economic report of the president 1969 - st. louis fed...economic report of the president to the...

ECONOMIC REPORTOF THE PRESIDENT

MM '"

Transmitted to the CongressJanuary 1969

Together WithTHE ANNUAL REPORT

of theCOUNCIL OF ECONOMIC ADVISERS

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Economic Report

of the President

Transmitted to the Congress

January 1969

TOGETHER WITH

THE ANNUAL REPORTOF THE

COUNCIL OF ECONOMIC ADVISERS

UNITED STATES GOVERNMENT PRINTING OFFICE

WASHINGTON : 1969

For sale by the Superintendent of Documents. U.S. Government Printing Office^ 1. 50


CONTENTSPage

ECONOMIC REPORT OF THE PRESIDENT 1

THE RECORD OF ACHIEVEMENT 4

Contribution of Policy 4Gains in 5 years 5

DEVELOPMENTS IN 1968 6

THE PROGRAM FOR 1969 7

The Budget 7Economic Outlook 9

TOWARD PRICE-COST STABILITY 9

The Roads to Avoid 10The Roads to Follow 10

REINFORCING THE FISCAL-MONETARY FRAMEWORK 12

Budget Policy and Procedures 12Monetary Policy 13After Vietnam 14

THE INTERNATIONAL ECONOMY 14

Balance-of-Payments Adjustment 14World Monetary System 15Trade 16Aid 17

KEY AREAS OF FEDERAL GOVERNMENT RESPONSIBILITY 17

Quality of the Environment 18Community Development and Housing 18Education 18Consumer Protection 19Worker Protection 19Social Security 21

OUR COMMITMENT TO ELIMINATE POVERTY 21

Employment Opportunities 21Education, Health, and Nutrition 22Housing 22Income Support 22

CONCLUSION 23

in


Page

ANNUAL REPORT OF THE COUNCIL OF ECONOMICADVISERS* 25

CHAPTER 1. STRENGTHENING THE FOUNDATION OF PROSPERITY 33

CHAPTER 2. POLICIES FOR BALANCED EXPANSION 61

CHAPTER 3. PRICE STABILITY IN A HIGH EMPLOYMENT ECONOMY. . . 94

CHAPTER 4. THE INTERNATIONAL ECONOMY 123

CHAPTER 5. COMBATING POVERTY IN A PROSPEROUS ECONOMY 151

REPORT TO THE PRESIDENT FROM THE CABINETCOORDINATING COMMITTEE ON ECONOMIC PLAN-NING FOR THE END OF VIETNAM HOSTILITIES. . . . 181

APPENDIXES 213

APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THE

COUNCIL OF ECONOMIC ADVISERS DURING 1968 213

APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EMPLOY-

MENT, AND PRODUCTION 221

*For a detailed table of contents of the Council's Report, see page 29.

IV


ECONOMIC REPORT

OF THE PRESIDENT


ECONOMIC REPORT OF THE PRESIDENT

To the Congress of the United States:

I regard achievement of the full potential of our resources—physical, human, and otherwise—to be the highest purpose ofgovernmental policies next to the protection of those rights weregard as inalienable.

I cited this as my philosophy in my first Economic Report in January1964. I reaffirm it today.

In the past 5 years, this Nation has made great strides toward realizingthe full potential of our resources. Through fuller use and steady growthof our productive potential, our real output has risen nearly 30 percent.

Most important of all are our human resources. Today the vast ma-jority of our workers enjoy productive and rewarding employment oppor-tunities. For those who lack skills, we have made pioneering efforts intraining. We have improved education for the young to enhance theirproductivity and their wisdom as citizens of a great democracy.

Our capital resources—plant and equipment—are being used inten-sively and have been continually expanded and modernized by a confi-dent business community.

This has all been accomplished in an environment that preserved—in-deed, enlarged—the traditional freedom of our economic system. In to-day's prosperous economy, our people have more freedom of choice—among jobs, consumer goods and services, types of investments, places tolive, and ways to enjoy leisure.

I look upon the steady and strong growth of employment and produc-tion as our greatest economic success. In recent years, prosperity hasbecome the normal state of the American economy. But it must not betaken for granted. It must be protected and extended

—by adopting sound and prudent policies for this year and—by improving procedures for fiscal and monetary policymaking

to meet our needs for the long run.I shall discuss these tasks in this Report. I shall also consider how we

might deal with some of our key unsolved economic problems.


• We must find a way of combining our prosperity with price sta-bility. Reconciling these two objectives is the biggest remainingover-all economic challenge facing the Nation.

• We must more fully secure the foundations of the world monetarysystem and of our own balance of payments. The internationalmonetary system has undergone important evolutionary improve-ments, but we must seek more effective ways of coping with thestresses that can still develop.

• We must fulfill our many unmet public needs such as good edu-cation, efficient transportation, clean air, and pure water. Qualityas well as quantity is the key to a better life.

• We must share more equitably the fruits of prosperity among allour citizens. A Nation as prosperous as ours can afford to openthe doors of opportunity to all. Indeed, it cannot afford to leaveany citizen in poverty.

The achievements we have made and the lessons we have learned pointthe way for further progress.

THE RECORD OF ACHIEVEMENT

The Nation is now in its 95th month of continuous economic advance.Both in strength and length, this prosperity is without parallel in ourhistory. We have steered clear of the business-cycle recessions which forgenerations derailed us repeatedly from the path of growth and progress.

This record demonstrates the vitality of a free economy andits capacity for steady growth. No longer do we view our economic lifeas a relentless tide of ups and downs. No longer do we fear that auto-mation and technical progress will rob workers of jobs rather than helpus to achieve greater abundance. No longer do we consider povertyand unemployment permanent landmarks on our economic scene.

CONTRIBUTION OF POLICY

Our progress did not just happen. It was created by American laborand business in effective partnership with the Government.

Ever since the historic passage of the Employment Act in 1946,economic policies have responded to the fire alarm of recession and boom.In the 1960's, we have adopted a new strategy aimed at fire prevention—sustaining prosperity and heading off recession or serious inflation beforethey could take hold.


• In 1964 and 1965, tax reductions unleashed the vigor of privatedemand and brought the economy a giant step toward itsfull potential.

• In 1966 and 1967, restrictive monetary and fiscal policies off-set the strains of added defense spending. The adjustment was farfrom ideal, however, because of the delay in increasing taxes topay the bills for the defense buildup and for continuing urgentcivilian programs.

• In 1968, our Nation's finances were finally adjusted to the needsof a defense emergency. The Revenue and Expenditure ControlAct strengthened the foundation of prosperity.

GAINS IN 5 YEARS

Aided by these policies in the past 5 years, the Nation's total outputof goods and services—our gross national product—has increased bymore than $190 billion, after correcting for price changes. This is aslarge as the gain of the previous 11 years.

The prosperity of the last 5 years has been accompanied by benefitsthat extend into every corner of our national life

—more than 8J/2 million additional workers found jobs,—over-all unemployment declined from 5.7 percent of our labor

force to 3.3 percent,—unemployment of nonwhite adult males dropped particularly

dramatically, from 9.7 percent to 3.4 percent,—the number of persons in poverty declined by about I2/2 mil-

lion—progress greater than in the entire preceding 13 years,—the average income of Americans (after taxes and after correc-

tion for price rises) increased by $535—more than one-fifth andagain more than in the previous 13 years combined,

—corporate profits rose by about 50 percent,—wages and salaries also went up by 50 percent,—net income per farm advanced 36 percent,—the net financial assets of American families increased $460 bil-

lion—more than 50 percent, and—Federal revenues grew by $70 billion, helping to finance key social

advances.Meanwhile, a solid foundation has been built for continued growth

in the years ahead.• Through Investment in Plant and Equipment. In the last 5

years, the stock of capital equipment has grown by nearly a


third. Only 5 percent of manufacturing corporations report thattheir capacity is in excess of currently foreseen needs.

• Through Investment in Manpower. More than a million Ameri-cans have acquired skills in special training institutions or on thejob—as a result of new Federal efforts.

• Through Investment in Education. College enrollment has risenby 2*4 million since 1963. Expenditures on all public educationhave increased at an average of 10 percent a year; Federalgrants have almost quadrupled.

• Through Investment in Our Neighborhoods. Our urban cen-ters are beginning to be restored as decent places to live and ini-tial steps have been taken to help ensure construction of 26 millionnew or rehabilitated housing units by 1978.

DEVELOPMENTS IN 1968

Our economy had an exceptionally big year in 1968.• Our gross national product increased by $71 billion to $861 bil-

lion. Adjusted for price increases, the gain was 5 percent.• Payroll employment rose by more than two million persons.• Unemployment fell by 160,000.• The after-tax real income of the average person increased by

3 percent.• An estimated four million Americans escaped from poverty, the

largest exodus ever recorded in a single year.• Our balance-of-payments results were the best in 11 years.

In some ways, 1968 was too big a year. Even our amazingly produc-tive economy could not meet all the demands placed upon it. Nearly halfof the extra dollars spent in our markets added to prices rather than toproduction. The price-wage spiral turned rapidly.

• Consumer prices rose by 4 percent and wholesale prices by 2*/2percent.

• Both union and nonunion wages increased about 7 percent—responding to higher costs of living and causing higher costs ofproduction.

• Some of the extra demands for goods were met out of foreignproduction, and imports soared 22 percent.

The main source of the overheating was the excessive and inappro-priate stimulus of the Federal budget in late 1967 and the first half of1968. In January 1967, I pointed to the need for a tax increase. In thesummer, when the upsurge was even more clearly foreseen, I urged im-


mediate enactment of a 10-percent income tax surcharge. The subse-quent delay in enactment resulted in a massive budget deficit of $25billion for fiscal year 1968, which

—accelerated the economy beyond safe speed limits,—weakened confidence in the dollar abroad, and—placed a heavy burden on credit markets at home, pushing interest

rates sharply higher.Ultimate passage of the Revenue and Expenditure Control Act of

1968 at midyear brought a much needed swing to fiscal restraint. Thebudget now shows a surplus of $2.3 billion for fiscal 1969. Because of bothgreater revenues and reduced expenditures, this picture has changeddramatically since last January when we estimated a deficit of $8 billion.

Just as the overly stimulative effects of the huge budget deficit of fiscal1968 were unmistakable, so there can scarcely be doubt that the reverseswing—of even larger size—will improve balance in our economy.But just as inappropriate fiscal stimulus took a while to cause obviousproblems, so needed fiscal restraint is taking time to work its full bene-ficial effects on the economy.

By the time the surcharge was enacted, the forces of boom and infla-tion had developed great momentum. Our economy continued to ad-vance too rapidly throughout 1968—but growth did slow from a hectic6/2 percent rate early in the year to about 4 percent at yearend. Thebudget is now in harmony with the needs of the economy, and its welcomeeffects are gradually emerging.

THE PROGRAM FOR 1969

The challenge to fiscal and monetary policies this year is difficult in-deed. Enough restraint must be provided to permit a cooling off of theeconomy and a waning of inflationary forces. But the restraint must alsobe tempered to ensure continued economic growth. We must adopt acarefully balanced program that curbs inflation and preserves prosperity.

THE BUDGET

My final budget is designed to meet this demanding assignment. It isa tight and prudent program for fiscal 1970.

• It holds total Federal expenditures within the bounds of avail-able revenues, yielding a surplus of $3.4 billion.

• It finances our continued military efforts in Vietnam while westrive to bring about peace.

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• It provides funds for our continuing national campaign againstpoverty, injustice, and inequality.

• It limits increases in expenditures to programs of highest priority:the encouraging JOBS program and other manpower training,Model Cities and key housing programs, law enforcement, andeducation.

• It trims lower priority programs wherever possible.The budget calls for the extension of the income tax surcharge at its

current rate of 10 percent for 1 year from July 1, 1969 to June 30,1970. My economic and financial advisers unanimously agree that thisfiscal restraint is essential to safeguard the purchasing power of the dollarand its strength throughout the world. Indeed, the need for continuedfiscal restraint is agreed upon by all informed opinion in both of ourpolitical parties.

In today's economic and military environment, an immediate lower-ing of taxes would be irresponsible. The American people would bepoorly served by a small short-run gain that would endanger theirenormous long-term stake in a steady and stable prosperity. I hope andI believe that Members of the Congress of both parties will support timelyaction on taxes to continue on the course of fiscal responsibility whichwe have worked together to achieve.

I asked for the surcharge as a temporary measure and that is the wayI regard it. My proposal for a 1-year extension preserves the option ofthe new Administration and the Congress to eliminate the surchargemore rapidly if our quest for peace is successful in the near future. It ismy conviction that the surcharge should be removed just as soon as thatcan be done without jeopardizing our economic health, our nationalsecurity, our most urgent domestic programs, or international confidencein the dollar. Clearly, that time has not yet arrived.

The extended surcharge will continue to take 1 percent of the incomeof the average American—less than half of the tax cut he received in1964-65. In return, he will receive improved protection against theravages of inflation, world financial crisis, and neglect or mismanage-ment of our priorities. It is the best investment in responsible fiscal man-agement that the United States can make in 1969.

Including this budget, I have been responsible for 6 years of fiscalplanning. From fiscal 1965 to fiscal 1970, the Federal Government willhave spent $969 billion on programs and received $936 billion in rev-enues. The total deficit for that period amounts to $33/2 billion. The bulkof that total deficit occurred in fiscal 1968, when action on taxes waslong delayed.

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By comparison, these six budgets—provided $35 billion of net tax reductions, even allowing for

higher social security taxes, and—carried $109 billion of outlays to cover the special costs of the

war in Vietnam.

ECONOMIC OUTLOOK

With this budget and appropriate monetary policy, our gross nationalproduct for 1969 should rise about $60 billion.

• Increased expenditures on new plant and equipment will helpexpand and modernize our productive capacity.

• State and local governments will continue to increase their spend-ing rapidly to meet public needs. But Federal purchases will riselittle.

• Consumer spending and homebuilding activity should advanceless than last year.

• The over-all gains will not and should not be as large as those in1968, but they will still make for a highly prosperous year.

• For the fourth straight year, unemployment should be less than 4percent of the labor force.

Because fiscal policy is soundly planned, monetary policy should notbe overburdened. It will need to support firmly the objective of mod-erating economic expansion. But homebuilding and other credit-sensi-tive areas need not be subjected to the sharp and uneven pressures of acredit squeeze. Monetary policy should be flexible and prepared to lessenrestraint as the economy cools off.

As pressures of demand moderate, our trade performance in worldmarkets should improve. We should also see a gradually improving trendin prices and costs, although the wage-price spiral will continue to betroublesome.

TOWARD PRICE-COST STABILITY

The immediate task in 1969 is to make a decisive step toward pricestability. This will be only the beginning of the journey. We cannot hopeto reach in a single year the goal that has eluded every industrial countryfor generations—that of combining high employment with stable prices.

There is no simple nor single formula for success. But this combinationcan and must be achieved—by the United States and within the nextseveral years. Now that we have learned to sustain prosperity, we cansurely not allow inflation to erode or erase that victory.


T H E ROADS TO AVOID

We stand at a critical turning point for national policy. We can meetthe challenge, or we can try to evade it.

Price stability could be restored unwisely by an overdose of fiscal andmonetary restraint. This has been done before, and it would workagain. But such a course would mean stumbling into recession andslack, losing precious billions of dollars of output, suffering rising un-employment, with growing distress and unrest. It would be a pre-scription for social disaster as well as for unconscionable waste.

Or we could conceivably travel the route to mandatory controls onprices and wages. But the vital guiding mechanism of a free economy islost when the Government fixes prices and wages. We did not imposesuch regulations on our businessmen and our workers during the recentyears of military buildup and hostilities. We surely must not turn downthis path—a dead end for economic freedom and progress.

Or we could throw up our hands and allow the price-wage spiral toturn faster and faster. This counsel of despair would eventually under-mine our prosperity and our financial system—wrecking the strong inter-national position of the dollar and imposing unjust burdens on millionsof our citizens.

T H E ROADS TO FOLLOW

Price stability in a prosperous economy must be pursued by a co-ordinated program involving a wide range of actions.

The fiscal and monetary program I outlined earlier is our first line ofdefense against inflation. The Nation has surely learned that inflation willemerge unless responsible budget and credit policies keep demandwithin the bounds of the economy's productive capacity.

Even then, advances in prices and wages at high employment canprove troublesome. No free economy can escape these tendencies en-tirely. But it can keep them from developing when unemploymentis too high, and it can moderate the pressures that do emerge. To do soeffectively requires reinforcing other important measures to reinforcefiscal and monetary policies.

Productivity and Efficiency

First, although the productive efficiency of our industries and ofour workers is already the envy of the world, we must keep striving forfurther improvements.

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Productivity can be raised even more rapidly and manpower can beemployed more effectively through many methods in which Govern-ment can lend a hand—by training programs that better match skills tojob requirements, by developing the potential of the disadvantaged, byusing the wasted abilities of those who are out of work seasonally orintermittently, by providing better information about job opportunities,and by encouraging research and investment in better technology.

Government, business, and labor can work together to improve in-dustrial efficiency. We can strengthen our dedication to the competitiveprinciples and practices that have made American industry preeminent.Impediments to efficiency must be identified and tackled, industry byindustry, wherever they exist—as they do particularly in medical care andconstruction.

The Government should look at its own programs and policies toensure that they do not add an unnecessary penny to the costs of produc-tion. To fulfill this goal, public policies must be reviewed continually inmany areas—procurement, regulation, international trade, commodityprograms, and research and development.

Voluntary Cooperation

Second, both in their own interest and in the public interest, businessand labor should exercise the utmost restraint in price and wage decisions.It is understandable that, with living costs rising sharply, labor cannotnow accept wage agreements limited to the rise in productivity. It isalso understandable that, with production costs increasing, businesscannot now hold prices entirely stable.

But the process of deceleration must take hold for both prices andwages. The demands for incomes by business and labor combined mustbe brought more closely into line with the amount of real income theeconomy can generate. A decisive step toward price stability in 1969requires labor and business to accept some mutual sacrifices in the shortrun to preserve their enormous long-term interest in prosperity and astable value of the dollar.

In recent years, business, labor, and Government have been discuss-ing the big economic issues—sometimes debating, but often agreeing.The dialogue should go forward and should explore new forms of labor-management cooperation to ensure greater fulfillment of commoninterests.

A year ago, I established the Cabinet Committee on Price Stability tocoordinate efforts within the Administration to help improve efficiency,enlist voluntary restraint, and contribute to public education and dis-

II


cussion on the wage-price problem. In its recent Report, the Commit-tee made many important recommendations which deserve the mostserious consideration. The work of the Committee has proved its value,and should be continued in some appropriate form.

The stakes are enormous in our efforts to combine high employmentand price stability. We can sacrifice neither goal. The challenge can bemet if we have the will.

REINFORCING THE FISCAL-MONETARY FRAMEWORK

The unparalleled economic expansion of the past 8 years testifies tothe accomplishments of our fiscal and monetary policies. Yet the blem-ishes on that record show plainly that further improvements are needed.

BUDGET POLICY AND PROCEDURES

The budget is the keystone of Federal Government operations. Itis a plan developed within the Executive Branch and a recommendedprogram for action by the Congress. It is a blueprint for fiscal and eco-nomic policy.

In my many years in Washington, I have worked intensively on thebudget on both the legislative and executive sides. I know the difficultiesof

—coordinating a host of appropriation requests into a total programthat accurately reflects national priorities,

—making the dollar sum of the parts equal a whole that remainswithin prudent bounds, and

—ensuring that decisions on tax revenues go hand in hand withthose on expenditures.

The Executive Branch coordinates its budgetary decisions through theBureau of the Budget, with extensive cooperation from the Departmentof the Treasury and the Council of Economic Advisers. The Congress hasno parallel process. I urge the Congress to review its procedures foracting on the annual budget and to consider ways that may improvethe coordination of decisions among Federal programs and on Federalrevenues in relation to expenditures.

My experience has thoroughly convinced me of the fundamental wis-dom of our system of checks and balances. The system works well becauseboth the President and the Congress subject their own operations con-tinually to careful scrutiny and review in light of experience.

Costly delays in enacting recent tax legislation demonstrate the need

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for a review of procedures in this area. Congress should ask: How can aprompt response to a Presidential request for tax action be assured?

When such a recommendation takes a simple form (like the currentincome tax surcharge) and when it is made to head off a threat to pros-perity, the Nation is entitled to a prompt verdict.

To provide the fiscal flexibility needed in our modern economy, theCongress might be willing to give the President discretionary authorityto initiate limited changes in tax rates, subject to Congressional veto.I believe that the President should have such authority. Alternatively,the Congress might choose to establish its own rules for ensuring a promptvote—up or down—on a Presidential request for tax action.

The Nation should never again be subjected to the threat of fiscalstalemate.

MONETARY POLICY

Our institutions allow monetary policy to adjust promptly andsmoothly, and the value of this flexibility has become evident. When fis-cal action has been delayed, monetary policy has been able to continuethe battle against inflation. But tight credit, soaring interest rates, pres-sures on homebuilding, and nervous financial markets are the unhappyresults of an overburdened monetary policy. Greater fiscal flexibilitywould help to ensure that monetary policy is not asked to carry an undueshare of the load in restraining—or stimulating—the economy.

The Administration and the Federal Reserve have learned to worktogether closely and to coordinate effectively, while preserving the appro-priate independence of the Federal Reserve within the Government. Ourmonetary institutions are working well, and I see a need for only a fewreforms to enhance their effectiveness.

• The term of Chairman of the Federal Reserve Board should beappropriately geared to that of the President to provide furtherassurance of harmonious policy coordination.

• The rigid requirement that no more than a single member ofthe Federal Reserve Board may be appointed from any oneFederal Reserve District should be removed so that the Presi-dent, with the advice and consent of the Senate, may choose thevery best talent for the Board.

• The Congress should review procedures for selecting the presi-dents of the 12 Reserve Banks to determine whether these posi-tions should be subject to the same appointive process that appliesto other posts with similarly important responsibilities for nationalpolicy.

323-166 O - 69 - 2


AFTER VIETNAM

Despite some encouraging signs of progress toward peace, hostilitiesin Vietnam continue. In planning our budget, we must assume continua-tion of the war. But we must also be ready to adjust to peace wheneverthat welcome day arrives.

Early in 1967, to ensure our readiness for peace, I established theCabinet Coordinating Committee on Economic Planning for the End ofVietnam Hostilities.

The Report of that Committee emphasizes the demanding task thatwill confront fiscal and monetary policies once a secure peace permitsdemobilization. The resources freed from war must not—and need not—be squandered in idleness. Rather, this manpower and material shouldbe promptly enlisted in the service of peaceful progress.

In addition to its immeasurable human benefits, peace will providean economic dividend to the Nation and to the Federal budget. But thatdividend is dwarfed by the urgent needs of our society. The Nation willhave to weigh the priorities among attractive programs carefully andwisely to take full advantage of this dividend. High on the list of priori-ties is the commitment to provide equal and full economic opportunitiesfor all our citizens.

THE INTERNATIONAL ECONOMY

BALANCE-OF-PAYMENTS ADJUSTMENT

Our international accounts were in balance in 1968—for the firsttime since 1957. Much of the improvement came from the program Iannounced in an atmosphere of world financial crisis a year ago. Thecontrast today is striking and gratifying.

The excellent results of last year were aided by temporary factors.Hence, we cannot relax our efforts to achieve fundamental improve-ment—especially in our disappointing trade performance. To strengthenour trade surplus and achieve a healthy balance of payments, we must

—restore price stability at home,—encourage our farms and factories to become ever more com-

petitive in quality and price so that they can export more,—intensify efforts to secure the removal of barriers to freer trade,—bring more foreign tourists to our shores to enjoy America with

us, and—minimize the foreign exchange cost of our military commitments

and economic aid overseas.

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Our temporary programs to restrain capital outflows worked well in1968. American businesses showed remarkable ingenuity and coopera-tion in pursuing their activities abroad while drastically cutting the drainon the Nation's balance of payments. These programs clearly aided inpreserving the strength of the dollar.

Capital restraints should never become permanent features of oureconomy. They should be ended as soon as possible.

But the war continues and the movement toward noninflationaryprosperity has just begun. We cannot now scrap our defenses againstlarge capital outflows. For the present, we must

—renew the Interest Equalization Tax before it expires on July 31,—maintain the direct investment control program in the more flex-

ible form recently announced, and—continue the Federal Reserve program of voluntary restraint

of foreign lending.To maintain our gains, ever closer international cooperation is needed

among the highly interdependent nations of the world. Countries indeficit must meet their responsibilities. And countries in surplus must alsopursue appropriate policies—striving especially for rapid economicexpansion and giving world traders greater access to their markets.

WORLD MONETARY SYSTEM

The international monetary system was strengthened in 1968. An his-toric international agreement was reached, creating in the InternationalMonetary Fund a new reserve asset—the Special Drawing Right.

We spent 3 years studying, exploring, and negotiating with our com-mercial partners in order to reach this agreement. I eagerly await the daythat actual distribution of SDR's will begin. They can meet the futureneeds of the world for international liquidity—in the proper amounts andin a usable form. I am proud that the United States acted so promptly toratify this agreement with such overwhelming bipartisan support in theCongress.

Some did not believe that such an agreement was possible, arguingthat a rise in the official price of gold was the only way to increase inter-national reserves. We and our trading partners rejected this futile course;it would have offered a ransom payment to speculators and would havefailed to provide for the orderly growth of reserves. I have carried out mypledge that the United States would sell gold to official holders of dollarsat $35 an ounce. There is clearly no need to change that price.


Myths about gold die slowly. But progress can be made—as we havedemonstrated. In 1968, the Congress ended the obsolete gold-backingrequirement for our currency.

Another major step in freeing the international monetary system fromdisturbances by gold speculators was taken in March, when the UnitedStates and the other active gold pool countries agreed to cease supplyinggold to the private market. The resulting two-price system for gold isworking successfully.

The international economy has made major strides in the past. But wemust recognize the problems that remain. The financial crises of 1968stimulated constructive discussion of many proposals for further evolu-tionary improvements in the international economic system.

These proposals are not an agenda for action in a week or a month oreven a year. The issues posed cannot be resolved in a summit meeting orby a superplan. But they can be tackled effectively with the same kindof careful study and negotiation that led to the successful SDR plan. TheUnited States should actively participate in such a procedure in order tostrengthen the foundation of the world economy.

TRADE

World trade has continued to expand briskly—virtually unaffectedby the sporadic crises in financial markets. Tariff barriers that once stifledinternational commerce have been substantially lowered—most notablyby the Kennedy Round reductions which began in 1968 and will con-tinue until 1973.

We must reinforce this success by devoting equal energy to the removalof nontariff barriers. On our part, Congressional action to rescind theAmerican Selling Price provision is essential for achieving reductions ofnontariff barriers offered by several of our trading partners.

Other nontariff barriers also need revision.• Agriculture has been the stepchild of trade negotiations, and de-

serves prompt and proper attention.• The international rules governing border tax adjustments should

be revised so that they no longer give a special advantage tocountries that rely heavily on excise and other indirect taxes.

While we work to reduce trade barriers, we must not drop our guardagainst the advocates of protectionism at home and abroad. We willnever neglect the legitimate concerns of any citizen. But the only realsolutions are ones that improve our economy—not ones that erect newbarriers that could provoke retaliation, or insulate producers from the

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invigorating force of world competition. To provide the right kind of aidto those seriously hurt by import competition, present provisions fortemporary adjustment assistance must be liberalized, as I have repeatedlyrecommended.

AID

Important economic progress is being made in the world's less de-veloped countries. The beginnings of spectacular advances in worldagriculture are now clearly evident. Family planning is gaining wide-spread support.

The United States can and should help to promote further progressin world agriculture and family planning, and the achievement of morerapid economic growth in the less developed countries. Only if funds forforeign aid programs are restored to an adequate level can we do ourpart.

The United States has long supported multilateral assistance as anequitable and efficient means of channeling aid from wealthy to poorernations. We must reaffirm this support by promptly authorizing the U.S.contributions to the replenishment of the International DevelopmentAssociation and to the Special Funds of the Asian Development Bank.

KEY AREAS OF FEDERAL GOVERNMENT RESPONSIBILITY

The bountiful output of the American private enterprise system hasmade our high standard of living possible. Yet this same abundancehas created a growing need for public action to improve the qualityof life in our cities, towns, and countryside. The Federal Governmentmust continue its partnership with the private sector and with State andlocal governments to provide better public services.

Increased efforts are needed to—improve the environment by ensuring clean air, pure water, and

the conservation of natural resources,—assist in community development and in education,—protect the consumer against unfair practices and unwholesome

products,—ensure safe employment conditions, and—provide a more comprehensive social insurance system to protect

against the financial impacts of retirement, unemployment, jobaccidents, and long-term illness of a breadwinner.

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QUALITY OF THE ENVIRONMENT

More than ever, Americans realize that purposeful action is requiredto ensure an environment we can all enjoy. In the last 5 years, legislationhas been enacted to abate air and water pollution and to control the dis-posal of solid wastes. Despite progress, many of our rivers still are opensewers, our atmosphere often unfit to breathe, and much of our landlittered with discarded junk. We must

—develop new methods for financing water treatment plants,—attack oil pollution of harbors and beaches,—strengthen laws for clean air and solid waste disposal,—stop the ravages of strip mining, and—preserve more parks and wilderness areas.

COMMUNITY DEVELOPMENT AND HOUSING

Rapid population growth in our cities and rising living standardshave created a backlog of community and housing needs.

Local governments are finding it increasingly difficult to finance essen-tial community facilities—schools, parks, hospitals, and transportationsystems. The Federal Government must develop new ways to help com-munities raise capital for public facilities.

The capacity of the housing industry must be enlarged and updatedto meet the Nation's goal of adding 26 million decent homes and apart-ments over the next decade.

To improve our communities and meet our housing needs, Irecommend

—an independent, federally established, Urban Development Bankto provide low-interest loans to State and local governments,

—increased Federal research and development to improve con-struction technology,

-—a Federal program to test housing materials and to improvebuilding standards and practices,

—the training of more construction workers through federallyassisted manpower programs in cooperation with trade unionsand contractors, and

—an urban mass transportation trust fund, financed by a portion ofthe automobile excise tax.

EDUCATION

Providing good education is a national responsibility in which theFederal Government must do its part. Great progress has been made in

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recent years toward our goal of providing every child all the educationhe wants and can absorb. But continued and expanded efforts will beneeded. This Nation must strive to

—provide every child with year-round opportunity for preschooleducation,

—offer every teacher assistance for continuing education,—bring the cost of higher education within the means of every

qualified student through expanded loans and grants, and—provide funds for higher education adequate to ensure instruc-

tion of finest quality.

CONSUMER PROTECTION

The confidence of consumers in the American marketplace is vital fora healthy economy. In the past 5 years, the Congress has ushered in anew era of consumer protection by enacting 20 major measures in thisfield. We have made great strides toward our goals of

—ensuring that all products are safe and wholesome,—providing full and fair disclosure in the marketplace, and—eliminating fraud and deception by the few who prey on the un-

suspecting, the elderly, and the poor.To carry on the work so well begun, legislation is needed to

—prevent deceptive sales practices by giving new authority to theFederal Trade Commission,

—reduce the likelihood of massive electric power failures which canparalyze our cities,

—ensure that the small investor shares in the benefits of our thriv-ing mutual fund industry, and

—complete the circuit of Federal inspection for foods commonlyserved at the family dinner table.

WORKER PROTECTION

American workers are the most productive in the world and they havemade our high standard of living possible. They and their families de-serve a safe working place and adequate protection against the loss ofincome from on-the-job accidents, disability, and unemployment.

Safety

The human costs of accidents are immense—14,000 people killed onthe job each year, 2.2 million workers injured. The monetary cost alone


is a staggering $5 billion. Recent tragedies in our factories, mines, andother work places have dramatized once more the need for better safetypractices. Must we wait for tragedy to strike again?

The Congress failed to act last year on an urgently needed Occupa-tional Safety and Health Bill and on the Coal Mine Safety Bill. We candelay no longer. This Nation must put an end to this senseless waste fromjob accidents—through comprehensive legislation that will ensure thebest job safety and health practices in all American work places.

Workmen's Compensation

Workmen's compensation should ensure that no victim of a job-relatedaccident lacks the funds to pay his medical bills and support his family.Currently, one employee in five has no workmen's compensation protec-tion. Benefit levels are too often tragically low. The Federal Govern-ment should act now to ensure that the States provide adequate work-men's coverage and benefits.

Disability Insurance

Today disabled workers wait as long as 6 months before receiving ben-efits—and their disability must be expected to last more than 1 year. Inaddition, disabled workers are too often unable to pay for the medicalcare they need. To meet these shortcomings, I recommend that

—the waiting period for benefits be reduced from 6 to 3 months,—the minimum duration of qualifying disability be reduced to 3

months, and—the totally and permanently disabled be eligible for Medicare.

Unemployment Insurance

Even in the height of prosperity during 1968, two million workerswere out of work for a period of 15 weeks or longer. About a millionworkers spent at least half the year fruitlessly looking for work.

Congress should strengthen the Federal-State Unemployment Insur-ance system by

—extending coverage to five million more workers,—raising benefit levels,—lengthening payment periods, and—providing special federally financed benefits for the long-term

unemployed, with recipients required to accept job training andother employment services under appropriate circumstances.

20


SOCIAL SECURITY

Social security is one of the oldest and best social programs. Currently,25 million people—one out of every eight Americans—receive a socialsecurity check every month. Largely because of social security, two-thirdsof the beneficiaries—the elderly, widows, orphans, and the disabled—are above the poverty line. Yet we need to do more. I recommend anaverage increase in benefits of 13 percent, including

—a rise of at least 10 percent for every beneficiary,—a 45 percent increase from $55 to $80 for the five million Ameri-

cans receiving the minimum benefit,—a $100 monthly minimum benefit for those who have contributed

to social security for 20 years or more, and—a liberalization of benefits for the elderly who choose to work.

OUR COMMITMENT TO ELIMINATE POVERTY

No achievement gives me greater pride than the advances in the waron poverty. No social challenge gives me greater concern than the elimi-nation of poverty.

Since the passage of the Economic Opportunity Act, which establishedthe Nation's commitment to eliminate poverty, the number of poorAmericans has been reduced by about 11 million. Still, 22 million Ameri-cans remain poor.

The effective programs of the Office of Economic Opportunity mustbe preserved and strengthened. For this purpose, I am recommending a2-year extension of the Economic Opportunity Act.

EMPLOYMENT OPPORTUNITIES

In recent years, our national prosperity has rapidly expanded jobopportunities for the poor. To maintain progress, we must not retreatfrom high employment. The doors to opportunity are bound to be lockedto the disadvantaged and to new workers if senior and skilled employeesare being laid off.

At the same time, we cannot count on normal economic growth tocreate as many jobs for the poor as were created when we moved out ofa slack economy. We must therefore increase the emphasis on manpowerprograms in order to provide effective aid to the disadvantaged.

In 1968, we launched a major new partnership with privateindustry—the National Alliance of Businessmen. Job Opportunities in

21


the Business Sector is a promising route for providing jobs and trainingfor the hard-core unemployed. The JOBS program has reached its initialtarget 6 months ahead of schedule. My budget provides for major ex-pansion of this program.

The experience with JOBS encourages us to develop a similar pro-gram for employment in the rapidly growing public sector.

EDUCATION, HEALTH, AND NUTRITION

The poor are often handicapped by inferior education, ill health, andinadequate diets. Federal Government programs have begun to attackthese roots of poverty. Head Start, Follow Through, and Title I of theElementary and Secondary Education Act help in educating disadvan-taged children. These should ultimately be expanded to meet the needsof all poor children.

Medicaid has a high proportion of poor beneficiaries and should ulti-mately free the needy from the bonds of inadequate health care.

Good health is essential for a good start in life. Expectant mothers andinfants in poor families should be provided comprehensive health care.

America, blessed with agricultural abundance, should not toleratehunger among its people. The Food Stamp program should be expandedand a cooperative Federal-State effort launched to protect all Americansagainst hunger and malnutrition.

HOUSING

With the Housing and Urban Development Act of 1968 we set thegoal of eliminating all substandard housing in the next decade. We mustback that commitment with the needed resources—financial, technical,and human. First priority must be given to the needs of the poorest ofthe poor through the Model Cities program, rent supplements, homeownership, and public housing. And all families must be assured fulland fair access to housing—with no discrimination.

INCOME SUPPORT

No matter how well we succeed in other efforts, cash assistance will beneeded by many of the poor—the elderly, the disabled, and some motherswith sole responsibility for the care of young children. Although suchfunds do not directly remove the causes of poverty, they sustain life and

22


hope and help prevent poverty from being bequeathed from one genera-tion to the next.

