To Extend the Defense Production Act of 1950

Even if the money supply should ease somewhat, there is no assurance that such utter misallocation of available credit by the banks and other financial institutions will not continue or that interest rates will not remain at high levels.

The regular operations of the banks and other financial institutions are not meeting America's needs. Moreover, they have been adding a high-interest rate credit-inflation to the business profit-inflation of the 1960s.

The time is long overdue for a sharp change in the nation's economic policies. The pace of rising prices must be slowed, without a growing army of unemployed. The urgent need is not last week's reduction of margin requirements for purchases in the stock markets to stimulate increased speculation.

The government must channel available credit, at low interest rates, to where it is needed and curb the inflationary expansion of credit for purposes that are less important to society.

Last December, Congress passed a bill entitled "Lowering Interest Rates, Fighting Inflation, Helping Small Business and Expanding the Mortgage Market"-which grants broad authority to the President for selective measures to curb the specific causes of credit inflation, while expanding credit for needed facilities and business operations. It provides the government with flexible means to re-balance the nation's credit structure and to finance housing, schools, hospitals and other community facilities at low interest rates.

More than four months have passed and still the President has not exercised this authority.

The need for increased low- and moderate-income home construction, at reasonable interest rates, is not being met, forcing the government to initiate interest-subsidy programs that reward high interest rate policies at taxpayers' expense, in order to prevent the complete collapse of home-building. Small and medium-sized businesses have been hit by a lack of available credit at reasonable interest rates. The inability of local governments to obtain low-interest loans is resulting in postponing construction of needed schools, hospitals and other facilities, while available credit is being drained off for less-urgent investments and dubious objectives.

So prices continue to rise rapidly; layoffs and production cutbacks are spreading; urgent social needs are not being met.

Therefore we recommend the following steps to take America out of recession and end inflation:

1. Confronted by the President's failure to use his authority, we urge the Congress to direct the Federal Reserve system to establish selective credit controls, maximum interest rates on specific types of loans and the allocation of available credit to where it will do the most good for America.

2. To meet the goal of 26 million new and rehabilitated housing units in ten years. the government should also require that a portion of such tax-exempt funds as pension, college endowment and foundation funds, as well as bank reserves, be invested in government-guaranteed mortgages.

3. To curb the price-raising ability of the dominant corporations, government action is needed to curtail the continuing high rate of business mergers, which has been greatly increasing the concentration of economic power in a narrowing group of corporations and banks.

4. The specific causes of soaring pressures on living costs, such as physicians' fees, hospital charges, housing costs and auto insurance rates, should be examined for the development of practical, sensible measures to dampen these pressures. If the President, after exercising that authority voted him by Congress, determines he needs additional authority and decides that the situation warrants extraordinary overall stabilization measures, the AFL-CIO will cooperate, so long as such restraints are equitably placed on all costs and incomes--including all prices, profits, dividends, rents and executive compensation, as well as employees' wages and salaries. We are prepared to sacrifice as much as anyone else, as long as anyone else, so long as there is equality of sacrifice.

The CHAIRMAN. Mr. Woodcock, we will hear from you now. In my book, Mr. Woodcock, you are bound to be a great man or you would not have been selected to succeed great man. Walter Reuther. He appeared before this committee many times and before the Joint Economic Committee. He always had valuable testimony.

We are delighted to have you, sir. You may proceed in your own

way.

of wage determination in a country of continental size, with thousands of different markets, industries and occupations. These are many factors that appropriately must be considered in the determination of wages in each firm, industry and market.

Furthermore, wages and salaries are not the only cost to business-there are a multitude of other factors But wages and salaries are the sole source of income for most Americans. Rigid application of a single-factor guideline, that bears down on the incomes of the vast majority of American families while profits and dividends have free scope, is neither fair nor workable.

We are prepared to sacrifice-as much as anyone else, for as long as anyone else so long as there is equality of sacrifice.

