'THE 1976 ECONOMIC REPORT OF

THE PRESIDENT

HEARINGS

BEFORE THE

- JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES

NINETY-FOURTH CONGRESS

SECOND SESSION

PART 1
JANUARY 28 AND 29, FEBRUARY 4 AND 5, 1976

Printed for the use of the Joint Economic Committee

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1976

74-582

For sale by the Superintendent of Documents, U.S. Government Printing Office

JOINT ECONOMIC COMMITTEE
(Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.)
HUBERT H. HUMPHREY, Minnesota, Chairman

WRIGHT PATMAN, Texas, Vice Chairman
SENATE

HOUSE OF REPRESENTATIVES JOHN SPARKMAN, Alabama

RICHARD BOLLING, Missouri WILLIAM PROXMIRE, Wisconsin

HENRY S. REUSS, Wisconsin ABRAHAM RIBICOFF, Connecticut

WILLIAM S. MOORHEAD, Pennsylvania LLOYD M. BENTSEN, JR., Texas

LEE H. HAMILTON, Indiana EDWARD M. KENNEDY, Massachusetts GILLIS W. LONG, Louisiana JACOB K. JAVITS, New York

CLARENCE J. BROWN, Ohio CHARLES H. PERCY, Illinois

GARRY BROWN, Michigan ROBERT TAFT, JR., Ohio

MARGARET M. HECKLER, Massachusetts PAUL J. FANNIN, Arizona

JOHN H, ROUSSELOT, California
JOAN R. STARK, Executive Director

SENIOR STAFF ECONOMISTS
JERRY J. JASINOWSKI

JOAN R. KARLIK
LOUGHLIN F. MCHOGH

COURTENAY M. SLATER
RICHARD F. KAUFMAN, General Counsel

ECONOMISTS
WILLIAM R. BUECHNER WILLIAM A. Cox

LUCY A. FALCONE
ROBERT D. HAMRIN
SARAH JACKSON

L. DOUGLAS LEE
RALPH L. SCHLOSSTEIN
GEORGE R. TYLER

LARRY YUSPEH

MINORITY

GEORGE D. KRUMBHAAR, Jr. (Counsel)

M. CATHERINE MILLER

CH
Ja

1976

CONTENTS

ptil

WITNESSES AND STATEMENTS

WEDNESDAY, JANUARY 28, 1976

Humphrey, Hon. Hubert H., chairman of the Joint Economic Committee: Pago

Opening statement.-----

Greenspan, Hon. Alan, Chairman, Council of Economic Advisers, ac-

companied by Paul W. MacAvoy and Burton G. Malkiel, Members.--

THURSDAY, JANUARY 29, 1976

Humphrey, Hon. Hubert H., chairman of the Joint Economic Committee:

Opening statement.---------

Lynn, Hon. James T., Director, Office of Management and Budget, ac-

companied by Paul H. O'Neill, Deputy Director; Dale R. McOmber,

Assistant Director for Budget Review; and Rudolph G. Penner, Deputy

Associate Director for Economic Policy -------

WEDNESDAY, FEBRUARY 4, 1976

Humphrey, Hon. Hubert H., chairman of the Joint Economic Committee:

Opening statement..
nent.---------------------------------------------

129

Simon, Hon. William E., Secretary of the Treasury, accompanied by

Sidney L. Jones, Assistant Secretary for Economic Policy -.---

132

THURSDAY, FEBRUARY 5, 1976

Humphrey, Hon. Hubert H., chairman of the Joint Economic Committee:

Opening statement.-------

Ackley, Gardner, professor of economics, University of Michigan.------..

Nathan, Robert R., chairman, Council on National Priorities and

Resources -----

205

Burress, Glenn, University of Texas of the Permian Basin, Odessa, Tex.,

and the Journal of Commerce, New York, N.Y..
Parks, Robert H., Advest Co., New York..----

195

196

1

245

253

AFTERNOON SESSION

Butz, Hon. Earl L., Secretary of Agriculture-------------------------

Richardson, Hon. Elliot L., Secretary of Commerce, accompanied by

Maynard Comiez, Acting Chief Economist; Beatrice N. Vaccara,

Associate Director for National Analysis and Projections; and John E.