Income support programs need a thorough review. The public dis-cussion required to illuminate this area is well under way and will bene-fit from the report of the Commission on Income Maintenance, due atthe end of this year. Americans will soon have to decide how best tohelp those who cannot earn enough to escape from poverty.

Whatever strategies we choose, the effort to reduce poverty must beredoubled. Victory in the war on poverty can be won with only a modestshare of the Nation's income gains. The total shortfall of income belowthe poverty line amounts to only 1 percent of our gross national product—one-fourth of our normal growth in a single year. A fully effective anti-poverty program would initially cost more than that—but would not beout of range. Surely Americans will make the investment needed toeliminate poverty.

CONCLUSION

The American economy has been steadily on the march in the 1960's.It has shattered all records for progress toward the Employment Act'sgoals of "maximum employment, production, and purchasing power."It has bestowed great blessings of abundance on the vast majority ofAmericans in all walks of life.

Economic growth has provided the resources for urgent defense needsand has still permitted a major expansion of civilian production—bothpublic and private. It has allowed us to send a youngster to Headstartand a man to the moon.

When our economy was less prosperous, many of our social problemswere neglected—eclipsed by the struggle of families to make ends meet.The plight of the poor was fatalistically accepted when the majority ofAmericans were vulnerable to unemployment and deprivation. Ourneeds for improved schools, better cities, and a healthier environmentwere pushed into the background.

As the average American's standard of living soared, we could affordto focus on new challenges. Facing these issues squarely has in itself beena great accomplishment. We have marshaled our determination to pro-vide a good job, a decent standard of living, quality education, and apleasing environment for everyone.

We have begun to make progress toward these new aspirations. Butwe have only begun. And because we have so far to go, many of us are


impatient. This feeling is in the great American tradition. High aspira-tions and impatience have constantly spurred us to greater achievements.

And they will again. Our economy will not rest on the laurels of the1960's. We will not relax to count or consolidate our gains. We willnot retreat from the unprecedented prosperity we have achieved. ThisNation will remain on the march.

January 16, 1969.

24


THE ANNUAL REPORT

OF THE

COUNCIL OF ECONOMIC ADVISERS


LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERS,

Washington, D.C.January 10,1969.T H E PRESIDENT:

SIR: The Council of Economic Advisers herewith submits its AnnualReport, January 1969, in accordance with Section 4(c) (2) of the Employ-ment Act of 1946.

Respectfully,

ARTHUR M. OKUN,

Chairman.

MERTON J. PECK.

WARREN L. SMITH.


CONTENTSPage

CHAPTER 1. STRENGTHENING THE FOUNDATION OF PROSPERITY 33

Economic Gains in 1968 '......•• 34Production and Productivity . . 34Employment and Income . 34The Composition of Demand 36

Economic Policy in 1968 37Fiscal Policy 38Monetary Policy and Financial Developments 39

Pattern of Activity During the Year 40Upsurge During the First Half of 1968. 40Expansion in the Second Half. 41Key Sectors in 1968 42Retrospect . . 45

Wages and Prices in 1968 45Wages and Compensation 46Real Earnings and Unit Labor Costs 47Prices in 1968 .. 48

Balance of Payments in 1968 49Goods and Services 50Capital Account 52

Economic Policy for 1969 53Anti-Inflationary Strategy 53Fiscal Program for 1969 54Monetary Policy 55

Economic Outlook for 1969 55Outlook by Sectors 56Price Outlook 58Outlook for the Balance of Payments . 59

CHAPTER 2. POLICIES FOR BALANCED EXPANSION 61

Realizing the Economy's Potential 61The Choice of a Target 62Potential Output 64Economic Gains of the Expansion •. 67

The Problem of Economic Fluctuations . 70Short-Run Instability 70Automatic Stabilizers and Fiscal Drag . 72

The Record of Policy 74Strategy for Expansion: 1961 to Mid-1965 74Fiscal Problems of Defense and High Employment: 1965-

68 75Lessons of the Policy Record 77

29


CHAPTER 2. POLICIES FOR BALANCED EXPANSION—Continued PageFormulating Fiscal Policy 78

The Role of Economic Forecasting 78Preparing the Annual Budget 80Congressional Procedures . 82Adjusting to New Developments 84

Some Issues of Monetary Policy 85The Conduct of Monetary Policy. 85Monetary Policy and the Money Supply 89

Looking Ahead 93CHAPTER 3. PRICE STABILITY IN A HIGH EMPLOYMENT ECONOMY. . . 94

Prices, Wages, and Employment 94The Record in the Sixties 96The Task for Policy . 97

Improving Labor and Product Markets 98Improving Labor Mobility 99Efficient Use of Manpower 103Manpower Training Programs. 104Competition and Antitrust Policy 106Legal Restrictions on Competition 108Improving Consumer Information 109Regulated Industries I l lGovernment Procurement 113Agriculture 115International Trade and Price Stability 116

Voluntary Restraint in Prices and Wages 118Role of Private Decisions 118Standards for Decisions 118Application of Standards 119Future Role of Cooperation 120

Conclusion . . 121CHAPTER 4. THE INTERNATIONAL ECONOMY 123

Economic Growth and World Trade 124Trade and Trade Barriers . 124Less Developed Countries 126

The Bretton Woods System 128The Liquidity Problem 129

Types of Reserves 130Special Drawing Rights 130The Need for Reserve Growth 131

The Confidence Problem 133Private Shifting Among Currencies 133Private Demand for Gold 134Shifts Among Official Reserve Assets 135Proposals for Improving Reserve Management 136

The Adjustment Problem 137Causes of Disturbances 138

3°Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page

CHAPTER 4. THE INTERNATIONAL ECONOMY—Continued

The Adjustment Problem—ContinuedInternal Adjustments 138Measures Directly Affecting International Transactions . . 140The Adjustment Problem of the United States 142

Exchange Rate Adjustments 145Present System 145Proposals for Exchange Rate Flexibility 146

Conclusion 149

CHAPTER 5. COMBATING POVERTY IN A PROSPEROUS ECONOMY 151

The Extent of Poverty 151Definition of Poverty . 152Poverty Trends 153Strategies for Reducing Poverty 155

Prosperity and the Reduction of Poverty 155Effects of Prosperity 156Prospects for Further Progress 158Income Distribution 160

Education, Jobs, and Training 161Education and Poverty 162Hiring Standards 162Training and Job Access . 163

Improvements in Income Maintenance 164Welfare Programs 165Benefits in Kind 166Social Insurance Systems 168Major Reform 170

Special Problems of Poverty Pockets 172Strategies for Attacking Ghetto Problems 173Strategies for Reducing Rural Poverty 176

Fulfilling the National Commitment 178

List of Tables and ChartsTables1. Gross Saving and Investment in Selected Years of Relatively

High Employment, 1952-68 362. Changes in Various Measures From the National Income and

Product Accounts Since Second Quarter 1967 413. Allocation of Disposable Personal Income in Selected Periods,

1956-68 434. Changes in Compensation, Productivity, Unit Labor Cost, and

Output Price in the Private Economy Since 1947 465. Wage and Benefit Changes in Collective Bargaining Situations,

1963-68 476. United States Balance of Payments, 1963-68 50

31Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Tables Page

7. Measures of Economic Activity During the Current Expansion. 688. Federal Fiscal Actions in Three Periods Since Fourth Quar ter

1960 749. Net Funds Raised by Nonfinancial Sectors, 1961-68 87

10. Changes in Employment, 1961 to 1968 10011. Changes in Hourly Earnings of Production and Nonsuper-

visory Workers on Private Nonagricultural Payrolls, 1961 to1968 100

12. Growth of Gross National Product in Developed and LessDeveloped Countries, 1950-67 124

13. Growth of World Exports, 1952-67 12514. Poverty and Near-Poverty Income Lines, 1967 15215. Number of Poor Households and Incidence of Poverty, Selected

Years, 1959-67 15716. Number of Near-Poor Households and Incidence of Near-

Poverty by Age and Sex of Head of Household, 1959 and1967 159

17. Selected Major Income Maintenance Programs, Fiscal Year1969 164

18. Major Federal Income-in-Kind Programs Substantially Bene-fiting the Poor, Fiscal Year 1969 167

Charts1. Changes in Gross National Product Since 1964 352. Wholesale Prices 483. Consumer Prices 494. U.S. Balance of International Payments 515. Gross National Product, Actual and Potential, and Unemploy-

ment Rate 656. Unemployment Rates 697. Selected Interest Rates 768. Price Performance and Unemployment 959. World Trade and Reserves 132

10. Number of Poor Persons and Incidence of Poverty 15411. Taxes and Transfer Payments as Percent of Income (Excluding

Transfers), by Income Class, 1965 161


CHAPTER 1

Strengthening the Foundation of Prosperity

THE AMERICAN ECONOMY achieved large gains in output and em-ployment in 1968, as it continued to expand through an unprecedented

eighth consecutive year. The value of the Nation's total output of goodsand services—gross national product (GNP)—rose by $71 billion from1967 to 1968; after adjusting for price increases, the gain amounted to 5 per-cent. Employment grew by I/2 million persons, and in December theunemployment rate was down to 3.3 percent, the lowest since the early1950's. The number of persons below the poverty income line declined by4 million, the largest such reduction in any year on record. Meanwhile, ourover-all balance of international payments improved markedly.

In part, however, this exuberance was too much of a good thing. Theproductive capability and adaptability of the American economic systemwere once more demonstrated; but the economy was severely tried by allof the demands placed upon it. The pressures of excessive demand pushedup the price level at the unacceptable rate of nearly 4 percent. Imports weredrawn in from abroad at a very rapid pace, easing some domestic supplyshortages but causing a sharp deterioration in the Nation's internationaltrade surplus. And domestic financial markets came under renewed heavypressure, producing sharp increases in interest rates.

The excessive buoyancy reflected, in large part, the extended delay in en-acting the 10 percent income tax surcharge which had been proposed by thePresident in August 1967. While the fiscal program was pending, restrictivemonetary policy took some of the steam out of the economy. But by the timethe appropriate fiscal restraint went into effect in mid-July, the underlyingforces of expansion had attained great momentum—more than was realizedat the time. As a result, the needed moderation in the pace of advancedeveloped slowly.

With inflationary pressures still strong, economic policy should continueto exert restraint in 1969. Total demand must be brought into better balancewith the Nation's productive capacity to permit a slowing of price and costincreases. But the restrictiveness of policy should be tempered to preserveour basic prosperity; it should ensure that output continues to grow,although at a rate somewhat less than the growth of the economy's potential.The Administration's fiscal program is designed to meet these objectives.

33


The remainder of this chapter reviews developments in 1968 in moredetail, sets forth the Administration's fiscal program for 1969, and finallysummarizes the outlook in 1969 for economic activity, prices and wages,and the balance of payments. The other four chapters of this Report reviewsome of the lessons of economic policy derived from recent experience anddiscuss some of the challenges of the future. The evolving role of fiscal andmonetary policies in the 1960's is discussed in Chapter 2. The challenge ofachieving price stability in a high employment economy is the subject ofChapter 3. International economic progress and problems are dealt within Chapter 4, while Chapter 5 is concerned with the reduction of poverty.This volume also contains a report on economic planning for the end of hos-tilities in Vietnam.

ECONOMIC GAINS IN 1968

The record of 1968 reflects both sides of the performance of an overlybuoyant economy: the benefit to most Americans from large gains in realincome and output, and the substantial cost of inflationary pressures.

PRODUCTION AND PRODUCTIVITY

The 5 percent growth of real output achieved in 1968 was impressive inview of the already high level of resource utilization at the beginning of theyear. But inflationary pressures were accentuated and, as shown in Chart 1,higher prices accounted for $31 J/i billion of the $71 billion rise in total GNP.

The rise in total real output was accomplished in part by a strong recov-ery of productivity growth in the private sector over the previous year—3.3 percent compared with 1.6 percent in 1967. In early 1967, many busi-ness firms had maintained high levels of employment in the expectation thatthe then emerging slowdown in production would prove temporary. Thusthe diminished pace of the expansion was reflected in a slowing of produc-tivity growth rather than a sharp rise in unemployment. Accordingly, withthe resurgence of economic activity late in 1967 and in 1968, it was possibleto meet some increased demand by fuller use of the existing work force.

EMPLOYMENT AND INCOME

As a result of the expansion, the unemployment rate fell to a 15-year lowof 3.6 percent in 1963 compared with 3.8 percent in both 1966 and 1967,and the number of unemployed declined by 160,000.

Workers on nonfarm payrolls increased by 2.1 million in 1968. Thelargest gains occurred in State and local government payrolls, which in-creased by nearly 565,000 workers, and in trade and private services, whichtogether added 950,000 workers. Manufacturing employment rose a rela-tively moderate 300,000. The Federal Government's civilian work forceremained practically unchanged from 1967, while 100,000 persons wereadded to the Armed Forces.

34


Chart 1

Changes in Gross National Product Since 1964

-20CHANGE IN BILLIONS OF DOLLARS

+20 +40 +60 +80

1964 TO 1965

1965 TO 1966

1967 TO 1968

TOTAL GNP

PERSONAL CONSUMPTION EXPENDITURES

GOVERNMENT PURCHASES

BUSINESS FIXED INVESTMENT

O T H E R i /

1966 TO 1967

^RESIDENTIAL STRUCTURES, CHANGE IN BUSINESS INVENTORIES, AND NETEXPORTS OF GOODS AND SERVICES.

SOURCE: DEPARTMENT OF COMMERCE.

35


With higher employment and more rapid wage increases, total wages andsalaries increased by $40 billion in 1968. A sharp $7 billion rise in transferpayments, plus gains in dividends, interest, and rental income, addedfurther to household purchasing power. Thus over-all personal incomeregistered a large increase of $57 billion over 1967. On an after-tax basis,and after correcting for price increases, income per capita increased by3 percent in 1968—well above the average annual increase for the postwaryears as a whole.

Corporate profits also rebounded sharply from their decline in 1967.Before-tax profits increased by more than $10 billion. The 10 percentFederal income tax surcharge, enacted in June and made retroactive toJanuary 1 for corporations, held the after-tax gain to $3 billion. Particularlylarge gains were recorded by the manufacturing sector.

THE COMPOSITION OF DEMAND

In contrast to the experience in many other years, the excessive expansionin 1968 was not attributable to any particular component of expenditures.Most components advanced, and they added up to a total of too much de-mand—what has been called a "well-balanced excess."

Investment Sectors

Residential construction outlays rose by $5 5/2 billion in 1968. As shownin Table 1, the proportion of total GNP accounted for by residential building

TABLE 1.—Gross saving and investment in selected years of relatively highemployment, 1952-68

Source or use of saving

Private sector:

Gross investment

Business fixed investment . .Residential structuresChange in business inventoriesNet foreign investment

Gross saving

Personal savingGross business saving

Excess of private saving or investment (—)

Government sector:

Federal surplus or deficit (—) .State and local surplus or deficit (—)

Government surplus or deficit (—)

Statistical discrepancy

1952

14.9

9.15.0.9

- . 1

15.4

5.210.2

.5

- 1 . 1

- 1 . 1

.6

Percent of gross national product

1956

17.1

10.45.21.1.4

16.2

4.911.3

- . 9

1.4- . 2

1.2

- . 3

1965

16.4

10.44.01.4.6

16.5

4.112.4

.1

.2

.1

.3

- . 5

1966

16.5

10.93.32.0.3

16.7

4.412.3

.2

.2

- . 4

1967

14.7

10.63.1.8.2

16.9

5.111.8

2.2

- 1 . 6- . 2

- 1 . 7

- . 4

19681

14.8

10.53.5.9

16.1

4.711.3

1.3

- . 6- . 1

- . 7

- . 5

1 Preliminary.2 Less than 0.05 percent.

Sources: Department of Commerce and Council of Economic Advisers.


recovered notably in 1968, although it remained far below the 4.3 percentaverage of the 1961-65 period.

Business fixed investment increased ll/i percent, but was not a strong stimu-lative force in 1968. Its share of GNP fell slightly from 1967 to 1968, incontrast to its usual rise in a year of rapid expansion.

Inventory accumulation played a relatively passive role in 1968, at least incomparison with the very sharp swings that were experienced in late 1966and early 1967. Inventory-sales ratios were at a fairly normal level through-out much of the year.

The net export balance declined to its lowest level since 1959. Exportsof goods and services rose $5 billion. But imports of goods and services surgedby $7 billion in response to the expansion of domestic demand. The increasein imports amounted to nearly 10 percent of the increase in GNP—abouttwice the normal share of total imports in GNP.

Government

The growth of Federal purchases for national defense slowed substantially.The $6/2 billion rise from 1967 to 1968 was far below the average of $11billion a year between 1965 and 1967. Nondefense purchases of goods andservices increased by $3 billion.

Purchases of goods and services by State and local governments con-tinued their rapid growth of recent years with a $9 billion increase. Theseexpenditure increases were heavily concentrated in higher employee com-pensation payments, reflecting the growth of State and local employment.

Personal Consumption Expenditures

Consumer expenditures turned out to be an important expansionary forcein the economy in 1968, in contrast to 1967. The over-all rise of $42 billion(8.6 percent) was marked by a strong $10 billion advance in durable goodspurchases. Automobile sales rebounded from the mild decline of 1967, withtotal sales of 9.6 million new cars exceeding the previous 9.3 million recordof 1965. The rate of consumer saving fell to 6.9 percent of disposable per-sonal income from the unusually high 7.4 percent reached in 1967.

ECONOMIC POLICY IN 1968

The buoyancy of public and private demand and the resulting buildupof inflationary pressures that developed after mid-1967 accentuated theurgent need for fiscal restraint. However, enactment of such restraint waslong delayed, complicating the management of monetary policy andenabling inflationary tendencies to become entrenched.

37


FISCAL POLICY

The economic background of fiscal policy in 1968 had its roots in develop-ments in early 1967. Although over-all economic growth was proceedingonly slowly at that time because of an inventory adjustment, it was apparentthat underlying forces of expansion were strong. These were expected tobecome more dominant in the second half of the year, once the inventoryadjustment had run its course. Accordingly, the President proposed, in hisBudget Message of January 1967, a temporary 6 percent surcharge on indi-vidual and corporate income taxes, to take effect on July 1, 1967.

By the second half of 1967, the prospect that excessive expansion was onthe way became more apparent. Accordingly, in early August, the formalmessage requesting prompt enactment of the surcharge—revised to 10 per-cent—was sent to the Congress. However, the economy was not actuallyexpanding at an excessive rate during the summer and early autumn, andthe Congress was reluctant to take major action on the basis of a forecastof acceleration. No action was taken, and the fiscal impact remainedstrongly and inappropriately expansionary.

The pace of economic expansion did in fact accelerate, and the Presi-dent renewed the request for a 10 percent tax surcharge in January 1968.The evidence of excessive demand, rising prices, deteriorating trade per-formance, and growing financial pressures at home and abroad becamecompelling. An international financial crisis developed in March, and bymid-May accelerating credit demands had pushed interest rates to recordhigh levels. Even after a rather general consensus on the need for fiscalrestraint developed, there were further delays in reaching agreement on theform of restraint. Some legislators were prepared to vote for higher taxesonly if accompanied by cutbacks in Federal spending; others only if a taxincrease would serve as a means of avoiding such cutbacks.

Congressional approval finally came with passage of the Revenue andExpenditure Control Act of 1968, signed into law by the President onJune 28.

The Act provided for the 10 percent surcharge as requested by the Presi-dent in January, with effective dates made retroactive to January 1 forcorporations and April 1 for individuals. Since the withholding rate underthe personal income tax was raised on July 15, many individuals will receivereduced refunds or have to make additional final tax payments early thisyear to cover the retroactive portion of the tax.

The Act also established specific limitations on Federal budget outlaysfor fiscal year 1969. Certain programs—support for Vietnam operations,interest on the public debt, veterans benefits and services, and social securitybenefits—were exempted from the limitations. Expenditures in the re-maining categories were required to be reduced by $6 billion below thelevels contained in the January Budget.

38


As a result of the enactment of this fiscal program, the Federal budget(as measured in the national income accounts) has shifted from a deficit of$11 billion in fiscal 1968 to one of only $1 billion (annual rate) in thesecond half of calendar 1968. The tax surcharge alone is currently with-drawing about $105/2 billion (annual rate) from the income stream.

The enactment of the surcharge and expenditure cutbacks immediatelystrengthened international confidence in the dollar, and caused some relaxa-tion in domestic financial markets. Economic activity continued to expandtoo strongly in the second half of 1968, but at a less feverish pace than in thefirst half.

MONETARY POLICY AND FINANCIAL DEVELOPMENTS

The Federal Reserve tightened credit in the first half of 1968 when littleprogress was made toward passage of the tax bill. In doing so, however, itattempted to steer a narrow course. There was hope for the enactment offiscal restraint and hence good reason to avoid an extremely tight creditpolicy. On the other hand, it was necessary for monetary policy to help incooling off the feverish economy in the short run and also to be ready toassume the full burden of restraint if the fiscal program should fail. Withinthese limitations, a series of actions did, in combination, achieve significantrestraint.

Two half-point increases brought the Federal Reserve discount rate to amodern high of 5 5/2 percent by late April. Regulation Q was also changedin April to raise the maximum allowable interest rates that banks couldpay on time certificates of deposit. Open market operations broughtpressures on bank reserve positions sufficient to slow bank credit growthto a 6/2 percent annual rate in the first half of the year, compared with anII/2 percent increase in 1967. In the first half of 1968, total funds raised incredit and equity markets were 17 percent below the volume of the last halfof 1967. Interest rates in the open market moved sharply upward. By lateMay, the rate on 3-month Treasury bills reached 5.90 percent and high-grade corporate bonds commanded more than 7 percent—above the highsduring the 1966 credit crunch.

Interest rates fell for a time after the logjam on the tax bill broke in lateMay. The Federal Reserve followed this with some relaxation of its grip onbank reserve positions in June and July. In mid-August, the discount ratewas reduced to 5*4 percent, largely in technical realignment to lower marketrates.

The initial easing of pressures on the banking system set off widespreadexpectations that monetary policy would soon be eased still further. Theresulting increased demand for securities to capture potential capital gainsdrove interest rates sharply downward. Meanwhile, the demands for creditto finance security purchases were added to the already heavy creditdemands from the Treasury and the private sector, with the result thatgrowth of bank credit accelerated sharply after midyear.

39


Federal Reserve policy continued to accommodate a good part of therising demands for credit, but not to the extent of preventing further in-creases in market interest rates. By early October, most rates had climbedmore than half way back toward their May peaks. Then, in mid-December,the discount rate was restored to 5 5/2 percent. Toward yearend, the rate on3-month Treasury bills was up to a new high of about 6.30 percent, a fullpercentage point above the level prevailing at the year's start, and mostother market rates were at their highs for the year and for recent times.

PATTERN OF ACTIVITY DURING THE YEAR

The record of expansion during the year reflects substantial adjustmentsin the behavior of the various sectors of the economy.

UPSURGE DURING THE FIRST HALF OF 1968

GNP increased by $42 billion (annual rate) between the fourth quarter of1967 and the second quarter of 1968. As shown in Table 2, that surge wasfueled by an extraordinary increase of $39^4 billion in final sales.

This was in contrast to the last half of 1967, when an important stimulushad come with a rise in inventory investment from its very low rate earlierin the year. In the first half of 1968, increases in inventory investment con-tributed only $2 J/2 billion, much of which reflected a buildup of stocks inanticipation of a possible strike in the steel industry.

Government expenditures were the most important expansionary forceduring the first half of 1968. Federal purchases of goods and services rose$65/2 billion (annual rate) from the fourth quarter of 1967 to the secondquarter of 1968, reflecting a renewed acceleration in defense spending.State and local purchases increased more rapidly than usual, rising $5^2billion over the period. A liberalization of Federal social security benefitstook effect in March and contributed a major part of the $5 billion increasein transfer payments during the period. The Federal fiscal impact remainedstrongly expansionary, even though revenues rose sharply with the boom-ing advance of economic activity.

Most areas of private demand made relatively little contribution to theexpansion. Business fixed investment rose $2 billion, barely keeping pacewith price increases. After its strong advance during 1967, residential con-struction leveled off, reflecting a tight monetary policy. Net exports declined,as imports expanded rapidly. Personal consumption expenditures grewnearly in pace with disposable personal income between the fourth quarterof 1967 and the second quarter of 1968.

Real GNP expanded at an annual rate of 6yi percent during these twoquarters, far outpacing the rate of growth of about 4 percent in the econ-omy's potential. Unemployment declined from 1967 levels and averaged3.6 percent of the civilian labor force. In sharp contrast with 1965-66, the

40


vigor of expansion was not concentrated in industrial areas. Indeed, indus-trial production rose at a 5 / 2 percent annual rate during the first half of1968, less than the pace of real GNP.

EXPANSION IN THE SECOND HALF

During the final two quarters of 1968, the growth of real GNP was 4 ^percent, still above the rate of growth of potential although only by anarrow margin. In current prices, GNP rose $35 billion (Table 2). Thegrowth in final sales decelerated, and inventory accumulation—after dippingin the third quarter—ended the year at a rate little different from the peakattained in the second quarter.

TABLE 2.—Changes in various measures from the national income and productaccounts since second quarter 1967

(Billions of dollars, seasonally adjusted annual rates]

Item1967 II

•n10

1967 IV

30.8

6.024.7

11.92.35.8

-1 .7

3.52.8

23.618.111.66.4

8.27.1

2.51.1

3.6

1.1

1967 IV•ft10

1968 11

41.9

2.539.4

25.72.01.0

- 1 . 4

6.55.6

32.926.726.2

.6

2 15.413.3

4.42.0

6.8

2.0

1968 IIto

1968 IV i

34.9

— 835! 7

18.47.22.31.0

1.65.2

30.116.218.8

- 2 . 6

15.44.9

1.0.6

3.3

10.6

Gross national product..

Change in business inventories..Final sales

Personal consumption expendituresBusiness fixed investment _Residential structuresNet exports of goods and servicesGovernment purchases of goods and services:

FederalState and local

Consumer sector:

Personal incomeDisposable personal income.Personal outlaysPersonal saving

Federal Government sector:

ReceiptsExpenditures.

Purchases of goods and services:National defenseOther.

Other expenditures..

Surplus or deficit ( — ) _ . .

1 Preliminary.2 Includes $3.6 billion of retroactive liability from corporate tax surcharge.Note.—Detail will not necessarily add to totals because of rounding.Sources: Department of Commerce and Council of Economic Advisers.

In contrast to the first half of the year, the government sector did notpropel the advance. Federal purchases of goods and services rose only $2billion, and other Federal expenditures increased $3 billion. Meanwhile,the 10 percent surcharge on corporate and personal income taxes withdrew

41


over $10 billion (annual rate) from the private income stream. By thefourth quarter, the Federal budget was essentially in balance.

Both homebuilding and business fixed investment, on the other hand,picked up steam in the second half and ended the year on a particularlystrong note. Net exports made a modest recovery. Consumer expendituresadvanced $18^2 billion between the second and fourth quarters, much lessrapidly than in the first half of the year.

The unemployment rate fell to a 15-year low of 3.4 percent in the fourthquarter, with exceptionally low rates for adult men.

KEY SECTORS IN 1968

Two components of demand—consumer expenditures and residentialconstruction—were subject to special influences in 1968 and therefore re-quire further examination.

Consumer Spending and Saving

Consumer spending was important in determining the pattern of activitythroughout the year. It was particularly stimulative in the third quarter,jumping $13 billion (annual rate) at a time when the surcharge was firstaffecting paychecks. Some delay in the adjustment of consumer spendingpatterns to the marked change in the growth of disposable personal incomewas expected. A lagged response was apparent, for example, in the behaviorof consumption outlays following the tax reductions of 1964-65. The in-crease in withheld taxes stemming from the 1968 tax surcharge was expectedto lead to a similar gradual response of consumption. Some decline inpersonal saving could be expected to absorb part of the tax for a while.

In fact, saving declined far more than had been anticipated in the thirdquarter, falling $7 billion from the second quarter—more than could con-ceivably be attributed to the $6 billion of additional taxes from the sur-charge. But this was immediately followed by an unusually small rise inconsumer spending in the fourth quarter, with a consequent increase in thesaving rate. During the second half of the year the saving rate averaged %of a percentage point lower than in the first half—nearly twice the declinethat would have been consistent with both an unchanging basic strength ofconsumer demand and the anticipated lagged response to the tax increase.

The third quarter surge in consumption continued to have a strong impacton economic activity through the end of the year as producers stepped uptheir rates of production in response to the increases in sales. With produc-tion proceeding vigorously, the moderation of consumer spending in thefourth quarter was translated into a substantial accumulation of inventoriesby yearend.

The marked movements of consumer expenditures during 1968 con-tinued the pattern of late 1966 and 1967. The ratios of consumer purchases

42


of various categories of goods and services and of consumer saving to dis-posable personal income for the past several years are shown in Table 3. Dur-ing the 1959-66 period, consumer spending behavior maintained a fairlyconsistent relationship to disposable personal income. The saving rates inexcess of 7 percent that prevailed in 1967 and the first half of 1968 repre-sented an unusually large fraction of disposable income by comparison with1959-66, although not with 1956-58. The saving rate has also been subjectto substantial quarterly fluctuations about its recent high level.

TABLE 3.—Allocation of disposable personal income in selected periods, 1956-68

[Percent]

Category1956-58average

1959-66average 1967

1968

Firsthalf

Secondhalf i

Disposable personal income

Personal consumption expenditures..

Durable goods

Autos and parts.Other durables..

Nondurable goods.

Food and beverages.Other nondurables...

Services

Interest paid and transfer payments to foreigners

Saving

100.0

91.1

12.8

5.47.3

44.0

23.920.1

34.3

2.1

6.9

100.0

91.9

13.3

5.87.4

41.7

21.919.8

37.0

2.4

5.7

100.0

90.1

13.3

5.67.7

39.5

20.019.5

37.3

2.5

7.4

100.0

90.2

13.8

6.07.8

39.2

19.819.4

37.3

2.4

7.3

100.0

91.0

14.2

6.47.9

39.0

19.819.2

37.8

2.4

6.6

i Preliminary.

Note.—Detail will not necessarily add to totals because of rounding.Sources: Department of Commerce and Council of Economic Advisers.

There is no clear explanation for the extra saving in the period from late1966 to mid-1968. But the high saving did contribute to a sharp buildup inconsumers' holdings of financial assets and to a slowing in the growth ofconsumer debt. Together, these developments meant that households hadachieved relatively favorable financial positions, which permitted them toincrease expenditures markedly whenever they chose to do so. Why theyhappened to pick the third quarter of 1968 to exercise this option cannotbe adequately explained.

Residential Construction

As was the case in the preceding 2 years, monetary policy again had a sig-nificant impact on homebuilding activity in 1968. After rising sharply in thesecond half of 1967, outlays for residential construction remained essentiallyflat over the first 3 quarters of 1968, despite the fact that household for-mation and other factors were creating a tremendous underlying demand

43


foi> new houses. Only in the fourth quarter did such outlays show anappreciable rise.

The factor that limited homebuilding was a curtailment in the avail-ability of mortgage credit. The net flow of funds into mortgages fell by about5 percent between the fourth quarter of 1967 and the second quarter of 1968.To some extent this reflected a slowdown of deposit inflows to major mort-gage lenders as savers were attracted by the high interest rates available inthe open market. But there was also a marked shift away from mortgagelending by mutual savings banks, which invested heavily in high-yieldingcorporate bonds.

The effects of tight credit on residential construction were, however,far less severe in 1968 than during the 1966 credit squeeze and were alsoless than most observers had expected. Indeed, the number of new housingunits started was at a depressed level in only 2 months—May and June—and then showed unexpected strength during the second half of the year.

In part, of course, the stronger performance of homebuilding in 1968reflected the fact that credit tightening early in the year was only short-lived and occurred against a background of continued hope for relief withthe enactment of the tax surcharge. Builders and mortgage lenders thustended to stretch a bit to keep operations going.

Steps taken over the past few years to improve the mortgage market alsohelped to mitigate the effects of tight credit on homebuilding. As a result of1966 legislation providing for improved coordination of the administrativeceilings applicable to interest rates that thrift institutions may pay on timeand savings deposits, the severe competition among the various institutionsfor each other's deposits that occurred in 1966 was not repeated in 1968.Legislation passed in May 1968 suspended the statutory 6 percent inter-est ceiling on federally insured mortgages until October 1969, replacingit in the meantime with an administrative ceiling controlled by the Secretaryof Housing and Urban Development. This administrative ceiling was raisedto 6% percent, thereby increasing the availability of these types of mortgages.The legislation of May 1968 also provided for the appointment of a Com-mission to reexamine the interest rate ceiling and make recommendationsfor a permanent solution to the problem.

There were also two important reforms affecting the operation of theFederal National Mortgage Association (FNMA) in 1968 that enabled itto support the mortgage market more effectively than in the past. In May,FNMA began auctioning commitments to purchase mortgages in the future,which builders and others could exercise at their option. By the yearend, outstanding commitments under this program totaled $1.2 billion,bringing FNMA's total net participation in the mortgage market during theyear to a record $4.2 billion.

This increased volume of operations was in part due to the other reform,provided for in the 1968 Housing Act, which split the old FNMA into twocorporations, one private (still designated FNMA) and the other a new

44


Government enterprise, the Government National Mortgage Association(GNMA). FNMA, which conducts the auctions mentioned above, has re-paid the Government's investment, and its operations have accordingly beenremoved from the Federal budget. It is now free of the budgetary constraintsthat had sometimes limited the role of the old Government enterprise in themortgage market. GNMA has powers—thus far unused—to help privatelenders tap the capital market for additional funds that can flow intomortgages.

RETROSPECT

In retrospect, 1968 is seen as a year of excessively rapid expansion through-out. Yet, there was a noticeable difference between the pace of advance in thefirst half of the year and that in the second half. The growth rate of realGNP slowed markedly from 6J/2 percent early in the year to 4 percent byyearend.

Still, a much more pronounced change of pace in activity was expectedas well as desired. As of midyear, many Government and private economistsexpected that the advance of GNP in the second half of the year might beroughly half of the $42 billion gain for the first 2 quarters. The enactmentof the fiscal program was one—but only one—of the elements underlyingthat expectation. Most of the slowdown was expected to result from a lessen-ing of demand in the private sector—steel and other inventories and home-building.

In point of fact, several elements of private demand showed unanticipatedstrength. The sluggishness of consumer buying in the early spring monthsproved to be temporary and misleading. Business fixed investment began tomove up sharply from its previous plateau. Homebuilding rebounded verystrongly and promptly following the easing of credit conditions. And, asnoted earlier, the strength of consumer demand in the summer contributedto a stepup in production and ordering and subsequently to rising inventoryaccumulation. All of these elements taken together amounted to an un-expected buoyancy in private demand and production.

While there is no clear way to tell how much the fiscal program moderatedthese forces, it is perfectly plausible that in the absence of fiscal restraintthere would have been no deceleration whatsoever in the second half(unless, of course, the alternative of severe monetary restraint had beenapplied).

WAGES AND PRICES IN 1968

As the economy resumed its vigorous advance in the last half of 1967,inflationary pressures reasserted themselves strongly and continued through-out 1968.

45323-166 O—69 4


WAGES AND COMPENSATION

Spurred by rising living costs and growing tightness in many labor mar-kets, both union and nonunion wages turned up sharply. Average hourlyearnings of production workers in private nonagricultural establishmentsrose 7 percent between December 1967 and December 1968, compared with5 percent in the preceding 12 months. The hourly wage increases during theyear for construction, manufacturing, and wholesale trade were all of aboutthe same magnitude, while those in mining and retail trade were some-what larger.

Average hourly compensation in the private sector, including fringebenefits and employers' social security contributions, rose 7.4 percent from1967 to 1968—as compared with 6.1 percent from 1966 to 1967 (Table 4).

TABLE 4.—Changes in compensation, productivity, unit labor cost, and output pricein the private economy since 1947

Sector and itemPercentage change per year

1947 to 1966 1966 to 1967 1967 to 1968 i

Total private economy:

Average hourly compensation: *Current pricesConstant prices a

Output per man-hourUnit labor costImplicit GNP price deflator.

Private nonfarm:

Average hourly compensation: 2Current pricesConstant prices'

Output per man-hourUnit labor costImplicit GNP price deflator

Manufacturing:

Average hourly compensation: 2Current pricesConstant prices 3

Output per man-hourUnit labor costImplicit GNP price deflator

5.23.13.51.72.0

4.92.82.91.92.2

5.13.03.21.82.0

6.13.21.64.43.1

6.03.11.14.83.5

5.32.4.6

4.72.6

7.43.33.33.93.6

7.23.23.43.73.6

7.03 02.84.2

* Preliminary.2 Wages and salaries of all employees and supplements to wages and salaries such as employer contributions for social

insurance and for private pension, health, unemployment, and welfare funds, compensation for injuries, pay of the mili-tary reserve, etc. Also includes an estimate of wages, salaries, and supplemental payment part of the income of theself-employed.

