COUNCIL OF ECONOMIC ADVISERS STATEMENT OF KERMIT GORDON, MEMBER; ROBERT SOLOW, SENIOR ECONOMIST; AND CHARLES A. COOPER, ASSISTANT TO THE CHAIRMAN AMENDMENT AND JUSTIFICATION Senator HOLLAND. The next item for consideration is a supplemental request in the amount of $177,000 for the Council of Economic Advisers. The House Committee recommended an allowance of $170,000 but this item was deleted on the floor on a point of order. There will be placed in the record at this point the extract from House Document 210 of July 12, transmitting this request and the justifications in support of this estimate. (The justification referred to follows:) [Extract from H. Doc. No. 210 of July 12, 1961] EXECUTIVE OFFICE OF THE PRESIDENT COUNCIL OF ECONOMIC ADVISERS "SALARIES AND EXPENSES "For an additional amount for 'Salaries and expenses', $177,000: Provided, That the appropriations under this head shall be available during the current fiscal year without regard to the limitation on salaries appearing under this head in the General Government Matters, Department of Commerce, and Related Agencies Appropriation Act, 1962." This proposed supplemental appropriation would enable the Council to carry out adequately the responsibilities vested in it by the President. The ceiling on salaries for members and staff of the Council contained in the Employment Act of 1946 were recently removed by Public Law 87-49. THE CHAIRMAN OF THE COUNCIL OF ECONOMIC ADVISERS, Hon. CARL HAYDEN, DEAR MR. CHAIRMAN: I wish to present for the consideration of the committee a request for a supplemental appropriation of $177,000 for the Council of Economic Advisers. This sum will enable the Council to increase its staff by nine professional and four secretarial positions, thereby restoring it to the approximate level of 1947-53. Together with the $414,000 currently available under H.R. 7577, this supplementary request will provide the Council with a total appropriation of $591,000 for fiscal year 1962. This supplementary appropriation request is being made pursuant to the enactment of legislation (H.R. 6094, signed into law June 17, 1961) removing the statutory limitation of $345,000 on salaries of the members and staff of the Council. This ceiling was still in effect at the time the House acted on the general Government matters, Department of Commerce, and related agencies appropriation bill, 1962, which reduced the Council's amended appropriation request by $200,000. In discussing this bill on the floor of the House, Chairman Andrews of the House Appropriations Subcommittee stated that, "The com mittee made this reduction of $200,000 so as to be in conformity with the limitations of $345,000 on salaries in the basic law and has included language in the bill limiting salaries to that amount. There is legislation pending that will either lift or increase the limitation on this and on enactment of such a law consideration can then be given to whatever fund adjustments that may be required." Since the $345,000 statutory salary limitation has now been removed, there no longer exists a legal barrier to granting whatever appropriation is deemed appropriate for Council salaries. In his letter to the Speaker of the House and the President of the Senate requesting the removal of the Council's statutory salary ceiling, the President stated that, "The work of the Council is one of the major staff services available to the President. *** The Council will be unable to discharge its duties without an increase in its personnel budget." The duties of the Council as set forth in section 4 (c) of the Employment Act of 1946 include the following: (1) to assist and advise the President in the preparation of the Economic Report; (2) to gather and analyze timely information concerning current and prospective economic developments, and report regularly to the President on the relationship of these developments to the achievement of maximum employment, production, and purchasing power as prescribed in the act; (3) to appraise and report to the President on the extent to which the various programs and activities of the Federal Government contribute to the growth and stability of the Nation's economy; (4) to develop and recommend to the President national economic policies to foster and promote competitive enterprise, to avoid economic fluctuations, and to maintain maximum employment, production, and purchasing powers; and (5) to make such studies, reports, and recommendations on Federal economic policy and legislation as the President may request. In accordance with section 4 (c)5, the President has asked us to undertake new responsibilities in a wide variety of fields, including international economics, manpower problems, defense and disarmament economics, problems of economic growth, technology and research and development, and natural resources. Without the addition of new professional and secretarial staff, we will be unable to fulfill these responsibilities. The Council is not a large agency with operating responsibilities. It is a staff advisory agency, composed largely of professional economists and statisticians who analyze the wide range of economic problems and policies with which the President is concerned in formulating domestic and foreign policy. The proposed increase in our staff will in no way alter the fundamental nature of Council operations. However, the President has expanded his reliance on the Council as a central source of economic analysis and advice; he has, for example, abolished the position of White House Special Assistant on Economic Matters. In order to furnish the President with the professional analysis he requires on economic matters, we need to be able to expand our activities into areas of particular importance to him. We will be unable to do so without an increase in our staff. The increase of $177,000, which we are requesting, would raise the total appropriation for the Council for the fiscal year 1962 to $591,000. This sum is $23,000 less than our earlier amended budget request. In accordance with the report of the House Appropriations Committee which stated, "it is understood that the public works planning activities will remain in 'Special