Then we come to another category which is buildings. Modified ventilation in commercial buildings, insulation, and so forth and so on. A total savings in 1975 of 345,000 barrels per day.

While thinking of the heating, I carry this thermometer with me, and it is now 810 in this room. The lights add somewhat to this, but all over the Capitol we are running 10° to 12° more than we need for the comfort of the persons who are in the rooms. So frankly, the Members of the Congress must stop talking about this subject, and they must see that the heat in the buildings here on the Hill is reduced.

I have directed a strong letter to the Architect of the Capitol, hoping he will take the initiative in these matters.

This is not a little matter. This is a very important matter. Throughout the country this is being done to a greater degree than we are doing here within Washington, D.C., within the buildings of the Federal Government.

Then we come to fuel substitution, which was a further category. Fuel conversion of utilities was established at 115,000 barrels a day. At this point, I ask you, Mr. Sawhill, to refresh your thinking back to June of last year, after the Congress had passed the Coal Conversion Act and it was signed into law.

Now 9 months later we are just beginning to get guidelines or whatever we desire to call them. The other day I asked Secretary Morton and Administrator Zarb what was being done. They conferred, and I am not critical of them, but they were not sure.

Can you, as the man who was in charge during those months, tell us what has been done in this conversion program, which would save 115,000 barrels of oil a day?

Dr. SAWHILL. That certainly is an important program, Senator Randolph, and immediately after the passage of the act, what we did at FEA was to take a sample of 10 or 15 utilities-I can't remember which and use them as a pilot test group for determining how best to develop the regulations.

It was my understanding the regulations were to have been developed by December 15, and orders made under the act according to the regulations, in January.

Senator RANDOLPH. You mean it takes 8 months to move on a matter of this kind?

Dr. SAWHILL. It took some time because we had to go through a testing procedure with a smaller group of utilities before we felt we were in a position to promulgate regulations nationwide.

Senator RANDOLPH. I am disappointed. I am discouraged. I think the American people are discouraged by the delay. I am not attempting to attribute it to any one person within the agency. But let's hope it doesn't take as long to enact the legislation we are talking about today.

The CHAIRMAN. Your time is up.

Senator RANDOLPH. May I take 1 more minute. I don't ask for this very often. I will ask today.

Now, the draft regulations, they were actually promulgated within the last 2 or 3 days. Now we are going to add some 3 months for comment on the environmental impacts. All I am saying is that if we pass a law and it takes us a full year and over to begin to see any results of it, the legislative mill can't grind very fast, can it, Mr. Sawhill?

Dr. SAWHILL. I think both the executive and legislative mills have ground too slowly in this instance.

Senator RANDOLPH. It is not because action has not been taken on legislative packages.

Now, that was millions of barrels of oil per day. Yet in your testimony-and I regard you very, very highly-you are not an economist who is always right but seldom in doubt-you are very often right. But today you come in and change this figure. You say, the economy has changed. But I am talking about the wasteful consumption problems that give us the opportunity to do a little job of conservation in this country.

I am not in school, but will you raise your hands, all of you who are on the panel, do you really believe we can do a conservation job in America on a voluntary basis and save tremendous amounts of petroleum every 24 hours if we level with the American public and actually call a crusade into being to do the job?

If there are any hands, I would appreciate it. One, two. [Dr. Cooper, Dr. Janeway.]

Senator RANDOLPH. I was in the minority again. Well, that is all right.

[The letter to the Architect of the Capitol referred to by Senator Randolph follows:]

Mr. GEORGE M. WHITE,
Architect of the Capitol,
Washington, D.C.

FEBRUARY 18, 1975.

DEAR MR. WHITE: Energy conservation affords an opportunity to foster energy independence. Significant energy savings are possible through improvements in the operation and maintenance of buildings such as the offices in the Capital and in both the Senate and House of Representatives.

In the spirit of Senate Resolution 59, approved by the Senate on February 5, 1975, it is incumbent upon government to demonstrate the energy savings that are possible through voluntary actions. In this regard, the Congress should institute all available actions to reduce energy consumption without reducing the level of essential services.

This letter is to request your office to survey the potential energy savings that can be achieved in the Capital buildings through a positive energy conservation program. During the last few weeks I have observed that room temperatures in the Capitol buildings are often significantly in excess of the recommended 68 degrees, ranging up to as high as 80 or 81 degrees. This is one opportunity for improvement. Other opportunities also exist.