3 Adjusted for changes in the consumer price index.* Not available.

Note.—Data for each sector relate to all persons.

Sources: Department of Commerce, Department of Labor, and Council of Economic Advisers.

Wage increases negotiated in all important collective bargaining situa-tions covered five million workers—an unusually large number—in 1968.Multiyear settlements, covering 5,000 or more workers, had a median in-crease of 6.6 percent a year in wages and benefits weighted over the life ofthe contract (Table 5).

In most cases, settlements were heavily "front loaded*'—that is, a dis-proportionate share of the increase was concentrated in the first year. The


average first-year wage settlement was 7.5 percent, substantially above the5.6 percent increase in 1967. This front-loading of new contracts may con-tribute to a substantial acceleration of economy-wide wage increases duringperiods of concentrated collective bargaining activity.

Many of the 1968 settlements replaced contracts negotiated in 1965 or1966, which had yielded very little gain in real hourly earnings because of theaccelerating advance in prices. The unions naturally sought to restore theirrelative positions as quickly as possible, and hence insisted on concentratinga substantial part of the gains under new contracts in the first year.

TABLE 5.—Wage and benefit changes in collective bargaining situations, 1963-68

Type of change

Median percentage change negotiated or effective during

1963 1964 1965 1966 1967 19681

Most important collective bargaining situations, annual rate ofincrease over life of contract: *

Wage and benefit changes negotiated during specifiedyear:3

Equal timing*Actual timing«

3.5 3.3

Wage changes negotiated during specified year:8

Equal timingAil important collective bargaining situations:7

First-year wage adjustment negotiated during specifiedyear:

All industries

ManufacturingNonmanufacturing.

Wage adjustment effective during specified year, regard-less of date of negotiations: *

All industries

ManufacturingNonmanufacturing.

2.5

3.0

2.53.4

2.9

2.73.2

3.0

3.2

2.03.6

2.7

2.03.5

3.3

3.8

4.03.7

3.4

3.43.4

4.14.5

3.9

4.8

4.25.0

3.6

3.33.8

5.25.6

5.0

5.6

6.45.0

4.4

4.04.8

6.06.6

5.1

7.5

7.17.5

5.5

5.06.0

1 Based on preliminary data available in early January 1969.2 Possible increases in wages resulting from cost-of-living escalator adjustments are omitted except for any part of

the escalator increase guaranteed in the contract.• The 1964 estimate is based on 20 key contracts which affected 2.25 million workers in 11 major industries. The 1965

estimate covers most settlements affecting 10,000 workers or more in all industries excluding construction, services,finance, and government. Subsequent estimates cover all settlements affecting 5,000 workers or more in all industriesexcept government.

* Annual rate of increase assuming equal spacing of wage and benefit changes over life of contract.5 Annual rate of increase taking account of actual effective dates of wage and benefit changes during contract period.6 The estimates for 1963 to 1965 cover most settlements affecting 10,000 workers or more in all industries excluding con-struction, services, finance, and government. Subsequent estimates cover all settlements affecting 5,000 workers or morein all industries except government.

^ All contracts affecting 1,000 or more workers. From 1963 to 1965, construction, services, finance, and government areexcluded. All industries except government are covered in subsequent estimates.8 Includes changes in wage rates negotiated during specified year, plus increases decided upon in earlier years, cost-of-living escalator adjustments, and no wage changes.

Source: Department of Labor.

REAL EARNINGS AND UNIT LABOR COSTS

The acceleration of money wages in 1968 was nearly matched by the ac-celeration of consumer prices so that the increase of 3.3 percent in real hourlycompensation in the private economy was only slightly greater than the1967 increase of 3.2 percent (Table 4).

47


Output per manhour in the private economy rose 3.3 percent in 1968,and this helped offset part of the cost to employers of the increase in hourlycompensation. Nevertheless, unit labor costs still rose by 3.9 percent between1967 and 1968.

PRICES IN 1968

The general price level advanced sharply in 1968. Wholesale prices in-creased 2.8 percent in the 12 months ended December 1968, compared withonly 0.8 percent during 1967 (Chart 2). Part of the spurt reflected the factthat farm prices rose 4.4 percent during 1968, reversing their decline duringthe 2 preceding years. However, industrial prices also rose on a broadfront, advancing 2.6 percent during 1968 compared with 1.8 percent during1967.

Chart 2

Wholesale Prices

1957-59=100

120 ~

110 -

100

90 -

-

\ ^- \ / ^

t tii

PROCESSED FOODS AND FEEDS

/

- A

ALL COMMODITIES /

\ A A /

V/ • • v . / ^

COMMODITIES

N X FARM PRODUCTS

, , , , .M l I i i i i I i i i i i I . . 11 1 1 1 1 . i I i , , , , ,

1963 1964 1965

SOURCE: DEPARTMENT OF LABOR.

1966 1967 1968

The consumer price index rose at an annual rate of 4.8 percent duringthe first 11 months of 1968 (Chart 3). This increase was led by a rise of6.1 percent in consumer services, including a 7.2 percent jump in the costof medical services. But prices of consumer commodities also moved upstrongly. Partly because mortgage interest and homebuying costs rose par-ticularly sharply, the deflator for personal consumption expenditures in the


Chart 3

Consumer Prices

1957-59=100140

130

120

110

100

—

1 1 1 1 1 1 1 1 1 1 1

ALL ITEMS

^ — -

1 1 1 1 1 1 1 1 1 I 1

/

s

SERVICES y y

^ ^ ^ FOOD ^ ^

COMMODITIES LESS FOOD

i i i i i 1 i i i i i 1 i i i i i 1 i i i i i 1 i i i i i 1 i i i i i 1 i i i i i 1 i i i i i

1963 1964


1965 1966 1967 1968

GNP—which excludes these elements—increased considerably less rapidlythan the consumer price index. It rose by 3.8 percent during the 4 quartersof 1968.

The behavior of prices in 1968 represented a further intensification ofthe upward pressures that developed late in 1967. After rising 3.3 per-cent during 1966, consumer prices slowed to a 2^4 percent annual rateof increase during the first half of 1967, when economic activity moderated.But, with the resurgence of over-all demand—spurred by fiscal stimulus—late in 1967, the rate of price increase again accelerated.

BALANCE OF PAYMENTS IN 1968

Although excessive economic growth generated a surge in imports anda sharp deterioration in the trade surplus in 1968, the overall balance ofpayments improved markedly. This primarily reflected a dramatic shift inthe direction of capital flows. In 1967, the U.S. balance of payments asmeasured on the liquidity basis registered a deficit of $3.6 billion; the deficitwas reduced to $1.1 billion at an annual rate during the first 3 quartersof 1968. (Table 6 and Chart 4). For the full year, preliminary estimates

49


TABLE 6.—United States balance of payments, 1963-68[Billions of dollars]

Type of transaction

Balance on goods and services-

Balance on merchandise trade..Balance on investment income..Balance on other services

Remittances and pensions

Government grants and capital, net

U.S. private capital, net

Direct investmentU.S. bank claimsOther U.S. private capital 2.

Foreign private capital, net . . .

U.S. securities (excluding Treasury issues).Foreign private liquid capital, net3

Other foreign private capital*

Errors and omissions

ON OFFICIALBALANCEBASIS.

RESERVE TRANSACTIONS

Plus: Increases in nonliquid liabilities to foreign monetaryauthorities

Less: Foreign private liquid capital, net3

BALANCE ON LIQUIDITY BASIS..

1963

5.8

5.13.3

-2.6

-.9

-3.6

-4.5

-2.0-1.5-.9

1.3

.3

.6

.4

-.2

-2.0

<5>.6

-2.7

1964

8.4

6.63.9

-2.2__ Q

-3.6

-6.6

-2.3-2.5-1.8

1.9

-.11.6.5

-.9

-1.6

1*.6

-2.8

1965

6.9

4.74.2

-2.0

-1.0

-3.4

-3.8

-3.5.1

-.4

.3

-.4.1.5

-.3

-1.3

.1

.1

-1.3

1966

5.1

3.64.2

-2.7

-1.0

-3.4

-4.3

-3.6.3

-.9

4.2

.92.4.9

-.2

.3

.82.4

-1.4

1967

4.8

3.54.6

-3.3

-1.3

-4.2

-5.5

-3.0-.5-2.0

3.4

1.01.5.9

-.5

-3.4

1.31.5

-3.6

1968,first 3

quarters'

2.4

.44.9

-2 .9

-1 .1

-4 .3

-5 .2

- 3 . 3.4

- 2 . 310.43.75.41.3

- . 3

1.9

2.45.4

-1 .1

1 Average of the first 3 quarters at seasonally adjusted annual rates.2 Includes redemptions of foreign securities.3 Includes changes in Treasury liabilities to international nonmonetary institutions.4 Includes certain Government transactions associated with special transactions.5 Less than $50 million.Note.—Detail will not necessarily add to totals because of rounding.Source: Department of Commerce.

show a liquidity surplus—for the first time since 1957. The balance on theofficial reserve transactions basis improved dramatically, achieving a surplusof $1.9 billion during the first 3 quarters of 1968, partly as a result of amarked shift in the holdings of liquid dollar assets abroad from foreigncentral banks to private investors. Such a shift improves the official settle-ments measure but does not affect the liquidity balance.

The improvement in the balance of payments can be attributed to thePresident's program announced on January 1, 1968; to some special factorsaffecting primarily capital flows; and to the continuation of some longerterm trends.

GOODS AND SERVICES

The merchandise trade surplus deteriorated markedly from $3.5 billionin 1967 to an annual rate of only $0.4 billion during the first 3 quarters of1968. Imports rose about 22 percent above 1967. Exports, reflecting mainlythe vigorous growth of income abroad, grew by 10 percent.

The U.S. trade balance during 1968 was influenced by strikes in the cop-per and aluminum industries and a threatened strike in the steel industry,


Chart 4

U.S. Balance of International Payments

BILLIONS OF DOLLARS

50

40

30

20

— EXPORTS AND IMPORTS OF GOODS AND SERVICES

-

EXPORTS

— ^ ^ ^ ^ ^ ^

IMPORTS

-

—

—

o\ I I I I I \ I1960 1962 1964 1966 1968 J/

10

-10

NET CAPITAL FLOWSOTHER FOREIGN

CAPITAL

7U.S. PRIVATE

J I I I

1960 1962 1964 1966 1968 ^

10

0

10

BALANCE

i i i

OFFICIAL RESERVETRANSACTIONS BASIS

1 1 1

LIQUIDITY BASIS

1 1

s

11960 1962 1964 1966 1968^

J/FIRST 3 QUARTERS AT SEASONALLY ADJUSTED ANNUAL RATES.

i/SECURITIES OTHER THAN TREASURY ISSUES.

SOURCE: DEPARTMENT OF COMMERCE.


all of which stimulated metal imports and reduced the trade surplus byperhaps $600 million.

Nonagricultural goods accounted for the entire growth of merchandiseexports during 1968, with exports to Western Europe and Latin Americaexpanding especially rapidly. Agricultural exports, the most rapidly grow-ing category between 1960 and 1966, declined rather abruptly in 1967 andremained depressed in 1968. While this decline was partially the result ofa reduction of sales and donations to less developed countries, it also reflecteda sharp decline in commercial exports to the European Economic Commu-nity, greatly influenced by EEC restrictions on agricultural imports.

The service account in the balance of payments improved, reachinga surplus of $2.0 billion annual rate (during the first 3 quarters of 1968),as compared to $1.3 billion in 1967 (Table 6). The major gain came in netincome from foreign investments, which continued its upward trend. Someimprovement also occurred in the travel account in 1968, reflecting thereduced attractiveness of the Canadian exposition.

CAPITAL ACCOUNT

The capital account improved markedly, swinging from a net outflow onprivate account of $2.2 billion in 1967 to a net inflow of $5.2 billion in 1968(first 3 quarters at annual rate). The new balance-of-payments programshad their major impact on the capital account. Mandatory controls on for-eign direct investment, imposed January 1, 1968, greatly stimulated effortsby American firms to raise money abroad. During the first 9 months of 1968,$1.6 billion of new U.S. corporate securities were sold abroad to financeforeign investments, compared with less than $500 million during all of1967. Firms also borrowed other funds totaling $0.7 billion, about twice thetotal for 1967. These borrowings permitted direct investment abroad to in-crease slightly, apparently proceeding in accordance with original intentions.Thus the target of $1 billion of balance-of-payments savings from the con-trols over direct investment was achieved without reducing American par-ticipation in the economies of other countries.

Operating under new directives issued by the Federal Reserve Board,American banks reduced their claims on foreigners by $300 million duringthe first 9 months of 1968, compared with an increase of about $500 millionduring 1967. The swing of $800 million in bank lending exceeded thetarget of $500 million set in the January program.

There were other improvements in the capital account that were not di-rectly related to the balance-of-payments program. By the end of September,foreigners had already purchased $1.2 billion (net) of American securitiesin the open market (in addition to the $1.6 billion of new issues previouslymentioned). In all of 1967, foreign purchases in the market amounted toonly $0.6 billion, as a $450 million liquidation of holdings by the UnitedKingdom held down the total. The greater foreign interest in U.S. stocksand bonds during 1968 can be attributed to rising prices of U.S. equities and

52


high yields on U.S. bonds, as well as to political developments in France andCzechoslovakia that made European securities seem less attractive. More-over, long-term forces continued to work, including the basic strength ofthe U.S. economy, the growing affluence of other countries, and the short-age of foreign corporate securities.

A major inflow of liquid funds resulted from borrowings by Americanbanks from their foreign branches. During 1968, these borrowings increasedby $1.8 billion, compared with only $200 million in 1967. The major causesof this increase were the existence of relatively tight monetary conditions inthe United States and fears about the stability of some European currencies.American banks also seem to be strengthening their ties to the Europeanmoney market, giving them access to additional sources of funds.

The U.S. Government increased its special financing arrangements duringthe year. In part, this increase resulted from greater efforts to obtain militaryoffsets or neutralizations in line with the President's program. Some portionalso resulted from a bilateral agreement with Canada whereby that countrywas exempted from the mandatory controls on direct investment.

ECONOMIC POLICY FOR 1969

Although economic expansion is expected to moderate during the firsthalf of 1969, a continuing policy of restraint is essential to curb inflationarypressures and to strengthen our international trade performance.

ANTI-INFLATIONARY STRATEGY

Checking inflationary forces that are deeply embedded in the structureof costs and prices is an extremely difficult and delicate process. One ap-proach would be to adopt a drastically deflationary fiscal and monetarypolicy, involving a sharp reduction in Federal expenditures or a furtherincrease in tax rates reinforced by extreme credit restraint.

Such a policy could surely stop inflation in a reasonable period of time.But the cost would be intolerable—unemployment would rise substantially,and the United States could easily experience its first recession in nearly adecade. As the over-all unemployment rate rose, the rates for the disad-vantaged—including nonwhites and teenagers—would rise even more rap-idly. With heavy unemployment even among experienced workers, it wouldbe extremely difficult to sustain recent initiatives to provide training andjobs for the unskilled and the disadvantaged. The danger of serious socialunrest would be greatly increased. Moreover, the entire economy wouldsuffer a huge loss of output, at a time when full production of goods andservices is urgently needed to fulfill national goals.

In any case, halting the current wage-price spiral is only the first step inthe longer term task of maintaining reasonable price stability. Once a stableprice performance had been achieved through a drastic policy of deflation, adecision would be required concerning the next step. If that choice should

53


be to prolong the slack performance of the economy, it would extend in-equity and waste for years to come. If, on the other hand, there was a deci-sion to shift to expansionary policy, there is no reason to believe that theperiod of deliberate deflation would have contributed to the longer run solu-tion of the problem. Indeed, a rapid recovery to the economy's potentialwould probably involve more serious dangers of inflation than would asteadier movement that remained close to the path of potential output.

In view of the intolerable costs of a drastic deflationary policy, a moremoderate approach is required. The aim should be to slow down the growthof demand to a rate less than the growth of capacity while consistentlymaintaining forward motion.

Once the rate of price increase has moderated, fiscal and monetary policycan be gradually adjusted toward stronger expansion. How soon that willprove appropriate cannot be foretold now. Nor can the proper target forutilization in the longer run be stated with assurance. If fiscal-monetarypolicy can succeed in avoiding spurts of expansion such as those experiencedin 1965-66 and again in 1967-68, it should be possible to improve somewhatupon our recent price performance. But it is doubtful whether acceptablelevels of unemployment and reasonable price stability can both be achievedwithout the successful implementation of structural anti-inflationary meas-ures and of voluntary cooperation in wage and price decisions, along linessuggested in Chapter 3. In any case, it is clear that, for 1969, stabiliza-tion policy should be designed to hold the rate of expansion of real outputbelow 4 percent but to keep it on a distinctly rising path.

FISCAL PROGRAM FOR 1969

The President's Budget is designed to fulfill these objectives for economicactivity in 1969.

Federal expenditures are expected to rise by about $10 billion in 1969compared with an increase of $19 billion in 1968. Defense purchases areexpected to increase by about $2 billion, while nondefense purchases arescheduled to rise by about $1 billion. About half of these increases for thefull year are accounted for by a pay increase at midyear for Federal civilianemployees and the Armed Forces. This increase is designed to make Federalcivilian pay scales comparable with those in private industry.

Increases of $3 billion and $4 billion, respectively, are anticipated in Fed-eral grants-in-aid to State and local governments and in domestic transferpayments. Most of the increases are either required by existing legislationor designed to help solve problems of highest national priority.

To preserve the needed posture of fiscal restraint in the face of these mini-mal necessary increases in Federal expenditures, the President is asking theCongress to extend the 10 percent tax surcharge on personal and corporateincome for 1 year beyond its present expiration date of June 30, 1969. Inaddition, the President is requesting a further extension at present levels of

54


the excise taxes on automobiles and telephone service which are nowscheduled to decline on January 1, 1970. With these tax actions, it is es-timated that the Federal budget (national income accounts basis) will showa surplus of about $5 billion during calendar 1969, compared with a deficitof $5 billion in 1968.

The 10 percent tax surcharge was enacted as a temporary measure inJune 1968 and is to be extended for 1 year as a temporary measure. Indeed,the President is urging the new Administration and the Congress to giveserious consideration to coupling the extension of the surcharge with au-thority for the President to remove it entirely or partially, subject to Con-gressional veto, if warranted by developments in Vietnam, in the domesticeconomy, or in Federal outlays.

MONETARY POLICY

Monetary policy should remain flexible in 1969. In the environmentprevailing at the start of the year, it is appropriate that monetary policyreinforce the effects of fiscal restraint to assure the needed moderation ofpressures on the Nation's resources. The recent increase in the FederalReserve discount rate and increased pressures on bank reserve positions arepursuing that objective. A slowing from the recent rapid growth of bankcredit is appropriate in early 1969.

But with fiscal restraint continuing through fiscal year 1970, monetarypolicy may gradually be able to shift to a less restrictive stance than presentlyprevails. Flexible and alert responses to a moderation of economic activitywould permit a timely de-escalation of interest rates from their currentlyhigh levels and hence a more adequate flow of funds to savings institutionsand the mortgage market.

A decline from present peak levels of nominal interest rates would be de-sirable for the long run as well to avoid restricting capital formation andeconomic growth in general, and homebuilding in particular. The continua-tion of the surcharge through fiscal 1970 should permit a gradual movementtoward a more desirable mix of monetary and fiscal policies; with fiscalpolicy better adjusted to the needs of economic stabilization, the need forrestrictive monetary policy and relatively high interest rates should graduallyabate.

ECONOMIC OUTLOOK FOR 1969

The fiscal restraint contained in the Revenue and Expenditure ControlAct of 1968 will have its major impact on the economy early in 1969. Assum-ing the fiscal program outlined above and appropriate monetary policy,GNP is expected to rise by $60 billion in 1969 from the $861 billion nowestimated for 1968. This projection should not be viewed as an exact esti-mate, but rather as the midpoint of a range of possible outcomes.

This forecast of an increase of approximately 7 percent in GNP means acontinuation of prosperous conditions and economic expansion, though, as

55


desired, at a considerably more moderate rate than in 1968. The unemploy-ment rate should remain below 4 percent.

The expansion within 1969 is expected to be considerably less rapid thanduring 1968, and the increase in GNP from the fourth quarter of 1968 tothe fourth quarter of 1969 should be about 6 percent—smaller than the year-over-year increase. The rise in real output during the four quarters of 1969should be less than 3 percent while the rate of increase of over-all prices maybe a little more than 3 percent.

The first part of 1969 should see a slowing of economic expansion. Con-sumer spending should rise moderately, influenced by the continuing impactof tax withholding, extra final settlements of about $1^4 billion on 1968taxes, and a $3 billion increase in social security taxes which became effec-tive January 1. Federal Government purchases will change little while Stateand local government expenditures are expected to increase at a normal pace.Inventory investment should retreat from the high rate of the fourth quar-ter of 1968. On the other hand, a strong rise in business fixed investment isexpected early in 1969, in line with recent surveys of business plans andnew orders for machinery and equipment. All in all, a significant slowingin the pace of expansion is now likely.

At mid-1969, a substantial pay increase for Federal Government em-ployees is scheduled. Beyond that, only a slight increase in Federal purchasesis anticipated. The tax burden on consumers will also be reduced atthat time as final settlements on 1968 taxes are completed in the first halfof the year, although consumer spending should continue to feel the lag-ged effects of the final settlements. These fiscal elements, together with acontinuing increase in private investment, are expected to lead to slightlymore rapid economic expansion in the second half of the year.

Thus the year 1969 promises continued prosperity for the Americaneconomy. The slowing of the expansion should provide welcome relieffrom the excessive demand pressures of 1968 and offers the prospect of somedeceleration in the upward movement of prices.

OUTLOOK BY SECTORS

A brief survey of the outlook for specific categories of expenditures willhelp to clarify the projection of over-all economic activity.

Business Fixed Investment

Private and public investment surveys compiled recently indicate asubstantial rise in business fixed investment in 1969. The Commerce De-partment-SEC survey reports that businessmen plan to increase their plantand equipment spending by about 9 percent in the first half of 1969 abovelevels prevailing in 1968. Such a sharp increase in investment is alreadyreflected in orders for durable equipment and in construction contracts.This marked prospective expansion of investment follows a year when in-dustrial production has reached new peaks and when business cash flows

56


have been at record levels, but when there has been relatively little pressureon existing industrial capacity. The dimensions of the rise in investmentare still difficult to evaluate in view of uncertainty about the possible impactof economic developments during the first half of the year and of monetarypolicy on business plans later in 1969. For the year as a whole, the increasein business fixed investment over 1968 is expected to be about $7 or $8billion.

Inventories

At the end of 1968, ratios of inventories to sales were at normal levels,both for manufacturing and for retail and wholesale trade. Barring unfore-seen changes in economic conditions over the year, inventory investmentin 1969 may show a slight decline from the average rate of 1968.

Homebuilding

Demographic trends and the relatively low level of residential construc-tion in recent years have created a very strong underlying demand for newhomes. Housing starts rose sharply in the second half of 1968, and residen-tial construction activity should advance further early in 1969. Because ofthe important role in the housing market of the availability of mortgagefinancing, considerable uncertainty attaches to estimates of home construc-tion beyond the next few months. Given the prospective monetary policyfor this year as outlined above, private nonfarm housing starts in 1969may be expected to fall somewhat below their recent rate of ap-proximately 1.6 million per year. Residential construction expenditures forthe year may rise by approximately 10 percent over the average 1968level, reflecting a larger number of new housing units and increased out-lays per unit. But this would mean only a modest rise from the rate ofactivity at the end of 1968.

Government

For the year 1969 an increase of State and local government purchasesof goods and services of about $10 billion can be anticipated in line withthe growing needs for public services and facilities. This estimate assumesthat monetary policy will not significantly curtail expenditures for publicconstruction projects.

Federal Government purchases are expected to remain at approximatelytheir present levels during the first half of 1969, in accordance with ex-penditure restraint applied under the Revenue and Expenditure ControlAct of 1968. However, an increase in Federal Government salaries willadd $2.8 billion at annual rates to Federal Government expenditures be-ginning in the third quarter of 1969, and the Budget for fiscal 1970 in-

57


eludes other modest increases in purchases. For the calendar year 1969,Federal purchases of goods and services, including the pay increase, are ex-pected to be approximately $3 billion higher than in 1968.

Consumption

Consumer spending in 1969 will be greatly influenced by the continuingadjustment of consumers to the changes in their disposable incomes result-ing from the pace of advance in private and Government activity and fromchanges in their tax obligations.

Consumer spending slowed in the closing months of 1968. Retail saleshave not increased significantly since midsummer and the pace of auto-mobile purchases has moderated.

In the first half of 1969, increased tax burdens will further slow thegrowth of disposable personal income, although this may be reflected, inpart, in a renewed decline of the saving rate. Consumer expenditures are thusexpected to grow rather slowly during the first half of 1969. Surveys of con-sumer buying anticipations tend to confirm this prospect.

Personal disposable income may grow somewhat more rapidly in the secondhalf of 1969—in part because of the Federal pay increase and the comple-tion by mid-year of final 1968 tax settlements. Thus, consumer spendingmay advance more strongly.

For the year as a whole, it is anticipated that disposable personal incomewill increase nearly $35 billion and consumer expenditures should increaseapproximately the same amount reflecting a small decline in the saving rate.

PRICE OUTLOOK

The excessive rate of price and wage advance during 1968 will inevitablyinfluence wages, costs, and prices during 1969. Unit labor costs will con-tinue to increase, as will the costs of materials, supplies, and capital equip-ment. Financial costs are also likely to remain relatively high.

Gradually, however, fiscal restraint coupled with restrictive monetarypolicy should moderate the excessive market pressures that prevailed dur-ing most of 1968. Present indications point to slightly lower farm pricesduring 1969, assuming normal weather conditions. Allowing for a con-tinued increase in the costs of food processing and distribution, food pricesat retail may remain approximately stable.

Wage increases may have somewhat less impact in 1969 than they did in1968. Second year increases in the union contracts negotiated in 1968 andthe last half of 1967 will generally be less than for the first contract year.Collective bargaining activity will also be relatively light, since expiringmajor contracts up for wage negotiations cover only about half as manyworkers as in 1968. And finally, as restraint takes hold more firmly, lessenedmarket pressures provide a prospect for some moderation in nonunion wagesas well.

58


Wage-Price Policies for 1969

If substantial progress is to be made toward the restoration of price stabilityin 1969, restraint in private decisions is essential to complement responsiblefiscal and monetary policies. Intensive consultations involving representa-tives of business, labor, and Government are required to explore practicaland equitable ways in which such restraint might be achieved. Mutual short-term sacrifices are needed to protect the great long-term interest of business,labor, and all Americans in noninflationary prosperity.

It would be unrealistic to expect the full restoration of price stabilityin the immediate future. Given the recent history and the outlook for thecost of living, labor cannot be expected to accept wage increases in 1969limited to the trend growth of productivity. Nor can businessmen be ex-pected to absorb substantial cost increases without any adjustments in prices.

Nevertheless, the process of price and wage deceleration must begin. Intheir own and in the public interest, business and labor should undertake apattern of voluntary restraint that will carry the Nation a substantialdistance back toward the goal of price stability in 1969. New wage agree-ments would move halfway back to the ultimate productivity standardnext year if labor accepted wage settlements that would bring the averageincrease in money wage rates a little below 5 percent. Business would displaycomparable restraint in pricing if it intensified its efforts to offset rising coststhrough greater efficiency and if it absorbed a share of unavoidable increasesin costs through acceptance of lower profit margins.

This could be translated into a general rule that business agree to absorbincreases of up to 1 percent in unit costs and accept as a guide in price de-cisions a profit target no higher than the average achieved in the years1967-68. Responsible pricing requires that businessmen focus on marginsbefore tax and not attempt to pass the temporary corporate tax surcharge onto consumers. It is also appropriate to ask those who depart from thesestandards to bear the obligation of demonstrating that special circum-stances render the standards grossly unreasonable.

These standards for price-wage restraint in 1969 were suggested by theCabinet Committee on Price Stability in its December 1968 report to thePresident.

Combined with responsible fiscal-monetary policy ajid continued effortsto improve the structure of the economy, acceptance of these standards for1969 by key private decision-makers would carry the Nation a long way onthe road to price stability.

OUTLOOK FOR THE BALANCE OF PAYMENTS

With the anticipated slowing of economic growth, only a modest increasein imports is expected in 1969. The special strike situations which adverselyaffected trade in 1968 should not be repeated, although new problems ofthis kind could arise. Continuation of the rising trend in earnings on foreign

59


investment should be another source of improvement in our current accountposition.

U.S. exports should increase in line with the expansion of foreign mar-kets. The restrictive measures taken by France and the United Kingdomto safeguard their payments positions have reduced our export prospects,but these are likely to be offset by the German measures in the oppositedirection.

The capital account is unlikely to show improvement, and indeed maydeteriorate. The restraint on bank lending cannot provide another largeswing in net loans. Foreign purchases of U.S. securities can hardly beexpected to continue at present rates. Even more important will be thestate of financial markets at home and abroad. If European monetary con-ditions remain fairly relaxed relative to those prevailing in the United States,capital inflows can be expected—even if not on the same scale as in 1968.

In view of the uncertain prospects for the balance of payments, themeasures for controlling capital movements must be maintained for thepresent. The Interest Equalization Tax which expires at mid-year must becontinued to assure against a major rise of new foreign security issues in theUnited States. Moreover, the program for controlling bank lending andthe direct investment controls should be maintained. Both have been modi-fied to make them more responsive to needs and more equitable. Whilefurther modifications will be possible as the balance of payments improves,the defenses provided by these programs cannot be lowered without riskingthe destabilizing effects of substantial refinancing of previous years' bor-rowings. Ultimate dismantling of the controls should proceed as soonas this can be accomplished without impairing the strength of the dollar.

60


Chapter 2

Policies for Balanced ExpansionThe Congress hereby declares that it is the continuing policy andresponsibility of the Federal Government to use all practicablemeans consistent with its needs and obligations and other essentialconsiderations of national policy . . . to promote maximumemployment, production, and purchasing power.

FOR THE PAST 23 YEARS, these forthright marching orders in theEmployment Act of .1946 have firmly committed the Federal Government

to an active role in promoting high standards of over-all economic per-formance. Federal fiscal and monetary policies have contributed to a muchimproved record of stability and growth in the U.S. economy throughout thepostwar era.

In particular, during the past 8 years, national policy has been designednot merely to counter cyclical fluctuations but to promote steady expansionof economic activity in pace with productive potential. While fiscal andmonetary policies have not always been appropriate to the needs of the day,their general success in fulfilling the lofty promises of the Employment Act isclearly demonstrated by the unparalleled prosperity achieved during theKennedy and Johnson Administrations. Eight consecutive years of eco-nomic expansion, the longest and largest sustained advance in the annals ofU.S. history, have dispelled the doubts that prevailed in the late 1950's aboutthe vitality of the American economic system.

The lessons of this experience are worth reviewing. Such a review, togetherwith some suggestions for improvements in the formulation and implemen-tation of stabilization policies, is the subject of this chapter.

REALIZING THE ECONOMY'S POTENTIAL

How much the Nation's economy can produce—its supply capability—depends on the quantity and quality of its productive resources, includingmanpower, plant and equipment, and natural resources. The economy'saggregate demand is the total of spending for final output by all groups—consumers, businesses, government, and foreign buyers. When aggregate de-mand matches supply capability, resources are fully utilized and productionequals the economy's potential. If aggregate demand should fall short of sup-ply capability, part of the output that the economy is capable of turning out

6i323-166 0—69——5


would not be produced, and some resources would be wasted in idleness. Onthe other hand, excessive demand—too much spending in relation to poten-tial output—would generate inflationary pressures on prices and costs.

The vbasic task of fiscal and monetary policies is to help ensure a matchbetween demand and productive potential. These measures operate pri-marily by affecting the demand side of the balance. Government purchasesof goods and services are directly a part of total demand; increases ordecreases in such purchases change total spending in the same direction.In addition, other government expenditures indirectly influence total de-mand through their impact on private incomes. Social security benefits, forexample, are "transfer payments" which add to the purchasing power ofindividuals, and thus encourage additional private spending, especially forconsumer goods and services.

Taxes, on the other hand, reduce the ability and willingness of familiesand business firms to spend, by drawing purchasing power out of privatehands. By raising (or lowering) tax rates, the Federal Government can holddown (or add to) the flow of private spending.

Monetary policies affect private spending primarily by changing the costand availability of funds required to finance certain types of expenditures.If borrowing becomes expensive and difficult, expenditures for new homes,business machinery, and other things may be discouraged or postponed.

The economy's potential output is continually expanding as a resultof the growth of the labor force and increases in productivity. Economicpolicy must therefore aim at a moving target—helping demand to grow inpace so that an appropriate balance with potential is maintained. If demanddoes not expand or if it grows only sluggishly, men and machines becomeunemployed.

THE CHOICE OF A TARGET

Economic potential or capacity is not an absolute technical ceiling onoutput. It allows for some margin of unused human and physical resources.Even in the most extreme boom, there are always some people unemployed,some who could be attracted into the labor force, some who would be will-ing to "moonlight" or work overtime. Similarly, there are always someplants that could be operated more intensively or for longer hours. To operatethe economy at its utmost technical capacity would require demands far inexcess of supply in most markets, with resulting rampant inflation.

The relevant concept of capacity, therefore, must allow for somemargin of idle resources. The choice of a specific margin involves anappraisal of the behavior of prices and costs in a high-employment econ-omy. But this appraisal involves more than a technical evaluation. If poten-tial output is to be viewed as a target for policy, the choice of the ideallevel of utilization is a social judgment that requires a balancing of nationalgoals of high employment and reasonable price stability.

62


Balances of this sort are never simple. Both unemployment and inflationinvolve social and individual costs. The severe economic burdenborne by those who have no jobs is obvious. At the bottom of the1957-58 recession, there were more than five million workers out of jobs; andduring 1958 more than 14 million workers experienced one or more spellsof unemployment. Still others were forced to accept part-time employ-ment or were relegated to jobs beneath their capacity. Some, in resignation,abandoned the search for jobs. The loss of income was tremendous. Thecosts in frustration, despair, and bitterness cannot be measured.

Some of the costs of unemployment linger on because skills and suppliesof labor are impaired. When over-all unemployment is excessive, employershave little incentive to provide job training programs for the unskilled orto upgrade workers to better paying jobs. Labor unions become increasinglyconcerned about the job security of existing members and often take meas-ures that limit the supply of available labor for the longer run.

Although the burden of a slack economy falls most heavily on the unem-ployed, the loss of production associated with underutilized resources im-poses serious costs on nearly all groups. The incomes lost by the unemployedrepresent far less than half of the total shortfall of output and income. A slackeconomy sharply reduces the profits of large and small businesses and cutsgovernment tax revenues. Moreover, part of the burden falls on futuregenerations, because underutilization of capacity weakens investment in-centives, slowing the rate of capital accumulation and limiting future pro-ductivity gains.

It is difficult to balance the costs of inflation against those of an absoluteloss of output and employment, because they are quantitatively andqualitatively different. Inflation has highly arbitrary and inequitable effectson the distribution of income and wealth. It benefits debtors at the expense ofcreditors; it hurts persons, such as some pensioners, whose incomes and assetvalues are fixed in money terms, and benefits those whose incomes and assetvalues increase more than in proportion to the over-all rise in prices. Sincethe impact of inflation on the welfare of an individual depends on the wayin which both his income and the value of his wealth respond to the changein prices, its effects on broad classes of the population cannot be easily char-acterized. But there are many persons, in nearly all walks of life, whoexperience significant losses as a result of inflation. In general, financiallysophisticated persons, who foresee the consequences of rising prices, can takesteps to protect themselves, while the less sophisticated may lose.

There is also a danger that inflation can set in motion speculative be-havior that will cause further acceleration of price increases, with seriousconsequences for economic and social stability. There are even extreme exam-ples in history of the breakdown of financial and economic systems as a resultof galloping inflation.

Finally, inflation may have adverse consequences for our balance ofpayments. If prices rise more rapidly in the United States than in other


countries, our competitive position in world markets can be seriouslyundermined.

As a collective social decision, the choice of an employment objective canand should be the subject of continuous reexamination. Chapter 3 suggests anumber of structural measures that can help to lessen the conflict betweenhigh employment and price stability. When combined with an improvedperformance of fiscal and monetary policy along lines discussed in thischapter, these measures may make it possible to achieve progressively lowerrates of unemployment with reasonable price stability.

POTENTIAL OUTPUT

In light of the considerations discussed above, a 4-percent unemploymentrate was established as an "interim" target for national policy early inthe Kennedy Administration. In each of its last seven Annual Reports, theCouncil of Economic Advisers has based its estimates of potential outputon a 4-percent rate of unemployment. This Report continues to make useof this definition.

