Economic Effect of Vietnam Spending

Significant pressures throughout the economy are generated by the Vietnam war, but there has been continuing uncertainty about the exact impact in many sectors. The committee held four days of hearings in late April, studying immediate effects of the war on the economy as well as the economics of possible cease-fire and de-escalation. Witnesses included Senator John Stennis, Chairman of the Senate Armed Services Subcommittee on Preparedness, the Assistant Secretary of Defense, the Director of the Bureau of the Budget, the Assistant Director of the Arms Control and Disarmament Agency, and representatives from the Federal Reserve System, the Department of Defense, industry, labor and various universities. The hearings focused on problems of coordinating military procurement, the size of Vietnam spending, and on issues of de-escalation.

Volume I of the hearings included statements and supporting materials; Volume II presented a compendium of background information.

On July 7, the committee published its report "Economic Effect of Vietnam Spending" which summarized, along with supplementary views, conclusions reached from the earlier hearings.

Economic Outlook and its Policy Implications

In June, the committee, in view of the on-going debate over government tax and spending policies, presented a three day set of hearings on the mid-year economic outlook.

Appearing before the committee in the hearings were the Chairman of the Council of Economic Advisers, a representative from the Department of Commerce, and academic and business leaders.

August Review of the 1968 Budget

"Because of the great importance of the Federal budget in the functioning of our economy, the Bureau of the Budget should be required to file with the Congress quarterly budget reports indicating major changes in earlier projections." This recommendation from the committee's 1967 annual report was initially implemented by an arrangement between the Budget Bureau and the committee by which revised budget figures will now be sent to Congress early each fiscal year. The first presentation of the revised budget came in a one-day hearing held on August 24, when Budget Director Charles L. Schultze and members of his staff testified to the committee. The hearing record contains both the testimony and the revised budget review.

Subcommittee on Economy in Government

Since approximately 20 percent of national income now passes through the Federal sector, government expenditure policies exert significant influence on the total economy. In view of this fact, committee members decided it was essential to maintain a continuous review of government expenditure policies to insure minimum waste and misallocation of resources. To meet this goal, the committee moved to expand the jurisdiction of its existing Subcommittee on Federal Procurement and Regulation, while at the same time, changing that subcommittee's title to the Subcommittee on Economy in Government. The Subcommittee concerns itself broadly with improving government management and specifically reviews such areas as procurement policies, inventory management, program evaluations, budgetary techniques and budget presentation.

Procurement and Property Management

The subcommittee continued studies undertaken by the Subcommittee on Federal Procurement and Regulation dealing with procurement and property management. Two volumes of background material were published, the first in April, and an updated version in November. Both volumes included information about government obligations, real property holdings, property management activities, contract specifications, utilization of military stocks, disposition of surplus materials and related reports on military and civilian property procedures.

Two series of subcommittee hearings looked into procurement and property management questions raised from earlier activity of the Subcommittee on Federal Procurement and Regulation and also from the background materials. A four day hearing in May heard as witnesses the Comptroller General, the General Services Administrator, and representatives from the Defense Department, the Budget Bureau, Congress and industry. Supplementary materials dealing with the "Buy American Act," Government in business, Federal real property

management, surplus material sales, agency financing programs, typewriter procurement, and the Executive program to improve management of automatic data processing equipment were printed in an accompanying volume to the printed hearing report.

Many of the witnesses reappeared in the second set of hearings, which ran from November 27-30 and also on December 8. These hearings covered the following issues:

Progress by the Department of Defense in implementing the Truth in Negotiations Act;

Actions being taken to get adequate controls over $15 billion of government-owned property in the hands of defense contractors;

Steps taken or planned to maintain adequate controls over the Department of Defense's supply systems' inventory of $41 billion;

Progress by the Administration in establishing one policy for all Federal agencies in applying price differentials under the Buy American Act; Steps being taken to utilize millions of dollars worth of short-shelf-life items by Federal or State agencies before they become useless;

Procurement actions taken by the General Services Administration to permit small manufacturers to participate in the Government's $3 billion annual cost of purchase or lease of computers and peripheral equipment; Status of program to increase advertised procurement in lieu of preponderant use of negotiation;

Development of an integrated National Supply System Program to improve management of Federal real property procurement of commercialindustrial type products and services.

