session was held with the Committee staff. At these and at subsequent appropriations hearings, CLC Director Donald Rumsfeld did not testify formally because of his status as Counsellor to the President and the Executive Privilege accorded to him, but he did meet informally with the members and staffs, much to their satisfaction. The funds requested by the CLC for FY 1972 ($20,153,000) were to be derived by transfer from other government agencies from savings generated by the President's directive of August 15, 1971 that all departments and agencies reduce personnel costs in FY 1972 and 1973 by five percent. The funds required by the Internal Revenue Service were derived by savings in their own appropriation due to this five percent reduction in personnel. In reality, what happened was that IRS was exempted from the personnel reduction with the understanding that they would carry out their functions under the Economic Stabilization Act without requesting any increase in their appropriation or personnel for FY 1972. The language of the request implied unlimited authority to transfer funds from other government agencies if actual needs exceeded the estimates presented to Congress. The Senate Appropriations Committee recommended on December 2, 1971, transfer authority equivalent to the amount requested ($20,153,000). The Conference recommended only a technical change and directed OMB to report to the Appropriations Committees of the House and Senate each quarter on the sources of transfers and the amount transferred. The supplemental appropriations bill (H.R. 11955) was then approved by the House and Senate and signed by the President on December 15, 1971 (P.L. 92-184). It provided for $20,153,000 to finance the economic stabilization activities to be transferred from the savings of other departments and agencies. Fiscal Year 1973 Meanwhile, during the final week of November 1971, preparation began on budget estimates for FY 1973. Estimates were submitted to OMB on December 22, 1973, approved, as submitted, the following day, and forwarded to Congress in January 1972. For Fiscal Year 1973 the Cost of Living Council requested $26,207,000 for stabilization activities. James W. McLane, Deputy Director of the Cost of Living Council, appeared in place of Director Donald Rumsfeld as the primary witness in hearings before the House Appropriations Committee on April 20, 1972, and in hearings before the Senate Appropriations Committee on May 9, 1972. He described the operations of the program and the allocation of funds to support its operation. The House Appropriations Committee recommended on June 19, 1972, a reduction in the appropriation from $26,207,000 to $26,000,000 for Fiscal Year 1973, to fund the Program until the Act's scheduled expiration on April 30, 1973. There was an understanding that if the Program was extended, requests for supplemental appropriations would be submitted to Congress. The Internal Revenue Service again justified its request for Stabilization activities at separate hearings before the Appropriations Committee. The Conference Report on the appropriations bill (H.R. 15585) was approved by the Senate and House during the last week of June 1972. The Act (P.L. 92–351) was signed by the President on July 13, 1972 providing $26,000,000 for stabilization activities through April 30, 1973. In addition, the Internal Revenue Service was appropriated $42,263,000 under a separate title of the Act for their stabilization activities. When the Economic Stabilization Program was extended past April 30, 1973, a supplemental request of $4,400,000 for IRS activities during the remainder of FY 1973 (May and June) was submitted to the Congress and approved. However, the CLC was able to use funds saved from other areas and therefore did not have to request additional funding for the period. The CLC and IRS were also able to absorb a 5.14 percent increased in Federal salaries without further appropriations. The amounts totaled $416,000 for the CLC and $950,000 for the IRS. Fiscal Year 1974 On June 4, 1973, CLC Director John T. Dunlop presented a budget request of $62,654,000 covering all stabilization activities for FY 1974 to the House Appropriations Committee. He explained that the budget estimate was more than double the amount requested in the two previous years because it incorporated requests for the stabilization activities in the IRS and the Department of Justice, which had previously submitted separate requests. Barely over a week later, however, these estimates were shaken by the announcement of Freeze II on June 13, 1973 and the subsequent plan for Phase IV. Because of the considerable sentiment in both Houses for stronger controls, the respective Appropriations Committees were willing to appropriate funds on the basis of an obsolete Phase III with the understanding that when the requirements of the Phase IV program became clear, a supplemental request could be submitted. Because the Program request had come so late in the budget season, it was necessary to undertake temporary funding as FY 1974 began. When the Council's appropriations for Fiscal Year 1974 had not been approved by July 1, 1973, a Joint Resolution (H.J. Res. 636; P.L. 93-52, was approved on that day providing for continuing appropriations. As consideration of the budget continued later in July, the House Appropriations Committee (Report