harm than good can come from headlong dismantling of regulations.

Most important, though, are efforts to stimulate the economy. By increasing production, productivity will rise and inflation lessen. And the best way to stimulate the economy is by putting people back to work.

It is ironic that as we enter our bicentennial year, having enjoyed 200 years of prosperity and progress, we have still not found a way to ensure job opportunities for all citizens along with low inflation rates. The President's refusal to spend what is necessary to put people back to work-all in the name of holding down inflation-shows a bankruptcy of faith in the future health and vitality of our nation.

Clearly the solutions are not easy: Our nightmare problems of unemployment and economic stagnation will not be solved by modest means or quickly. It requires some fundamental reform of the American economy, and possibly the alteration of the institutional structure within which economic policy is set. There are many who argue that we must begin to establish major economic goals and plans for achieving and maintaining full employment and balanced growth.

Despite the complexity of the problems and their solutions, we are nevertheless optimistic. The heritage of this nation has been one of great creativity and initiative. The people of this nation do not lack the boldness and creativity necessary to solve our problems. Nor do they lack the maturity of opinion or honesty to undertake broad new programs to meet the needs of all citizens. The willingness of our people to make the tough decisions confronting this nation is our only cause for optimism and hope.

Chairman HUMPHREY. NOW, Mr. Burress, please.

STATEMENT OF GLENN BURRESS, UNIVERSITY OF TEXAS OF THE PERMIAN BASIN, ODESSA, TEX., AND THE JOURNAL OF COMMERCE, NEW YORK, N.Y.

Mr. BURRESS. Before going into my statement, I would like to add a few comments on the matter of the deficits that Mr. Nathan just

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