Employment Act of 1946

The Employment Act of 1946 ch. 33, section 2, 60 Stat. 23, codified as 15 U.S.C. § 1021, is a United States federal law. Its main purpose was to lay the responsibility of economic stability of inflation and unemployment onto the federal government.[1] The Act stated: it was the "continuing policy and responsibility" of the federal government to:

coordinate and utilize all its plans, functions, and resources . . . to foster and promote free competitive enterprise and the general welfare; conditions under which there will be afforded useful employment for those able, willing, and seeking to work; and to promote maximum employment, production, and purchasing power.[2]

Liberals wanted an emphasis on "full employment" but conservatives were in control and they did not get it. Stein (1969) notes, "The failure to pass a 'Full Employment Act' is as significant as the decision to pass the Employment Act."[3] The Act also created the Council of Economic Advisers, attached to the White House, which provides analysis and recommendations, as well as the Joint Economic Committee. In practice, the government has relied on automatic stabilizers and Federal Reserve policy for macroeconomic management, while the Council of Economic Advisers has focused primarily on discussions of microeconomic issues.

Employment Act of 1946
Great Seal of the United States (obverse)
Enacted bythe 79th United States Congress
Citations
Public lawPub.L. 79–304
Statutes at Largech. 33, Sec. 2, 60 Stat. 23
Legislative history
  • Introduced in the Senate as S. 380 by James E. Murray (D-MT) on January 22, 1945
  • Committee consideration by Senate Banking, House Expenditures
  • Passed the Senate on September 28, 1945 (71–10)
  • Passed the House as the Employment-Production Act of 1945 on December 14, 1945 (255–126)
  • Reported by the joint conference committee on February ?, 1946; agreed to by the House on February 6, 1946 (322–84) and by the Senate on February 8, 1946 (unanimous consent)
  • Signed into law by President Harry S. Truman on February 20, 1946
Major amendments
Humphrey–Hawkins Full Employment Act (1978)

Background

By 1940 the Great Depression was finally over. A remarkable burst of economic activity and full employment came during the war years (1941–45). Fears of a postwar depression were widespread since the massive military spending was ending, the war plants were shutting down, and 12 million soldiers were coming home. Congress, fearful of a return to a state of depression, sought to establish preemptive safeguards against an economic downturn.[4]

The White House relied on Keynesian economic theory to develop its strategy. The theory, set forth by economist John Maynard Keynes and his American disciples such as Alvin Hansen at Harvard, contends that unemployment is caused by insufficient aggregate demand relative to the possible aggregate supply generated by full employment. Swings in aggregate demand create a phenomenon known as a business cycle that leads to irregular downsizing and hiring runs, causing fluctuations in unemployment. Keynes argued that the biggest contributor of these shifts in aggregate demand is investment.[5]

Compromises

The original bill, called the Full Employment Bill of 1945, was introduced in the House as H.R. 2202 and introduced without change by Congressman Wright Patman in the Senate as S. 380. The bill represented a concerted effort to develop a broad economic policy for the country. In particular, it mandated that the federal government do everything in its authority to achieve full employment, which was established as a right guaranteed to the American people. In this vein, the bill required the President to submit an annual economic report in addition to the national budget. The report, designated the Economic Report of President, must estimate the projected employment rate for the next fiscal year, and if not commensurate with the full employment rate, to mandate policies as necessary to attain it.

There was strong opposition to the wording of the bill from the business community, which feared government regulation, deficit spending and runaway inflation.[6] Conservative Congressmen, led by Republican Senator Robert A. Taft, argued that business cycles in a free enterprise economy were natural and that compensatory spending should not be exercised except in the most extreme of cases. Some also believed that the economy would naturally drive toward full employment levels. Others believed that accurate employment level forecasting by the government was not practical or feasible. Some were uncomfortable with an outright guarantee of employment.

The Conservative Coalition of Northern Republicans and Southern Democrats controlled Congress. The bill was pressured to take on a number of amendments that forced the removal of the guarantee of full employment and the order to engage in compensatory spending. Although the spirit of the bill carried through into the Employment Act of 1946, its metaphorical bite was gone. The final act was not so much a mandate as a set of suggestions.

The result was a bill that made the general goals full employment, full production, and stable prices. President Harry S. Truman signed the compromise bill into law on February 20, 1946.

Overview

Conservatives removed all of the Keynesian markers from the final bill, so that it merely encourages the federal government to "promote maximum employment, production, and purchasing power."

The act requires the President to submit an annual economic report within ten days of the submission of the national budget that forecasts the future state of the economy, including employment, production, capital formation, and real income statistics. This Economic Report of the President, as the act names it, sets forth future economic goals of the country and offers suggestions on how to attain it, a marked compromise from the original bill's focus on compensatory spending.

