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Mr. Thomas. The committee will please come to order. We have with us this morning an old agency that we are not only familiar with but are quite proud of. We are certainly delighted to have such distinguished gentlemen with us: Dr. Heller, the Chairman; Mr. Tobin, member of the committee; Mr. Gordon, a member; Mr. Stocking, administrative officer: Mr. Cooper, assistant to the Chairman.

Dr. Heller, we would certainly be delighted to hear from you and the rest of you gentlemen. Tell us something about yourself and what you have on your mind.

As well as I remember, this commission was set up in 1946, and it has been our privilege and pleasure to deal with it on many occasions and with each of the commission personnel. We are quite familiar with your work and with your headaches. We will listen to you as long as you want to talk. "If you have a statement for us, will you please proceed.

Mr. HELLER. Mr. Chairman, we appreciate the opportunity of being heard and particularly appreciate the committee's courtesy in arranging for our hearing at this time in order to accommodate the schedules of the council members.

As you know, we submitted a letter and justification in support of our request for supplemental appropriation. At the committee's pleasure, I can read these or, if you prefer, I am prepared to give a brief oral statement highlighting the main points.

Mr. Thomas. You are appearing before us in behalf of a supplemental estimate for salaries and expenses in the amount of $177,000, as contained in House Document No. 210.

JUSTIFICATION OF THE ESTIMATE Give us your oral statement and we will insert your justifications in the record at this point. (The justifications follow:) SUPPLEMENTAL ESTIMATE 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 ..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 $391,000 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 (0) 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.")

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1. Background facts

The general Government matters appropriation bill, 1962, H.R. 7577, which was passed by the House of Representatives on June 13, 1961, 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 Appropriation 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 avail. able 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 parttime 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 Eco nomic 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 improve ments 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 economic 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 Advisers 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:

Positions International economics..

2 Consumer economics-

1 Manpower problems.

1 Defense and disarmament economics. Economic growth--

1 Technology and research and development---

1 Natural resources_

2 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 longrange studies of resource supplies and requirements to be conducted by research workers in a number of agencies. \ Deletion of language limitation

With the elimination of the salary ceiling provisions of the Employment Act, it is no longer necessary to insert in the annual appropriations act for the Council language limiting Council salary expenditures. Council expenditures for items other than personnel compensation and associated personnel benefits payments are only a small percentage of total Council expenditures.

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