STATEMENT OF THE AFL-CIO EXECUTIVE COUNCIL ON THE NATIONAL ECONOMY, MAY 12, 1970, WASHINGTON, D.C.

The Administration's campaign against inflation has been a complete failure. Prices have gone up, unemployment has grown, and the nation has crossed the threshold of recession.

The time has obviously come for the Administration to abandon its bankrupt economic policies before the already grave damage to American living standards snowballs.

In April, unemployment soared to 4.8% of the labor force or close to 4 million workers equalling the sharpest month-to-month rise since the 1960 recession. The jobless rate for Negro workers shot up to 8.7% for teenagers, to 15.7%. In the four months since last December, 1.1 million workers were added to the swelling ranks of the unemployed-victims of the Administration's deliberate policy to slow production and employment.

Millions of additional workers have seen their paychecks shrink as the spreading effects of the squeeze on the economy has brought production cutbacks and reductions in working hours.

But living costs have continued to mount. The Consumer Price Index has risen at a yearly rate of about 6% since December.

The buying power of the weekly after-tax earnings of the average non-supervisory worker in private employment-about 48 million wage and salary earners-is less than last year and below 1965.

With unemployment rising sharply and industry operating at merely 79%% of its productive capacity, there is no classical inflationary condition of widespread shortages of goods and manpower that could justify government measures of severe, general economic restraint.

The Administration's policy-with the highest interest rates in 100 yearshas been discriminatory, as well as ineffective, in combating the rapid rise of prices. It has cut urgently needed residential construction-with housing starts down from a yearly rate of 1.9 million in January 1969 to 1.4 million last March. It has hit the expansion of state and local government facilities and smaller businesses. In addition, skyrocketing interest rates have raised costs and prices all along the line to the consumer-adding to inflationary pressures.

Moreover, this blunderbuss policy has not curbed business profiteering, while it boosts bank profits. Cuts in government appropriations, as those for medical schools which threaten to continue the shortage of medical personnel, will continue the soaring rise of medical costs. And the tight monetary squeeze has not curtailed the credit inflation of the banks, with their lines of credit to the blue-chip corporations and wealthy families for lendable funds.

The banks have been permitted to evade the monetary squeeze. In 1969, for example, the international banks increased their "borrowings" from their foreign branches by $7 billion and even modest government regulations were not imposed until September. Bank holding companies issued $4 billion in promissory notes last year-and are continuing to issue such commercial paper, at present-at very high interest rates, free of government regulation.

Thus, while credit for needed production, such as housing. has been drying up-or if available at all, at extortionate interest rates-business loans of the large banks are up 5% from a year ago. The nation's major banks have been extending loans for such operations as conglomerate take-overs, gambling casinos, unnecessary inventory accumulation and a continuing boom of business investment in new plants and machines, while more than 20% of industry's existing capacity stands idle.

Even if the money supply should ease somewhat, there is no assurance that such utter misallocation of available credit by the banks and other financial institutions will not continue or that interest rates will not remain at high levels.

The regular operations of the banks and other financial institutions are not meeting America's needs. Moreover, they have been adding a high-interest rate credit-inflation to the business profit-inflation of the 1960s.

The time is long overdue for a sharp change in the nation's economic policies. The pace of rising prices must be slowed, without a growing army of unemployed. The urgent need is not last week's reduction of margin requirements for purchases in the stock markets to stimulate increased speculation.

The government must channel available credit, at low interest rates, to where it is needed and curb the inflationary expansion of credit for purposes that are less important to society.

Last December, Congress passed a bill entitled "Lowering Interest Rates, Fighting Inflation, Helping Small Business and Expanding the Mortgage Market" which grants broad authority to the President for selective measures to curb the specific causes of credit inflation, while expanding credit for needed facilities and business operations. It provides the government with flexible means to re-balance the nation's credit structure and to finance housing, schools, hospitals and other community facilities at low interest rates.