Projects,'" we are not asking for the $21,000 originally requested to support these activities. In addition, we are not asking for restoration of the $2,000 for travel disallowed by the House. An attachment entitled "Council of Economic Advisers, Supplemental Estimate of Appropriations, 1962" outlines additional details in support of this appeal. My colleagues and I will be pleased to testify before the committee at your convenience. Sincerely yours, WALTER W. HELLER. COUNCIL OF ECONOMIC ADVISERS SUPPLEMENTAL ESTIMATES OF APPROPRIATION, 1962 APPROPRIATION LANGUAGE "For an additional amount for 'Salaries and expenses,' $177,000: Provided, That the appropriations under this head shall be available during the current fiscal year without regard to the limitation on salaries appearing under this head in the General Government Matters, Department of Commerce, and Related Agencies Appropriation Act, 1962." GENERAL STATEMENT The Employment Act of 1946, establishing the Council of Economic Advisers, contained a statutory limit of $345,000 on the annual appropriations for salaries of Council members and of officers and employees of the Council. In anticipation of the removal of this ceiling, the Council budget request for fiscal 1962 asked for an appropriation for personal services in excess of this amount. However, removal of this ceiling did not occur until after the House passed the General Government matters, Department of Commerce, and related agencies appropriation bill, 1962. In order to comply with the basic statutory limitation on Council salaries, the House reduced the Council's 1962 appropriation request by $200,000 and inserted language limiting the amount available for salaries to $345,000. Subsequent to this action, legislation (Public Law 87-49) was enacted which removed the salary ceiling in the Employment Act. Accordingly there is no longer any legal barrier to granting the Council request for an appropriation for personal services of greater than $345,000. The funds requested under this supplemental appropriation are necessary for the Council adequately to discharge its responsibilities under the Employment Act of 1946. The proviso in the language of the estimate is to insure that the limitation inserted in the regular annual Appropriation Act prior to the amendment of the basic law will not apply to the use of the Council's funds during the fiscal year 1962. JUSTIFICATION The Council of Economic Advisers respectfully requests a supplementary appropriation for fiscal 1962 of $177,000. Together with the $414,000 previously approved by the House of Representatives and the Senate in H.R. 7577, this supplementary request would provide the Council with a total appropriation of 8591,000 for fiscal year 1962. This is $23,000 less than the $614,000 appropriation requested in the amended budget for 1962. The reduction results from decisions: (a) not to renew our request for funds ($21,000) to support the public works planning activities transferred by the President from "Special projects, the White House Office," to the Council; and (b) not to appeal the decrease of $2,000 for travel voted by the House. (A fuller explanation of the first matter is contained in the attached "Statement of the Council of Economic Advisers on Public Works Functions.") The General Government matters appropriation bill, 1962, H.R. 7577, which was passed by the House of Representatives on June 13, 1962, reduced by $200,000 the Council of Economic Advisers' amended budget request for the fiscal year 1962. This reduction was necessary at that time in order to conform to the statutory limit of $345,000 on the annual appropriations for salaries of Council members and of officers and employees of the Council which was contained in the Employment Act of 1946 establishing the Council. In discussing the reduction in the Council's budget request in the debate on the House floor prior to the passage of this appropriations bill, Chairman Andrews of the House Appropriations Subcommittee on General Government Matters made the following statement: "The committee made this reduction so as to be in conformity with the limitation of $345,000 on salaries in the basic law and has included language in the bill limiting salaries to that amount. There is legislation pending that will either lift or increase the limitation and on enactment of such a law consideration can then be given to whatever fund adjustments that may be required." The then pending legislation, H.R. 6094, has since been enacted into law. H.R. 6094, as passed by the House on May 11, 1961, had provided for an increase in the salary limitation from $345,000 to $2 million. The bill was amended in the Senate on May 26, 1961, to remove the limitation entirely. In this form, the bill was then accepted by the House on June 19, 1961, and signed into law by President Kennedy on June 17, 1961. The requested increase of $177,000 in Council appropriations will enable the Council to return to a level of operations approximately equal to that maintained in the first 6 years of its existence when the salary ceiling had not yet become a serious hindrance to its operations. Since 1946, seven Federal employee salary increase measures have been enacted, and there has been a statutory increase in Council members' salaries. As a result, although the number of professional experts on the Council staff shrank from 19 in 1952 to only 11 in 1960, the Council budget in 1960 was pressing against the statutory ceiling. 