No. 93-399, July 25, 1973, on the 1974 Appropriations Bill, H.R. 9590) recommended a reduction in the appropriation from $62,654,000 to $60,000,000 and suggested that still more definite information was necessary on the budget estimate for Phase III as well as a budget estimate for Phase IV. The Senate Report (No. 93-378) which followed on August 3, 1973, recommended a further reduction to $55,000,000 and also cited the necessity of further information as well as estimates for the second freeze and Phase IV. This $55,000,000 total was the sum that was finally recommended by the Conference Report (93-570) on October 10, 1973, and signed by the President on October 30, 1973 (P.L. 93-143). In the meanwhile, it had been necessary to pass two more joint resolutions to provide funding for the Program (H.J. Res. 753, P.L. 93-118, October 4, 1973; and H.J. Res. 727, P.L. 93-124, October 16, 1973). Section 3 of the second resolution also prohibited the Council from using any of the funds made available by the Act "to formulate or carry out a program which discriminates among petroleum marketers in the method of establishing prices for petroleum products." First Supplemental Appropriation for Fiscal Year 1974 Before the original appropriation for Fiscal Year 1974 had been approved, the President recommended on October 18, 1973, a supplemental appropriation of $20,700,000 for the economic stabilization activities during the remainder of Fiscal Year 1974. CLC Director John T. Dunlop and Deputy Director James W. McLane testified before the House and Senate Appropriations Committees on November 9, 1973, concerning this request and presented detailed documentation explaining the requests covering Phase IV activities. The House Appropriations Committee Report on November 26, 1973, pertaining to the supplemental appropriation bill (H.R. 11576) recommended full approval of the $20,700,000 requested. The Senate Report on the bill (H.R. 11576) recommended a supplemental appropriation of $10,000,000. The bill providing supplemental appropriations for Fiscal Year 1974 was signed by the President on January 3, 1974 (P.L. 93-245). It allowed $17,000,000 for Phase IV stabilization activities during Fiscal Year 1974. Second Supplemental Appropriation for Fiscal Year 1974 The Council requested a second supplemental appropriation in the amount of $4,660,000 for Fiscal Year 1974 to cover increased pay costs not included in previous appropriations. The House Supplemental Appropriations Bill (H.R. 14013) recommended an appropriation of $3,495,000. On May 7, 1974, the House approved the amended bill providing the Council with a second supplemental appropriation of $3,395,000. Evaluation The record indicates that over the years the Cost of Living Council was highly successful in obtaining from Congress the necessary funding for the administration of economic stabilization activities. This success can be attributed to several factors. First, the Congress generally supported the Economic Stabilization Program and was therefore willing to appropriate funds required to operate it. Secondly, the size of the bureaucracy administering the control program was significantly smaller than during previous stabilization programs. The President carried out his pledge that the controls bureaucracy would not grow large, and Congress was apparently willing to appropriate funds for this comparatively small agency. The following chart compares the dollar cost of the recent Economic Stabiliztion Program with those of World War II and Korea. World War II (Office of Price Administration) 1944 $1.62 billion 1945 $1.15 billion 1946 $.90 billion Korea 1951 $102 million 1952 $304 million 1953 $166 million Recent ESP Program 1972 $ 21 million 1973 $30 million 1974 $75 million (Includes IRS and Justice) Finally, it should be noted that the Cost of Living Council staff presented comprehensive and well-documented budget estimates and testimony to Congress in support of its requests. The high point came during the November 1973 hearings before the House Appropriations Committee when Congressmen Tom Steed (D. Okla.) and Howard Robison (R-N.Y.) remarked that the CLC presentation was the best they had ever seen in their combined 44 years on the Committee. PRICE CONTROL By: John Flory Assisted by: Elaine Gilde Judith Ann Epstein This paper discusses a variety of regulatory mechanisms for price control and explores their impact under different economic conditions. Some of these options were utilized during the life of the Program; some were merely discussed. This paper should serve as a brief overview of the various options available to future controllers. Also, it serves as a guide for reading between the lines of the regulations of the Economic Stabilization Program in order to understand some of their less obvious intentions and shortcomings. Mr. Flory was associated with all Phases of the Economic Stabilization Program as an economist at the Office of Emergency Preparedness, the Price Commission, and the Cost of Living Council. He was previously an economist at the Department of Commerce and worked as a financial analyst in New York City. Mr. Flory majored in economics at Michigan State, and has done graduate work at New York University and the University of Maryland. Ms. Gilde is majoring in economics at Harvard University. Ms. Kaliski is a student at Yale College. |