Appendix 4(a) of the hearing record includes verbatim the Report to the Congress by the Comptroller General of the United States on the "Need for Improvements in Controls over Government-Owned Property in Contractors' Plants," B-140389, dated November 24, 1967. This detailed report on 21 commercial contractors and 2 universities contains many criticisms of wasteful practices, together with recommendations for improvements.

Appendix 4 (b) of the hearing record contains responses from contractors to the GAO Report.

Included in the hearings also is the Report of the Comptroller General on "Improved Inventory Controls Needed for the Departments of the Army, Navy, and Air Force, and the Defense Supply Agency, Department of Defense."

The Planning-Programming-Budgeting System

Over the past few years, new techniques have been introduced which assist Government in achieving optimal resource allocation and efficiency. The planning-programming-budgeting (PPB) system is one of the more extensive developments in this field. In a four day hearing conducted in September, the subcommittee received testimony from Federal, State and local government officials, and representatives from universities and research organizations. One session concentrated on the question of current government discounting methods employed in cost-benefit analysis.

The subcommittee report stemming from these hearings. "The Planning-Programming-Budget System: Progress and Potentials," recommended that all government levels continue to utilize these decision-making aids and suggested that Congress should make additional use of PPB methods for its own benefit.

Review of Report of the President's Commission on Budget Concepts A strong endorsement for creation of a Presidential commisison set up to review and revise government budget concepts was made in the committee's 1967 annual report. After the Commission released its findings in mid-October, the subcommittee held hearings on October 31 and November 2. in which it heard from Mr. David M. Kennedy, Chairman of the Commission, members of the Commission staff, and from other leading budget experts.

Interest Rate Guidance for Federal Decisionmaking

On January 29, 1968, the subcommittee continued its study of Federal expenditure policy in a hearing dealing with a survey by the General Accounting Office of the types of discounting practices applied in government investment decisions. Witnesses were the Comptroller General and members of his staff.

Subcommittee on Economic Progress

Federal Programs for the Development of Human Resources

Joint Economic Committee involvement with problems of low income families and human resources dates back to the founding of the committee itself. The most recent thrust through the subcommittee's investigation of Federal programs for the development of human resources was initiated in 1965. Three volumes describing Federal involvement in the human resource field were published during the second session of the 89th Congress. As a follow-up to those reports, the subcommittee issued in June a series of questions and an outline for a compendium of papers providing economic analysis of government programs.

This two volume compendium studying government human resource activities has just been published: topics covered in the first volume are program ap praisal, national goals, program management and coordination, manpower, and education; volume two includes income maintenance and family support, health care and improvement, and housing and the quality of man's environment.

Economic Education

Senate Resolution 316 of the 89th Congress, second session, requested the Joint Economic Committee to undertake a detailed study of the adequacy and objectively of practices of economic education at all levels, including shall education. Earlier subcommittee hearings in 1966 dealt with the relationship of technology to education, and on April 14, 17, and 21, 1967, the subcommittee began its inquiry of economic education.

During the three hearing days, the subcommittee received testimony from Members of Congress, the United States Commissioner of Education, and representatives from the Council of Economic Advisers, the National Science Foundation, and various education associations, school systems, univeristies, finance, labor, and farm organizations. Target of the hearings was to determine the extent of and need for education in economics, and to determine reasons for this need.

Financing Municipal Facilities

In its earlier two volume study published during the 89th Congress, "State and Local Public Facility Needs and Financing," the subcommittee reported on difficulties faced by municipal institutions in marketing bonds. One estimate predicted that over the coming decade, State and local agencies would have to invest over $300 billion in public facilities.