2. Expanded role of the Council of Economic Advisers A return to its earlier level of operation is necessary if the Council is adequately to discharge its duties as one of the major staff services available to the President. The President at his press conference on December 23, 1960, announcing Mr. Heller's appointment as Chairman, set forth his conception of the role of the Council in the following words: "I intend that we should return to the spirit as well as the letter of the Employment Act of 1946. "I intend the Economic Reports to deal not only with the state of the economy but with our goals for economic progress. And I don't think that we should treat the economy in narrow terms but in terms appropriate to the optimum development of the human and natural resources of this country, of our productive capacity and that of the free world. "With this in mind, I have asked Dr. Heller to find ways and means of providing us with the best possible staff assistance and advice in the major fields of economic and social policy with which the administration will be concerned. "Dr. Heller will work closely with the members of the Cabinet and with the Budget Director. I have asked him to develop close relations also with the country's many private centers for policy research and analysis in this field. "Under Dr. Heller's direction. I expect the CEA to take its place as a key element within the Presidential Office. I believe we can make a major contribution to the successful organization of the Presidency and by revitalizing the Council of Economic Advisers we shall fill a major gap in the staff services available to the President." As part of its expanded responsibilities under the present administration the Council has assumed the duties performed in the previous administration by a Special Assistant to the President. In the absence of such a White House economist, President Kennedy relies upon the present Council for advice on many day-to-day items of business in the field of economic policy for which the prior Council did not assume responsibility. Under the previous administration these duties were handled by a staff of four people: the Special Assistant, a part-time assistant, and two secretaries. In addition, the President has asked the Council to assume increased responsibilities in a wide variety of fields: International economics.-Recent changes in the international economic environment make it increasingly imperative that national fiscal and monetary decisions be made in the light of their effects on the balance of payments and on the economies of other countries. Accordingly, it is necessary that we extend our knowledge of how economies interact with one another, that we exchange such knowledge with other countries, and that we engage in frequent consultations with other countries to arrive at consistent and advantageous policies. The Council of Economic Advisers, at the request of the President, has undertaken new responsibilities in this connection. The Chairman of the Council serves as head of the U.S. delegation to the Economic Policy Committee of the Organization for European Economic Cooperation. In April, the Economic Policy Committee set up two working parties, in which the Council participates regularly, for continuing consultation on international arrangements for the coordination of fiscal and monetary policies, and on problems of accelerating the rate of economic growth. Consumer economics.-The President has asked the Council to undertake new responsibilities in the field of consumer economics. The Council will advise the President on administrative and legislative questions which relate to the economic problems of consumers. Manpower problems.—Recent studies of increased labor productivity in the United States indicate that a good part of the gain is attributable to improvements in the quality of the labor force. The President has requested the Council, in cooperation with the Department of Labor, to study the question of investment in human resources to assist in the development of programs to stimulate economie growth. Defense and disarmament economics.—Variations in the size and composition of the defense budget have important consequences for the economy as a whole and for particular regions and industries. The President has asked the Council, in cooperation with other Government agencies, to evolve methods of anticipating the economic consequences of changes in defense expenditures. In addition, the President has directed the establishment of an Advisory Committee to the Secretary of Defense, on which the Chairman of the Council serves, "to assist in meeting those unemployment and other economic problems of communities affected by termination of military installations in this country by the Department of Defense." Policies for promoting economic growth.-In recognition of the need to increase the rate of growth of the U.S. economy, the President has directed the Council to undertake the study of long-range growth problems and to assist in the formulation of Government programs designed to foster more rapid growth. Technology and research and development.-Research and development play a central role in the process of economic growth. A substantial share of research and development activity in the United States is supported by Government expenditures. The President has asked the Council to undertake research on the relationship between research and development and economic growth, and to aid him in evaluating present government research and development programs and in developing future programs. Natural resources.-In his message to the Congress of February 23, 1961, on natural resources, the President announced that the Council of Economic Advisors would "report to the President, the Congress, and the public on the status of resource programs in relation to national needs." 3. Deployment of additional positions The requested supplemental appropriation of $177,000 will provide for nine additional professional positions and four additional secretarial positions. Together with the positions already provided for this will mean that the Council will have a total employment of 44 staff members-25 professional (including the 3 Council members), and 19 secretarial and clerical. The nine additional professional positions will be used as follows: In each of the above areas the professional staff members concerned will be responsible for analyzing and assessing the significance of economic developments, for conducting research, and for criticizing and appraising current policies as well as for suggesting new policies. In the field of international economics, one position will be devoted to international financial affairs, and the other to problems of international trade and aid. In the natural resources field, a senior resources specialist and a junior economist would coordinate long-range studies |