The resulting estimated path of potential output for the period 1955 to1968, together with the path of actual gross national product (GNP), isshown in Chart 5. Actual GNP was approximately equal to potential in1955, but fell gradually below potential in the following years. The gapwidened sharply in the 1957-58 recession, it failed to close fully in theensuing expansion, and it widened again in the recession of 1960-61. In thefirst quarter of 1961, the gap amounted to about $60 billion (in 1968 prices),and the unemployment rate was 6.8 percent.

From the first quarter of 1961 until the end of 1965, when the unemploy-ment rate reached 4 percent, actual output was consistently below potential.But actual output grew more rapidly than potential, catching up and finallyclosing the gap. Since then, actual output has exceeded the calculated po-tential most of the time, as the unemployment rate has been below 4 percent.

It is estimated that potential output grew about 3 / 2 percent a year fromthe mid-1950's to the early 1960's. After that, its growth appears to havespeeded up gradually; for the last few years, it is estimated at 4 percenta year.

Growth of potential output reflects the combined effects of expansion ofavailable man-hours of labor and rising output per man-hour.

Available Man-Hours

Sustained growth of the labor force has resulted in a substantial rise inpotentially available man-hours despite a gradually declining trend inaverage hours of work. Over the long run, the labor force has increasedroughly in line with the working-age population (16 years old and over).This tendency has continued in the 1960's. The rising participation ofwomen in the labor force has been roughly offset by the effects of a shift

e4


Chart 5

Gross National Product, Actual and Potential,and Unemployment Rate

BILLIONS OF DOLLARS (ratio scale)*

700

650

600

550

500

450

400

GROSS NATIONAL PRODUCTIN 1958 PRICES

-

yS

POTENTIAL.!/ y S /

— \^^^ y^

yS G A P / \

S^ / * " ^ ^ / ACTUAL

/ ^ /

1 1 1 1 1 1 1 1 1

—

-

-

1 1 1 1

1956 1958 1960 1962 1964 1966 1968

PERCENT PERCENT

12

-6

[ ] GNP GAP AS PERCENT OF POTENTIAL (Left scale)

•—• UNEMPLOYMENT RATE2/(Right scale)

J L J L J L J I I I I 01956 1958 1960 1962 1964 1966 1968

•SEASONALLY ADJUSTED ANNUAL RATES.

-I/TREND LINE OF 3'2% THROUGH MIDDLE OF 1955 TO 1962 IV, L\% FROM 1962 IV TO 1965 IV, AND 4%FROM 1965 IV TO 1968 IV.

I/UNEMPLOYMENT AS PERCENT OF CIVILIAN LABOR FORCE; SEASONALLY ADJUSTED,

SOURCES: DEPARTMENT OF COMMERCE, DEPARTMENT OF LABOR, AND COUNCIL OF ECONOMIC ADVISERS.


in the composition of the working-age population toward teenagers and olderpeople, who have relatively low participation rates.

Average hours worked per employed person have declined slowly overthe long run, reflecting the secular trend toward more holidays, longervacations, shortening of the workweek, and increasing participation ofpeople who want to work only part time.

Growth of the potential labor force has accelerated from 1*4 percent ayear in the early 19605s to a present rate of about 1% percent—reflecting theupsurge in births immediately after World War II. This has been partiallyoffset by the secular decline in hours worked of about l/± of 1 per-cent a year. The net result has been an acceleration of the growth of avail-able man-hours from 1 to 11/2 percent a year over the period.

Productivity

Many factors contribute to growth in output per man-hour—the pro-ductivity of labor. These include increases in the stock of productive capitaland improvements in its quality; better educated, better trained, and moreexperienced labor; and advances in technology, production methods, andmanagement techniques.

Since 1950, output per man-hour in the private economy has expandedat an average annual rate a little above 3 percent. For the entire economy,the calculated trend is somewhat lower, because improvements in the effi-ciency of Government workers are not measured statistically and are arbitrar-ily taken at zero. Thus the trend rate of increase in aggregate productivity—private and public—has been about 2*/2 percent a year. When added to thegrowth of available man-hours, this results in the 3 ]/2 percent annual growthof potential output for the late 1950's and the 4 percent current growth rate.

Actual and Potential GNP

Over the entire period from the recession trough in the first quarter of1961 to the fourth quarter of 1968, actual GNP rose by $288 billion (in 1968prices), reflecting the combined result of keeping up with the growth of po-tential GNP and of closing the gap. Potential GNP rose by $216 billion, anincrease of 33 percent. Thus the Nation is presently earning a huge addi-tional bonus of $72 billion a year in output as a result of having eliminateda great waste of idle resources.

The unemployment rate in the first quarter of 1961 stood at 6.8 percent.At current levels of the labor force, the reduction of this rate to the 3.4 per-cent that prevailed in the fourth quarter of 1968—below the 4 percent ratethat is used to define potential output—represents a gain in employment of2.7 million. On the basis of current average productivity, this number ofworkers can be credited with a $31 billion contribution to output (annualrate).

66


However, the reduction of 3.4 percentage points in the unemploymentrate accounts directly for only a portion of the gain in output associatedwith the closing of the gap. There were four other important factorsinvolved:

1. In a slack economy, firms are often reluctant to lay off certain types ofworkers, particularly foremen, semi-professionals, and the highly skilled.The result is considerable on-the-job underemployment which depressesmeasured labor productivity. As the economy moves back toward potential,productivity increases more rapidly than the long-term trend. Since early1961, output per man-hour has risen at an average annual rate of 3 percent,l/i of a percentage point more than trend.

2. Labor force participation has risen since 1961 as people who had notbeen looking for work responded to the greater availability of jobopportunities.

3. The increased pace of economic activity slowed the secular decline inthe length of the workweek.

4. The proportion of the labor force reporting involuntary part-timeemployment for economic reasons declined from 4.4 percent in early 1961to 2.1 percent in the fourth quarter of 1968.

Together, these four factors contributed an additional $41 billion to theoutput gain associated with the reduction of the unemployment rate.

The $72 billion of extra GNP resulting from reducing the unemploymentrate amounts to about 11 percent of potential output at the start of theperiod—that is, there was about a 3 percentage point bonus of annual pro-duction for each 1 percentage point reduction in the unemployment rate.

ECONOMIC GAINS OF THE EXPANSION

The chief over-all measures of the progress of the American economyduring the past 8 years are presented in Table 7. The benefits of economicexpansion have permeated nearly every corner of the economy and everyaspect of our national life. From the recession trough in early 1961 to theend of 1968, the expansion of output created more than 10^4 million jobs.This was enough to provide work for the 8J/2 million net increase in the laborforce while at the same time reducing the pool of unemployed workers bymore than two million.

Living standards have substantially increased. On an after-tax basis andafter adjusting for price increases, total disposable personal income percapita—the purchasing power of households—has risen by 33 per-cent since early 1961. Personal consumption expenditures per person haverisen in step.

Meanwhile, net financial assets of households—the excess of their financialassets over their debts—have grown from $700 billion at the end of 1960to an estimated $1,350 billion at the end of 1968.

67


TABLE 7.—Measures of economic activity during the

Series

Production:

Gross national product2

Personal consumption expendituresBusiness fixed investmentResidential structuresGovernment purchases

Federal. . .State and local

Industrial production

Income:

Disposable personal incomeCorporate profits after taxPer capita disposable personal income

Employment:

Civilian employmentNonagricultural payroll employment...

Unit or base

Billions of dollars,1958 prices.3

dodo.

. do-do

do._do

1957-59=100

Billions of dollars 3..do

Dollars, 1958 prices3.

Millions of personsdo

current

Amount

1961 1

482.6

316.244.920.997.6

52.245.4

103.7

354.824.4

1,871

65.753.5

1968 IV i

719.1

454.879.424.0

151.0

79.471.6

167.3

602.54 51.22,483

76.468.9

expansion

Percentage change1

Total

49.0

43.876.814.854.7

52.157.7

61.3

69.8109.832.7

16.328.8

Per year

5.3

4.87.61.85.8

5.66.1

6.4

7.110.43.7

2.03.3

1 Preliminary.2 Total includes change in business inventories and net exports of goods and services not shown separately.3 Annual rates.* 1968 IV not available; 1968 III used.

Note.—All data are seasonally adjusted.

Sources: Department of Commerce, Department of Labor, and Council of Economic Advisers.

Corporate profits have more than doubled during the past 8 years, bothbefore and after taxes. In addition to permitting sharply increased dividendpayments to stockholders, these rising profits have provided the financingfor a wholesale expansion and modernization of the Nation's productivecapacity. Indeed, business has increased its real stock of capital goods bymore than 40 percent since the end of 1960 and has progressively reducedthe average age of existing capital.

The decline in the over-all unemployment rate since early 1961 has beenaccompanied by equally impressive gains by specific categories of the laborforce, as shown in Chart 6. In particular, the unemployment rate for whiteadult males had fallen to 1.8 percent by the fourth quarter of 1968, a levellast achieved in 1953. For nonwhite adult males the decline in unemploy-ment has been especially dramatic—from an intolerable 11.6 percentrate in early 1961 to 3.9 percent in late 1968. This represents a signifi-cant narrowing of the differential between white and nonwhite unemploy-ment rates for men, from 6.4 percentage points at the beginning of theperiod to about 2 percentage points by the fourth quarter of 1968. Onthe other hand, there has been little progress in reducing the unemploymentrates of teenagers, especially nonwhites.

The progressive tightening of the over-all labor market during this periodhas made a substantial contribution to the elimination of employmentbarriers based on race and sex. While these are significant gains, the un-employment rates for some groups of workers still remain appall-ingly high. As Chapters 3 and 5 make clear, additional efforts are needed to

68


Chart 6

Unemployment Rates

PERCENT (Seasonally adjusted)!/

10 20 30

ALL CIVILIAN WORKERS

NONWH1TE MEN

WHITE WOMEN

NONWHITE WOMEN

WHITE TEENAGERS

NONWHITE TEENAGERS

10 20 30

I/PERCENT OF CIVILIAN LABOR FORCE IN EACH GROUP WHO ARE UNEMPLOYED,



assist such workers, who often suffer from such disadvantages as inadequatetraining and job discrimination.

The strong advance in the economy has also permitted rapid progressin many social fields. As discussed more fully in Chapter 5, the num-ber of Americans in poverty declined by 18 million during the past 8years. Rates of infant and maternal mortality have been reduced, school en-rollment and school completion rates have been raised, and millions of addi-tional young people have been able to attend college.

Many of these advances would have been impossible to achieve if risingtax revenues had not been generated by a vigorously expanding economy.Federal revenues expanded from $92/2 billion in fiscal 1960 to an estimated$186 billion in fiscal 1969, while State and local government revenuesmore than doubled. School construction, urban development, low-incomehousing, and many other programs at all levels of government have ex-panded correspondingly.

THE PROBLEM OF ECONOMIC FLUCTUATIONS

There is nothing inherent in the U.S. economy to ensure that totaldemand will grow consistently in pace with the economy's produc-tive potential. The sum total of millions of decentralized spending decisionsby households, businesses, and governments at all levels will not automaticallyand necessarily match potential output.

The historical record is marked and marred by a pattern of fluctuationsin which the economy often took two steps forward and then one step back.According to the National Bureau of Economic Research, the United Statessuffered 27 business-cycle contractions between 1854 and 1961, an average ofone every 4 years. At other times, especially in periods of active hostilities,sharp surges in demand have strained the economy's potential, generatinginflationary pressures.

SHORT-RUN INSTABILITY

All of the elements of demand have at times been sources of economic fluc-tuations. In the private sector, variations in the strength of demand havemost often been concentrated in investment—inventory accumulation, busi-ness outlays for fixed capital, and residential construction expenditures.

Elements of Demand

Inventory stocks serve primarily as a buffer to ensure a smooth andefficient flow of material supplies and production and to guard againstunforeseen increases in sales. Once inventory stock has been built upto a level adequate to cover a few months' production or sales, furtheraccumulation is necessary only insofar as increases in sales are anticipated.Thus inventory investment can be sustained only by a steady expansionof sales.

70


Even relatively small variations in the rate of growth of sales can havesizable effects on inventory investment. An unexpected slowdown in demand,for example, will initially leave unsold goods on the shelves. Businessmenwill wish to work off these excess inventories, and if they expect sales tocontinue at a slower pace, they will reduce their desired levels of futureinventories. Cutbacks in production will then follow. As illustrated by the$17j/2 billion drop in the annual rate of inventory accumulation in early1967, such fluctuations can be a major source of instability.

Businessmen invest in new plant and equipment to increase and modernizetheir productive capacity. The rate of current capacity utilization, antici-pated growth in demand, corporate cash flow, relative costs of capital andlabor, and borrowing costs all influence investment decisions. Re-sponses to changes in these factors are neither smooth nor readily pre-dictable; and because of the long leadtimes generally involved in the produc-tion of capital goods, such responses may be spread out over a considerableperiod of time. But fluctuations in capital spending have often been an im-portant source of instability. For example, real investment (constant prices)rose by 42 percent between 1963 and 1966, contributing to a strong expansionof aggregate demand, but then leveled out in 1967.

The third component of investment, homebuilding, is dependent uponfamily formation and income, with the availability of mortgage funds oftenacting as a major constraint, particularly in the short run. Because creditconditions generally tighten when the economy is expanding rapidly and easewhen growth slows down, residential construction has frequently movedopposite to the path of over-all economic activity, contracting when therest of the economy has been booming.

Consumer outlays normally follow the path of household incomes fairlyclosely. But such spending has also occasionally been an independent sourceof economic instability. Because consumption accounts for more than 60percent of GNP, relatively small shifts in consumer demand have large im-pacts. The increase of 1 percentage point in the personal saving rate thatoccurred between 1966 and 1967, for example, directly reduced consumerexpenditures by more than $5 billion. Fluctuations are particularly pro-nounced in consumer purchases of automobiles and other durable goods.

The volatility of expenditures that makes for economic instability is by nomeans confined to private demand. Sudden changes in Federal spendinghave, on occasion, seriously disrupted the stability of the economy. Indeed,the rapid expansion of defense expenditures early in the Korean war, therapid decline in 1953-54, and the upsurge of outlays for Vietnam in 1965-67 challenged economic policy as much as any change in the strength ofprivate demand during the past 20 years.

Multiplier Process

An autonomous increase in demand and production in any sector canbe expected to work through the economy by raising disposable income

71


and hence consumer expenditures, by encouraging greater inventory accum-ulation, and by creating incentives for additional investment in plant andequipment. This cumulative expansion is known as the "multiplier process."

The results of this multiplier process are affected by the amount of unusedresources available in the economy. At times of high unemployment andextensive unutilized capacity, an initial stimulus in demand is likely to bereflected primarily in a rise in real output with very little additional pressureon prices. But in an economy already operating at or above potential, whereadditional resources are not readily available, the main result may be up-ward pressure on prices with relatively little gain in real output.

Developments in financial markets may influence the magnitude of themultiplier. Increases in demands for goods and services will tend to enlargecredit demands. Unless monetary policy permits supplies of funds to expandcorrespondingly, interest rates will rise and credit will become less readilyavailable. In that event, some offsetting reduction is likely to take place inresidential construction and other credit-sensitive expenditures. Generallythis will be a partial offset, varying according to how much the supply ofcredit is permitted to expand.

AUTOMATIC STABILIZERS AND FISCAL DRAG

The potential sources of instability discussed above produced four reces-sions between 1948 and 1961. By prewar standards, these recessions wereall relatively short and mild, though nevertheless costly. They were limitedin intensity and duration by several elements built into the fiscal systemwhich serve to moderate economic instability in an automatic and passivefashion. These so-called "automatic fiscal stabilizers" operate to bolsterincome flows to households and business firms in periods of declining outputand, conversely, to slow down the growth of income in periods of expansion.

Almost every tax—including State and local taxes—responds in somedegree to changes in economic activity. Federal personal income tax col-lections are particularly responsive to such changes. They are the mostimportant automatic fiscal stabilizer, cushioning take-home pay againstfluctuations in the before-tax incomes of individuals. Another importantstabilizer is the automatic expansion of unemployment compensation bene-fits when unemployment increases. The corporate income tax serves toreduce fluctuations in after-tax profits and hence in business investmentoutlays and dividend payments.

By reducing the size of secondary effects on consumer and business out-lays, these stabilizers reduce the severity of economic fluctuations. With thepresent tax system and schedules of unemployment compensation benefits,a decline in GNP automatically produces a reduction in government re-ceipts and an increase in transfer payments. This limits the decline in privateafter-tax income—disposable personal income and retained corporateprofits—to about 65 cents for each $1 of reduction in GNP.

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During the postwar period, the automatic fiscal stabilizers have been amajor factor in reducing economic instability. They go to work at onceand avoid the delays inherent in discretionary action. But valuable as theseautomatic stabilizers are, they work only to limit—not prevent—swings ineconomic activity. For example, they become operative in a recession onlyafter the decline has begun and cannot, by themselves, generate a recovery.If the factors causing a downturn are strong and persistent, automatic sta-bilizers may not be powerful enough to prevent a long and severe recession.

The automatic stabilizers also operate without regard to the over-all levelof economic activity. If the economy has fallen substantially below the pathof potential output, the return to that path is made more difficult by theretarding effects of automatic fiscal stabilizers. The existence of the automaticstabilizers in such a situation means that a larger amount of fiscal or mone-tary stimulus—increased expenditures, reduced tax rates, or easing of creditconditions—will be required to achieve the needed increase in aggregatedemand.

In addition, automatic stabilizers work in a fashion that may inhibit thelong-run expansion of demand. As the economy moves along the potentialoutput path with reasonably stable prices, the Federal tax system generatesan increase in revenues of about 6 percent a year. Unless this revenue growthis offset by reductions in taxes or by increases in expenditures, it acts as a"fiscal drag" by siphoning off income. Actions by the private sector canconceivably offset this effect if businesses increase investment expendituresfaster than the growth of internal funds, or if households reduce their rateof saving. But under normal conditions, needed expansion may be prevented.

In interpreting the economic impact of fiscal policy, it is essential to dis-tinguish between the automatic changes in revenues and expenditures re-sulting from the operation of the automatic stabilizers, on the one hand, anddiscretionary changes brought about by changes in tax rates and expenditureprograms, on the other. In order to measure the impact of discretionary fiscalpolicy, it is useful to prepare estimates of revenues and expenditures at agiven—or "standardized"—level of income. When the difference betweenrevenues and expenditures is estimated at the level of potential output, theresult is sometimes referred to as the "full employment surplus."

The full employment surplus was a particularly enlightening measure offiscal policy in the early 1960's when the economy was far below its potential.Actual Federal budgets were then in deficit. But after taking account of thelarge shortfall in tax revenues associated with the gap between potential andactual output, there was a large full employment surplus. It meant that theeconomy could realize its potential only if private investment far exceededprivate saving. By that standard, discretionary fiscal policy was highlyrestrictive.

The vigorous and unbroken expansion of the last 8 years is in dramaticcontrast to the 30-month average duration of previous expansions. No longer

73


THE RECORD OF POLICY

is the performance of the American economy generally interpreted in termsof stages of the business cycle. No longer do we consider periodic recessionsonce every 3 or 4 years an inevitable fact of life.

The forces making for economic fluctuations have been contained throughthe active use of fiscal and monetary policies to sustain expansion. Therecord of these policy actions is briefly surveyed in this section. A detailedreview of the objectives and effects of monetary and fiscal actions from 1961through 1967 was presented in last year's Annual Report. The discussionbelow summarizes some particularly pertinent aspects of the magnitude andscope of these actions. Subsequent sections discuss some of the problems ofeconomic diagnosis and policy formulation in light of experience.

STRATEGY FOR EXPANSION: 1961 TO MID-1965

A series of deliberately stimulative fiscal measures was undertaken from1961 to mid-1965 to bring the economy up to full potential. The net mag-nitude of these actions is summarized in Table 8. The $37^4 billion totalof expansionary actions—expenditure increases and net tax reductions—more than offset the $30yi billion estimated normal growth of revenues.

Early actions on the expenditure side included an acceleration of ascheduled increase in social secu-rity benefits in 1961, liberalization of publicassistance payments, and a step-up in defense purchases as part of a general

TABLE 8.—Federal fiscal actions in three periods since fourth quarter 1960[Billions of dollars, seasonally adjusted annual rates]

Item1960 IV

to1965 11

1965 11to

1967 IV

1967 IVto

1968 IV i

Federal expenditure increases2

Defense purchases.Other purchasesOASDHI3 benefits-All other2 4 __.

Federal tax reductions 5_.

CorporatePersonalOASDHI s payroll taxes.Indirect business

25.6

3.47.45.09.8

12.0

5.5

48.9

25.42.8

10.010.7

- 6 . 0

Total expansionary actions8

Normal revenue growth at full employment-

Change in full employment surplus *

8.5- 3 . 0

1.0

37.6

30.5

- 7 . 0

- 8 . 52.5

42.9

27.0

-16.0

18.2

5.42.65.25.0

-13.0

-3.5-7.3-2.2

5.0

14.0

9.0

1 Preliminary.2 Includes adjustment in unemployment insurance benefits for change in unemployment rate.3 Old-age, survivors, disability, and hospital and related insurance (OASDHI).« Consists of transfers other than OASDHI, grants, interest, and subsidies.5 Minus sign indicates an increase in tax.6 Sum of expenditure increases and tax reductions.7 Normal revenue growth minus expansionary actions.Note.—Detail will not necessarily add to totals because of rounding.Sources: Department of Commerce and Council of Economic Advisers.

74


realignment of our military forces. On the revenue side, stimulus to privateinvestment was provided by a revision of depreciation guidelines and enact-ment of an investment tax credit of 7 percent on purchases of machineryand equipment in 1962. These measures were partially offset by increases insocial security taxes in 1962 and 1963.

The net stimulus from these actions worked in the right direction, butwas inadequate to the major task of reaching potential output. In the middleof 1962, business investment demand proved disappointingly weak, and thepace of economic expansion slowed. In the absence of Congressional actionon President Kennedy's tax reduction program in 1963, the budget againmoved toward an unduly restrictive position.

Tax reduction finally became a reality in the Revenue Act of 1964, whichwas President Johnson's first major legislative victory. This tax cut wasunprecedented in many respects. When fully effective in 1965, it added morethan $11 billion to private purchasing power—the largest stimulative fiscalaction ever undertaken in peacetime. It was enacted while the Federalbudget was in deficit and while expenditures were rising. It was designedexplicitly to sustain and invigorate expansion up to potential output ratherthan to combat an existing or imminent recession. This major action wasfollowed by the enactment of a phased reduction in excise taxes in the springof 1965.

Monetary policy also made an important contribution to the economicexpansion by consistently accommodating growing credit demands at re-markably stable interest rates. A vigorously expansionary monetary policywhich would have pushed interest rates to very low levels might, of course,have helped bring the economy to high employment more quickly. Butsuch a decline in interest rates could have caused increased capital outflowsfrom the United States, further impairing our balance-of-payments position.A series of actions by the Federal Reserve and the Treasury did actuallyraise U.S. short term interest rates during this period to bring them moreinto line with rates abroad. As shown in Chart 7, however, the upwardpressure on short term rates did not spill over into long term markets.

Decisions by the Federal Reserve at the beginning of 1962, in mid-1963,and in late 1964 to increase the maximum interest rates commercial bankscould pay on time and savings deposits gave banks greater freedom tocompete for funds. This enabled the banks to play an aggressive rolethroughout the period in tapping the market for liquid savings and re-channeling the funds into loans and investments.

FISCAL PROBLEMS OF DEFENSE AND HIGH EMPLOYMENT: 1965-68

By mid-1965, the unemployment rate had been reduced to about 4 / 2

percent, and the gap between actual and potential output was being nar-rowed gradually and steadily. At this point, defense orders and expenditures

75


Chart 7

Selected Interest Rates

PERCENT

8 -

—..A y

I n n i h i i i i l i i i n i l i i i i I i i i i i l M i n i

1960 1961 1962 1963 1964 1965 1966 1967 1968

NOTE.-DATA PLOTTED ARE QUARTERLY THROUGH 1965, MONTHLY THEREAFTER.SOURCES: FEDERAL HOUSING ADMINISTRATION, BOARD OF GOVERNORS OF THE FEDERAL RESERVE

SYSTEM, MOODY'S INVESTORS SERVICE, AND TREASURY DEPARTMENT.

began to build up rapidly, and the task of economic policy became con-siderably more complicated. The increase in defense activity reinforced astrong expansion of business spending on plant and equipment. The resultwas an excessively rapid growth of economic activity which generatedinflationary pressures.

Some fiscal action to restrain the economy was taken in 1966. A previ-ously enacted rise in payroll taxes of $6 billion took effect at the start ofthe year. This was followed by prompt enactment of a series of tax measuresproposed by the President in January—the reinstatement of some excisetaxes that had been reduced, and the introduction of a system of graduatedwithholding of individual income taxes and of accelerated payments of cor-porate taxes. But even with these actions, fiscal policy remained stronglyand inappropriately expansionary—in large part because defense spendingcontinued to outrun expectations. As the President has recently made clear


in reviewing the record, he discussed a recommended general rise in taxesprivately with business and Congressional leaders early in 1966 and becameconvinced that a tax increase could not be enacted. In the fall, added fiscalrestraint was provided by a temporary suspension of the investment taxcredit and cutbacks in nondefense spending.

In the absence of a full measure of timely fiscal restraint, an undue shareof the burden of dampening the excessive expansion fell on monetarypolicy. In December 1965, the Federal Reserve raised the discount rate from4 to 4J/2 percent and increased the maximum allowable interest rate on timedeposits of commercial banks. As interest rates on bank time deposits and inthe open market rose sharply, savings and loan associations and mutualsavings banks experienced a sharp drop in their deposit inflows and thushad to cut back their lending to the homebuilding sector. These develop-ments are described in more detail later in this chapter.

The result of these actions was a marked slowing in the growth of finaldemand. But homebuilding bore a disproportionate share of the re-strictive impact. Moreover, interest rates ratcheted sharply upward to thehighest levels in several generations, and a near-crisis atmosphere developedin financial markets in August 1966.

Because production continued to advance when final demand initiallyslowed, inventories increased rapidly late in 1966. The ensuing turn-aroundin inventory investment sharply accentuated an economic slowdown earlyin 1967, and the rate of price increase also slowed notably. Rising Govern-ment spending helped to maintain over-all expansion in the face of thelarge inventory adjustment in early 1967. And with easier credit stimulatinghomebuilding, strong expansionary forces reasserted themselves in the secondhalf of that year. In August, President Johnson urged enactment of a10-percent income tax surcharge. Delay in the passage of this measure in-tensified inflationary pressures and placed monetary policy in an awkwardposition as discussed in Chapter 1.

LESSONS OF THE POLICY RECORD

In most respects, the economy has performed extremely well in the last8 years, and vigorous use of fiscal and monetary policy has contributedto this good performance. But the record could have been better, and itprovides several lessons that should serve as guides for the future.

First, the fiscal and monetary policy actions that were taken deliberatelyto influence economic activity generally worked in the right direction witheffective results. Most of the shortcomings of the period were errors ofomission rather than commission. This applies both to the delays in takingadequate stimulative action in 1961-63 and to the more recent delays inachieving fiscal restraint.

Second, the experience of 1961-65 demonstrated that an effective fiscalpolicy to stimulate the economy could be carried out without adding un-necessarily to the size of the Federal budget. Since the aims of stabilization

77323-166 0—69 6


policy can be implemented either through tax changes or expenditurechanges, decisions regarding Federal expenditures can be properly based onthe desired allocation of resources between the public and private sectors.

Third, the record testifies to the effectiveness of a restrictive monetarypolicy in slowing down the economy, but also to its substantial undesirableside effects in bearing down on homebuilding and straining the financialsystem. The side effects point to the need for active fiscal policy to avoidplacing a disproportionate share of the burden of economic stabilizationon monetary policy.

The major shortcomings of economic policy in recent years can be tracedto difficulties in achieving prompt and appropriate adjustments in fiscalpolicy to offset variations in the strength of private demand and substantialchanges in defense spending. The next section discusses some improvementsthat might be made in the formulation and implementation of fiscal policy.

FORMULATING FISCAL POLICY

The focus of fiscal policy in the United States is the annual Federalbudget, which is presented in the Budget Message of the President in Jan-uary. This budget covers the fiscal year starting 6 months later, on July 1.Any analysis of fiscal policy must begin with a consideration of the way inwhich this budget is formulated in the Executive Branch and the proce-dures by which the Congress acts on the President's recommendations.

The requirements of economic stabilization are not always fully met,however, by the fiscal program incorporated in the annual budget, nomatter how carefully this program is formulated. Conditions may changeduring the course of the year in such a way as to call for a significantpolicy response after the annual budget has been planned. Some degreeof continuing flexibility is therefore necessary.

One important forward step in budgetary practice was taken when theFederal budget for the fiscal year 1969 was presented. In accord with rec-ommendations contained in the October 1967 Report of the President'sCommission on Budget Concepts, a single unified budget was adopted, whichcovers in a comprehensive way all of the financial activities of the FederalGovernment. This unified budget provides a much improved statistical basisfor formulating fiscal policy and evaluating its economic impact.

THE ROLE OF ECONOMIC FORECASTING

A certain amount of time is required for the economy to respond fully tochanges in fiscal—and monetary—policies, and the actions taken at onepoint in time have effects that are felt over a considerable subsequent period.Whether a policy action will help or impair economic performance dependson the state of the economy in the period following the action. It cannot bejudged adequately just by the facts of the economic situation at the time thedecision is taken. It must be assessed in light of a forecast.

78


The responsibility within the Administration for projections of Federalrevenues, expenditures, and economic activity rests jointly with the Depart-ment of the Treasury, the Bureau of the Budget, and the Council of Eco-nomic Advisers. Liaison is maintained with the Federal Reserve Board,which must also forecast economic activity as a basis for its decisions con-cerning monetary policy.

These projections are particularly important in formulating the annualbudget, and they are set forth regularly in the Council's Annual Report. Butthe evaluation of the economic situation and outlook must be kept up to dateduring the year. Thus the forecasts are revised for internal use as new infor-mation becomes available—indeed, the process of assessing the economicoutlook is essentially a continuous one. The projections are frequently sup-plemented by quantitative estimates of the probable effects of alternativepolicy actions which might be taken. Quantitative evaluations of the outlookhave been prepared for the President essentially on a quarterly scheduleever since 1961. This procedure assures a regular review by the President,with his chief economic and fiscal advisers, of the suitability of the budgetprogram for the needs of the economy.

The techniques used in preparing the Administration's economic projec-tions have changed considerably over the years; but in general they dependon a set of quantitative relationships among economic magnitudes over time.The relationships that are relied upon may be based on formal statisticalprocedures, subjective expert judgment, or survey data.

To a considerable extent, forecasting relies upon the timely availabilityof data relating to the economy's past performance which can be used as abasis for projecting its future behavior. Although there are still gaps ineconomic statistics, considerable progress has been made in recent years bythe Department of Commerce, the Department of Labor, and other FederalGovernment agencies in increasing the quantity and improving the qualityof statistical data available for assessing the performance of the economy.

Government agencies also collect valuable information on the anticipatedfuture behavior of some categories of expenditures. For example, the quar-terly survey of investment anticipations provides a useful indication of theprobable behavior of this highly volatile element of private demand. The Bu-reau of the Budget prepares up-to-date estimates of future Federal expendi-tures. Estimates of Federal tax revenues are prepared and kept current by theTreasury Department.

Forecasting was notably successful in gauging in advance the rapid ex-pansion of 1964 and the upsurge from late 1967 into 1968. On someoccasions, however, difficulties have been encountered. The strength of the1965-66 boom was not fully foreseen. Unexpected increases in the personalsaving rate intensified the slowdown in economic activity that occurred inthe first half of 1967. In the second half of 1968, private demand was

79


stronger than had been anticipated, as noted in Chapter 1. Nevertheless,the whole record makes clear that explicit quantitative projections aresuperior to extrapolations or hunches, which are the only alternative waysof guiding policy decisions that affect the future.

The need for greater precision in both forecasting and policy formulationhas increased greatly in recent years. Between 1961 and 1965, when actualoutput was consistently below potential, there was little threat of a seriousrise in prices, and the risks of excessive expansion were small. Thus emphasiscould be placed upon achieving a growth of actual output in excess of thatof potential in order to close the gap. Since 1965, however, as actual outputhas remained relatively close to potential, the need to anticipate and to off-set fluctuations in demand has correspondingly increased.

PREPARING THE ANNUAL BUDGET

The Federal budget should be formulated with two objectives in view.One is to provide the amount of fiscal stimulus or restraint needed to keepthe economy moving along the potential output path—or to move it backtoward that path if a departure has occurred. The other is to choose a levelof Federal expenditures that provides the appropriate allocation of nationalresources between private and public uses. In principle, these two objec-tives can be pursued independently, since fiscal stimulus or restraint can beprovided either by adjusting public expenditures or by adjusting tax ratesto influence private spending.

Determining the Extent of Expansionary Action

In developing a budget that is appropriate in terms of fiscal impact, itis necessary at the outset to prepare an economic forecast for a period ex-tending a year and a half beyond the time of budget presentation. The fore-cast covering the first 6 months of this period—for which the budget outlookhas already been fairly well determined—provides the point of departurefor viewing economic prospects in the ensuing fiscal year. From that pointon, forecasts of private demand are used to determine the appropriate degreeof fiscal stimulus or restraint to be provided by the budget.

This determination takes account of the growth of Federal revenues whenGNP grows in line with potential m a noninflationary environment at un-changed tax rates. When the economy is in reasonable balance on the pathof potential output and private demand is expected neither to weaken norto accelerate, the forecast will point to the need for expansionary fiscalaction sufficient to offset the fiscal drag exerted by normal revenue growth.

If the projection suggests that private demand will weaken or if theeconomy is operating below potential at the beginning of the year, ex-pansionary fiscal action will be called for in an amount more than sufficient

8o


to counteract the restraining effects of normal revenue growth. Conversely,if private demand is expected to strengthen or if the economy is operatingabove potential at the beginning of the year, an amount of expansionaryfiscal action less than sufficient to offset the restraining effects of normalrevenue growth will be required—or, in an extreme case, some additionalrestraint, beyond that provided by normal revenue growth, may be necessary.

The desired amount of expansionary (or restrictive) fiscal action, as in-dicated by the forecast, can be provided either by increasing (reducing)Government expenditures, by reducing (increasing) tax rates, or by somecombination of the two. A decision therefore has to be made whether toadjust taxes, or expenditures, or both. This decision involves difficult choicesabout the allocation of resources between public sector programs and theprivate sector.

Public Expenditures and Tax Changes

In order to make these choices intelligently, it is necessary to examinecarefully the proposed Federal expenditures having the highest priorities—whether they be for the expansion of existing programs or for new initia-tives—and judge whether the public needs that would be met by theseprograms are more or less urgent than the demands of the private sectorthat would be satisfied by tax reduction.

Allowance ordinarily has to be made for a virtually unavoidable increasein expenditures sufficient to keep pace with rising costs and rising workloadsunder existing Federal programs. The decision would, however, still haveto be made whether any needed restraint or additional stimulus over andabove that provided by this built-in expenditure growth should come fromchanges in tax rates or in expenditures.

All of this suggests that there is no reason to suppose that the proper allo-cation of resources between public sector and private sector activities wouldbe achieved by keeping tax rates constant and adjusting Federal expendi-tures to meet the requirements of fiscal policy. It should be perfectly normalfor the President to recommend a change in tax rates in his annual BudgetMessage. Such proposed changes have in fact been a feature of the last sevenannual budgets. Indeed, consideration of the appropriateness of tax ratesshould be a normal part of the budget program—if no change is beingproposed, the President should explain why existing tax rates are regardedas appropriate. If Government expenditures move ahead year by year ata rate about equal to the growth of tax revenues, changes in tax rates maynot need to be made very often. However, it would be a remarkablecoincidence if a steady growth in Government expenditures at that ratesimultaneously satisfied the needs of economic stabilization and the Nation'swishes over the long run with respect to the proper allocation of resourcesbetween the public and private sectors of the economy.