Cremeans, Chief Statistician, Bureau of Economic Analysis, Department
of Commerce...

SUBMISSIONS FOR THE RECORD

WEDNESDAY, JANUARY 28, 1976

Greenspan, Hon. Alan, et al.:

Prepared statement.--.---

Response to Representative Bolling's request for a list of specific pro-

posals to increase employment which have been examined by the

Council of Economic Advisers.---.

Response to Representative Bolling's request for estimates of the full

employment budget, by quarter, through the end of calendar 1976...

119

66

10

THURSDAY, JANUARY 29, 1976

Humphrey, Hon. Hubert H.:

Statement to the Committee on the Budget, U.S. House of Representa- Page
tives, January 26, 1976----

86
Article entitled “Government Growth in Perspective," by John L.

Palmer, from the Washington Post---------
Javits, Hon. Jacob K.:

Article entitled "Three States Deplore Health Fund Cuts," by Martin

Tolchin, from the New York Times, January 22, 1976 -

Lynn, Hon. James T., et al.:

Prepared statement ----

Budget message of the President. -04212

Response to Chairman Humphrey's request to furnish an estimate of

the growth rate in outlays from fiscal year 1976 to fiscal year 1977.

Table: Financial assistance for health care, grant amount by State,

fiscal year 1977----------

Response to Representative Bolling's request to supply an outline of

procedures to be followed by congressional committees in order to

accomplish the recommendations of the Budget Act--

Response to Senator Proxmire's query regarding number of OMB per-

sonnel assigned to Intelligence Branch

Response to additional written questions posed by Chairman

Humphrey --------

------------------

122

9WEDNESDAY, FEBRUARY 4, 1976

Simon, Hon. William E. et al. . 1 bu l g

u l

Response to Chairman Humphrey's request to supply an estimate of

full employment social security tax receipts -----

131

Prepared statement...

147

Tables:

Proposed tax changes-

vd Single person with itemized deductions of 16 percent of ad-

justed gross income-1--------

167

Married couple one earner with itemized deductions of 16

percent of adjusted gross income. -----

168

Married couple-two earners with itemized deductions of 16

:93ima percent of adjusted gross income. - 20...-

D

mer

Family of four-one earner with itemized deductions of 16

percent of adjusted gross income..Jo

169

brus Family of fourtwo earners with itemized deductions of 16

percent of adjusted gross income.-

170

Response to Senator Taft's query re classification of OPEC countries in

relation to the proposed IMF trust fund

Article entitled "Fiscal Stimulus Not Issue in Deficit Spending De-

bate," by Beryl W. Sprinkel, from the Chicago Tribune, February 2,

1976

- -10-209--------------

181

Tables:

--Total funds raised in U.S. credit markets ------

186

Total funds supplied in U.S. credit markets U P UT

187

Response to Representative Long's query regarding accelerated depre-

ciation deductions in areas of high unemployment...

191

Table: Federal old-age, survivors, and disability insurance trust funds,

receipts and outlays, fiscal years 1971-77----

192

Taft, Hon. Robert, Jr.:

Opening statement.--

ООО Л ОПТ 10-ионата

176

168

199

THURSDAY, FEBRUARY 5, 1976

Ackley, Gardner:

Prepared statement..

Speech entitled “Some Observations of the 1976 Outlook and Its Im-

plications," before the 26th Annual Economic Outlook Conference,

University of Michigan, December 12, 1975.--

Response to additional written questions posed by Chairman Ilum-

phrey ----

Burress, Glenn E.:

Prepared statement.-----

202

242

224

Butz, Hon. Earl L.:

Prepared statement...
Nathan, Robert R.:

Chart: Percentage deviations of actual GNP from potential GNP.
Table: Actual and potential gross national product.-----

Prepared statement.------
Parks, Robert H.:

Summary statement.----
Richardson, Hon. Elliot L., et al.:

Prepared statement.----
Response to Representative Moorhead's question regarding share of

business fixed capital investment in gross national product -----Response to Representative Heckler's request to supply the recom

mendations of the Commission on Productivity-----

230

257

263

269