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The growth record and the growth need in detail.

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The "longest upward movement on record," and the economic outlook...
Productivity trends, and their significance...

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Bearing of rate of economic growth upon employment and unemployment..
Targeting economic growth through 1967, and its significance..
The erroneous views of the CEA on economic growth...

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Chapter II. THE PROBLEM OF ECONOMIC EQUILIBRIUM, OR BALANCE:

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Chapter III. THE PROBLEM OF SOCIAL EQUILIBRIUM, OR PLAIN JUSTICE:

Identity of economic and social objectives in the United States---.

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Poverty and income maldistribution ___

Social equilibrium involves the public sector.

CEA position on poverty: talk versus action_

Chapter IV. FISCAL POLICY:

Misdirection of tax cuts to date..

Narrow view of scope of the total tax burden..

The issue of "tax reform"

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A model Federal Budget, responsive to needs and capabilities.
CEA views on fiscal policy---.

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Chapter V. THE PROBLEM OF INFLATION:

Three main errors in approach to problem of inflation....

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Evaluation of magnitudes of inflationary trends.

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CEA has not probed deeply into actual consequences of rising prices..

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The CEA has gravely misjudged the causes of inflation--

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My thesis with respect to recent and current inflation..

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Tight money and rising interest rates work against economic equilibrium.
Tight money and rising interest rates are in themselves inflationary.
Tight money and rising interest rates are appallingly unequitable_.
CEA comments on monetary policy---

* Former Chairman, Council of Economic Advisers; consulting economist, and attorney.

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Chapter VII. THE INT
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Chapter IX. My Own

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Need for a long-term perspe

The 1969 CEA Report bri era in the development and ap extending from January 1961 t been basically responsible for th

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ing appellation of the "New Economics." It was reasonably to be expected, and in fact it has so developed, that the final CEA Report of the "New Economists" should be, in substantial measure, an explanation, defense, and praise of the policies, accomplishments, and economic philosophy of the "New Economics."

It would therefore seem most fitting, and I hope most helpful to the Joint Economic Committee, that I focus mainly, not upon what has happened during the past year or so, but instead focus in broad perspective upon what has happened during the past 8 years, and in this larger view appraise the "New Economics" of the recent CEA members. This course seems particularly desirable at this time, for at least three reasons:

First, it has long been my view that economists in general, including conspicuously the "new economists," have devoted relatively too much attention to short-range trends and policies, and far too little attention to long-range trends and policies. In the main during the most recent years, the "fine tuning" attempts to adjust policies and programs to short-range trends have in some important respects been unsuccessful, not primarily because of detailed errors in judgment, but rather because of failure to invoke sufficiently a longer term perspective. Socalled fine tuning has fallen short, not primarily because of the nature of the instruments, but primarily because the listening apparatus has been far too circumscribed and insulated. It is my view that the greatest single improvement in national economic policies would be to turn more sytematically and comprehensively to longer range analysis and programs. Indeed, I believe this to have been the core intent of the Employment Act of 1946.

A second reason why this appears to me to be a very appropriate time to evaluate the "new economics" in the full perspective of 8 years is this: It is the very nature of our political system that the recent change in the national administration should be expected to bring forth a fundamental reexamination of national economic policies and programs, and some considerable changes in them. It is my hope that the type of analysis which I shall bring forward may be helpful toward changes in proper directions.

In the third place, the fundamental approach I am undertaking would seem desirable, because we now stand at what appears to be a clear and important transition in the economy. Despite the current stress upon curbing inflationary forces, which has come to amount to almost a sole preoccupation, the even more important challenge now confronting us is the threat of a serious retardment in the rate of real economic growth, a serious rise in unemployment, and in consequence an increasing inability-at least in the context of general attitudesto meet adequately the great priorities of our domestic and international needs.

Plus marks for the "New Economics"

There can be no doubt that the "new economics" has accomplished much, even though these accomplishments have unfortunately been accompanied by an unusual degree of public self-praise which has impeded critical evaluation. For the 8 years as a whole, a high, though not entirely satisfactory, rate of economic growth has been maintained. Unemployment has been reduced greatly, even though not sufficiently. For the 8-year period as a whole, in terms of the realities rather than

the ideal, a fair measure of average price stability has been maintained. Established programs, devoted to the well-being of the people, have been greatly expended. Many innovative social programs have been initiated, some of them successfully. The conscience of America has been aroused to the problem of poverty, even though the measures forged to deal with it have thus far been inadequate and disappointing. The responsibility of national fiscal and monetary policies to contribute to economic stability and growth has fortunately become increasingly recognized, even though the equal or even greater responsibility of these and other national policies to improve income distribution and enlarge social justice has been grievously neglected. The level of economic literacy and interest has been greatly elevated, largely through national leadership, and an enlarged consensus on many important matters has been achieved, perhaps enduringly.