Sharp increases in defense spending pose special issues relating to the

81


allocation of resources between Federal nondef ense programs and the privatesector. A sharp increase in defense expenditures normally requires acompensating fiscal adjustment to prevent the budget from becomingundesirably stimulative. In principle, any needed adjustment can be accom-plished either by increases in tax rates or reductions in Federal nondefenseoutlays. For a number of reasons, however, increases in tax rates shouldnormally be the main instrument. First, sharp slashes in Federal nondefenseprograms are simply not administratively feasible in the short run. Second,social priorities for the nonmilitary public sector would be violated if theseprograms carried the major burden of fiscal adjustment. The overhead coston society of increased defense requirements should be expected to be borneprimarily by the 80 percent of GNP that represents private uses of output.It seems evident that the roughly 10 percent of GNP which Federal non-defense spending represents should not be expected to carry the major partof the load. This seems particularly compelling in a Nation which is affluentin general and yet beset by serious social problems. While it is entirelyappropriate for some types of nondefense spending to be cut and stretchedout in order to ease the fiscal problem, there are strong grounds for avoid-ing reductions in social programs that deal with the urgent problems ofpoverty and urban blight.

CONGRESSIONAL PROCEDURES

If fiscal policy, as embodied in the annual budget, is to make its maxi-mum contribution to economic stabilization, some changes in Congressionalprocedures for reviewing and determining the budget would be desirable.

General Budget Review

One important problem lies in existing Congressional procedures for de-termining budget authority and hence Federal expenditures. In both theHouse and Senate, budget authority is essentially controlled by 13 separateappropriations subcommittees which determine budget authority for in-dividual agencies and programs. Their individual decisions can lead to a totalof budget authority and outlays that is not controlled nor determnied in acoordinated way. The Legislative Reorganization Act of 1946 called for aconcurrent resolution on an expenditure total in advance of appropriations,but this limitation was not integrated into the appropriations procedures.

Congress needs new machinery which ensures that the actions taken onauthorizations and outlays for particular programs will add up to a totalthat achieves an appropriate allocation of resources between Federal pro-grams and the private sector of the economy. This machinery should focusspecific attention on the level of taxes required in conjunction with anygiven total of outlays in order to achieve an appropriate fiscal policy. Inmaking its judgments on these matters, the Congress would presumably beginwith the Administration's expenditure and tax recommendations as con-

82


tained in the January Budget. Then, assuming no major disagreement with,or change in, the basic economic outlook, any proposals to change the ex-penditure total substantially from that recommended in the Budget shouldbe accompanied by a corresponding proposal for adjusting taxes. If suchmachinery could be satisfactorily introduced, it would help produce a morecoordinated Congressional decision on both expenditures and taxes.

Procedures for Tax Changes

Procedures for a general review of the economy's fiscal needs alonglines suggested above should expedite whatever specific action on taxesmight be needed for fiscal policy purposes. In most circumstances, normalCongressional procedures for enacting the needed tax legislation wouldprobably be satisfactory—especially if the Congress were to agree in advanceon a form of tax adjustment that would be judged appropriate for this pur-pose. A proportional change in individual and corporate income taxes—like the current surcharge—might be a suitable form of adjustment.

However, the experience of the 1960's, including the costly delays inthe passage of the 1964 tax cut and the 1968 tax surcharge, suggests thedesirability of some other standby arrangement for obtaining prompt ad-justments in tax rates to achieve fiscal policy objectives in case of a delayin reaching a decision through normal Congressional procedures. As notedin Chapter 1, the Administration has requested that the Congress con-sider giving the President discretionary authority, subject to Congres-sional veto, to remove the current surcharge entirely or partially if war-ranted by developments. A more permanent arrangement to provide thedesirable flexibility could take various forms, including:

1. Presidential discretion to propose temporary changes in personal in-come tax rates within certain specified limits—such as 5 percent in eitherdirection—subject to veto by the Congress within (say) 30 days. This year'sBudget Message contains such a proposal

2. A streamlined Congressional procedure for ensuring a prompt vote onPresidential proposals for changes in tax rates within certain specified limits.This would not shift any of the traditional powers of Congress to the Presi-dent; the Congress would simply change its own rules.

Since changes in tax rates required for fiscal policy objectives wouldprobably take the form of simple modifications of the basic schedule ofrates, it would be necessary also to ensure opportunities for a thoroughgoingreview of the over-all structure of the revenue system, including the tax baseand rates. A structural review of rates would be especially appropriate ifrates should drift downward (or upward) consistently for a period of severalyears as a result of fiscal adjustments. It is important, however, that theissues of tax reform be treated and considered separately from the annualtax decisions related to fiscal policy.

83


ADJUSTING TO NEW DEVELOPMENTS

Under the procedures outlined above, it would surely take several monthsfor full legislative response to the President's January Budget. During thatperiod, both the Congress and the Administration would be alert to anymajor unanticipated developments in the strength of private demand, inFederal defense needs, and in the desired mix of fiscal and monetary policy.Any such developments could and should be reflected in the implementationof the budget program.

If the annual budget is carefully formulated and implemented, the needfor a significant subsequent revision of the budget program later in theyear should be the exception rather than the rule. Stabilization requirementscould largely be met by reliance on automatic stabilizers and monetarypolicy.

Much of the success of these stabilization efforts would depend upon theFederal Reserve's flexibility in adjusting monetary policy to circumstancesas they unfold. In the development of the annual budget, there should beclose consultation and coordination with the monetary authorities. A tenta-tive projection of monetary and credit conditions should be prepared aspart of the forecast underlying annual budget decisions. The fiscalprogram should minimize the risk of putting an excessive share of the burdenof economic stabilization on monetary policy, as happened in 1966. Butmonetary policy should not be bound by the projections made at budgettime—if conditions change, it should be adjusted accordingly. Indeed, givena reasonably appropriate fiscal policy, the further adjustments needed tokeep the economy reasonably close to potential output should normally bewithin the capability of the Federal Reserve.

It should be recognized, however, that major unforeseen developmentsmay significantly modify the path of demand anticipated in the annualbudget. As mentioned earlier, private demand has on occasion exhibitedsubstantial unexpected strength or weakness.

A major problem in recent years has stemmed from the uncertain path ofincreases in defense spending during the Vietnam buildup. While it is to behoped that such a military buildup will not again be necessary, there can beno assurance in an insecure world that this will be the case. Accordingly, it isessential to be prepared to deal with such contingencies. Moreover, therecould be similar and equally challenging problems of gauging the magnitudeand timing of a demobilization—when peace is established. A special reportto the President discussing the challenges and opportunities that will con-front policymakers when peace comes in Vietnam is included in this volume.

The path of defense orders and outlays is inherently difficult to predict ina period of military flux. Through intensified efforts of the Departmentof Defense, considerable progress has nevertheless been made in providingan improved flow of information relating to both the current and prospectiveeconomic impact of defense spending. Some of this information is nowbeing made public by the Bureau of the Census in a monthly digest entitled


Defense Indicators. Further efforts are needed, together with a full aware-ness of the importance of accurate information, especially at critical turningpoints in the trend of defense spending.

SOME ISSUES OF MONETARY POLICY

The record of the past 8 years demonstrates that flexible, discretionarymonetary policy can make an effective contribution to economic stabilization.The economy's gradual return to full productive potential in the early 1960'swas partly attributable to a monetary policy which kept ample supplies ofcredit readily available at generally stable interest rates. And in early 1967,the prompt recovery of homebuilding after the 1966 slowdown was the directresult of timely and aggressive easing of credit conditions by the FederalReserve.

The most dramatic demonstration of the effectiveness of monetary policycame in 1966, however, when a dangerously inflationary situation was curbedprimarily by a drastic application of monetary restraint. Credit-financedexpenditures at the end of that year appear to have been as much as $8billion below what they might have been had monetary policy maintainedthe accommodative posture of the preceding 5 years. And there were sub-stantial further "multiplier" effects on GNP as these initial impacts reducedincome and consumption spending.

THE CONDUCT OF MONETARY POLICY

The primary guides for monetary policy are the various broad measuresof economic performance, including the growth rate of total output, therelation of actual to potential ouput, employment and unemployment, thebehavior of prices, and the Nation's balance-of-payments position. Extensiveresearch, together with the experience of the last few years, has increasedour knowledge of the complex process by which monetary policy influencesthese measures. While there are still major gaps in our knowledge of theprecise chain of causation, some conclusions seem well established.

Like fiscal policy, monetary policy affects economic activity only aftersome lag. Thus actions by the Federal Reserve must be forward-looking. Inconsidering the prospects ahead, however, an assessment must be made ofboth the expected behavior of the private sector and of the likely futurecourse of fiscal policy. As noted earlier, the inherent flexibility in the ad-ministration of monetary policy permits frequent policy adjustments to takeaccount of unexpected developments in either the private or the publicsector.

Sectoral Impacts

Monetary policy can affect spending through a number of channels. Tosome extent it works by changing the terms of lending, including interestrates, maturities of loans, downpayments, and the like, in such a way as toencourage or discourage expenditures on goods financed by credit. There

85


may also be market imperfections or legal constraints and institutional rigid-ities that change the "availability" of loans as monetary conditions change—that is, make it easier or more difficult for borrowers to obtain credit atgiven terms of lending. Under some circumstances, purchasers of goods andservices may finance their expenditures by liquidating financial assets, andchanges in the yields on these assets produced by a change in monetarypolicy may affect their willingness to engage in such transactions. Changesin monetary policy may also, on occasion, change the expectations of bor-rowers, lenders, and spenders in ways that affect economic conditions, al-though these expectational effects are rather complex and dependent uponthe conditions existing at the time policy is changed.

Monetary policy affects some types of expenditures more than others. Theextent of the impact depends not only on the economic characteristics ofthe activity being financed but, in many instances, on the channels throughwhich financing is obtained and the legal and institutional arrangementssurrounding the financing procedures.

Residential Construction. The sector of the economy most affected bymonetary policy is residential construction. Although the demand for hous-ing—and for mortgage credit—does not appear to be especially responsive tomortgage interest rates, the supply of mortgage funds is quite sensitive toseveral interest rate relationships.

The experience of 1966 clearly demonstrated how rising interest rates cansharply affect flows of deposits to banks and other thrift institutions andthereby severely limit their ability to make new mortgage loans. In the firsthalf of that year, the net deposit gain at savings and loan associations andmutual savings banks was only half as large as in the preceding 6 months.These institutions could not afford to raise the rates paid on savings capitalto compete with the higher rates available to savers at banks and elsewherebecause of their earnings situation—with their assets concentrated in mort-gages that earned only the relatively low rates of return characteristic ofseveral years earlier. Commercial banks experienced a similarly sharp slow-ing in growth of time deposits in the second half of the year, as the FederalReserve's Regulation Q prevented them from competing effectively forliquid funds. This forced banks to make across-the-board cuts in lendingoperations.

In addition, life insurance companies had a large portion of their loan-able funds usurped by demands for policy loans, which individuals found at-tractive because of relatively low cost. High-yielding corporate securities alsoproved an attractive alternative for some institutional investments that mightotherwise have gone into mortgages.

Table 9 provides some indication of the extent of these various in-fluences. As can be seen, savings and loan associations and mutual savingsbanks together supplied less than 10 percent of total funds borrowed in 1966,well below their 22 percent share in the preceding 5 years. This was the main

86


TABLE 9.—Net funds raised by nonfinancial sectors, 1961-68

Nonfinancial sector

Total funds raised (billions of dollars)

Percent of total raised by:

Private domestic nonfinancial sectors

State and local governments .Nonfinancial businessHouseholds

Mortgages __Other

U.S. Government... _._

Rest of world.

Percent of total supplied by:

Commercial banks.Nonbank financial institutions _.

Savings and loan associations and mutual savings banksOther

Federal Reserve and U.S. GovernmentState and local governmentsForeign lendersNonfinancial businessHouseholds, less net security credit

1961-65average

59.2

84.5

10.834.639.0

25.513.5

10.6

5.1

35.143.6

22.121.5

10.16.81.22.7.5

1966

69.9

88.7

9.748.130.9

18.612.3

9.0

2.1

24.732.2

9.922.3

16.38.9

- 2 . 04.6

15.3

1967

83.1

79.9

12.644.822.5

13.78.8

15.3

4.8

43.639.0

19.519.5

11.29.43.9.5

- 7 . 5

19681

97.1

80.4

l i .737.031.7

17.114.6

16.7

2.9

39.129.7

14.015.7

12.97.7

- . 35.15.8

i Preliminary.

Note.—Detail will not necessarily add to totals because of rounding.

Source: Board of Governors of the Federal Reserve System.

factor limiting the availability of household mortgage loans. The effect onhomebuilding was quick and dramatic, as the seasonally adjusted volume ofnew housing units started fell by nearly half between December 1965 andOctober 1966.

In 1967, as interest rates in the open market retreated from their 1966highs, the thrift institutions were able to regain their competitive positionin the savings market. A good part of their funds was fairly quickly channeledinto the mortgage market. By fall, housing starts had recovered nearlyto the level of late 1965.

As noted in Chapter 1, many factors—including several significant insti-tutional reforms, sharply improved liquidity positions, and the widespreadexpectation that monetary restraint was only temporary pending passage ofthe tax bill—helped to moderate the adverse effects of renewed monetaryrestraint on mortgage lending in 1968. But the thrift institutions again experi-enced some slowing of deposit inflows when market interest rates rose to newheights, and mutual savings banks switched a good part of their invest-ments away from the mortgage market to high-yielding corporate bonds.

State and Local Governments. State and local governments also felt theeffects of monetary restraint in 1966. These governments cut back or post-poned more than $2.9 billion, or nearly 25 percent, of their planned bondissues that year.

It is difficult to determine precisely what caused these postponements. In

87


cases involving more than half the dollar volume, the reasons given relatedto the prevailing high level of interest rates. In some instances, the interestcosts simply exceeded the legal ceiling governments were permitted to payfor borrowed funds. In other cases, finance officers decided to delay bondissues for a few months in the expectation that interest rates would decline.

This sizable cutback in borrowings had a relatively small effect on Stateand local government expenditures. Larger governments apparently wereable to continue most of their projects about as scheduled by drawing downliquid assets or borrowing temporarily at short term. Smaller governmentalunits, however, cut their contract awards by a total estimated at more than$400 million.

Because of the problems State and local governments often face in raisingfunds, the Administration is proposing the establishment of an UrbanDevelopment Bank, which could borrow economically in the open marketand then lend in the amounts needed to individual local governments.The Bank could lend at federally subsidized interest rates, with the FederalGovernment recovering the cost of the subsidy through taxation of the in-terest income earned by holders of the Bank's securities.

Business and Consumer Spending. The 1966 credit squeeze undoubtedlyalso had some effects on business and consumer spending, though theamount of impact is not easily determinable. Most theoretical and empiricalstudies find that business firms in some way balance the cost of borrowedcapital against the expected returns from their capital projects. Some smallfirms may also simply not be able to obtain funds during tight money peri-ods. In 1966, bank lending to business did slow sharply during the secondhalf of the year. Many of the larger firms shifted their demands to the openmarket—and paid record high interest rates for their funds—but some ofthe smaller ones probably were forced to postpone their projects.

Household spending on durable goods—particularly automobiles—hasbeen shown to be affected by changes in the cost and availability of con-sumer credit, as reflected in the interest rate, maturity, downpayment, andother terms. While it is difficult to sort out cause and effect, householdsborrowed only two-thirds as much through consumer credit in the secondhalf of 1966 as in the preceding half year. Capital gains or losses on assetholdings accompanying changes in yields may also induce consumers tospend more or less on goods and services.

Active and Passive Elements

Monetary policy, like fiscal policy, has what might be termed active andpassive components. Recognition of this distinction played an important rolein formulating the accommodative policy of the early 1960's. In the 1950's,economic expansion had generally been accompanied by rising interest rates,which tended to produce an automatic stabilizing effect somewhat


similar to the fiscal drag of the Federal tax system discussed earlier. Thelarge amounts of underutilized resources available in the early 1960'smade such restraint inappropriate, and credit was expanded sufficientlyto prevent it from occurring.

It is especially important to distinguish between these elements in mone-tary policy at cyclical turning points. If, for example, private demandweakens and causes a decline in economic activity, interest rates will gener-ally fall as credit demands slacken, even without any positive action by theFederal Reserve to push rates down. This induced fall in interest rates canhelp to check the decline in economic activity but may not, by itself,induce recovery. Similarly, as the economy rises above potential, the in-duced rise in interest rates may only moderate the expansion but may notbring activity back into line with capacity.

An active monetary policy during such periods requires positive effortby the Federal Reserve to produce further changes in interest rates andin availability of credit beyond those that would occur automatically.Since expectational responses may either accentuate or moderate theeffects of the initial action, it is sometimes difficult to know in advanceprecisely how much of a policy change is needed. But the main pointis clear—at such turning points, interest rate movements alone are notlikely to provide an accurate reflection of the contribution of monetary policyto economic stabilization. Careful attention must also be paid to credit flows,particularly those to the private sector of the economy.

MONETARY POLICY AND THE MONEY SUPPLY

Examination of the linkages between monetary policy and various cate-gories of expenditures suggests that, in the formulation of monetary policy,careful attention should be paid to interest rates and credit availability asinfluenced by and associated with the flows of deposits and credit to differenttypes of financial institutions and spending units. Among the financial flowsgenerally considered to be relevant are: the total of funds raised by nonfi-nancial sectors of the economy^ the credit supplied by commercial banks,the net amount of new mortgage credit, the net change in the public'sholdings of liquid assets, changes in time deposits at banks and other thriftinstitutions, and changes in the money supply. Some consideration shouldbe given to all of these financial flows as well as to related interest rates informulating any comprehensive policy program or analysis of financialconditions.

Much public attention has recently been focused on an alternative view,however, emphasizing the money supply as the most important—sometimes the only—link between monetary policy and economic activity.This emphasis has often been accompanied by the suggestion that the Fed-eral Reserve can best contribute to economic stabilization by maintaininggrowth in the stock of money at a particular rate—or somewhat less rigidly,

89


by keeping variations in the rate of growth of the money stock within a fairlynarrow band.

There are, of course, numerous variants of the money view of monetarypolicy. The discussion below focuses only on the simple version that hascaptured most of the public attention.

Money and Interest Rates

In a purely theoretical world, abstracting from institutional rigidities thatexist in our financial system and assuming that relationships among financialvariables were unvarying and predictable, it would make little differencewhether monetary policy was formulated in terms of interest rates or themoney supply. The two variables are inversely related, and the alternativeapproaches would represent nothing more than different paths to preciselythe same result. The monetary authorities could seek to control the moneystock, with interest rates allowed to take on whatever values happen to re-sult. Or alternatively, they could focus on achieving the interest rates thatwould facilitate the credit flows needed to finance the desired level of ac-tivity, allowing the quantity of money to be whatever it had to be.

But financial rigidities do exist that often distort flows of credit in re-sponse to swings in interest rates. And financial relationships have changedsteadily and significantly. Just since 1961, several important new financial in-struments have been introduced and developed, including negotiable timecertificates of deposit and Euro-dollar deposits. Attitudes of both investorsand lenders have also undergone marked shifts, with sharp variations in thepublic's demand for liquidity superimposed on an underlying trend towardgreater sensitivity to interest rates.

There is, to be sure, enough of a link between money and interestrates at any given time to make it impossible for the Federal Reserveto regulate the two independently. But this linkage is hardly simple, andit varies considerably and unpredictably over time. The choice betweencontrolling the stock of money solely and focusing interest rates, credit avail-ability, and a number of credit flows can therefore make a difference. Thischoice should be based on a judgment—supported insofar as possible byempirical and analytical evidence—as to whether it is money holdings alonethat influence the decisions of various categories of spending units.

Money and Asset Portfolios

The Federal Reserve conducts monetary policy primarily by ex-panding and contracting the supply of cash reserves available to the bank-ing system. Such actions seek to induce an expansion or contractionin loans and investments at financial institutions, with correspond-ing changes in the public's holdings of currency and deposits of variouskinds. The proportions in which the public chooses to hold alternative

9O


types of financial assets depend upon a complex set of preferences, which,in turn, depend upon interest rate relationships.

The process of expansion and contraction of money and credit stemmingfrom Federal Reserve actions is fairly complex. But one aspect of it shouldbe clearly understood: The money so created is not something given to thepublic for nothing as if it fell from heaven—that is, it is not a net additionto the public's wealth or net worth. There can be an immediate change inpublic wealth, but only to the extent that changes in interest rates generatecapital gains or losses on existing assets.

Any change in the money stock is associated with a change in the composi-tion of the public's balance sheet, as people and institutions are induced toexchange—at a price—one asset for another or to increase (or decrease) boththeir assets and their liabilities by equal amounts. Since all the items in thepublic's balance sheet might be changed as a result of these compositionalshifts, the change in the public's liquidity is not likely to be summarized ade-quately in terms of any single category of financial assets.

It is, of course, possible that decisions to spend on goods and services areaffected more by the presence of one type of financial asset than another ina spending unit's portfolio. But there is only scattered evidence of such be-havior in various sectoral studies that have been undertaken to analyze thefactors affecting the spending decisions of consumers, businesses, or State andlocal governments. Indeed, to the extent these studies do find spending de-cisions systematically affected by financial variables, it is often throughchanges in interest rates and availability of credit.

Money and Income and a Monetary Rule

One problem with the money supply as a guide to monetary policy is thatthere is no agreement concerning the appropriate definition of "money."One definition includes the total of currency outside commercial banks plusprivately held demand deposits. A second also includes time deposits at com-mercial banks, and even more inclusive alternatives are sometimes used.On the other hand, there is a more limited definition, sometimes called "high-powered money" or "monetary base," which includes currency in circula-tion and member-bank reserve balances at the Federal Reserve banks.

These different concepts of money do not always move in parallel withone another—even over fairly extended periods. Thus assertions that themoney supply is expanding rapidly or slowly often depend critically on whichdefinition is employed. In the first half of 1968, for example, there was asharp acceleration in the growth of currency plus demand deposits, butgrowth of this total plus time deposits slowed considerably.

On the other hand, relationships between movements in GNP and anyof the money concepts have been close enough on the average—especiallywhen processed through complex lags and other sophisticated statisticaltechniques—to be difficult to pass off lightly.

91


There is, of course, good reason to expect some fairly close relationship be-tween money and income. This would be true even in a completely abstractsituation in which it was assumed that the money supply per se had no directinfluence on GNP, and that monetary policy worked entirely through interestrates. Since interest rates and the money supply are inversely related, any risein GNP produced by a reduction in interest rates and increased credit avail-ability would be accompanied by at least some increase in the money supply.

The relationship also exists in a sort of "reverse causation" form—that is,as income goes up so does the demand for money, which the Federal Reservethen accommodates by allowing an increase in the actual money stock. Thisis precisely what happened during the 1961-65 period of accommodativepolicy, and it is always present to some extent as the Federal Reserve actsto meet the economy's changing credit needs. The problem of sorting outthe extent of causation in the two directions still challenges economicresearchers.

A one-sided interpretation of these relationships is sometimes used tosupport the suggestion that the Federal Reserve conduct policy on the basisof some fixed, predetermined guideline for growth of the money supply(however defined). Given the complex role of interest rates in affectingvarious demand categories and the likely variations in so many other factors,any such simple policy guide could prove to be quite unreliable.

The experience of the past several years illustrates the kinds of difficultiesthat might be encountered in using the money supply (defined here as cur-rency plus demand deposits) as the exclusive guide for monetary policy. Asdescribed previously, high interest rates in 1966 began affecting the nonbankthrift institutions, the mortgage market, and the homebuilding industrysoon after the start of the year. But during the first 4 months of that year,the money supply grew at an annual rate of nearly 6/2 percent, well abovethe long-term trend. Later that year, the financial situation of major mort-gage lenders improved somewhat and housing eventually rebounded despitethe fact that growth of money supply plus bank time deposits was proceedingat only a snail's pace.

Growth of the money supply in the second quarter of 1968 was at anannual rate of 9 percent. The reasons for this acceleration—to a ratealmost double the growth in the preceding quarter—are not fully apparent.The Federal Reserve could have resisted this sizable increase in the demandfor money more than it did, but interest rates in the open market wouldthen have risen well above the peaks that were in fact reached in May.Whether still higher rates would have been desirable is another issue, whichcannot be settled merely by citing the rapid growth of the money supply.

These illustrations suggest that any simple rigid rule related to thegrowth of the money supply (however defined) can unduly confineFederal Reserve policy. In formulating monetary policy, the Federal Re-serve must be able to take account of all types of financial relationships cur-rently prevailing and in prospect and be able to respond flexibly as changing

92


economic needs arise. In deciding on such responses, especially careful con-sideration must be given to likely changes in interest rates and credit avail-ability, in view of the effects of these factors on particular sectors of theeconomy—especially the homebuilding industry.

LOOKING AHEAD

In the future as in the past 8 years, the maintenance of full prosperitydeserves high priority among the Nation's goals because it contributes somuch to so many of our other national objectives. Job opportunities providethe stepping stones out of poverty for many of the disadvantaged. AsChapter 5 makes clear, efforts to train the disadvantaged can hardly succeedin a sluggish economy. For those who have already obtained some minimumstandard of living, prosperity offers a ladder to higher standards of comfort,civilization, and security. For those high on the income scale, prosperityprovides the incentives and the funds for the growth of capital to strengthenour productive performance in the future. For the public sector, prosperityoffers the revenues that can help to repair the accumulated decay of ourcities, purify the environment, and improve education and transportationsystems.

Between 1968 and 1975, our civilian labor force will increase by 10J4million persons, or an average of ll/2 million a year. If the new entrantsare employed and productivity continues to grow at the recent trend rate,GNP will amount to about $1,150 billion (in 1968 prices) in 1975.

The experience of the past 8 years should be of considerable benefit in theformulation of economic policies to ensure continued movement along thepotential output path to reach this level of GNP in 1975. Economic policy-makers can reasonably hope to maintain sustained growth in line with po-tential and to avoid the bumps of the business cycle and the unconscionablewaste of a slack economy.

A dynamic society should not, however, be satisfied merely with con-tinuing along the present path of potential. Faster growth can be achievedif ways can be found to accelerate the growth of national productivity.Policies that aim at stimulating capital formation, education, and techno-logical advance can play an important role. Additional gains in output andstandards of living for all our citizens can be realized if ways can be foundto achieve lower levels of unemployment and reasonably stable prices simul-taneously. Chapter 3 discusses a number of measures that can help to makehigh employment and price stability more compatible.

93323-166 <


Chapter 3

Price Stability in a High Employment Economy

THE REMARKABLE ACHIEVEMENT of prosperity as the normalstate of the American economy has been recorded in Chapter 2. Recent

price performance has been far less satisfactory.Since 1965, prices have been rising too rapidly. The history of both the

United States and other industrial nations shows that high employment isgenerally accompanied by inflationary tendencies, and that when prices arereasonably stable, this is at the cost of too many idle men and idle machines.

The record of the past poses the critical challenge of the years ahead. Rec-onciling prosperity at high employment with price stability is the Nation'smost important unsolved problem of over-all economic performance.Though the United States has done better than most industrial countries, itsrecord is far from adequate. That record can and should be improved bymeasures discussed in this chapter.

PRICES, WAGES, AND EMPLOYMENT

The difficulties of combining price stability and high employment in thepast 15 years are evident in Chart 8. It reveals a fairly close associationof more rapid price increases with lower rates of unemployment. In 1956-57and from 1966 to 1968, when the unemployment rate was between 3.6 and4.3 percent, price increases ranged between 3.1 and 4.1 percent. In contrast,between 1958 and 1964 the unemployment rate consistently exceeded 5percent, and price increases were uniformly less than 2 percent.

The historical relationship has been neither mechanical nor precise. Insome periods, the over-all price level has been affected by special and erraticfactors such as crop failures, shifts in foreign demand, or bottlenecks arisingfrom a spurt of demand in one sector of the economy. Moreover the priceperformance of any year is influenced by cost developments arising fromconditions in prior years.

Still, upward pressures on prices and wages are likely to be intensifiedwhen the economy is operating at high utilization of manpower and capital.In a slack economy, rising prices are rarely a problem. Even when demandbegins to expand strongly, additional output is readily provided by increasesin employment and fuller use of industrial capacity. If the expansion persists

94


Chart 8

Price Performance and Unemployment

4 -

Xu

sI 3h

o

y 9 -a: ^

O

i

1

• 1968

#1966

-

-

1

• 1956

• 1957

• 1955

• 1965

1

1964

1

• 1960

• 1959

• 1963

#1962

I

-

• 1958

• 1961

13 4 5 6 7

UNEMPLOYMENT RATE-PERCENTl/

J/CHANGE DURING YEAR, CALCULATED FROM END OF YEAR DEFLATORS (DERIVED BYAVERAGING FOURTH QUARTER OF A GIVEN YEAR AND FIRST QUARTER OF SUBSEQUENTYEAR).

2/AVERAGE FOR THE YEAR.

SOURCES: DEPARTMENT OF COMMERCE, DEPARTMENT OF LABOR, AND COUNCIL OFECONOMIC ADVISERS.

at a rate exceeding the growth of the economy's productive capacity, how-ever, demand will begin to press upon available capacity in some indus-tries. As a result, increases in prices will become more frequent, there will befewer offsetting decreases elsewhere, and living costs will begin to rise.Shortages of workers with particular skills or in certain localities maydevelop, and wages will accelerate for these groups. Because the balanceof demand and supply differs among industries, these tendencies may emergeeven while over-all unemployment and unused capacity are substantial.

If demand continues to grow strongly, more industries and labor marketsare strained and inflationary pressures become more pervasive. As unem-ployment declines, wages accelerate, since employers prefer to raisewages rather than jeopardize sales and profits through either strikes orinability to attract enough labor. The threat of losing markets through price

95


increases exercises much less discipline on the pricing policies of a firmwhen it (and its competitors) are operating close to capacity. Thus pricesare readily marked up, both to reflect increased costs of labor and materialsand to provide for higher profit margins.

With living costs rising, wage increases are stepped up in most industriesand generally exceed the economy-wide growth of productivity. Thus unitlabor costs rise and in turn tend to be translated into higher prices. In thisway, a buoyant economy can move from price stability into a rising spiral ofwage and price adjustments. And once such a spiral starts, it becomes increas-ingly difficult to arrest, even after productive capacity has caught up withdemand and the initial pressures have largely subsided.

THE RECORD IN THE SIXTIES

This sequence of events is illustrated by the performance of the U.S.economy in the 1960's.

Price Stability: 1961-65

Between the first quarters of 1961 and 1965, rapid economic expansiontook up much of the slack in the use of resources. The unemployment ratedropped from 6.8 percent to 4.8 percent (seasonally adjusted) during this4-year period, and capacity utilization in manufacturing increased sharply.

Yet the price and wage record was excellent. Average hourly compensationin the private nonfarm economy rose an average of 4.0 percent annually,but productivity increased at a rate of 3.9 percent, so that unit labor costsremained virtually unchanged. The average level of wholesale prices in Jan-uary 1965 was the same as 4 years earlier. Consumer prices advanced ata moderate annual rate of 1.2 percent, largely reflecting gradual cost in-creases in distribution and services where productivity gains come slowly.

The Price-Wage Upturn: 1965-68

The first significant break in relative price stability occurred early in1965. Farm and food prices began a sharp upward climb, spurred by specialand erratic factors affecting supply at home and abroad. More pervasive in-flationary pressures started in the second half of 1965 when the militarybuildup in Vietnam began. The rise in prices of consumer services accel-erated as firms found it increasingly difficult to recruit and keep workers inthe traditionally lower paying service jobs. With consumer prices rising morerapidly and with stronger demand for labor, upward pressures on wagesmounted.

These developments show up clearly in the price and wage record. Betweenthe second quarters of 1965 and 1966, consumer prices rose 2.7 percent.During the same period, average hourly compensation in the private

96


nonfarm economy jumped 6 percent, well above the growth of productivity;as a result, unit labor costs rose nearly 3 percent.

Wage and price developments were influenced by the high level of utili-zation of the economy. In January 1966, unemployment fell below 4 percentof the labor force for the first time in nearly a decade, and the utilizationof manufacturing capacity reached the highest rate since 1955. But pricepressures were also intensified by the unusually rapid speed of the advance,as reflected in an annual rate of growth in the real gross national product(GNP) of more than 8 percent between the second quarter of 1965 andthe first quarter of 1966. Had the economy approached the neighborhood of4 percent unemployment more gradually, there would have been moretime to train and upgrade labor and to introduce newer and more efficientequipment.

When the rate of expansion slowed down late in 1966 and early in 1967,so did the upward movement of prices. Between August 1966 and April 1967,consumer prices continued to advance; but the annual rate of increasemoderated to 2 percent, while average wholesale prices actually declined.An increase in supplies of farm products and other raw materials wasespecially helpful. As new facilities were completed, the pressures on manu-facturing capacity decreased sharply, and price increases slowed down for anumber of manufactured products.

Nevertheless, higher costs had been built into the economy during 1965and 1966, and when the economy picked up speed in the second half of1967, prices and wages again accelerated. Union settlements, which hadlagged in the initial stage of the advance, rose especially sharply in late 1967and in 1968. As discussed in Chapter 1, the problems of rising prices andwages remain intense as 1969 begins.

THE TASK FOR POLICY

Because of the general relationship between prices and unemployment,decisions of fiscal and monetary policy present a serious dilemma. Achievingprice stability by accepting high unemployment involves dreadful waste andtremendous social and human costs. But historically, unemployment rates of4 percent or below have been associated with a price performance that mostAmericans consider unsatisfactory. As explained in Chapter 2, price increasesat the rate recently experienced clearly impair our international trade per-formance, cause a haphazard redistribution of income and wealth, and mayjeopardize sustained prosperity.

The first line of defense against inflation must be fiscal and monetarypolicies that avoid excessive pressures of demand on productive capacity. Byheading off sudden surges in demand and by promoting steady and smoothgrowth, these policies can also contribute to improved price performanceat high employment. But fiscal and monetary policies alone cannot ensurethe simultaneous achievement of low rates of unemployment and reasonable

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price stability. The relationship between inflation and unemployment de-pends upon the workings of the Nation's institutions and markets. There isneed for a wide ranging attack on inflation that will bring about pervasiveimprovements in the economy's price performance.

To this end, the President established the Cabinet Committee on PriceStability early in 1968. The Committee has studied many aspects of theproblem and has submitted its report, which covers many of the issuesdiscussed below.

IMPROVING LABOR AND PRODUCT MARKETS

Our labor and product markets are among the most efficient and flexiblein the world. Yet their further improvement is the key to making higherlevels of employment consistent with price stability. These markets must beeven more responsive to changing patterns of demand, and they must con-tinuously increase the productivity of our resources.

Measures to improve these markets are of two general but related kinds:those that facilitate the most productive use of our manpower resources, andthose that improve the efficiency of our product markets.

The efficiency of labor markets is reflected in the matching of job oppor-tunities and available manpower. The fit is never perfect: while in someareas and for some skills "help wanted" signs prevail, there are simultane-ously many unemployed persons whose skills or locations do not fit theneeds of employers. Continued job vacancies tend to pull wages up andthereby attract labor. In areas of excess supply, however, wages are rarelysubject to strong downward pressures. Thus unmanned jobs and joblessmen do not offset each other in influencing average wages. The better thelabor markets operate, the higher the level of employment and the lowerthe volume of job vacancies that can accompany any degree of upwardpressure on average wages.

There are a number of ways that a better and more flexible fit of availablemanpower and job opportunities can be achieved. Workers can move moreeasily between occupations and geographical locations if they are given im-proved information about job opportunities and if they are not confrontedwith barriers to entry into certain occupations. They can be aided by train-ing programs which are more closely oriented toward skills that are in shortsupply. And the productivity of employed labor can be improved by theremoval of restrictive work practices.

Measures of these kinds can both alter the level of employment consistentwith reasonable price stability and add significantly to the real output pro-duced at a given level of employment.

Product markets can also be made more efficient. The major thrust mustbe the strengthening of competition. Vigorous enforcement of antitrust policyis essential. Opportunities can be found to remove or reduce existing re-

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straints on competition. Better information for the consumer can alsostrengthen competition. The continued pursuit of freer international tradecan enhance the effectiveness of competition. Standards and policies in reg-ulated industries, in agricultural programs, and in Government procurementshould be kept under constant review, with price stability recognized as oneof the goals of policy.

The major measures discussed below should be viewed as elements of acomprehensive program to improve price-cost behavior. Other areas andother possible policy actions could be added to the list. The effects of themeasures vary considerably in potential magnitude, and no single one canensure a significant advance by itself. Yet if progress can be achieved onmost of these fronts, the inflationary tendencies that accompany low unem-ployment should be reduced.

Most of these measures may be expected to yield substantial gains inother directions. Some would increase employment opportunities for thedisadvantaged. Others would enhance productivity and growth over the longrun.

It must also be recognized that many of these measures involve some so-cial and financial costs that have to be assessed against the potentialbenefits. In fact, some of the present problems result from past publicor private policies designed to promote such objectives as job security, publicsafety or health, and the protection of small businesses. Frequently these pol-icies were aimed at conditions which prevailed years ago; they requirereexamination in today's high employment economy.