On December 5, 6, and 7, 1967, the subcommittee looked further into the problems of municipal finance. Witnesses heard represented both small and large municipalities and officials such as mayor, city finance director, and city manager. Other witnesses, from Congress and leading municipal organizations, also testified.

Further subcommittee inquiry in this area is scheduled for 1968.

Subcommittee on Foreign Economic Policy

The Future of U.S. Foreign Trade Policy

One of the most sweeping series of trade negotiations, the so-called "Kennedy Round," concluded its five year begaining negotiations on June 30, 1967. Trade regulations for many commodities were changed; however, an equally significant impact came from the nature of the Kennedy Round itself.

With termination of the Kennedy Round, the subcommittee felt it an appropriate time not only to review technical changes resulting from the negotiations, but also the proper time to appraise future U.S. trade policy.

Six hearing days dealing with various aspects of trade policy were held in mid-July. The subcommittee received testimony from the President's Special Representative for Trade Negotiations, from officials from the Departments of Agriculture, Commerce, and State, and from the U.S. negotiating team, as well as from representatives from Congress, universities, banks, international study organizations, research institutions, and industry.

The printed record of the hearings was published in two volumes, the first containing the actual sessions, and the second including a series of submitted statements answering questions asked by the subcommittee of a number of industry, farm, and trade organizations.

On September 29, the subcommittee released its report, "The Future of U.S. Foreign Trade Policy," which, along with supplementary views of certain members, summarizes the findings made in the hearings.

Issues and Objectives of U.S. Foreign Trade Policy

In conjunction with the subcommittee hearings on future trade policy, a number of leading international economists from universities, professional associations, and the business world were asked to present their views on certain important aspects of U.S. foreign trade policy and how it might be directed in light of the Kennedy Round negotiations.

The compendium incorporating the twelve papers, published on September 22, 1967, was divided into four sections: the basis of negotiation; institutional aspects; trade and the adjustment process; and specific issues.

Subcommittee on International Exchange and Payments

New Plan for International Monetary Reserves

After a two year study period, the Ministers of Finance and the Governors of the Central Banks of the Group of Ten countries agreed, in August 1967, on plans for establishing a new international monetary reserve facility. Later, at the IMF annual meetings in Rio de Janeiro, the IMF Board of Governors adopted a resolution which set the framework for implementing the "Special Drawing Right"

reserve.

The subcommittee, pursuant to its continuing study of the international settlements mechanism, paid special attention to these developments. A September 14 hearing received testimony from the Secretary of the Treasury and the U.S. Executive Director of the IMF. The September hearing dealt mainly with the new reserve concept. On November 22, the subcommittee looked more specifically at the Rio Agreement as three leading international economists appeared as witnesses.

Guidelines for Improving the International Monetary System-Round Two Much of the theory adopted for the new "Special Drawing Right" reserve proposals substantiates subcommittee recommendations for its August 1965 report, "Guidelines for Improving the International Monetary System." In that report, creation of new international reserves was labeled an imperative condition.

With that imperative met, the subcommittee offered in December 1967 its second series of recommendations on improving international monetary systems. The report stresses the need to implement SDR's as soon as possible, and underlines their importance, both for this country and for the rest of the world. The new guidelines also ask that IMF quotas for Common Market nations be revised, analyzes the relationships between SDR's and less developed countries, and suggests that SDR's be marshalled on a regional basis.

Subcommittee on Economic Statistics

The Coordination and Integration of Government Statistical Programs Demands for government statistics have been expanding rapidly. The 1967 Joint Economic Committee Annual Report, in recognizing the increasing pressures for better statistical programs, directed that the subcommittee "look into the possibilities of a truly integrated system providing genuinely comparable statistics consistent with and meshed into an overall system of economic statistics including the Federal, State, and local governments."