The act creates the Council of Economic Advisers, an appointed advisory board that will advise and assist the President in formulating economic policy. It also creates the Joint Economic Committee, a committee composed of both senators and representatives instructed to review it as the government's economic policy at least annually.

Amendment

Unemployment levels remained fairly steady after the passing of the act. After 1970, however, the economy began to fluctuate and unemployment rates rose again. The same fears that motivated the creation of the act in 1946 precipitated an amendment in 1978, entitled the Full Employment and Balanced Growth Act. This act was identical in spirit to the original Full Employment Bill of 1945, providing a guarantee of full employment and economic means to do so.[7]

In popular culture

In the Star Trek: Deep Space 9 episode Past Tense, the Employment Act was repealed, one of the changes in the future of 2024.

Notes

  1. ^ Norton (1977)
  2. ^ J. Bradford De Long, "Keynesianism, Pennsylvania Avenue Style: Some Economic Consequences of the Employment Act of 1946," Journal of Economic Perspectives, (1996) 10#3 pp 41-53. online
  3. ^ Herbert Stein, The fiscal revolution in America (1969) p 197
  4. ^ Norton (1977)
  5. ^ Theodore Rosenof, Economics in the Long Run: New Deal Theorists and Their Legacies, 1933-1993 (1997)
  6. ^ Don Yalung-Mathews, "Business Perspectives on the Full Employment Bill of 1945 and Passage of the Employment Act of 1946," Essays in Economic and Business History, 1990, Vol. 8, pp 331-342
  7. ^ Weidenbaum, (1996)

Further reading

  • Bailey, Stephen K. Congress Makes a Law: The Story Behind the Employment Act of 1946 Columbia University Press (1950)
  • Norton, Hugh S. The Employment Act and the Council of Economic Advisers, 1946-1976 (1977)
  • Wasem, Ruth Ellen. Tackling Unemployment: The Legislative Dynamics of the Employment Act of 1946 (W.E. Upjohn Institute for Employment Research; 2013) 241 pages
  • Weidenbaum, Murray. "The Employment Act of 1946: A half century of presidential policymaking," Presidential Studies Quarterly, Summer 1996, Vol. 26 Issue 3, pp 880–85

External links

Bertram Myron Gross

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Clifton Truman Daniel

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Until recently, he was the Director of Public Relations for Truman College, one of the seven City Colleges of Chicago. Prior to that, he worked as a feature writer and editor for the Morning Star and Sunday Star-News a New York Times paper in Wilmington, North Carolina.

Daniel is the honorary chairman of the board of trustees of the Harry S. Truman Library Institute, the member-supported, nonprofit partner of the Harry S. Truman Library and Museum in Independence, Missouri. He is a frequent speaker and fundraiser.

Daniel visited Hiroshima and Nagasaki in 2012, the sites where his grandfather had ordered the only use of atomic bombs for warfare in history.He appeared on Race for the White House as a commentator for his grandfather's experiences during both his first term and the 1948 United States presidential election.

Council of Economic Advisers

The Council of Economic Advisers (CEA) is a United States agency within the Executive Office of the President established in 1946, which advises the President of the United States on economic policy. The CEA provides much of the empirical research for the White House and prepares the annual Economic Report of the President.

Fiscal policy of the United States

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President Franklin D. Roosevelt first instituted fiscal policies in the United States in The New Deal. The first experiments did not prove to be very effective, but that was in part because the Great Depression had already lowered the expectations of business so drastically.

Full Employment Act

Full Employment Act may refer to:

Employment Act of 1946, a United States federal law

Humphrey–Hawkins Full Employment Act of 1978

George Aiken

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As Governor, Aiken battled the New Deal over its programs for hydroelectric power and flood control in Vermont. As a northeastern Republican in the Senate, he was one of four Republican cosponsors of the Full Employment Act of 1946. Aiken sponsored the food allotment bill of 1945, which was a forerunner of the food stamp program. He promoted federal aid to education, and sought to establish a minimum wage of 65 cents in 1947. Aiken was an isolationist in 1941 but supported the Truman Doctrine in 1947 and the Marshall Plan in 1948. In the 1960s and 1970s, he steered a middle course on the Vietnam war, opposing Johnson's escalation and supporting Nixon's slow withdrawal policies. Aiken was a strong supporter of the small farmer. As acting chairman of the Senate agriculture committee in 1947, he opposed high rigid price supports. He had to compromise, however, and the Hope-Aiken act of 1948 introduced a sliding scale of price supports. In 1950, Aiken was one of seven Republican senators who denounced in writing the tactics of Senator Joseph McCarthy, warning against those who sought "victory through the selfish political exploitation of fear, bigotry, ignorance and intolerance."