Structural improvements in our product and labor markets usually taketime to institute and require time to show measurable effects. Most of thestrategies cannot be counted upon to assist significantly in the immediatetask of moving toward price stability in 1969. But early efforts are neededto make timely progress toward the long-run objective of combining highemployment with reasonable price stability.

IMPROVING LABOR MOBILITY

Over the long term, there have been dramatic shifts in the pattern ofdemand for labor—from agriculture to manufacturing, from the produc-tion of goods to the supply of services, and from less to more highly skilledoccupations. Agricultural workers represent only 5.0 percent of the civilianlabor force as compared with 13.1 percent 20 years ago. The number ofwhite collar workers has risen from one-third to nearly one-half of totalemployment since World War II, with an especially rapid rise in the numberof professionals. The industry shifts in the past 7 years are shown in Table 10.

The needed adjustments to both short- and long-run changes in thedemand for labor have been largely accomplished by the normal operationof the market. Increases in earnings have been particularly large in those oc-cupations for which demand has been rising rapidly. For example, increased

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TABLE 10.—Changes in employment, 1961 to 1968

Industry group

Millions of persons

1961 1968 i

Percentagechange per

year,1961 to196812

Percentage distribution 2

1961 19681

Total employment ._

Agriculture

Nonagriculture

Nonagricultural payroll employment

State and local governmentServicesRetail tradeFinance, insurance, and real estateWholesale tradeManufacturing

Production workersNonproduction workers _.

Federal GovernmentContract constructionTransportation and public utilities..Mining

65.7

5.260.5

54.0

6.37.78.32.73.0

16.3

12.14.2

2.32.83.9

.7

75.9

3.872.1

68.1

9.510.510.43.43.7

19.7

14.55.3

2.73.34.3.6

2.1

-4.32.5

3.4

5.94.63.33.02.92.7

2.63.1

2.62.11.5

-1 .0

100.0

7.992.1

100.0

11.714.215.4

5.15.5

30.2

22.47.9

4.25.27.21.2

100.0

5.095.0

100.0

13.915.415.3

4.95.4

29.0

21.37.7

4.04.86.4

.9

1 Preliminary.2 Based on employment in thousands.

Note.—Detail will not necessarily add to totals because of rounding.

Source: Department of Labor.

needs for workers in retail trade and service occupations have been reflectedin wage gains larger than those in manufacturing (Table 11). Similarly,earnings in many professions have advanced rapidly.

Although the labor force is highly mobile and able to adjust readily tosubstantial shifts in demand, there are still many costly barriers that work-ers must cross when moving among jobs and occupations. One remedy isto lower the barriers, allowing workers freer access to jobs. Another is tobring work to areas of high unemployment. The benefits and limitations ofmaking jobs available to those living where few opportunities now exist areexplored in Chapter 5.

TABLE 11.—Changes in hourly earnings of production and nonsupervisory workerson private nonagricultural payrolls, 1961 to 1968

Percentage. change per

Industry group year,1961 to19681

Total private nonagricultural payrolls2

Retail tradeContract constructionFinance, insurance, and real estateWholesale tradeManufacturingMining

1 Preliminary.2 Total includes certain industry groups not shown separately.Source: Department of Labor.

Average hourly earnings

1961

$2.14

1.563.202.092.312.322.64

19681

$2.85

2.164.382.753.053.013.34

4.2

4.84.64.04.03.83.4

IOO


Information on Job Opportunities

Rapid adaptation of the labor force to changing demands can be aidedby timely information regarding job opportunities. The disadvantaged inparticular are likely to lack such information. Recognizing this handicap,the Federal-State Employment Services in 1965 began seeking out disad-vantaged workers for enrollment in training programs, for job referral, andfor work counseling.

The importance of improved job information was also recognized in the1968 Amendments to the Manpower Development and Training Act(MDTA). This legislation authorized the development of a comprehensivesystem of labor market information, using electronic data processing andtelecommunication systems for direct contact among recruitment, job train-ing, and placement agencies.

Relocation Assistance

The cost of moving can make it difficult for low-income workers torespond to job opportunities. The 1965 Amendments to the MDTA author-ized an experimental program of relocation assistance to test the value ofhelping disadvantaged workers in depressed areas move to places of betteremployment opportunity. Thus far, 13,000 workers and their families havereceived assistance under the program. The experience from this pilot pro-gram suggests that the benefits far outweigh the $750 average cost ofrelocation.

Vesting and Portability of Pension Rights

By 1980, private retirement plans will cover some 40 million workers—about three-fifths of all private nonfarm employees. Nonvested plans, inwhich the worker loses his pension rights if his employment terminates, notonly operate inequitably against many long-service employees but also dis-courage mobility.

Vesting would enable the worker to retain his financial stake in his pen-sion when he changes employers. To encourage more vesting, the Depart-ment of Labor has proposed a Pension Benefit Security Act. It would requirefull vesting after 10 years of service, to become fully effective 12 years afterpassage. At present, only about 20 percent of all workers are in retirementplans which fulfill this requirement.

Another way to overcome the restrictive effect of pension plans on mobilitywould be to increase the ability of employees to transfer pension creditsamong employers in a particular industry. This type of portability, largelyfound in multi-employer collective bargaining contracts, enhances mobilitywithin industries but not across industry boundaries. In construction, multi-employer pension plans are common but generally limited to a particular city

IOI


or metropolitan area. Greater reciprocity among these plans would enhancemobility in this important sector.

Licensing

State licensing provisions affecting some skilled trades and many profes-sions restrict mobility to the extent that there is not full reciprocity amongStates. Electricians, plumbers, barbers, and beauticians are examples of thelicensed tradesmen; physicians, dentists, lawyers, accountants, and teachersare examples of the professionals. In some cases, notably physicians, there isrelatively full reciprocity. But in others, those who have licenses in one Stateare required to pass new examinations or to meet different special qualifica-tions if they want to move to other States.

In principle, these requirements are imposed to protect public healthor safety, or the quality of service. Yet they may serve to restrict competition,particularly in localities or States where pay scales are relatively high.Mobility could be enhanced by universal reciprocity at generally acceptablestandards.

Discrimination in Employment

One of the most widespread barriers to the full use of our labor force isdiscrimination against women and members of minority groups. Greatprogress has been made in reducing these and other categoric barriers toemployment; Federal legislation now outlaws discrimination on the basisof race, religion, national origin, sex, or age. While the policy is now clear,a very large job of enforcement remains.

In addition, arbitrary barriers to employment may still be imposed by em-ployers who maintain unnecessarily restrictive hiring standards as describedin Chapter 5. Some unions also impose unreasonable restrictions on mem-bership.

Minimum Wages

Minimum wage laws protect the worker against the imperfections of thelabor market which lead to substandard wages. Such laws may also en-courage the more efficient use of labor. Although increases in the minimumwage are likely to be reflected in higher prices, society should be willing to paythe cost if this is the best way to help low-wage workers. Yet excessivelyrapid and general increases in the minimum can hurt these workers bycurtailing their employment opportunities.

Since 1956, the Federal minimum has gone up about in line wTith averagehourly compensation, while coverage has progressively expanded to coverlow-wage industries. In considering the future rate of increase for minimumwages, careful scrutiny should be made of the possibility of adverse employ-

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ment effects. The benefits of higher minimums should be weighed againstalternative ways of helping low-wage workers.

EFFICIENT USE OF MANPOWER

Responding to the expanding employment opportunities of our economy,American workers generally have accepted—and even welcomed—techno-logical change. But there are exceptions; unions have secured managementacceptance of restrictive work rules in such industries as railroads, printing,longshoring, and construction. These rules reflect a legitimate concern forjob security. But where technological change does adversely affect job se-curity, it would be preferable to avoid restrictive practices and developsolutions specifically to meet that problem. Workers can be largely com-pensated for the loss of particular positions and of seniority protectionthrough such provisions as severance pay, attrition plans, and the option ofearly retirement for older workers. The trend of collective bargaining agree-ments is in this direction, but the exceptions are still costly to the economy.

Legal Restrictions

Legal restrictions designed to protect health and safety may, in somecases, impose unnecessary barriers to the efficient use of labor.

For example, local building codes sometimes prevent the use of con-struction labor as efficiently as technology allows, according to a report ofthe National Commission on Urban Problems. The Commission also foundthat an unnecessary diversity among codes inhibits large-scale operations bycontractors and manufacturers. It recommended that private and publicbodies develop standards that could be accepted and applied throughoutthe Nation.

Another example is railroad full-crew laws affecting freight and roadservice in seven States. These laws reflect an approach that dates back tothe era of the steam engine. Despite dieselization and modern improvementsin communication, the laws remain.

Seasonality

Instability of work leads to inefficient use of manpower, throwing personsable and willing to work into unemployment. Seasonal variations are amajor source of such waste, particularly in construction.

More than one-fourth of all wage and salaried workers in contract con-struction experience some unemployment during the year. This is aboutdouble the proportion in manufacturing and other nonagricultural indus-tries. Besides the waste of valuable manpower, seasonality leads to laborshortages during peaks of activity in particular occupations and geographicalareas. A number of studies have indicated that, for most types of construc-tion, the added costs of winter work are small and might be offset by just thesavings in unemployment compensation for construction workers. More

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stable employment might also moderate the sharp upward trend in hourlywages for construction workers, at the same time improving their annualincomes.

In light of these considerations, the President recently instructed Gov-ernment agencies to explore the possibility of scheduling more constructionin winter months. Progress in this direction by the Federal Government couldserve as an example to State and local governments and to private industry.

MANPOWER TRAINING PROGRAMS

Training programs must be oriented toward two main objectives. Thefirst, and probably most important in both its economic and social implica-tions, is to assist the disadvantaged and the unemployed to acquire new skills.Such efforts present special and highly important problems, which are dis-cussed in Chapter 5 in the context of the problem of poverty. The secondobjective is to help increase the supply of skilled workers and professionalsto keep up with rapidly rising demand.

Skilled Workers

Federal and federally assisted training programs can make an importantcontribution to meet the rising demand for skilled workers in periods ofhigh employment. The Vocational Education Act of 1963 authorized alarge expansion of vocational training programs. Post-secondary day schoolvocational enrollments increased from 171,000 in 1964 to 501,000 in 1967,and enrollments of adults in part-time programs rose from 2.3 to 2.9 mil-lion. The total number of persons in trade and industrial programs rosefrom 1.1 to 1.4 million between 1964 and 1967.

Establishing and operating flexible, expanding training programs posesome difficult problems. Ideally, the pattern of training should be related toforecasts of changing demand for workers in different occupations, thusmeshing the training with emerging needs. In practice, this is not easy toaccomplish.

There is also danger that vocational programs, once established, may con-tinue unchanged despite radical shifts in the demand for skills. For example,high school enrollments in vocational agriculture remained almost constantfrom 1964 to 1967, despite the sharp and persistent drop in agricultural workopportunities and the movement of many rural youths to other jobs. Thescope of vocational education should be broadened to meet the future man-power needs of the economy. The 5 percent of total enrollees in vocationalclasses preparing for health and technical occupations is much too small.More training should be provided in new occupations such as automatic dataprocessing and electronics.

In addition, skilled workers will be needed in such traditional trades asconstruction. There is every indication that the demand for constructionin the 1970's will be of unprecedented magnitude. Success in meeting the

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national target for housing recently adopted by the Congress will dependupon the availability of enough skilled workers.

Professions

The demand for professionals has increased sharply. Although theirnumber has grown at an annual rate of 4.2 percent in 1961-68, as comparedwith only a 2.6 percent increase in the number of production workers inmanufacturing, supply has not kept pace with demand. As a result, earn-ings in many professions have risen at a substantially higher rate than thoseof manufacturing production workers.

The rise in demand for professional and technical personnel reflectsnumerous factors. In health care, the general rise in affluence has contributedsignificantly, along with Medicare, Medicaid, and the rapid increase in theelderly population. Total spending on health care rose from $26 billion infiscal 1960 to $53 billion in fiscal 1968.

The great technological advances of the past decade have vastly increasedthe demand for such professionals as physicists, chemists, mathematicians,and engineers. Expenditures for research and development have grownrapidly. Between fiscal 1961 and 1966, the dominant factor in the expansionwas Government spending for research and development, which rose atthe rate of 11.5 percent a year, before slowing markedly in 1966-68. Forthe National Aeronautics and Space Administration program alone, thenumber of scientists and engineers directly involved increased from lessthan 11,000 in 1960 to a peak of nearly 92,000 in mid-1966. Private spend-ing on research and development also increased at a rapid rate, growing at8.8 percent annually between 1961 and 1967.

Newly instituted Federal programs have helped to meet the expandingdemand for professional personnel. The Education Professions DevelopmentAct of 1967 gave the Office of Education authority to assist in the trainingof school personnel at all levels and in various occupations. Under theHealth Professions Educational Assistance Amendments of 1965, about13,500 scholarships have been awarded in medicine, dentistry, and phar-macy. A variety of fellowship, training, and grant programs is providingassistance to more than 43,000 students in 1968-69, as compared with10,500 in 1962-63.

Despite these advances, the present programs are not adequate tomeet the growing needs for trained professionals.

Adjusting Job Requirements

In light of the high and growing demand for fully qualified professionalpersonnel, the more routine or subprofessional tasks should be performed bysuch paraprofessionals as teacher's aides, nurse's aides, dental technicians,and engineering technicians.

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The New Careers Program, administered by the Department of Labor,is helping to prepare disadvantaged adults for jobs in public and private non-profit agencies in the fields of health, education, welfare, neighborhood rede-velopment, and public service. As of mid-1968, about 5,000 persons wereenrolled under this program. Cooperating institutions have agreed to revisejob requirements and to develop new career opportunities for subpro-fessional workers.

Future Directions for Manpower Policy

Training programs under the MDTA have the potential for making agreat contribution to price stability and high employment. Accomplish-ments thus far have been limited, mainly because the programs havebeen small relative to need. Only an average of 173,000 persons yearly havebeen enrolled from 1963 to 1968. In 1968, 272,000 were enrolled, equal tothree-tenths of 1 percent of the Nation's labor force. Moreover, only 18 per-cent of the total were trained in critical skills.

The creation of a new system of adult job training proved complex.Difficulties were inherent and experimentation necessary. But after 5 yearsof experience, it is evident that MDTA training and assistance can helpthe economy make more efficient use of manpower.

The Federal Government has greatly increased its support of collegestudents and institutions of higher education. The total funds availablein both grants and loans rose from an estimated $1.5 billion in 1962 to$4.4 billion in 1968. Federal funds for student loans increased from anestimated $75 million in 1962 to $251 million in 1968. Nevertheless, thereremains a need for additional support. When properly designed, loans area particularly suitable form of aid for college students, although manyyouths from low-income families may require special assistance throughdirect grants.

Federal aid can also be useful in underwriting the costs of expanding thecapacity of professional schools where training facilities are most criticallyshort, as in medical education. And better planning of Government pro-grams can lessen the pressure on the limited pool of professional manpower.The Federal Government directly and indirectly pays the salaries of 10to 15 percent of all professionals. Because the supply of professionals can-not be expanded quickly, adding significantly to demand can affect salariesthroughout the economy for many years.

COMPETITION AND ANTITRUST POLICY

The prevalence of strong competitive forces in most markets of the U.S.economy reflects its vast size, the ability and willingness of businessmen torespond to new opportunities, and a long-standing commitment of publicpolicy to promote competition—most importantly exemplified in the antitrustlaws.

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Antitrust Laws and Prices

While antitrust action is an effective weapon against collusive price agree-ments, violations still occur and continuous vigilance is necessary. Forexample, since 1965, there have been price-fixing convictions in such diverseindustries as plumbing fixtures, steel, and pharmaceuticals.

Antitrust also has a major role to play in reducing concentration. In highlyconcentrated industries—those in which a few firms control a large propor-tion of sales—price competition is likely to be less intense than it is elsewherein the economy. Numerous studies have shown a significant relationshipbetween high concentration and high profit rates—an indication of weakcompetitive pressures. Moreover, the high profits sometimes earned byfirms in the less competitive industries are understandably a tempting targetfor large wage demands, which sometimes spread to other industries.

Furthermore, concentrated industries often maintain prices in the faceof declining demand, reducing output instead. As demand fluctuates amongproducts over time, prices may rise where demand increases, but fail todecline where demand decreases. This results in an inflationary bias, whichmight be substantially reduced by greater competition.

Vigorous antitrust enforcement helps to hold down prices by breaking upprice conspiracies and reducing concentration. A continuing program ofantitrust actions can increase competition and contribute to improvedover-all price performance at high employment.

Mergers and Concentration

The present levels of concentration in many industries are in large partthe result of peaks of merger activity at the turn of the century and duringthe 1920's. Although the number of mergers in recent years has reachedgargantuan proportions—1,496 major mergers of manufacturing and miningconcerns in 1967 as compared to 219 in 1950—most of them involvedfirms in different industries rather than in the same industry. In part, thisreflects the Celler-Kefauver amendment to the Clayton Act which hasseverely restricted combinations that might lessen competition. In 1967, 83percent of the larger mergers consisted of purchases of firms in unrelatedindustries; in comparison, less than 60 percent of larger mergers between1948 and 1953 were of this conglomerate type.

Reducing Concentration

In a few major industries, concentration has been very high for manyyears. New approaches to reducing concentration in these industries shouldbe examined. Competitive forces can be enhanced by modifying existingindustry patterns or by promoting entry of additional competitors.

One approach would be to seek court decrees to promote competition bysuch measures as altering distribution and patent licensing practices. In

107


industries of critical economic importance, the appropriate remedy may bethe divestiture of parts of the operations of the largest firms to create newcompetitors.

A second approach is to adopt measures to channel merger activity indirections that would increase competition. Mergers could have a healthyimpact on concentration if acquiring firms of very large size were barredfrom purchasing the leading firms in other concentrated industries. Themajor route for entry into a concentrated industry by a very large firm thenwould be to build new capacity or to buy an existing smaller firm.When a very large firm buys a small firm in a concentrated industry, it hasthe resources to expand that firm's capacity and to try to increase its shareof the market. Such a merger can infuse new vigor and ideas into that market.

There is also need to review certain provisions of the tax laws which pro-vide incentives for mergers. Consideration should be given to modifyingthe statutes so as to make the tax laws more consistent with the objectivesof antitrust policy.

An effective program to deal with very high levels of concentration mayrequire new legislation, carefully drafted to avoid either penalizing economicefficiency or placing unnecessary restrictions on the freedom to respondto competitive opportunities. With these two limitations, measures tostrengthen competitive pressures in a number of highly concentrated indus-tries could further increase the contribution of antitrust policy to pricestability.

LEGAL RESTRICTIONS ON COMPETITION

In spite of the Government's commitment to the strengthening of com-petitive markets, some existing laws may weaken competition. Most of theselaws were adopted during the 1930's to relieve the especially serious impactof the depression on small firms in the distributive trades.

Resale Price Maintenance

Major examples of these depression-born laws are the resale price main-tenance statutes still in effect in 22 States. These "Fair Trade" acts permita manufacturer to require that all the retailers in a State observe a minimumresale price for that manufacturer's trademarked products. Since these prod-ucts generally move in interstate commerce, the practice rests on exemptionsfrom Federal antitrust laws granted under the provisions of the Miller-Tydings Act (1937) and the Maguire amendment (1952).

Resale price maintenance contracts are used mostly in the sale of drugs,cosmetics, appliances, and liquors. A survey by the Department of Justicein 1956 showed that prices were 19 to 27 percent higher on fair-tradeditems in States with resale price maintenance laws than in other States.Some estimates place the annual cost to the consumer of resale price main-tenance at $1.5 billion.

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One effect of resale price maintenance is to shift the focus of competitioninto less desirable forms. Retailers compete by providing more extensiveconsumer services, thereby increasing business costs. Manufacturers often setresale prices at levels providing generous markups to retailers, in order to in-duce them to favor the sale of their products.

The principal objective of resale price maintenance is to protect smallerconcerns from their larger competitors. The prohibition of predatory prac-tices is a valid objective of public policy. In practice, however, lower pricesreflecting greater efficiency and lower costs cannot be called predatory.Moreover, there is no evidence that the efficient small retailer needs suchspecial protection, which can freeze an inefficient market structure.

For these reasons, the Administration has consistently opposed legislationdesigned to extend resale price maintenance. Indeed, it is hard to see acontinuing justification for the existing laws in today's prosperous economy.

Robinson-Patman Act

The Robinson-Patman Act is another important Federal law intendedto protect the small from the large. The Act attempts to prevent chains,mail-order houses, and other huge buyers from extorting preferential priceconcessions from suppliers.

Although public policy should be concerned with preventing improperuse of the advantages conferred by sheer size, some evidence indicates thatthe Act has had the unintended effect of accentuating price rigidities insome markets. A seller may refuse to bargain on price with an individualcustomer by contending that under the law any concession granted to onebuyer would have to be made uniformly available to all others. The law mayconflict with the development of more efficient methods of distribution, suchas integrating wholesale and retail functions or dispensing with independentbrokers. By requiring proportionally equal treatment in certain promotionalpractices, the Act has discouraged experimentation with marketing tech-niques. It has been interpreted to prevent sellers from charging differentprices in widely separated geographic markets.

A careful reappraisal of the Act might suggest ways to focus its applica-tion more sharply on those particular forms of price discrimination thatconstitute a truly serious threat to competition.

IMPROVING CONSUMER INFORMATION

The effectiveness of price competition in consumer markets dependspartly on the purchasing skill of the consumer. Dependable product andprice information are needed to allow consumers to evaluate and comparethe relative costs and merits of the enormous variety of goods and servicesoffered for sale.

109323-166 0—69 8


Legislative Achievements and Proposals

In the last two Congresses, 20 bills protecting the consumer were enacted.Two of the most important were the Truth-in-Packaging and the Truth-in-Lending Acts.

The Truth-in-Packaging Act, signed in November 1966, recognizes thatthe bewildering multiplicity of package sizes for common household prod-ucts makes price comparison difficult. While the enforcement provisionsare weak, the Act takes important steps toward remedying the situation.One provision encourages interested industry groups, with the aid of con-sumers and government agencies, to develop voluntary standards to limit thenumber of package sizes. Another provision requires standardization of thelocation and form of the quantity statements on packages.

The 1968 Truth-in-Lending Act requires that the finance charge on con-sumer credit transactions be expressed in terms of a simple annual rate.At present such charges are often stated in ways that make it difficult forthe consumer to know the true cost of credit.

Among the legislative proposals remaining from the previous Congressare those relating to deceptive sales techniques, which in the home improve-ment field alone are estimated to cost the consumer over $500 million an-nually. The Deceptive Sales Act, passed by the Senate but not the Housein 1968, would give the Federal Trade Commission authority to obtaincourt orders to stop fraudulent and deceptive practices promptly. Otherproposals would permit cancellation without penalty for 3 business daysafter the signing of a door-to-door sales contract and would authorize aFederal Trade Commission study of the home improvement industry.

Sometimes selling practices themselves may restrict consumer choice andlead to higher prices. Often when a promotional practice is introduced byone seller, the response from competitors is not to lower prices but tointroduce the same type of promotion. Trading stamps illustrate thecontagious nature of sales techniques. Although many buyers can choosereadily between stores that offer stamps and those that do not, other buyerscan do so only at substantial inconvenience. In fact, almost half of all foodsales in 1963 were made by merchants offering trading stamps. Thereforeconsideration should be given to legislation that assures consumers achoice between stamps and an equivalent cash discount.

Product Testing

Steps can also be taken to provide more complete and reliable productinformation. Advertising is a major source of consumer information, butit needs to be supplemented. The purpose of advertising is to stress the de-sirable qualities of particular items, not to set forth an objective appraisalof the relative merits of competing products.

A few independent groups now test products and publicize their results,but their ability to do so is limited partly because their financial resourcesare not large. These activities could be supplemented by making available

HO


to the public the test data which various agencies of the Federal Governmenthave accumulated in connection with their procurement activities. As abeginning, the Department of Health, Education, and Welfare and theVeterans Administration have recently announced that they will release theresults of future product tests.

REGULATED INDUSTRIES

Electric power, most communications, natural gas, banking, securitiesmarkets, insurance, and most public transportation are subject to detailedregulation by Federal, State, or local agencies. The economic importance ofthese sectors is great. They account for about 9 percent of national income,and their prices and services affect many production and investment deci-sions throughout the economy.

Problems naturally develop in regulated areas where technology anddemand have changed rapidly. Existing regulatory practices need continu-ing review to determine whether established measures and institutions areefficiently responding to changing technology. Moreover, regulatory issuesincreasingly span the jurisdictions of several Federal agencies or cut acrossthe authority of Federal-State-local agencies. Some of the areas wherecareful review might be most rewarding are identified below.

Utilities

Public utilities, especially electric and telephone companies, have madeimpressive economic gains through high rates of productivity and decliningrelative prices. Notwithstanding these gains, utilities might contribute moreto price stability if productivity improvement or cost savings were morepromptly translated into lower rates, with due regard to preserving theincentives for increased efficiency and the ability of the companies to raisenew capital.

Electric Power* The two major characteristics of the electric powerindustry in the last decade have been its rapid growth, now at 7 percenta year, and the lower unit costs made possible by advances in technology,increased interstate system coordination, and economies of scale. Thesecomplementary trends have permitted significant reductions in rates chargedconsumers, despite increases in many costs to the industry. These trendsshould continue in the next decade; the National Power Survey estimatedthat cost savings of as much as $11 billion annually (measured in 1962dollars) are possible by 1980, if full advantage is taken of technologicalprogress and market potential, and if closer coordination of planning andoperations among the diverse ownership segments of the industry is achieved.Regulatory programs must be reevaluated periodically and new programsdesigned to ensure that these potential cost savings are fully realized andpromptly reflected in rates.

i l l


Natural Gas. This important fuel has almost tripled its share of theenergy market in the last 3 decades and now supplies about one-thirdof the Nation's energy requirements. Natural gas is subject to comprehensiveFederal, State, and local regulation. The Federal Government regulatesentry into interstate markets, wholesale rates, and conditions of serviceand safety. In the 1960's, Federal regulation has resulted in relatively stablerates, in contrast to the steep price increases that marked the precedingdecade. The new concept of setting a common price schedule for natural gassales in each producing area offers the expectation of an improved regula-tory procedure.

Recently, rising costs—particularly taxes and bond interest rates—havecaused natural gas companies to file a rash of applications for rate increases.Some applications also assert that higher rates are necessary to stimulate ex-ploration for, and development of, future reserves. These contentions mustbe recognized and dealt with expeditiously. Specifically, careful scrutinymust be given to costing formulas, evolving technology, and to the futureadequacy of supply.

Securities Markets

A careful review of securities markets revealed several problems in thethriving mutual funds industry. In particular, a provision of the InvestmentCompany Act prohibits dealers from reducing sales charges fixed by themutual fund underwriter. Many mutual funds have commission chargesconsiderably higher than those on most other security transactions.

In addition, stock exchange rules prescribe uniform minimum brokeragecommissions. The Securities and Exchange Commission is currently in-vestigating this practice to see whether such limits on price competition canbe eliminated or modified without damage to security markets.

Transportation

The sector that appears to offer the broadest opportunities for furtherregulatory improvement is transportation. Regulation was originally imposedon railroads about 80 years ago, when competition from other modes wasminimal, to protect shippers and travelers from discriminatory treatment.With the development of new modes of transportation such as pipelines,trucking, and air carriers, the general pattern of railroad regulation hasbeen extended to cover them.

But technological change, rising consumer incomes, and extensive publicinvestment in transport facilities have led to greatly increased competitionamong different forms of transportation. In the past two decades, someregulatory decisions have insulated existing carriers and their patternsof service and rates from that invigorating competition.

Competition. Statutory exemptions from regulation in water and motortransport cover about 87 percent of the ton-miles moved on inland waterways

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and 64 percent of intercity ton-miles moved by truck. Free market decisionsinvolving rates and the amount and quality of service have worked satis-factorily in these exempted areas over a long period. Current antitrust lawsprotect against improper carrier conduct.

Reliance on competition permits carriers to adjust rates freely. Regulators,in contrast, have often required firms to keep rates up to the level of "fullydistributed costs," which reflect an arbitrary allocation of overhead. Air,truck, and inland water carriers do not have the large indivisible inputscharacteristic of railroads and pipelines, such as rights-of-way and terminals.Thus railroads have relatively high fixed costs, and if overhead must be allo-cated to each traffic unit on a rigid basis, the calculated average costs andrate schedules may differ markedly from the variable expenses of additionaltraffic. Minimum rates based on these average costs can divert traffic fromrailroads even when they could offer the least costly mode of transportation.

A recent specific case illustrates this problem. The Interstate CommerceCommission denied a request by the railroads to reduce their rate for han-dling ingot molds to a level lower than that charged by the competing barge-truck service. The proposed rate was below the railroads' fully distributedcosts, but above their marginal costs. On appeal, the Supreme Court heldthat the Commission had the authority to determine which cost base touse. The decision thus left it to the Commission to base its rulings onmarginal cost criteria when it thought appropriate.

To the extent that minimum rate regulation is continued, marginalcosts rather than fully distributed costs would most closely approximate thepattern which a competitive market would produce. This principle, ifgenerally applied, would result in a much more efficient distribution of trans-portation resources and in lower costs to users of transportation services.

Entry. A better use of our potential transportation resources can also beachieved by lessening regulatory barriers to entry—particularly for trucks.A motor carrier now requires a specific grant of operating authority, aprocedure instituted in an earlier period of overcapacity. The problem todayis to serve a growing volume of traffic, which has expanded since 1961 at anannual rate of 4 percent as measured by intercity ton-miles.

The Interstate Commerce Commission has issued over 100,000 grantsof operating rights to motor carriers, mostly at the time regulation was in-stituted. At present, securing new rights is difficult; moreover, some existingrights are restricted to specific commodities, routes, direction of movement,and territory.

GOVERNMENT PROCUREMENT

The Federal Government, the largest single buyer in our economy, pur-chased $54.7 billion of goods and services from the private sector in 1967.Consequently, the manner and care with which the Government carries outits purchases have a significant impact not only on the prices it pays but onother prices throughout the economy.


Competitive Procurement

Because competition normally works to improve quality and keep pricesin line with costs, the Government has long relied on competitive biddingwhenever possible. In fiscal 1968, about three-quarters of the dollars spentby the General Services Administration, the chief purchaser of generalsupplies for the Government, involved formal bidding; another fifth involvedother procurement methods that stressed price competition. Currently 82percent of all Government purchases are made by the Department ofDefense. Since many of these expenditures involve the development andproduction of sophisticated weapon systems, they are less suited to con-ventional price competition. In fiscal 1968, only 38 percent of defenseoutlays—up from 33 percent in fiscal 1961—utilized formal bidding orother methods stressing price competition. However, varying degreesof competition existed for a substantial portion of the remainder of defenseprocurement.

Negotiated Procurement

Competitive procurement is most difficult to achieve for specially builthardware, such as major defense systems, for which the Federal Govern-ment is the only buyer. When competition cannot be relied upon to holddown costs, contracts providing incentives for cost reduction are desirable.Fixed-price type contracts, in which the contractor shares in any cost reduc-tion or cost escalation, have increased from 58 percent of all defense pur-chases in fiscal 1961 to 78 percent in fiscal 1968. Cost-plus-fixed-fee con-tracts, which provide less incentive for cost reduction, have dropped from 37percent of the dollar volume to 11 percent over the same period.

Total Package Procurement, a major procurement innovation of the1960ss, has extended competition and permitted more fixed price contracts.It requires a binding commitment from the contractor on as much of theproduction program as is feasible at the time of the initial award. This is asignificant departure from the earlier practice of conducting design competi-tions for development followed by cost reimbursement production contractswith the developer. The new approach emphasizes the use of performancespecifications and provides tightened control over design and contractchanges, thereby reducing expensive modifications. Since the contractor iscommitted to cost and performance figures for production units before de-tailed design begins, he has a strong motive to design for economical produc-tion, reliability, and simplicity of maintenance.

Single Source Procurement

Unfortunately, it is not possible to introduce price competition into allpurchasing. For example, Total Package Procurement is unsuited for pro-

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grams where needs or technology are changing rapidly, since technical uncer-tainties cannot be identified in detail before major work starts.

From the point of view of price stability, the least desirable situation isthe case of a "sole source" supplier, operating under a cost reimbursement(rather than fixed price) contract. In fiscal 1968, 14 percent of the dollarvolume of defense procurement was in this category.

Such awards often reflect the special experience of one firm as well asthe uncertainties of technology. For example, only one particular firm is con-sidered to have the capability to develop the Sentinel antiballistic-missilesystem. Therefore, the Department of Defense will of necessity procure fromone source for this multibillion dollar program for some time. A large num-ber of subcontractors are involved, however; and as soon as possible, majoritems will be broken out and procured separately under competitiveconditions.

Great progress has been made in recent years in improving procurementmethods, but further progress is essential for improved price performance.Efforts to encourage competition and to develop new methods of procure-ment must be maintained.

AGRICULTURE

Three main problems continue to confront agricultural policymakers.Returns to the labor of some farmers and their workers are low, particularlyon smaller farms. Price fluctuations are severe as a result of weather, live-stock production cycles, and international developments. And price instabilityis compounded by excess capacity and a consequent chronic tendency toproduce more of certain major crops than the market can readily absorb atreasonable prices.

Achievements of Agricultural Policies

In broad perspective, past agricultural programs have been successfulfor commercial farmers. They have made it possible to eliminate theburdensome surpluses of 1960. They have provided higher and more stableprices than would have existed otherwise and thereby helped moderatefluctuations in farm income. They have reduced risks associated with farmplanning, permitted more efficient business management, and encourageda substantial increase in the capital investment per worker. These factors inturn have made possible gains in labor productivity of 175 percent since 1950.

Changing Farm Structure

Profound changes have occurred in the structure of the farm economyin the 35 years since major farm price legislation was first introduced. Thenumber of farms has been halved. Total farm output and average farm sizehave more than doubled. Differences in output per farm have become pro-


nounced. Fifteen percent of the farmers—those grossing $20,000 or moreannually—marketed two-thirds of the value of the 1967 farm output. Morethan half of the farmers accounted for less than 7 percent of the total.

Farm income is a progressively less important part of the total incomeof many operators of smaller farms. In 1967, farmers selling less than $2,500in farm products received net farm incomes averaging only $1,018 buthad average off-farm incomes of $5,681. Nevertheless, there are many farmfamilies without such off-farm income whose total incomes fall below thepoverty line.

New Directions for Policy

In light of the changing structure of U.S. agriculture, proposals havebeen advanced to modify price support programs. A reasonable limit onthe amount any one farmer could receive from Government paymentsmight provide annual savings approaching $200 million. Any such pro-gram, however, would have to be carefully designed to avoid major ad-ministrative difficulties and to preserve the incentives for acreage limita-tions. A Department of Agriculture study indicates that, in recent years,farmers with gross annual incomes at or above $20,000 earned more fortheir labor and capital than they would have with the same resourcesin the nonfarm sector. This suggests that these highly efficient farmers havea lessening need for economic aid. On the other hand, those with smallfarms derive less than 20 percent of their income, on the average, fromfarm sales. Hence some gradual restructuring of farm price supports tobring market demand and supply into closer balance would have littleeffect on their income, and payment limitations would not apply to them.

A better balance of equity among large farms, small farms, and consumerswould be achieved if more market-oriented price supports were accompaniedby: an expansion of the 1965 Cropland Adjustment Program (providing forvoluntary land retirement) ; more job training programs in rural areas;continued emphasis on community resource development; and more effectiveincome maintenance programs for farm families in poverty (see Chapter 5).

A restructuring of farm programs along these lines could encouragelarge farmers to continue to increase their investments and make full useof the opportunities constantly being opened by new technology. Theywould also have freedom to exercise the option of conserving land re-sources until market competition made profitable cultivation possible.

INTERNATIONAL TRADE AND PRICE STABILITY

Price competition is enhanced by the availability of imported products.During periods of high employment, increased import competition helps tooffset the decline in the intensity of competitive behavior among domesticproducers which accompanies high over-all demand. Rising imports alsohelp to avoid the development of bottlenecks and shortages when demand is

n6


straining domestic capacity. They thus make a vital contribution toward themoderation of inflationary tendencies.

There is no doubt that prices in industries subject to strong import com-petition would have risen faster if such competition had been restricted. Forexample, steel prices increased by 35 percent between 1953 and 1961 whenimports were small, but only 7^2 percent between 1961 and the end of1968 when growing world capacity led to an expansion of imports. Thereis clear evidence that steel producers have been especially wary about raisingprices for product lines subject to heavy import competition, such as wireand wire products, or hot rolled sheet.

To the extent that less expensive imported items enter into furtherprocessing or manufacture, they reduce costs and permit lower prices forfinal products. Thus the availability of imported yarn and fabrics, by reduc-ing the costs of our apparel manufacturers, permits them to compete moreeffectively against apparel imports. The competitiveness of our machinerymanufacturers in export markets is similarly enhanced by their ability toobtain steel—imported or domestic—at prices lower than they would haveto pay if imports were restricted.