Your assistance is requested in providing a report to the Committee proposing an energy conservation program for the Capital facilities.

With regards, I am,

Truly,

JENNINGS RANDOLPH,

Chairman.

The CHAIRMAN. Thank you very much. Senator Hansen. Senator HANSEN. Thank you very much, Mr. Chairman, I came in late so let me yield to others ahead of me.

The CHAIRMAN. Maybe I will take 5 minutes.

We have a physicist over here.who will keep the time and so it should be accurate.

I wonder if we could nail down one thing that is very confusing, I think, to those of us trying to follow it, let alone the public. But the administration talks about a $31 billion program. That is the import tax, the excise tax, the decontrol of oil and so on, including as I understand it, the ripple effect.

48-736-75—16

Now let me read from testimony of Dr. Eckstein up in Boston when Senator Kennedy questioned him on this point:

Senator KENNEDY. What is your estimate on the rippling effect on the President's $30 billion program, would you say?

Dr. ECKSTEIN. We estimate the total rippling effect to be on the order of $25 to $30 billion additional. So the total is not 2 percent but near 4.

Senator KENNEDY. That is the way we reach anywhere the $50 to $60 billion. Is there agreement here that there is very substantial ripple effect beyond the $30 billion? Does anyone disagree with that?

I am not saying the amount, but a substantial increase beyond the $30 billion; does any one disagree?

The Chair hears none. What is the approximate amount? This becomes crucial at a time when we are talking about fighting a recession, which is the new input here in the last few months and also fighting, of course, inflation.

Most economists, I take it, are giving precedence to the impact of a declining economy at a very rapid rate. The GNP, in real terms, I think, dropped the last quarter. The last quarter was 9.2 percent, I believe, in real terms not in current dollars.

Now, what I would like to find out is what these figures in your best judgment really are. I will go right down the line. Professor Cooper? Just give a round number.

Dr. COOPER. No; Mr. Chairman, I won't give a number because I have not done the analysis. But I will make a distinction that I think is important.

You used this term ripple effect. I believe there is a very strong ripple effect for the imposition of a tax on a particular kind of energy into other prices.

There is not a ripple effect on real output arising from the imposition of taxes. Apart from the tax revenue, that repreesnts a transfer from one part of the American public to another. I am not saying there are no consequences from that, but it does not represent a net additional deflationary impact. I think it is important to distinguish between the two.

The CHAIRMAN. Disposable income is decreased right? Purchasing power? Disposable income is decreased?

Dr. COOPER. No. Disposable income, purchasing power in the hands of the public, is decreased to the extent of Government tax revenues but not by the secondary price increases that take place as a result of the tax. Those represent transfers of purchasing power from one part of the American public to the other. For example, from utilities to coal mine owners.

The CHAIRMAN. But you have to assume real wages, real income is going up and real income has been going down the last 18 to 24 months, real wages.

Dr. COOPER. Are you talking about purchasing power in the hands of the American public or real wages of the urban American worker? The CHAIRMAN. Real wages of the American urban worker.

Dr. COOPER. Real wages of the urban American worker will fall by more than the amount of the increase in taxes because of the effect on further prices, and as I argue in my statement, workers will try to recoup that in higher wage settlements, and that would feed the inflation.

The CHAIRMAN. The wage-price spiral?

Dr. COOPER. Yes.

Dr. JANEWAY. I accept the data analysis for specific numbers, I would just add to what Professor Cooper has said, the crucial effect is the way this tax increase becomes a cost increase to workers, to businessmen, and I would add it has not been dealt with yet today to Government, to the State and local governments who above all do not have the alternative of running deficits. So you can get an additional quasi-political ripple effect.

For example, in New York, the impact on the city and State budget of higher energy prices can force the abandonment of the 35-cent fare and increase public transportation costs, driving people to automobiles, forcing them to use more gasoline, and so on.

The exact negative of the purpose of the program.

The CHAIRMAN. Mr. Herr? I assume you agree.

Mr. HERR. I wouldn't dare disagree.

The CHAIRMAN. You can give it off the record, if you want.

Mr. HERR. I will say DRI in its exercise put in approximately the President's assumption and then came up with a $30 billion figure as a direct cost to the program.

The CHAIRMAN. That is the ripple?