Harry S. Truman Farm Home

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Harry S. Truman Historic District

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Harry S. Truman Presidential Library and Museum

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Housing Act of 1949

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Humphrey–Hawkins Full Employment Act

The Full Employment and Balanced Growth Act (known informally as the Humphrey–Hawkins Full Employment Act) is an act of legislation by the United States government.

I'm Just Wild About Harry

"I'm Just Wild About Harry" is a song written in 1921 with lyrics by Noble Sissle and music by Eubie Blake for the Broadway show Shuffle Along.

"I'm Just Wild About Harry" was the most popular number of the production, which was the first financially successful Broadway play to have African-American writers and an all African-American cast. The song broke what had been a taboo against musical and stage depictions of romantic love between African-Americans.

Originally written as a waltz, Blake rewrote the number as a foxtrot at the singer's request. The result was a simple, direct, joyous, and infectious tune enhanced onstage by improvisational dancing. In 1948 Harry S. Truman selected "I'm Just Wild About Harry" as his campaign song for the United States presidential election of 1948. Its success in politics led to a popular revival.

Key West Agreement

The Key West Agreement is the colloquial name for the policy paper Functions of the Armed Forces and the Joint Chiefs of Staff drafted by James V. Forrestal, the first United States Secretary of Defense. Its most prominent feature was an outline for the division of air assets between the Army, Navy, and the newly created Air Force which, with modifications, continues to provide the basis for the division of these assets in the U.S. military today.

The basic outline for the document was agreed to at a meeting of the United States service chiefs that took place from March 11 to March 14, 1948 in Key West, Florida, and was finalized after subsequent meetings in Washington, D.C. President Harry S. Truman approved the agreement on April 21, 1948, which was revised in 1954 by the Dwight D. Eisenhower administration.

Lewis B. Schwellenbach

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Second Bill of Rights

The Second Bill of Rights is a list of rights that was proposed by United States President Franklin D. Roosevelt during his State of the Union Address on Tuesday, January 11, 1944. In his address, Roosevelt suggested that the nation had come to recognize and should now implement, a second "bill of rights". Roosevelt's argument was that the "political rights" guaranteed by the Constitution and the Bill of Rights had "proved inadequate to assure us equality in the pursuit of happiness". His remedy was to declare an "economic bill of rights" to guarantee these specific rights:

Employment (right to work), food, clothing and leisure with enough income to support them

Farmers' rights to a fair income

Freedom from unfair competition and monopolies

Housing

Medical care

Social security

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Unemployment

Unemployment, or joblessness, is a situation in which able-bodied people who are looking for a job cannot find a job.

The causes of unemployment are heavily debated. Classical economics, new classical economics, and the Austrian School of economics argued that market mechanisms are reliable means of resolving unemployment. These theories argue against interventions imposed on the labor market from the outside, such as unionization, bureaucratic work rules, minimum wage laws, taxes, and other regulations that they claim discourage the hiring of workers. Keynesian economics emphasizes the cyclical nature of unemployment and recommends government interventions in the economy that it claims will reduce unemployment during recessions. This theory focuses on recurrent shocks that suddenly reduce aggregate demand for goods and services and thus reduce demand for workers. Keynesian models recommend government interventions designed to increase demand for workers; these can include financial stimuli, publicly funded job creation, and expansionist monetary policies. Its namesake economist, John Maynard Keynes, believed that the root cause of unemployment is the desire of investors to receive more money rather than produce more products, which is not possible without public bodies producing new money. A third group of theories emphasize the need for a stable supply of capital and investment to maintain full employment. On this view, government should guarantee full employment through fiscal policy, monetary policy and trade policy as stated, for example, in the US Employment Act of 1946, by counteracting private sector or trade investment volatility, and reducing inequality.In addition to theories of unemployment, there are a few categorizations of unemployment that are used to more precisely model the effects of unemployment within the economic system. Some of the main types of unemployment include structural unemployment and frictional unemployment, as well as cyclical unemployment, involuntary unemployment, and classical unemployment. Structural unemployment focuses on foundational problems in the economy and inefficiencies inherent in labor markets, including a mismatch between the supply and demand of laborers with necessary skill sets. Structural arguments emphasize causes and solutions related to disruptive technologies and globalization. Discussions of frictional unemployment focus on voluntary decisions to work based on each individuals' valuation of their own work and how that compares to current wage rates plus the time and effort required to find a job. Causes and solutions for frictional unemployment often address job entry threshold and wage rates.

The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession, an economy usually experiences a relatively high unemployment rate. Millions of people globally or 6% of the world's workforce were without a job in 2012.

United States Congress Joint Economic Committee

The Joint Economic Committee (JEC) is one of four standing joint committees of the U.S. Congress. The committee was established as a part of the Employment Act of 1946, which deemed the committee responsible for reporting the current economic condition of the United States and for making suggestions for improvement to the economy. The JEC is chaired by Senator Mike Lee of Utah.

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