But many problems have remained unsolved, some vital problems have been seriously neglected, and economic analysis and policymaking have been guilty of many serious errors of commission and omission.

Minus marks for the "New Economics"

The above critical comments would not seem excessive. Despite policies put forward to achieve stable and optimum economic growth, the real growth rate for the 8-year period as a whole has been somewhat on the low side, the 2-year period 1966-68 averaged a palpably and seriously deficient real rate of economic growth, and the short-term outlook can hardly be called favorable. Meanwhile, instead of seeking to reverse this low-growth-rate trend, policies and exhortations seem directed toward carrying it further. Dspite programs and policies put forth to curb inflation and improve the balance-of-payments situation, the 2 most recent years, and especially the past year, have evidenced the highest rate of price inflation since one short period during the Korean war, and the end is not yet. The international financial situation remains parlous, and fundamental remedies have been avoided. Despite the long-avowed promise to get unemployment down to levels consistent with maximum employment, the rate of unemployment among some vulnerable groups remains tragically high, and is contributory to political, civil, and social unrest, notoriously in our urban areas. Despite the promise to move toward a Great Society, which in proper context clearly means a good society, some of the greatest and most pressing priorities of our domestic public needs remain sorely neglected. And there have not thus far emerged, either in the pronouncements of the "new economists" or in the declared intentions of the new administration, any substantial and specific programs and policies offering reasonable prospects of overcoming these manifold difficulties.

Significance of my earlier studies

I approach the task of specifying my reasons for the foregoing conclusions with mixed feelings. On the one hand, I regret that more and better have not been done, and this is my primary sentiment. On the other hand, I feel justified, rather than prideful, in calling to the attention of the Joint Economic Committee and others that, year by year for many years, my presentation of matters to the Joint Economic Committee and to the public at large have identified fairly consistently

what was going wrong, and have to a high degree been vindicated by where we now stand. I take no particular satisfaction in this, except that I feel duty bound to point out that there is a lesson to be learned, that is, that the extent to which I have turned out to be correct may be explained mainly by my attempt to work in a long-range perspective. Thus, it might be profitable and in the public interest for economists in the public service, and others, to examine more carefully than they have thus far done what I have made available to the Joint Economic Committee practically year by year during the past 8 years.

Outline of my presentation

I shall deal specifically with the following:

I. The problem of optimum economic growth.

II. The problem of economic equilibrium or balance.
III. The problem of social equilibrium, or plain justice.
IV. Fiscal policy.

V. The problem of inflation.

VI. Problems of monetary policy.
VII. The international economy.

VIII. The Economic Report of the President.

IX. Summary of my own recommendations.

In dealing with the first seven of these nine topics, I shall in each instance state first my own analyses and conclusions (responsive, naturally, to my examination of the CEA annual report), and then discuss those portions of the CEA report which seem to me most relevant.

I. THE PROBLEM OF OPTIMUM ECONOMIC GROWTH

The growth record and the growth need in detail

During 1960-68, the average annual rate of U.S. economic growth was 4.8 percent in real terms, a marvelous record when compared with the 2.4-percent average rate during 1953-60. Nonetheless, the evidence is strong that this performance was somewhat short of the optimum, particularly when one considers the historic record; the identity of optimum economic growth with optimum resource use; the current level of unemployment, and more essentially its distribution; the imperative nature of our unmet domestic needs; and the scope and weight of our international obligations.

Turning first to historical review: Our average annual rate of real economic growth was 4.7 percent during 1922-29, 4.5 percent during 1947-50, 5.1 percent during 1950-53, 5.1 percent during 1960-66, 4.8 percent during 1960-68, and 5 percent from 1967 to 1968. I should mention at this point, although I will deal with the inflationary problem in detail later on, that the periods 1922-29 and 1960-66 were characterized by a quite satisfactory degree of price stability, and that the price inflation during a portion of the period 1950-53 was mainly a speculative reaction to the Chinese intervention in the Korean war, and was not due to an excessive rate of economic growth. All this appears to support my conclusion that the 4.8-percent average annual rate of real economic growth during 1960-68 was somewhat on the low side. In view of technological trends, the unsolved unemployment problem, and the pressures of our domestic and international needs, I believe that we should aim toward a real rate of economic growth averaging

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