Mr. HERR. NO. That is the direct effect. Then, working it through the model, we get Dr. Eckstein's figure that we would add in addition to that $30 billion another $25 to $30 billion in increased costs of the

economy.

The CHAIRMAN. But the administration includes in their $30 to $31 billion a ripple effect.

Mr. HERR. I don't think that is clear.

The CHAIRMAN. I know it isn't clear, but Mr. Seidman made a comment to the press it would add $25 billion, and then later the White House issued a statement denying it. But I think they are sticking by their $31 billion, my staff tells me. Their $30 billion."

Mr. HERR. At the risk of misquoting Mr. Seidman, I believe he said the direct costs of the package were $30 billion, and there were no ripple effects.

The CHAIRMAN. No ripple effects. Does everyone on the panel agree that there are no ripple effects? Mr. Lichtblau?

Mr. LICHTBLAU. We have not done the computations.

The CHAIRMAN. I want the record to show they all agree that there are ripple effects. Let the record so show.

Not stipulating the amount, but that there are rippling effects?

Mr. LICHTBLAU. This is precisely my point. I have not done the calculations, so I will accept Data Resources'. But obviously, the $31 billion is the direct effect only, and there must be a ripple effect; the idea that there is no ripple effect is illogical. So whatever that effect is, it must be in addition to the $31 billion. You can't have a program of this magnitude, of this nature, that does not have an additional ripple effect throughout the economy.

The number that has been issued by the administration, an effect of $250 per family, is only the direct impact on gasoline, heating oil, and natural gas expenditures.

Even the real direct cost, without any ripple effect of the $31 billion, is much higher. If you distribute this per family, you come up with an

average of $500 before you even get to the ripple effect. So the $250 is really a gross understatement of the impact of this program.

The CHAIRMAN. Thank you, Mr. Lichtblau. I am over my time. Senator Hansen has got something up his sleeve.

Senator HANSEN. My generous nature always come through.

Dr. SAWHILL. I will quickly agree with other members of the panel. It seems to me not terribly important whether there is a ripple effect or not-although we all agree that there is-and the ripple effect will be of some size; certainly with coal costs going up $2 to $3 billion, that is a clear indication of a partial ripple effect anyway. But I think the real issue with these higher prices is that they are causing great problems for low-income groups that would be very greatly affected by rising energy costs.

As Mr. Lichtblau has pointed out, residual fuel costs went up about 160 percent last year, heating oil costs about 70 percent, and with those kind of increases that people, particularly in lower income brackets, have already experienced, adding further price increases on top of that, is really intolerable at a time when our economy is spiraling downward into recession. It is these very people who are standing in the unemployment lines today.

The CHAIRMAN. Thank you very much. Senator Bartlett.

Senator BARTLETT. Thank you, Mr. Chairman. It seems to me the basic domestic problem is a shortage of domestic energy with controlled prices that are controlled too low to bring on sufficient domestic supplies quickly, and related with that is the worldwide oversupply of energy with controlled prices too high and also with controlled deliveries in the form of embargoes-one embargo and the threat of others.

I would like to ask Dr. Sawhill if we freed up the price of controlled oil, the 63 percent or so, what price increase would you anticipate there would be in gasoline?

Dr. SAWHILL. I believe our earlier estimates were about 5 cents. I am not positive of that. But you have $5 on 60 percent of our supplies, and it is 2 cents for each dollar. It would be somewhere in that range;. 5 to 6 cents, I would think.

Senator BARTLETT. If I recall, I think the earlier figure was 6.4

cents.

Dr. SAWHILL. Let's say 4 to 6 cents.

Senator BARTLETT. It seemed to me the panel in their discussions on the positive side seemed to be a little concerned about a major impact of freeing up the price.

Mr. Lichtblau, I think, suggested that perhaps freeing up secondary oil, which I think is about 20 percent of the total, so I would like to ask you very quickly-as you know, I am limited on my time-I would like a yes or no kind of an answer, do you feel or if you feel the 4.6-percent freeing up of the market could bring on additional supplies which I would assume raise the price up to the $11.20 that currently exists on free oil, that will be less, $2 less than the imported price, would that be too much of an impact on the economy? And if you thought so, would you then favor doing that in graduated steps such as secondary oil which would be about one-third of the 60 percent? Maybe do it over 2 or 3 years?