Impact on Domestic Industries

The increased flow of imports entails certain costs that must be weighedagainst the benefits. It has cut into the markets of some important industries(notably steel, textiles, and footwear) and a few agricultural sectors. Thishas resulted in pressures for import restrictions, usually in the form of quotalimitations. An international arrangement controlling imports has beenin effect for cotton products since 1962, and a current issue is whether toextend this type of arrangement to textiles made from wool and synthetics.Quotas have been imposed on agricultural imports, usually to prevent thegrowth of Government stockpiles. For a number of products, informal ar-rangements limiting imports are in force or are being considered as a moreflexible and less onerous instrument than formal quotas.

While imports are an important factor in a number of domestic markets,they have not prevented expansion of the industries most affected. Steel,textile, and apparel output has increased since 1960, and after-tax profitshave risen in all three industries. The rate of return on equity for theseindustries has also improved considerably, although it remains below theaverage for all manufacturing—as it has for many years.

It is important to emphasize that increased imports in these and otherindustries reflect, in part, long-run changes in trade patterns resulting fromthe natural development of the industrial structures of the United States andits trading partners. The dynamic U.S. economy need not and shouldnot be insulated from these changes. The crucial issue is not whetherbarriers to imports would increase employment and sales in the industriesaffected, but rather whether our economy is offering ample employmentand investment opportunities, at the same or better conditions, in other

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pursuits. If these interindustry shifts impose transitional costs, such burdensshould be shared and alleviated by Federal adjustment assistance. Further-more, fundamental shifts in efficiency should be carefully distinguished fromspecial situations such as dumping practices and export incentives given byother nations. Some of these situations, as well as adjustment assistance, arediscussed in Chapter 4 along with other measures to ensure the two-waynature of trade by keeping world markets open and fair.

National Security and Trade

A valid case for protecting a key industry can be made if national securitywould be seriously threatened by a sharp increase in imports. The nationalsecurity rationale underpins the mandatory oil import program, whichimposes limits on petroleum imports. It may be desirable to reexamine thesecurity rationale to determine if the present administration of the programbest meets the objective. Some changes may be possible which, while preserv-ing essential security objectives, would permit greater flexibility and ensurean economical supply of petroleum feedstocks for the petrochemical industry.

VOLUNTARY RESTRAINT IN PRICES AND WAGES

The forces exerting upward pressures on wages and prices in a highemployment economy are broad and impersonal. The responses of wagesand prices to these pressures, however, are expressed through a multitude ofseparate decisions by employees and employers, by sellers and buyers.

ROLE OF PRIVATE DECISIONS

These decisions must be made within the constraints imposed by themarket, constraints which operate on even the largest businesses and thestrongest unions. Nevertheless, major companies in highly concentrated in-dustries have substantial discretion in their price and wage decisions, as domany unions in the determination of wages. The way this discretion isexercised by the majority of business executives and labor leaders can havea substantial impact on the trends of prices and wages, even though nosingle business or union can by itself have a decisive influence.

This imposes a grave responsibility on decisionmakers who have discre-tionary market power. Since the economic consequences of private priceand wage decisions bear so importantly on the public welfare, it is appro-priate for Government to point the way in which these individual decisionscan best serve the public interest.

STANDARDS FOR DECISIONS

The Government has worked to evoke a general awareness of the im-portance of price and wage restraint among business, labor, and the public.These efforts date back to the Economic Reports of President Eisenhower

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in the late 1950's. A more explicit formulation was proposed in the Council's1962 Annual Report in the form of the wage-price guideposts. In subse-quent Reports, these guideposts evolved gradually—a process describedin detail in the Council's 1967 Annual Report.

As initially set forth in 1962, the guideposts stated:

The general guide for noninflationary wage behavior is that therate of increase in wage rates (including fringe benefits) in eachindustry be equal to the trend rate of over-all productivityincrease. . . .

The general guide for noninflationary price behavior calls forprice reduction if the industry's rate of productivity increase ex-ceeds the over-all rate—for this would mean declining unit laborcosts; it calls for an appropriate increase in price if the oppositerelationship prevails; and it calls for stable prices if the two ratesof productivity increase are equal.

The guideposts were never intended to apply in highly competitive sectorswhere market forces determine prices and wages in an impersonal fashion.They are applicable to markets in which discretionary power exists. Even inthese markets, short-run exceptions have always been recognized whenchanges in relative prices and wages are necessary to facilitate shifts inthe use of labor and capital, or where substandard wages exist.

APPLICATION OF STANDARDS

Between 1961 and 1965, decisionmakers with discretionary power gen-erally conformed to the pattern envisaged by the guideposts. There wereoccasional departures, however. In particular, some industries with higher-than-average productivity gains did not reduce prices as unit labor costs fell.

The extent to which the satisfactory performance was enhanced by theefforts of the Administration to urge the observance of the guideposts can-not be precisely assessed. But the history of key wage and price decisionsduring this period indicates that these efforts did exert a distinct and sig-nificant influence.

The blemished price-wage record of the past 3 years reflects primarilyan excessive growth of demand. Indeed, the initial departures from the pathof price and cost stability were concentrated in farm products, raw materials,and services where guideposts have little, if any, applicability. The sameforces also influenced price and wage decisions in areas of discretionarymarket power. Once consumer prices started to move up sharply, increasesin compensation no larger than the productivity trend would not have ledto any improvement in real income. Workers could not be expected toaccept such a result, particularly in view of the previous rapid and consistentrise in corporate profits.


Recognizing this situation, the Council, in its 1967 and 1968 Reports, didnot suggest that wage increases should be limited to the trend growth ofproductivity. It did, however, continue to urge maximum possible restraintin both wage settlements and price adjustments, and it continued to main-tain the validity of the basic productivity principle for long-run pricestability.

With wage increases substantially in excess of productivity, it was alsorecognized that production costs in many industries would rise and thatsome price adjustments were inevitable. At the same time, with profitsgenerally at a high level, many industries were in a position to absorbincreases in labor costs either wholly or in considerable part. The Adminis-tration therefore continued to urge business executives to avoid or minimizeprice increases.

This stress on the economy-wide consequences of discretionary price andwage decisions has served an important educational role in addition to itsdirect effects on prices and wages. The discussion of standards for pricesand wages has focused the attention of business, labor, and the public onthe inflationary results of individual actions that add up to demands forincome in excess of what the economy can produce. Awareness of this propo-sition has spread among key decisionmakers in both the business and laborcommunities in recent years.

FUTURE ROLE OF COOPERATION

The cooperation of labor and business in the observance of voluntarystandards of price and wage behavior is an essential part of a full programto combine high employment and reasonable price stability. Such coopera-tion must be viewed as a supplement to appropriate fiscal and monetarypolicy and to measures for improving the efficiency of the economy.

The task immediately ahead is to make significant progress toward restor-ing price stability during 1969. The public and private policies essentialto this end are discussed in Chapter 1.

Once this has been achieved, however, the essential task for the longerrun will still remain. Mandatory price and wage controls are no answer.Such controls freeze the market mechanism which guides the economy inresponding to the changing pattern and volume of demand; they distortdecisions on production and employment; they require a huge and cumber-some bureaucracy; they impose a heavy and costly burden on business; theyperpetrate inevitable injustices. They are incompatible with a free enterpriseeconomy and must be regarded as a last resort appropriate only in an ex-treme emergency such as all-out war.

Better ways must be devised of establishing standards for voluntaryrestraint, and for eliciting cooperation from those who enjoy discretionarymarket power. But if voluntary restraint is to be effective, better means mustbe found of focusing the attention and eliciting the cooperation of all pri-vate groups concerned—business, labor, the public—in dealing with the

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issue of maintaining reasonable price stability at high employment. The taskwill not be easy since it requires that each group accept some sacrifice of itsapparent short-run interest in order to serve its own and the public's long-run interests.

In the past, neither labor nor business played a major role in the develop-ment of the guidepost approach. In the future, effective cooperation is muchmore likely if those to whom the standards will apply participate in theirdevelopment. Persuasion can be helped by representation.

In view of such considerations, the President instructed the CabinetCommittee on Price Stability to: "Work with representatives of business,labor, and the public to enlist cooperation toward responsible wage and pricebehavior . . ."

The institutional arrangements for increased business and labor par-ticipation can take many forms. This past year, the Labor-ManagementAdvisory Committee has begun the dialogue necessary to develop standardsthat business and labor leaders might be willing to accept jointly. Thedevelopment of standards by such a cooperative effort would strengthenthe educational role of voluntary restraint and increase its effectiveness.

It is essential that the system remain on a voluntary basis. The principalsanction consistent with voluntary restraint is the force of public opinion.This means that decisions which significantly threaten the public interestmust be spotlighted. Since many wage and price decisions are complicatedand difficult to analyze, some competent authority must call attention toflagrant departures from standards of responsible decisionmaking. Unpleas-ant as such a task may be, it is inescapable. The precise way in which thistask is carried out is less important than public acceptance of the necessity,equity, and reasonableness of the procedures used to review price and wagedecisions.

CONCLUSION

This chapter has reviewed some of the programs which may improve theability of the economy to maintain reasonably stable prices at high levels ofemployment. It has also reviewed the contribution that can be made by vol-untary cooperation toward price and wage decisions consistent with thepublic interest. Some conclusions emerge clearly.

It is not inevitable that pressures on labor supply should begin to ap-pear when unemployment falls below 4 percent. It is not inevitable thatwage increases should substantially exceed productivity gains, and thatprices should begin to rise rapidly, as the economy reaches high employment.It is not inevitable that price stability should be restored only through thewasteful remedy of repeated doses of economic stagnation and high un-employment.

But to meet the challenge, the Nation must move ahead vigorously andimaginatively on many fronts. Both labor and product markets require nu-

121


merous structural improvements, and voluntary restraint must make an evengreater contribution than in the past.

The task of reconciling price stability with high employment cannot beaccomplished by Government alone, or by business alone, or by labor alone.

It requires clear comprehension by all groups of the overwhelming impor-tance of this goal.

And it requires an awareness of the bleakness of the alternatives: eitherachieving stability by sacrificing high employment or realizing high employ-ment by acquiescing in persistent inflation. We cannot, and need not, accepteither of these alternatives.

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Chapter 4

The International Economy

I N THE PAST TWO DECADES, enormous progress has been made inbuilding a closely knit international economy. Remarkable growth in

the volume of international commerce has gone hand in hand with sus-tained world prosperity; each has contributed to the other. At times, deepand obvious strains in the international monetary system have imperiled thisprogress, but these financial difficulties have been weathered without a seri-ous setback in economic growth or world trade.

The world economy emerged from the Second World War in a gravelyweakened state, with many countries suffering severely from war damage.International trade was disrupted, and exchange controls and bilateral trad'ing arrangements were the order of the day. However, the recuperativestrength of the European nations, assisted by U.S. aid, resulted in rapideconomic recovery.

During the 1950's, the increasingly prosperous countries of western Europeliberalized trade and capital movements substantially. Meanwhile U.S. capi-tal exports promoted economic growth abroad, and our balance-of-paymentsdeficits contributed to a desirable expansion of world monetary reserves.

However, by the end of the 1950's, U.S. deficits were beginning to causeconcern. A nagging question was raised: Did the international monetarysystem require continuous U.S. deficits and an intolerable, persistent weaken-ing of the reserve position of the United States if serious reserve inadequaciesfor other countries were to be avoided?

The growth of world trade and income has continued—indeed, has ac-celerated—during the 1960's. But there have been periodic monetary dis-turbances associated with expected or feared realignments of exchange rates.While financial officials have shown wisdom and ingenuity in modifying andstrengthening the international monetary system, important problems re-main. Recent major financial disturbances have emphasized the need forfurther evolution to insure that the system can continue to support growingwrorld trade and income.

This chapter briefly reviews the growth of world trade and output andsome of the key policy issues regarding our trade relationships with thedeveloped and less developed countries. The review is followed by discus-sion of international financial problems and by analysis of several currentproposals designed to strengthen the international monetary system.

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ECONOMIC GROWTH AND WORLD TRADE

In the years since the Second World War growth has come to be acceptedas a normal feature of the world economy. It is easy to forget that this wasnot the case in earlier periods. The depression years of the 1930's presenta particularly sharp contrast. But by any historical comparison, the economicprogress of the last 20 years is unprecedented.

World income has more than doubled since 1950. In the fifties, growth wasespecially rapid in the western European countries, while in recent years theUnited States has grown more vigorously (Table 12). Japan has experi-enced rapid and sustained growth throughout the period.

With their more rapid population growth, the less developed countries,taken together, have experienced a slower growth of per capita income thanhave the developed countries, even though total income has grown at aboutthe same rate in both groups of countries. Growth of per capita incomehas varied widely among the less developed countries, in recent years rang-ing from high rates for Iran, Korea, Taiwan, and Thailand to virtual stag-nation or even decline for some parts of Asia and Latin America.

TRADE AND TRADE BARRIERS

The rapid growth of recent decades has contributed much to the increasein world trade (Table 13). A continuing reduction in trade barriers has

TABLE 12.—Growth of gross national product in developed and less developedcountries, 1950-67

[Percentage change per year]

Region and country

Developed countries

United StatesEurope1

EEC2Other countries3

Japan

Less developed countries5

Latin AmericaNear East6

South AsiaEast AsiaAfrica

1950to

1955

4.7

.4.35.06.36.2

4 7.7

4.7

5.1

o3.4oo

Total real GNP

1955to

1960

3.4

2.24.45.36.19.8

4.5

5.05.94.23.8

o

1960to

1967

4.9

4.74.24.67.7

10.4

5.0

4 66.44.35.23.6

Per capita real GNP

1950to

1955

3.5

2.64.35.54.4

* 6.2

2.8

2.3

°1.3

8

1955to

1960

2.2

.53.64.44.68.8

2.2

2.13.42.11.2

O

1960to

1967

3.7

3.33.23.66.39.3

2.5

1.73.91.92.51.3

* Excludes Spain, Greece, and Turkey.2 European Economic Community (EEC) consists of Belgium, Luxembourg, France, Germany (Federal Republic and

West Berlin), Italy, and Netherlands.3 Consists of Canada, Australia, New Zealand, South Africa, and Japan.i Change from 1952 to 1955.5 Estimates based on countries for which data are available.6 Includes Greece and Turkey.7 Not available.

Note.—Data exclude U.S.S.R., other East European countries, Mainland China, and Cuba.

Source: Agency for International Development.

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TABLE 13.—Growth of world exports, 1952-67

[Percentage change per year]

Region and country

World total..

Developed countries. _Industrialized countries *Other developed countries 2.

Less developed countries...

Latin AmericaOther Western Hemisphere...Middle EastAsia excluding JapanAfrica excluding South Africa.Other countries

By type of export:Selected exporters of manufactures 3.Selected oil exporters *Other less developed countries

1952-53to

1959-60

5.7

6.26.53.7

4.1

2.33.19.44.23.47.3

5.39.73.0

1959-60to

1966-67

8.1

8.88.98.0

5.9

5.13.58.34.07.86.1

15.78.24.6

1952-53to

1966-67

6.9

7.57.75.8

5.0

3.73.38.84.15.66.7

10.48.93.8

1 Includes United States, United Kingdom, industrial Europe, Canada, and Japan.2 Includes other Europe, Australia, New Zealand, and South Africa.3 Includes Israel, Hong Kong, Korea, and Taiwan.* Includes Iran, Libya, Saudi Arabia, Venezuela, and Kuwait.Note: Data include Yugoslavia, but exclude U.S.S.R., other East European countries, Mainland China, and Cuba.Source: International Monetary Fund.

also stimulated trade. As a result of six multilateral trade negotiations withinthe framework of the General Agreement on Tariffs and Trade (GATT),levels of protection have been repeatedly lowered during the past 20 years.As the staged tariff reductions negotiated during the recent Kennedy Roundare completed during the next 3 years, this downward trend will continue.Even after these reductions, tariffs will remain a significant barrier to tradeand further efforts will be required to reduce them.

Nontariff Barriers

As tariffs have been reduced, other barriers to trade have increased inrelative importance. Nontariff barriers have been adopted for a variety ofreasons. For example, some import quotas are surviving remnants of sup-posedly temporary restrictions imposed by certain countries during periodsof balance-of-payments difficulties, as permitted under the rules of theGATT. Other barriers result from domestic laws aimed at protectingconsumers, such as sanitary and health regulations. Government procure-ment policies discriminating in favor of domestic producers are anotherform of nontariff barrier and are at times a serious impediment to interna-tional competition for government contracts.

While protection on industrial goods has been reduced in recent years,restrictions on agricultural trade, including tariffs, have risen. These barriersare of particular concern to the United States because they have proven to bea major hindrance to U.S. agricultural exports.

125323-166 O—69-


The GATT rules are interpreted as permitting a country to exempt exportsfrom indirect taxes and to impose on imports a charge equivalent to theseindirect taxes. Countries such as the United States that rely heavily on in-come or other direct taxes may suffer a disadvantage, since similar "borderadjustments" are not permitted for direct taxes. This urgent problem isunder intensive discussion with our trading partners.

Work on other nontariff barriers is going forward in the GATT. Continu-ing and concerted efforts are necessary both for the United States and forits trading partners. Meaningful negotiations require that the United Statesas well as foreign countries be prepared to make concessions.

The barrier maintained by the United States that is of greatest con-cern to our trading partners is the "American Selling Price" provision.Under this practice, applicable to certain benzenoid chemicals and a fewother goods, tariffs are based on the prices of domestic products rather thanactual prices of imports.

During the Kennedy Round, conditional agreement was reached for theUnited States to eliminate this provision, in return for commitments byothers to undertake additional reductions in tariffs on chemicals. In addi-tion, Belgium, France, Italy, Switzerland, and the United Kingdom agreed,as part of the package, to modify certain of their nontariff barriers. Legis-lation to eliminate the American Selling Price provision would permit thissignificant agreement to be carried out.

Adjustment Assistance

The Trade Expansion Act of 1962 provided for adjustment assistanceto those injured by tariff reductions. It recognized that, because the gainsfrom trade are widely distributed to the consuming public, the Nation as awhole should share the costs of adjustment associated with trade liberaliza-tion. In practice, however, the criteria of the Act have proved too rigorous.In no actual case has it been possible to demonstrate, as required, boththat tariff reductions have been the major cause of an increase in importsand that the increase in imports has been the major cause of serious injuryto an industry, firm, or group of workers. Legislative modification of thesecriteria is required in order to establish an effective program of adjustmentassistance.

LESS DEVELOPED COUNTRIES

International trade and capital transfers have made important contri-butions to the growth of many less developed countries during the postwarperiod, and they will have a major role to play in the future.

As shown in Table 13, less developed countries have not shared fullyin the growth of world trade. Apart from a few countries which exportmanufactured goods or petroleum, exports of the less developed countries

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have grown only about half as rapidly since 1952 as those of developednations.

Most of the less developed countries depend heavily on export earningsfrom the sale of primary products. These products are subject to markedyear-to-year price fluctuations and in some cases to declining price trends,making them a highly unreliable source of foreign exchange. Some ex-perts have proposed formal international commodity agreements aimedat changing market price behavior. While some commodity agreements arealready in existence, they have not provided a complete solution, andfew additional commodities appear suited to such agreements. Additionalborrowing arrangements to compensate for shortfalls in export earnings,similar to the facility established by the International Monetary Fund(IMF) in 1963, have also been suggested. The staffs of the IMF and theWorld Bank have been studying the problem of volatile export receiptsand are expected to report soon on the additional part these two institu-tions might play in arrangements to increase the stability of foreign exchangeinflows to primary producers.

Tariff Preferences

In the long run, dependence of the less developed countries on primaryproducts can be lessened through increased exports of manufactured goods.The advanced countries can assist in this process by removing some of theircurrent restrictions on imports of those manufactured and semimanufac-tured goods of particular interest to less developed countries. Since furthergeneral tariff reductions seem unlikely in the immediate future, the grantingof tariff preferences to less developed countries may represent a way ofachieving a more rapid reduction of these barriers.

The 1968 United Nations Conference on Trade and Development(UNCTAD) unanimously endorsed the early establishment of a systemof generalized nonreciprocal tariff preferences for less developed countries.The United States and other developed nations are now engaged in discus-sions to determine whether a mutually acceptable system can be devised.

A generalized tariff preference system would help the less developed coun-tries, but it wrould be only a modest step toward meeting their total foreignexchange needs. The developed countries are likely to insist on excludingcertain products from the preference scheme, and trade in other commodi-ties will continue to be restricted by quotas and other nontariff barriers.Furthermore, the initial benefits of the preference scheme would go largelyto the minority of less developed countries that have already begun to exportmanufactured goods.

Foreign Aid

The experience of the 1950's and the 1960's has demonstrated the value offoreign assistance in promoting economic development. Foreign capital and

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technical assistance from both public and private sources have been signifi-cant factors in the highly successful development efforts of such countriesas Greece, Israel, Korea, Mexico, Pakistan, and Taiwan.

While the total volume of foreign assistance has been growing duringthe 1960's, it has not kept pace with the rising ability of the less developedcountries to make efficient use of such funds. Foreign assistance expendituresby the United States rose sharply in fiscal 1962 but have not increased signif-icantly since then. Unless the recent declining trend in appropriations isreversed, expenditures must ultimately fall.

The International Development Association, an affiliate of the WorldBank, was established in 1960 to make credits available to developing coun-tries on liberal terms. It has been an effective channel of multilateralassistance, of which the United States has been a major proponent. How-ever, its resources have been largely exhausted and replenishment is essen-tial. It is important that the United States authorize its contributionpromptly, because the contributions of other countries depend on the U.S.decision.

THE BRETTON WOODS SYSTEM

The rapid growth in the world economy in the post war period has beenbuilt on a greatly improved financial base. At the 1944 Bretton WoodsConference, the major industrial countries created through the IMF aninternational monetary system based on pegged exchange rates. The systemhas been strengthened by the great strides in cooperation in the IMF andin other institutions such as the Organization for Economic Cooperationand Development (OECD) and the Bank for International Settlements(BIS).

This cooperation has paid handsome dividends in times of crisis. Inter-national understanding, carefully nurtured during periods of calm, haspermitted the multilateral assessment of problems and the determinationof mutually acceptable solutions. This was well illustrated in March 1968,when decisions taken with respect to the private gold market ended theimmediate threat to stability and basically strengthened the system. At timesof severe strain, such as the British devaluation in 1967, international co-operation has contained crises and prevented chain reactions.

To be sure, the international monetary system has had its problems. Criseshave occurred all too frequently. Yet the system has consistently been ableto meet the needs of the day, it has evolved and adapted, and it can bestrengthened further to meet the remaining strains. While conserving provenarrangements, governments seem increasingly ready to consider additionalimprovements. Proposed evolutionary changes require careful study anddeliberation, based on widespread official and public discussions. Itis particularly important that these involve the bankers and traderswho would be directly affected. The following discussion is intended tocontribute to such a dialogue, rather than to make specific recommendations.

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International monetary disturbances have centered around three interre-lated problems: adjustment, confidence, and liquidity.

"Adjustment" is the process of reestablishing balance-of-payments equilib-rium when a country is substantially out of balance. An adjustment problemexists when the relevant forces and policies are either too weak to reestablishequilibrium within a reasonable period or involve domestic or internationaleffects that are inordinately costly.

"Confidence" refers to the willingness to hold monetary assets. A problemarises when holders either become dissatisfied with the safety of some of theseassets or see the possibility of profit in switching them abruptly into a differ-ent form. This problem is related to adjustment: dissatisfaction with acurrency often reflects a lack of faith in the ability of the issuing country toeliminate its balance-of-payments difficulty without resort to a change in itsexchange parity.

"Liquidity" relates to international monetary reserves which are heldby countries to finance temporary balance-of-payments deficits. If worldreserves are too low or too high, or if their rate of growth is inadequateor excessive, a liquidity problem exists. Liquidity needs are closely related toadjustment: the less rapidly and effectively the adjustment process works,the higher the level of reserves needed to finance temporary balance-of-pay-ments deficits, and the less likely it is that any given level of reserves will beadequate.

THE LIQUIDITY PROBLEM

A country incurs a balance-of-payments deficit when its payments toother countries exceed its receipts from them, apart from "settlement items"required to square accounts. The immediate consequence of a deficit isthat the foreign exchange market becomes unbalanced. More of the deficitcountry's currency is supplied than demanded at the existing price of thecurrency, and this will depress the price—the exchange rate. Because oftheir commitment to a fixed exchange rate, however, central banks interveneto limit the fall in the rate. The floor on the exchange rate is within 1 percentof the official parity established by the country in agreement with the IMF.

In order to prevent the exchange rate from dropping below this floor, acountry in deficit must use its foreign exchange reserves to buy the excesssupply of its own currency. If the country has ample reserves, it will havesufficient breathing space to restore equilibrium—without resort to policiesof excessive domestic restraint or direct intervention in external transactions.If reserves are scanty, however, pressures will develop to deal immediatelywith the deficit, even through undesirable means. If a general shortage of re-serves should occur, economic growth could be retarded by widespread defla-tionary policies, and international trade and investment could be burdenedby restrictions. On the other hand, excessive amounts of reserves could un-duly weaken the incentives of deficit countries to adjust, thereby encouragingworldwide inflation.

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TYPES OF RESERVES

Existing stocks of world reserves include gold, foreign exchange, and IMFreserve positions.

Gold is the largest component of reserves, but gold holdings have ex-panded very little for many years; most recently, they have declined. As wasdiscussed in the Council's 1968 Annual Report, nonmonetary demand forgold seems to be absorbing a substantial and increasing share of currentnew production at existing prices.

The value of official gold reserves would be increased if the official priceof gold were raised. This action is explicitly rejected for compelling reasons.Although it would immediately increase world reserves, it could not providethe orderly growth of reserves needed by the world economy. It would grantunearned windfall gains to private speculators, to gold producers, and tocountries holding their reserves mainly in gold; it would encourage specula-tion; and it would divert scarce resources into the production of a metalalready adequately supplied for nonmonetary uses.

The foreign exchange component of reserves grows only if the majorreserve currency countries, the United States and the United Kingdom, incurbalance-of-payments deficits; and if surplus countries are willing to holdmore dollars and sterling. Thus, as the foreign exchange component of worldreserves is expanded, the liquidity position of the reserve currency coun-tries may be undermined. It is generally recognized that the United Statesshould not run large deficits, and policies have been formulated and imple-mented for reaching an acceptable payments position. The United Kingdomalso is determined not to run deficits and has in fact designed its economicpolicy to yield balance-of-payments surpluses in order to retire external debt.To some extent, such debt repayments will actually contract world reserves.

Thus world reserves cannot be expected to grow substantially throughexpansion of official holdings of either gold or foreign exchange. Some lim-ited expansion through normal IMF lending is to be expected. Reservepositions in the Fund are expanded, however, only when countries draw onthe Fund beyond their "gold tranche" or automatic drawing rights. In sodoing, they accept obligations to repay. The natural reluctance of coun-tries to become overcommitted to the Fund or to other countries throughborrowings sharply limits the probable expansion of reserves in this form.

SPECIAL DRAWING RIGHTS

In order to deal with the liquidity problem, steps have been taken tocreate a new international reserve asset, the Special Drawing Right (SDR),as discussed in the Council's 1968 Annual Report. SDR's will be allocated bythe IMF to member countries. They will be a form of owned reserves, usablefor balance-of-payments needs without an obligation of repayment. Theiruse is subject only to the reconstitution provision, which requires that dur-

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ing the initial 5-year period a country's average holdings of SDR's shouldbe at least 30 percent of its average net cumulative allocation over this period.

A draft outline of the proposed arrangements for issuing SDR's was ap-proved at the 1967 meetings of the IMF in Rio de Janiero and subsequentlytranslated into legal form by the Executive Directors of the Fund. InMarch 1968, at a meeting in Stockholm of Ministers and Central BankGovernors of the major industrial countries, a consensus was reached on anamendment to the IMF Articles of Agreement. The amendment was sub-sequently approved by an overwhelming majority of the Board of Governorsof the Fund.

The amendment was then submitted to member countries for ratification,which requires acceptance by 67 member countries (total membership is111) having 80 percent of the voting power in the IMF. By January 1, 1969,the amendment had been accepted by 27 countries representing 47 percent ofthe voting power. Seven countries have taken the further required step ofdepositing with the IMF instruments of participation indicating that theyare prepared to carry out their obligations under the proposed amendment.The United States, acting with overwhelming bipartisan support in theCongress, was the first country to complete both of these steps. When partici-pation has been certified by member countries having 75 percent of totalIMF quotas, the new facility will be established in the Fund.

Resolving the world liquidity problem requires actual creation of SDR's—a major step beyond legal establishment of the facility. The basic decisionslie ahead—namely when to activate the facility and in what amounts. Thesedecisions will require collective judgment concerning the desired growthof world reserves and the portion of that growth which should take the formof Special Drawing Rights.

THE NEED FOR RESERVE GROWTH

The problem of estimating reserve needs has attracted much interest amongeconomists and government officials in the last few years. The neededvolume of reserves depends in part on the probable size of temporarybalance-of-payments deficits which must be financed, because this affectsthe judgment of monetary authorities as to the amounts of reservesthey need to hold. According to findings by the staff of the IMF, the magni-tude of deficits requiring financing has tended to increase at the same rateas the volume of world transactions. This suggests that the prospective growthof world transactions might be a helpful guide to the required growth in re-serves. Since trade in commodities makes up the largest portion of interna-tional transactions and is the one most reliably reported in statistics, it isuseful as an indicator of trends.

The historical relation between the growth of reserves and the growth oftrade (measured by imports) is depicted in Chart 9. Between 1950 and1968 imports increased 7.6 percent a year, while reserves grew at only 2.5percent a year. Thus, in the aggregate, reserves declined quite substantially


Chart 9

World Trade and Reserves

BILLIONS OF DOLLARS (ratio scale)

200 ~

150 -

100 "

WORLD TRADE(ANNUAL IMPORTS)

201950 52 54 56 58 60 62 64 66 68-

.I/ESTIMATES BASED ON DATA FOR FIRST 3 QUARTERS.

NOTE.-TRADE DURING YEAR, RESERVES AT END OF YEAR. DATA INCLUDE YUGOSLAVIA, BUTEXCLUDE U.S.S.R., OTHER EAST EUROPEAN COUNTRIES, MAINLAND CHINA, AND CUBA.SOURCE: INTERNATIONAL MONETARY FUND.

in relation to imports, and probably in relation to the average size of deficits.These over-all results are, however, heavily influenced by the large net declinein reserves of the United States, the world's largest holder. The United Stateswas able to give up these reserves because of its excess holdings at thebeginning of the period. But this loss cannot continue. No other country nowappears to have excess reserves sufficient to replace the United States as awilling and able net loser of reserves.

The relationship between growth of reserves and growth of imports issignificantly altered when the United States is excluded from world totals.Between 1950 and 1968, reserves of countries other than the United Statesgrew 5.6 percent a year, on the average, while their imports grew at 7.8percent.

Some have suggested that reserves in the future should grow at essentiallythe same rate as world transactions—about 8 percent a year—to avoid anyfurther decline in the ratio of average reserves to potential deficits. How-ever, the world economy has been able to adapt to reductions in this ratio inthe past. And a moderate further decline may be appropriate, both becausecountries should have increasing access to borrowed reserves and because

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possible improvements in the adjustment process may reduce the need forreserves.

Some guidance might be derived from the 5.6 percent growth rate ofreserves experienced between 1950 and 1968 by countries other than theUnited States. In any case, a major increase from the very slow growthof the past 2 years is needed. Whatever the desired rate of growth ofreserves, its achievement will depend mainly on the creation of SpecialDrawing Rights, since other components of total reserves, as noted above,are unlikely to expand significantly.

While it is still too early to make a decision about the proper size of theinitial issue of SDR's, amounts of $1 billion or $2 billion a year—which havebeen used as illustrative examples of SDR creation—appear to be inade-quate. These amounts imply a rate of reserve growth of only about 1.4 to 2.8percent. With such slow growth, the SDR facility might fail to achieve itsobjective of avoiding a destructive competition for reserves.

THE CONFIDENCE PROBLEM

Shifts in confidence can be reflected in two ways: through actions ini-tiated in the private economy and through actions by governments. Privateholders of liquid assets constantly adjust the composition of their holdings.When they decide to shift from the financial assets of one country to thoseof another—a process described for simplicity as shifting from one cur-rency to another—either exchange rates or official reserve holdings orboth are affected. In addition, shifts by private holders between currenciesand gold can have an impact on monetary stability, although the significanceof such shifts has been substantially altered by the gold accord reached inWashington in March 1968.

PRIVATE SHIFTING AMONG CURRENCIES

Some shifts by private holders out of one currency into another aremerely responses to differentials in short term interest rates. Other shiftsamong currencies may be induced by the expectation of, or anxiety about,a change in exchange rates—and thus can be viewed as reflecting changesin confidence. Such speculative movements occur when the payments andreserve positions of some countries create significant uncertainties thatexchange parities will remain fixed. Speculative capital flows can resultfrom direct sales of the suspect currency for stronger ones, or through theoperation of the so-called "leads and lags" mechanism, under which normalcommercial disbursements denominated in foreign currency are acceleratedwhile receipts denominated in domestic currency are delayed. (This was animportant element in the 1968 French crisis.) A crisis of confidence canseverely deplete the monetary reserves of a nation. Flows of this kind canbe very large—up to $1 billion in a single day.

Crises resulting from shifts of confidence have occurred from time to


time. At different times in 1968, the Canadian dollar, the British pound,and the French franc were under downward pressures, and the Germanmark was subjected to upward pressures. As international businesses andfinancial institutions have matured, additional currencies have been broughtinto wide international use. Thus the number of currencies potentially sub-ject to such crises has increased.

It is quite appropriate that countries should borrow reserves, if necessary,to deal with temporary emergencies of this kind. The "swap network"has traditionally provided lines of credit among central banks for thispurpose; it was expanded and enlarged during 1968. Further improve-ments could be made in central bank borrowing procedures through a pro-posal whereby speculative funds would be immediately "recycled"—re-turned to countries suffering losses from countries experiencing gains.

Even if generous lines of short term credit are available, they leave coun-tries vulnerable, because crises may be long lasting. Lenders or borrowersmay be reluctant to renew loans, fearing overcommitment. Fortunately, inrecent years, improvements in cooperation among the central banks and inthe procedures of the IMF have reduced such fears.

However generous borrowing facilities may be, they cannot deal fully witha crisis of private confidence that arises from a major disequilibrium in theunderlying balance-of-payments position of a country. In such circum-stances, prompt and decisive measures to achieve a basic adjustment are thekey to the restoration of confidence. But the requirements for adequate ad-justment are aggravated when a loss of confidence imposes a heavy drain onreserves.

PRIVATE DEMAND FOR GOLD

Private asset holders may respond to a loss of confidence in a currencyby buying gold rather than other currencies, particularly when the choice ofa "safe" foreign currency is not obvious. Gold speculation is rather commonin many countries, although not in the United States where it is illegal.Private imports of gold can be an important channel for currency flight andthus become a claim on a country's reserves. Furthermore, because the priceof gold in the private market is sometimes used by speculators as a barometerof confidence in currencies, increases in that price can intensify currencyruns.

While governments still retain some concern over private demands forgold, they are now much less directly involved than prior to March 1968. Forthe preceding 7 years, countries participating actively in the "gold pool" hadstabilized the price of gold in the private market in London by buying andselling near the official price of $35 an ounce. In March 1968, these countriesagreed to discontinue their activities.

Prior to 1966, the pool was a net purchaser of gold, and the resultingadditions of gold to monetary reserves strengthened the international mone-tary system. Subsequently, however, the pool became a substantial net

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seller, parting with gold out of monetary stocks to keep the price fromrising. Following British devaluation in late 1967, and in the early monthsof 1968, the volume of net gold sales became a serious drain on inter-national monetary reserves. Moreover, the market took on a highly specula-tive tone. Several large and irregular waves of gold purchases had destabiliz-ing domestic monetary effects in certain countries and transmittedspeculative fever to foreign exchange markets.

In March, the active gold pool countries agreed to cease selling gold in theprivate market, and agreed that purchases of gold from the private marketwere no longer necessary. They obtained the cooperation of other centralbanks in this decision. As a result, the international monetary system hasbeen substantially insulated from the destabilizing effects of changes in theprivate demand for gold, and gold can no longer be drained from monetarystocks into private uses.