To comply with this directive, the subcommittee devoted four days to hearings in May and June. Witnesses included representatives from Congress, the Budget Bureau, the Council of Economic Advisers, and statistical experts from universities, research groups, and eminent statisticians.

The subcommittee's report, published on August 9, recommended establishing a national statistical servicing center, as well as outlining several areas where imme diate improvements could be undertaken.

Subcommittee on Fiscal Policy

Revenue Sharing and its Alternatives: What Future for Fiscal Federalism? Numerous suggestions have been offered concerning fiscal relationships between differing governmental levels. In 1967, the Fiscal Policy Subcommittee initiated comprehensive analyses on the issue of revenue sharing and its alternatives by publishing an extensive three volume compendium and holding two sets of hearings.

Nearly one hundred articles were included in the compendium, which was released in July. Volume I, entitled "Lessons of Experience," dealt with Federal aid to State and local governments, State revenue sharing and aid to local governments, and intergovernmental fiscal experience in other countries: Volume II,

"Range of Alternatives for Fiscal Federalism." was divided into five parts-the range of alternatives; revenue sharing with States and local governments; improving conditional grants-in-aid; tax credits and coordination; and tax reduction: the final Volume, "Federal, State and Local Fiscal Projections," included sections on State and local deeds, demands and resources; on Federal surpluses, and concluded with an annotated bibliography.

Four days of hearings, July 31-August 3, presented a theoretical background to the revenue sharing question. Each day centered on a given area-lessons of experience, fiscal projections, and their policy implications, revenue sharing or tax credit options, and other possible options-and witnesses represented Congressional, university, and research roganization viewpoints.

A second hearing series in November looked in more detail at individual State and local problems. The fifteen witnesses included Members of Congress, the Chairman of the Advisory Commission on Intergovernmental Relations, and municipal officials and organizations.

Old Age Income Assurance

Following its November 1966 outline of issues and alternatives for old age income assurance, the subcommittee is publishing a six volume compendium on problems and policy issues in the public and private pension system. Three volumes, numbers III, IV, and V, were made available in December, 1967, and publication of the remaining volumes, numbers I, II, and VI, is expected shortly. Part I presents general policy guidelines; Part II looks into the aged population and retirement income programs; public programs are investigated in Part III; the topic of Part IV is employment aspects of pension plans; Part V deals with financial aspects of pension plans; and Part VI summarizes all of the papers. Subcommittee on Urban Affairs

Director of Urban Research Study Centers

The newest Joint Economic subcommittee made its first presentation in midAugust when it released a directory listing activities and staffs of over 95 organizations and study groups which work in urban affairs. Two types of organizations were included, university-sponsored study centers and nonprofit research institutes. The subcommittee hopes to up-date the directory in additional revised editions.

Urban America: Goals and Problems

As its initial major long-range study, the subcommittee opened an analysis of urban problems with publication of a compendium and five days of related hearings. Aim of the long-term effort is stimulation of Congressional and public concern with the future of America's urban environment; the approach employed emphasizes research into both current and potential urban issues.

The subcommittee's August compendium is divided into four sections which study urban values, goals and priorities, financial problems, and rules of the game in the public and private sectors.

Hearings tied in with the compendium ran in late September and early October. Witnesses who appeared before the subcommittee all had written papers in the compendium. For the most part, the witnesses were from urban research study centers, universities, or from different levels of urban administration.

Other Committee Studies Completed Since March 1967

In carrying out its duty to make a "continuing study" of the economy, the Joint Economic Committee from time to time releases for public information pertinent materials prepared for the committee under the direction of the staff. Economic Policies and Practices

In April, the committee issued its tenth paper in its study of international economic policies as practiced by leading industrial nations. The tenth study paper, "Foreign Government Restraints on United States Bank Operations Abroad," was prepared for the committee by the American Bankers Association. An Economic Profile of Mainland China.

After publication of the committee's research into the economy of Communist China, many of the contributors to that study appeared in a three day hearing session held in April. In June, the committee released its report, which summarized its findings and conclusions.