SHIFTS AMONG OFFICIAL RESERVE ASSETS

Problems may arise if monetary authorities decide to shift their holdingsabruptly among the various reserve assets. They may shift for political orother reasons, but they are often motivated by changes in the relativedegrees of confidence attaching to the future values of these assets. Forexample, if official holders, fearing a sterling devaluation, were to shift intodollars, the United Kingdom would be forced to give up some of its inter-national reserves. Likewise, if official holders of dollars decided to convertthem into gold, the United States would lose some of its reserves. Crises ofconfidence may feed on themselves; for example, a significant decline inU.K. reserves could further weaken the confidence of both official andprivate holders of sterling.

Shifts out of officially held sterling by sterling area countries became aserious problem following the British devaluation of November 1967. Thegreat majority of the sterling area countries did not devalue along with theBritish; thus the purchasing power of the reserves of sterling holders wasreduced in terms of their own currencies as well as in dollars. This loss ledto a movement toward reserve diversification which became particularlypronounced in the spring of 1968.

In recognition that the burden of such reserve diversification should not beborne by the British alone, 12 industrial countries, including the UnitedStates, together with the Bank for International Settlements, set up a new$2 billion loan facility in September 1968. It was designed to provide financeto Britain to replace reserves lost as a result of the decline of sterling bal-ances within the sterling area. The BIS will act as an intermediary and willobtain the required funds by borrowing in international markets, by accept-ing reserve deposits from central banks of the sterling area, and by callingupon standby lines of credit provided by the cooperating countries. TheUnited Kingdom has given a dollar-value guarantee to the sterling area on


eligible official sterling reserves, and the sterling-area countries in return haveundertaken to maintain an agreed proportion of their reserves in sterling.The new facility should go far toward moderating the sterling diversificationproblem.

Some observers have pointed to the possibility of large-scale conversionsof dollars into gold by central banks. The likelihood of such an abrupt shiftof preferences must, however, be viewed in perspective. There are severalreasons why countries choose to hold dollars. Dollars are useful becausethey can be readily employed in exchange markets and are more easily putto use in emergencies than gold. Countries recognize that they can convertdollars to gold as they see fit, although they may at times refrain from goldconversions through a cooperative desire not to weaken the internationalmonetary system by reducing total world reserves. Dollars—unlike gold—earn interest, and the efficient American money and capital markets makeinvestment easy. Thus there is and should continue to be a strong demandfor dollars by central banks.

Some central banks have a preference—arising mainly from tradition—infavor of gold as a reserve asset. They often appear unconcerned about earninginterest on reserves, perhaps because their income is usually turned over totheir national treasuries.

When dollars are acquired by countries with a preference for gold fromcountries with a preference for currencies as reserves, conversions into goldmay occur. This could happen even with no increase in total dollars heldabroad and no shift in general sentiment toward gold or away from thedollar. Furthermore, as world reserves grow, there would be a demand foradded gold if countries attempted to maintain their "traditional" ratios ofgold to total reserves. However, countries recognize that gold will decline asa proportion of total world reserves. And as the SDR agreement indicated,they seem prepared collectively to adjust the composition of their reserveholdings.

Preferences that now exist among sterling, dollars, and gold couldbecome more complicated as SDR's are added, thereby creating further pos-sibilities for shifts in the composition of reserves. Certain safeguards, how-ever, were provided in the plan: the power given the IMF to direct SDR'sto various holders was designed to prevent inadvertent destabilizing shiftsfrom SDR's into other types of reserves. Furthermore, additional SDR'scould be created to offset world reserve losses arising from shifts amongreserve assets.

PROPOSALS FOR IMPROVING RESERVE MANAGEMENT

It has been suggested that agreement on mutually acceptable rules ofreserve management might help to avoid destabilizing changes in reservecomposition. If deficit countries used each of their reserve assets in pro-portion to its share in their total holdings, and if surplus countries were

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willing to accept and hold different types of reserves in the exact propor-tions made available, the system would be internally consistent. Beforesuch rules could be endorsed, their workings would need to be examinedand agreed upon in detail.

A more sweeping suggested reform would be to eliminate the differencesamong reserve assets. Countries could combine all their reserves by deposit-ing them in a joint account, which would be drawn upon when reserves wereused. Such a scheme was discussed in the September 1968 Report of the Sub-committee on International Exchange and Payments, of the Joint EconomicCommittee (JEC) of the Congress. In an examination of proposals ofthis kind, many questions arise which would require careful study: Whatwould be the role of the United States? Would participation be voluntaryor compulsory? Would countries be permitted to withdraw from the pool?In view of the progress already made in dealing with world liquidity and instrengthening international cooperation, how urgent is such a major reform?

THE ADJUSTMENT PROBLEM

The Bretton Woods system was designed to correct the weaknesses in theinternational monetary system that were apparent in the interwar years.Faced with domestic economic collapse during the 1930's, some countriesattempted, by deliberately undervaluing their currencies, to stimulate ex-ports, retard imports, and thus add to employment. But one country's gainwas another country's loss. Competitive devaluations, and restrictions onexchange and trade, imposed a heavy toll on international commerce.

The postwar economy was built upon the general understanding that fullemployment would be the target of national economic policies, and that thisgoal would be sought primarily through domestic monetary and fiscal poli-cies. It was also expected that excessive price increases would normally beavoided. In the absence of both chronic deflation and chronic inflation, con-tinuous balance-of-payments problems were viewed as unlikely. The IMFwas to help in the adjustment process by granting credit to allow countriestime to adjust without parity changes.

Provisions were included to put pressure on surplus countries to take anappropriate part in the adjustment process—for example, the "scarce cur-rency" clause, which permits discrimination in trade against persistent sur-plus countries whose currencies are formally declared to be scarce. Underthese conditions, a system of stable exchange rates was expected to operatesuccessfully and to stimulate international trade and capital movements,while removing the temptation for governments to solve domestic problemsby external means.

Although pegged parities were made the normal operating rule of thesystem, provision was also made for changing parities to correct fundamentaldisequilibria. The meaning of "fundamental disequilibrium" was not fullyclarified, but the expectation at the time was that changes in parities wouldnot be unusual. Actually, parity changes for developed countries have been

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rare. In part, this is because major countries have been reasonably successfulin avoiding excesses of inflation and deflation; but it also reflects concernabout the serious economic and political consequences of changes in the par-ities of major currencies, including the possibility of a worldwide chainreaction. Furthermore, greater freedom for international capital transactionshas complicated the process of changing parities.

CAUSES OF DISTURBANCES

Despite the real accomplishments of stabilization policies, the internationaleconomy has been subject to disturbances. Some have been caused by therelatively mild cyclical fluctuations that have occurred, and others by differ-ences among countries in long term trends of prices, economic growth, tech-nological advance, and import demand. Countries differ with respect tothe maximum rate of price increase—or the maximum volume of idleresources—that they view as tolerable. In general, a country incurring priceincreases greater than the average of other countries will find its exportsbecoming less competitive and its domestic market more accessible to imports.Countries which grow particularly rapidly tend to experience stronger in-creases in imports (although they may simultaneously improve the compet-itive position of their exports). Or a country may experience long termdeterioration in its external position if its demand for imports is more re-sponsive to income growth than is the demand for its exports. These factors,singly and in combination, have led to some serious imbalances.

Adjustment problems may also reflect, in part, an insufficient growth ofglobal reserves. When over-all reserves are growing only slowly, there canbe acute pressures on deficit countries to adjust. At the same time, surpluscountries may find that their reserves are not accumulating too rapidly;hence they may have little incentive to correct their imbalances. A worldshortage of reserves could particularly complicate the adjustment problemof the United States, subjecting it to intense pressures from other countriesin weak payments positions or from countries not satisfied with their reserveholdings. The United States might literally be prevented from correctingits balance-of-payments deficit, because every improvement in the U.S.position would cause some other countries to take protective actions tocounter any weakening of their own positions.

There are a number of means open to a country for correcting balance-of-payments disequilibria without altering its exchange rate. These meansdiffer in speed, in effectiveness, and in their side effects. They include inter-nal measures such as fiscal and monetary policies, together with supportingincomes, manpower, and regional policies; and direct measures affectinginternational movements of goods, services, or capital.

INTERNAL ADJUSTMENTS

Often the domestic policies which would contribute to balance-of-pay-ments adjustments are also desirable for domestic reasons. Thus if a country

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faces a balance-of-payments deficit and rapidly rising prices, it should followtighter monetary and fiscal measures, supported by incomes policy to helprestrain wages and prices, both to improve its trade balance and to curbinflation. Indeed, one argument sometimes made in favor of a system offixed exchange rates is that balance-of-payments deficits stiffen the resolveof governments to achieve price stability. Conversely, if high levels of un-employment are accompanied by payments surpluses, expansionary domesticpolicies are clearly indicated.

However, a country may face a balance-of-payments deficit at a timewhen domestic demand is not excessive. It will then be understandably re-luctant to attack its payments problem by restrictive monetary and fiscalpolicies. The opposite problem may arise if a payments surplus occurs whenthe domestic situation calls for anti-inflationary policies.

While the situations of surplus and deficit countries are symmetrical, in-centives to adjust may not be equally strong in the two cases. There is no def-inite limit on the accumulation of reserves, so surplus countries often areunder little pressure to restore equilibrium. But for deficit countries whosefreedom of action is constrained by a limited supply of reserves, pressures totake corrective action may become inexorable. If real progress is to be madein achieving a better balance of world payments, it is crucial that surpluscountries participate in the adjustment process, as was indicated in the 1966Report on the Balance of Payments Adjustment Process by Working PartyNo. 3 of OECD.

Changes in the Policy Mix

There are some opportunities to mitigate conflicts between internationaland domestic goals by altering the mix of monetary and fiscal policies. Byinfluencing interest rates, monetary policies have direct effects on capital flowsas well as on domestic demand. If a country has a balance-of-paymentsdeficit and a satisfactory or inadequate level of domestic demand, fiscal policymay be eased and monetary policy simultaneously tightened. This combina-tion can, in principle, avoid any reduction of internal demand, and capturethe benefits of tighter money in reducing capital outflows or attractingforeign capital. Thus it may be possible to improve the balance of paymentswithout adding to unemployment. The reverse combination of policies maybe used by countries facing the surplus-inflation dilemma.

While changes in the mix of monetary and fiscal policy have significantpossibilities, and they can be reinforced by appropriate incomes and man-power policies, such adjustments cannot always be relied upon as an escapefrom major conflicts in objectives.

Some of the balance-of-payments gains resulting from interest rate adjust-ments may be temporary. A change in interest rates may initially cause in-vestors to make large adjustments in the composition of their existing port-folios of financial assets. Once this initial stock adjustment is completed, how-ever, further gains from this source may be quite small.

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There are limits on the willingness of countries to alter the mix ofmonetary and fiscal policies. A deficit country may hesitate to raise in-terest rates, fearing that such a move would deter capital formation andthereby curtail the improvement in productivity that may be a basic solu-tion to its balance-of-payments difficulties. Or high interest rates may be ob-jectionable because of their uneven impact on the domestic economy. Or agrowing level of foreign indebtedness may be undesirable because it will in-crease the burden of service payments.

Finally, increases in domestic interest rates may lead to higher interestrates abroad. In that event, the differentials between foreign and domesticrates may diminish, weakening the impact on capital flows. In the absenceof international coordination of monetary policies, efforts by deficit coun-tries to tighten credit may lead to a worldwide escalation of interest rates.This may not only impede the immediate objectives of the deficit countriesbut may also dampen world economic growth. Clearly, the adjustmentmechanism could benefit from a continued strengthening of internationalcooperation in this area of policy.

Thus there are often important limitations on the practical scope for ad-justments in the monetary-fiscal mix as a means of reconciling domestic andinternational objectives. One important principle stands out. In a countrywith a serious balance-of-payments problem, the use of monetary policy forexpansionary domestic purposes may be severely constrained; and primaryreliance may therefore have to be placed on fiscal policy to pursue stabiliza-tion objectives. In the United States and in many other countries, thisimplies the need for greater speed and flexibility in the implementation offiscal measures.

MEASURES DIRECTLY AFFECTING INTERNATIONAL TRANSACTIONS

In the OECD Adjustment Process report, it was recognized that fiscaland monetary policies, no matter how skillfully combined, cannot alwaysbe relied upon as the exclusive means of balance-of-payments adjustment.Given the many goals of economic policy, numerous instruments are needed.Under some circumstances, the report suggests the use of measures directlyaffecting international transactions.

Most countries do make use of specific measures affecting trade or capitalmovements as part of their adjustment. These policies may help to reconciledomestic and international objectives. Such measures as import duties orquotas, export subsidies, changes in border taxes, and taxes and prohibitionson international capital movements offer opportunities for improving thepayments balance while avoiding major effects on the domestic economy.Some of these measures, such as special tariffs and export subsidies,are prohibited by the GATT, but their use has at times been sanctioned, im-plicitly or explicitly, so long as they were considered temporary. Likewise,exchange controls on current transactions are generally discouraged for

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countries accepting the full obligations of convertibility in the IMF, butspecific authorizations have been granted under emergency conditions.

Trade Measures

The only trade measure explicitly condoned by the GATT for safe-guarding the balance of payments is the use of temporary quantitative re-strictions. Quotas on imports can be a very powerful instrument. But theycan be very disruptive of normal commercial arrangements, troublesome toimpose and administer, and difficult to abandon. Over the last few years,developed countries have shown a growing preference for the use of importsurcharges, export subsidies, or combinations of the two.

At times, countries change their normal pattern of tax adjustments at theborder in an attempt to promote balance-of-payments equilibrium. When adeficit country is taking only partial advantage of its opportunity under theGATT to make border adjustments for domestic indirect taxes, it can help it-self by moving to full compensation. However, such action by a surpluscountry conflicts with the policies that should be followed for balance-of-pay-ments adjustment. For example, on January 1 and July 1, 1968, in conjunc-tion with an internal tax reform, the German government raised its rateof border adjustment. This tended to increase the German merchandisesurplus—much as a small devaluation of the mark would have done—andat a time when Germany's balance-of-payments position was very strongindeed.

Another example of a change in a domestic tax which permitted an increasein border adjustments was the action taken by the French government inNovember 1968. A rise in value-added taxes, which are eligible under theGATT for border adjustments, was substituted for the existing payroll tax,which was not eligible. In this case, the aim of the increase in border adjust-ments was to help restore over-all payments equilibrium.

Also in November, the German government reduced by 4 percentagepoints its border charge on most imports and its tax rebate on most exports,without any corresponding domestic tax changes. This measure was takendeliberately to reduce the large German trade surplus and had effects some-what similar to an upward valuation of the mark.

When countries resort to trade measures to affect their balance-of-pay-ments positions, efforts should be made to minimize distortions. General im-port charges imposed by themselves favor production for the domesticmarket, thus shrinking the volume of international trade, while generalexport grants alone unduly favor production for export. When general im-port charges are combined with general export grants at the same rate,these two tendencies offset each other, with no more distortion of merchan-dise trade than would result from a devaluation.

Even such a uniform and general combination of import charges and ex-port grants would distort the choice between merchandise transactions andother international flows, such as tourism. Furthermore, serious misalloca-

141323-166 0—69 10


tions could occur if exemptions were given individual industries or classes ofproducts. Finally, even under the best of circumstances, temporary trademeasures may in practice become embedded and thus should be used withgreat caution. Nevertheless, this approach may be useful under some condi-tions. It should be explored further to determine whether proper safeguardscan be established to ensure that equal use is made by surplus and deficitcountries, and that the goals of liberal commercial policy are maintained.

Capital Account Measures

All major countries take actions at times to influence international capitalflows. The techniques employed range from special incentives for domesticinvestment to exchange controls and capital issues committees. There issome rationale for concentrating on the capital account, since fewer basicadjustments in the allocation of real resources are required by shifts infinancial flows than by changes in trade. And measures to influence the capi-tal account are generally more easily reversed in response to shifting balance-of-payments fortunes.

Sometimes, however, restraints on capital movements develop into apatchwork of controls that involve major administrative difficulties, beardown unevenly and inefficiently on different types of capital flows, andcreate a search for loopholes. The distortions can be reduced to the ex-tent that restraints can be applied more equally among categories of capitalflows and interference can be minimized within any particular category.

There may be opportunities to make greater use of the price system byapplying variable taxes to capital flows or by auctioning permits to exportcapital. While the allocation of capital might be improved and administra-tive burdens eased by innovations in the techniques of controlling capitalflows, any system of major restraints is bound to be far from ideal. Thepossible need for temporary direct measures on the capital account must berecognized, but so should the long term benefits of greater freedom in capitalflows among nations.

THE ADJUSTMENT PROBLEM OF THE UNITED STATES

The difficulties of balance-of-payments adjustment for deficit countriesare evident from the recent experience of the United States. In the early1960's, the United States was faced with a payments deficit at a time whenits economy was operating far below capacity.

The causes of the deficit were numerous. The United States was shoulder-ing an extraordinarily large share of the burden of providing for the securityof the Free World and of supplying aid to less developed countries. TheUnited States possessed the only large and sophisticated capital market inwhich foreigners could borrow freely, and the European countries hadadvanced to the point where they desired capital and could attract it. More-over, because of Europe's general economic progress and the formation ofthe EEC and the European Free Trade Association, American companies

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had developed an intense interest in making direct investments there. Finally,the U.S. competitive position had deteriorated during the 1950's.

The Over-All Strategy

In the early 1960's, U.S. domestic needs called for expansionary policies,while traditional balance-of-payments remedies would have required greaterrestraint on demand. To reconcile this conflict, a mixed strategy was fol-lowed. It emphasized those elements in the domestic expansion whichtended to improve international competitiveness, together with specificmeasures of a temporary nature to influence the external position. Theselection of balance-of-payments measures reflected several concerns: thedetermination to maintain, as far as possible, liberal policies with respectto international trade and capital flows; the desire not to shift problemsto countries in a weak balance-of-payments position; and the need to main-tain the stability of the international monetary system, which was so cruciallydependent on the dollar. Further difficulties in designing appropriate bal-ance-of-payments measures arose from uncertainty over how much correctionwas needed, from the unpredictability of the immediate quantitative impactof particular actions, and from the large and uncertain "feedback" effectsinherent in the large size of the United States.

Some policies were clearly desirable on all counts, such as improvingknowledge with respect to export prospects, trimming unnecessary govern-ment expenditures abroad, encouraging other industrial countries to givelarger amounts of aid to less developed countries, pressing for a moreequitable sharing of military burdens, and removing a tax penalty onforeigners trading in American securities.

Reducing the Impact of Government Activities

A further group of measures to reduce the foreign exchange costs of U.S.military and foreign aid required more difficult decisions. In principle, sav-ings of foreign exchange in the military area could have been pursuedthrough three alternative strategies: (1) reducing the level of security, (2)obtaining increased contributions of military forces from other countries, or(3) reducing, offsetting, or neutralizing the foreign exchange costs of a main-tained level of U.S. military effort. The first alternative was ruled out. Thesecond was pursued but with little immediate prospect of success. Thus thethird became the approach emphasized in the short run. Domestic producerswere given a preference over foreigners in supplying defense needs, at someadded cost to the Federal budget. Foreign governments were urged to pur-chase more of their military equipment in the United States. In recent years,special U.S. Treasury bonds have been sold to countries to neutralize theirbalance-of-payments inflows from U.S. military expenditures.

Reducing the foreign exchange costs of U.S. aid presented an equallydifficult choice. Either the amount of foreign aid had to be reduced, or a

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method had to be found to ensure that more of the money provided by theUnited States was spent in this country. The second alternative—aid-tying—was chosen. This tended to reduce the effectiveness of a given dollar amountof aid, but the alternative of slashing the volume of aid would have beeneven more costly to recipient countries.

Restraining Capital Outflows

While gains were obtained through these measures in the early sixties, theover-all payments problem was intensified by a major increase in privatecapital outflows. Faced with an apparently insatiable demand for capitalabroad, the United States had the choice of raising domestic interest ratesenough to price foreigners out of our market, of taxing foreign loans specifi-cally, or of using direct controls to stop capital outflows. The first alternativewas inconsistent with domestic needs for economic expansion. The secondalternative was chosen when the Interest Equalization Tax (IET) wasproposed in 1963. It substantially reduced foreign portfolio investmentsby Americans, except new security issues from Canada and investments inless developed countries, which were exempted. But demand for capitalshifted to American banks, so the IET was extended to longer term loansof banks. Other types of bank loans and direct investment were not coveredby the tax, and these forms of capital outflow kept expanding.

In response to a large outflow of capital at the end of 1964, voluntaryprograms were initiated in February 1965 to cover the major remainingcapital flows. The American corporations which were large direct investorswere asked to help by reducing their capital expenditures abroad, by relyingon foreign financing for a greater share of their investments, or by expand-ing reflows of dividends to the United States. Banks and other financialinstitutions were meanwhile asked to follow guidelines established by theFederal Reserve Board which suggested quantitative limits on foreignlending.

Most, if not all, of these measures have been successful in achieving theobjectives for which they were designed. The basic balance-of-paymentsposition improved through 1964 and 1965, and the liquidity deficit wassharply reduced. Further progress was interrupted in 1966 by the mountingforeign exchange costs associated with the war in Vietnam and by the re-duced trade surplus resulting from overly rapid domestic expansion.

Because the U.S. external position deteriorated sharply late in 1967and the stability of the international monetary system seemed in seriousdanger, a new set of measures was proposed by the President on January 1,1968. This program included mandatory restrictions on foreign direct invest-ment, further tightening of the guidelines on lending by banks and otherfinancial institutions, and various other steps to reduce the deficit. The pro-gram was successful. As noted in Chapter 1, the balance of payments has im-proved. In particular, American direct investors have managed to finance a

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much greater proportion of their investments abroad by foreign borrowing,and there has been a net reduction in U.S. bank credit to the rest of theworld.

With the exception of more timely action to assure adequate domesticrestraint in recent years, it is hard to see, even in retrospect, any preferablestrategies in U.S. policies to correct the deficit. The eclectic, ad hoc measuresthat were taken involved certain costs. But they maintained the strength ofthe dollar and the health of the world economy. More basic improvementslie ahead—pending peace and the restoration of price stability.

EXCHANGE RATE ADJUSTMENTS

An efficient international adjustment mechanism should permit coun-tries to choose their own domestic economic targets for growth, employ-ment, and price-cost performance. Policies that restore balance at homeshould not lead to pressures on the international accounts—in the form ofeither excessive accumulation or rapid depletion of reserves.

Suggestions have been put forward for amending the adjustment mecha-nism to lessen the conflict between domestic and balance-of-paymentsobjectives. It is claimed by some that greater reliance on changes in exchangerates would work in this direction.

PRESENT SYSTEM

Present IMF rules provide for adjustments of exchange parities as ameans of correcting a fundamental disequilibrium. In practice, however,the process of exchange rate adjustment may involve major difficulties; andin consequence, there is often extreme reluctance to change exchangerates even when balance-of-payments difficulties are severe.

To illustrate, the currency of a country with a large and persistent deficitwill become widely recognized as a candidate for devaluation and this maytouch off a crisis in private confidence, as discussed above. Speculation basedon the prospect of devaluation will aggravate the initial balance-of-paymentsdifficulties and increase the outflow of reserves. To discourage such specu-lation, governments tend to make categorical assertions that devaluation isnot being considered; once such assertions have been made, it becomes amatter of national pride and political reputation to maintain the parity.

Furthermore, an actual adjustment in an exchange rate may generate theexpectation of a further change; once an exchange parity has been adjusted,a second adjustment seems less unthinkable. Fear of such a perverse reactionmay cause a country to depreciate by an excessive amount in the first in-stance. This may lead other countries to devalue also, thus reducing thepotential balance-of-payments gain of the initiating country. Such a chainreaction can severely disrupt foreign exchange markets. Thus the difficulties

*45


associated with parity adjustments have at times driven countries to committhemselves to existing parities in all but the most extreme situations.

PROPOSALS FOR EXCHANGE RATE FLEXIBILITY

A number of suggestions—ranging from minor adjustments to far-reachingchanges—have been made for altering the current exchange rate arrange-ments of the IMF.

The most sweeping change, advocated primarily by some academic econ-omists, would be to abandon the pegged exchange system in favor of "floatingrates," completely free to fluctuate in response to market forces.

In contrast, other proposals call for a modest widening of the existing 1percent limit on fluctuations of rates on either side of parity. Still anothertype of proposal would provide for small but frequent changes in parities.

Each of the proposals is intended to make adjustments in exchange ratesa more acceptable and effective means of correcting payments imbalances,and to reduce the speculative disturbances that sometimes develop underthe present system. Opinions differ widely over the probable effects of thevarious proposals; intensive study would be required before seriousconsideration could be given to the adoption of any of them. The dramaticadvances in world trade and prosperity achieved under the present systemprovide a strong case for conservatism in considering innovations; at thesame time, the recurrence of financial strains has aroused widespread inter-est in possible amendments to the system.

In general, the wider the latitude for changes in exchange rates, thegreater would be the amount of adjustment provided; but also the greaterwould be the uncertainty of those engaged in international commerce andthe possibility of a disturbance to trade and investment relationships.

Floating Rates

While a system of floating exchange rates would ensure essentially auto-matic adjustment to balance-of-payments disturbances, serious questionsarise about its operation.

Advocates of flexible exchange rates are divided on whether officialintervention in exchange markets should be permitted. A complete banon official intervention would be a very radical change, obviating any needfor central banks to hold international reserves. Exchange rates might fluc-tuate quite widely, causing substantial uncertainty. If, on the other hand,official intervention were permitted under a system of floating rates, it mightsmooth out transitory fluctuations in exchange rates, but it would open upthe danger of exchange rate manipulation. For example, a government mightwish to drive down the price of its currency in order to strengthen the com-petitive position of its exports. It is difficult to devise rules which would per-mit desirable smoothing and yet ban manipulation.

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In general, fluctuating exchange rates would require shifts of resourcesamong industries that export, those that compete with imports, and others,as relative prices in world markets reflected changes in exchange rates. More-over, uncertainty about future exchange rates would concern internationaltraders and investors. They could obtain some insurance by entering forwardexchange markets, buying or selling foreign currencies at definite prices fordelivery at some specified future date. But such forward transactions mightbe quite expensive and thus add to the costs of world trade. Furthermore,international investors might not be able to satisfy their needs for protectionin forward exchange markets, given the long time horizon of many capitaltransactions.

Advocates of floating exchange rates believe that the benefits outweighthe costs of these uncertainties. They point out that uncertainty about ex-change rates is not unique to a system of floating rates. Indeed, no feasibleinternational system can guarantee against exchange rate adjustments. More-over, they emphasize that international businessmen live with many uncer-tainties, both political and commercial. Finally, it is their contention—notuniversally accepted—that, under floating rates, there would be an easingof pressures for exchange controls and trade barriers.

The adoption of floating exchange rates would constitute a drasticchange in the international monetary system. If the present system werefunctioning very badly and if no other possibility of reform were available,there might be a compelling argument for adopting this one; but such isnot the case.

Wider Bands

Under present arrangements, day-to-day market pressures can be reflectedin small fluctuations of each exchange rate within a narrow band. Centralbanks of countries other than the United States intervene in the market bybuying and selling foreign exchange to keep the dollar prices of their cur-rencies within 1 percent or less of established parities. The United Statesrounds out the system by selling and buying gold in dealings with centralbanks at $35 an ounce. Proposals have been made by the JEC Subcommitteeon International Payments and by others to introduce greater flexibilityof rates by widening the permissible band of fluctuation around the parvalue. With a band of 2 percent on either side of parity, the exchange ratebetween two nondollar currencies could change by as much as 8 percent.Suggestions for a wider band, like other proposals for greater flexibility in ex-change rates, are not directed at the official price of gold. The latter is notan exchange rate. There is no need whatsoever for it to be altered to accom-modate greater flexibility of exchange rates.

A widening of exchange rate bands could contribute to the adjustmentprocess. The currency of a country with an incipient deficit would fall inprice, thus making imports more expensive and lowering the cost of exports

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to buyers in world markets. Imports would be discouraged and exports stim-ulated, strengthening the balance of payments. If the exchange rate ap-proached the floor with its future course expected to be upward, the stimulusmight be particularly strong; there would be an incentive to take advantageof the temporary low price of the country's exports.

Advocates of a wider band believe that it might deter speculative runs intwo ways. First, the additional adjustment permitted by the wider bandmight make discrete changes in parities appear less likely, thus reducing un-certainty. Second, a wider band would increase the potential loss on a"wrong bet" against a currency. Under the present narrow band, the specu-lator has relatively little to lose if he bets against a currency and it is notin fact devalued. With a wider band, the risk of loss would be increased,because a currency that was initially under pressure could experience a largerrebound in price. There is, however, no concrete basis for estimating theextent to which these features would deter speculation.

The wider the band is made, the greater the potential uncertainty aboutthe course of exchange rates, but also the greater the amount of balance-of-payments adjustment which may take place within the band. In an evalua-tion of a wider band, these conflicting considerations would have to beweighed in determining its optimum width. A very wide band comes closeto a floating exchange rate and thus shares the shortcomings of this drasticreform. A small widening of the band, on the other hand, might notmarkedly reduce the need for, and the expectation of, discrete changesin parity.

Gradual Adjustment of Parities

The evolution toward greater exchange rate flexibility could involve agradual, limited adjustment of exchange parties. Two forms of the so-called"crawling peg" have been proposed, one discretionary and one automatic.

Under the discretionary variant, a country in disequilibrium would nolonger make one substantial change in its parity, but rather would announcea rate of increase (or decrease) in its parity of some specified small per-centage per month, until further notice. Once the desired effect had beenattained, the country would halt the process. This might make thetransition to an equilibrium parity easier, and perhaps curb speculation. Itseffect on the political obstacles to changes in parities is not entirely clear;governments might find it just as painful to announce a parity change in aseries of small steps as in a single abrupt one. The discretionary crawlingpeg might therefore be used no more frequently than the present "ad-justable peg."

The automatic form of gradual adjustment would remove parities fromthe direct control of individual countries. Under one variant, the parityon any business day would be the average of the actual exchange rates overthe preceding 12 months (or some other suitable period). The actual ex-change rate would be within a band around the parity prevailing on that

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day, with official intervention permitted only at the floor or ceiling. For aperiod of 1 year and a band of 1 percent, the largest possible changein the parity—attained only if a currency were continuously at its flooror ceiling—would be 2 percent a year. Larger or smaller potential changescould be permitted by adopting a different period for calculating the movingaverage, or by altering the width of the band. Again an optimum choicewould depend upon the importance of certainty about future exchange rates,on the one hand, and on the speed of balance-of-payments adjustment to bepermitted through the crawling peg, on the other.

Unlike fully flexible rates, the crawling peg would not be intended tooffset all cyclical and random fluctuations in international transactions; but,unlike a widening of the band, it would permit sizable changes in exchangerates over the long run. Thus it could cope with the problem of modesttrends in the equilibrium values of currencies resulting from divergentnational trends of prices, economic growth, export supply, import demand,or investment flows.

It might seem that, if a currency showed fundamental weakness andwas therefore expected to move downward for an extended period,speculation would become a problem because of the predictability of theexchange rate movement. This kind of speculation could, in principle, beavoided by raising interest rates above the otherwise prevailing level by anamount equal to the anticipated rate of downward crawl of the currency.The exchange gain from moving out of the currency would then be offset bythe loss of interest. Such changes in interest rates might, however, necessitateoffsetting adjustments in fiscal policy and, as discussed earlier, markedchanges in the policy mix are sometimes difficult to achieve. Limits ontolerable interest rate changes would thus be one constraint on the speed ofparity adjustment which could be permitted in such a system.

The various proposed modifications in the exchange rate system raisemany difficult technical issues, and clearly a proper evaluation of theseproposals must be preceded by a great deal of careful study.

CONCLUSION

By far the most important attribute of the postwar international economyhas been steady and rapid growth. The spectacular nature of recent inter-national monetary disturbances should not obscure the mighty contributionthat the international economic system has made to world prosperity. World-wide flows of goods and investments have been the cornerstones on whichthe prosperity of many nations has rested; at the same time, the growthof national economies has made possible the tremendous increases in worldtrade and international investment.

Trade is the center of the international economic system, and it cannotprosper in the face of highly restrictive national policies. Only a continuous

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chipping away at tariffs and other trade barriers can provide assuranceagainst backsliding. Pressures for protection must be successfully resisted.

The fruits of unprecedented prosperity are still not being fully shared bymany nations in Africa, Asia, the Middle East, and Latin America. Thefuture growth of these nations must be built primarily on the skills, intelli-gence, and labor of their citizens. But the developed countries must facilitatethe process by providing technical assistance, capital resources, and accessto markets.

The international monetary system established at Bretton Woods anddeveloped through the years has made a major contribution to interna-tional economic growth. This system has served the world well, but it hasincreasingly been subject to serious strains.

To ensure the continuing smooth operation of the monetary system, workmust go forward on the problems of liquidity, confidence, and adjustment.Great progress has been made in recent years as exemplified by the agree-ment creating Special Drawing Rights. This achievement required carefulstudy and long negotiations. Similar extensive efforts will be needed in thefuture if progress is to be maintained, but the prospects for eventual successare bright.

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Chapter 5

Combating Poverty in a Prosperous Economy

. . . the policy of the United States [is] to eliminate the paradox ofpoverty in the midst of plenty in this Nation by opening to every-one the opportunity for education and training, the opportunityto work, and the opportunity to live in decency and dignity.

FOR OVER 4 YEARS the United States has had an explicit nationalcommitment to eliminate poverty in our society, a commitment enun-

ciated by the President in the State of the Union Message of 1964 andconfirmed by the Congress in the above words later that year in the Fco-nomic Opportunity Act.

Americans are increasingly prosperous. Median family income in theUnited States (in constant 1967 prices) rose from $6,210 in 1959 to$7,974 in 1967, a gain of 28 percent in 8 years. Yet many families are stillnot able to attain minimum living standards. A preliminary estimateindicates that in 1968 about 22 million people lived in households withincomes below the "poverty line." While this is far fewer than in the past—more than 40 million were similarly situated in 1960—too many Americansremain poor.

This chapter examines the recent progress in reducing poverty, the natureof the task that remains, and the strategies available for eliminating poverty.

THE EXTENT OF POVERTY

A family is "poor" if its income is insufficient to buy enough food, clothing,shelter, and health services to meet minimum requirements. Universallyacceptable standards for determining these minimum needs are impossibleto formulate since the line between physical necessities and amenities isimprecise.

The social and psychological aspects of poverty further complicate effortsto measure poverty. As average incomes rise, society amends its assessmentof basic needs. Individuals who cannot afford more than a small fractionof the items enjoyed by the majority are likely to feel deprived. Consequent-ly, an absolute standard that seems appropriate today will inevitably berejected tomorrow, just as we now reject poverty definitions appropriatea century ago.


DEFINITION OF POVERTY

Even a rough measure of progress in reducing poverty requires an explicitdefinition, although the line drawn is unavoidably arbitrary. In its 1964Annual Report, the Council used a poverty line of $3,000 annual familyincome. Since 1965, the Council has employed the more refined definition ofpoverty developed by the Social Security Administration (SSA).

The SSA poverty lines reflect the differing consumption requirementsof families based on their size and composition, the age of members, andwhether their residence is farm or nonfarm. The calculations center aroundthe U.S. Department of Agriculture's Economy Food Plan, which in De-cember 1967 added up to a per capita weekly food outlay of $4.90. Forfamilies of three or more, the SSA measure assumes all other family needscan be obtained for an amount equal to twice the family's food requirement.In 1967, the nonfarm poverty threshold for an average four-person familywas $3,335 as compared to a median income, for families of that size, of$8,995. Poverty lines for different types of households are shown inTable 14.

The problems of low-income families neither begin nor end at any arbi-trary poverty line. A sharp decline in poverty may be a misleading indicator

TABLE 14.—Poverty and near-poverty

Household characteristic^

Nonfarm households:

1 member. . .

65 years and overUnder 65 years

2 members.. .

Head 65 years and overHead under 65 years . . . .

3 members4 members.. .5 members6 members .7 members or more . . - . .

Farm households:

1 member

65 years and over .Under 65 years . . . . . . . . . .

2 members

Head 65 years and overHead under 65 years

3 members4 members5 members - . .6 members7 members or more

income lines, 1967

Povertyincome line

$1,635

1,5651,685

2,115

1,9702,185

2,6003,3353 9304,4105,430

1,145

1,0951,195

1,475

1,3801,535

1,8152,3452,7553,0903,790

Near-povertyincome line

$1,985

1,8902,045

2,855

2,6552,945

3 4254,3455 0805,7006,945

1,390

1,3301,450

1,990

1,8702,075

2,4003,0603,5653,9954,850

1 Households are defined here as the total of families and unrelated individuals.

Note.—Poverty and near-poverty income standards are defined by the Social Security Administration; they take intoaccount family size, composition, and place of residence. Income lines are adjusted to take account of price changesduring the year.

Source: Department of Health, Education, and Welfare.


of progress if a large number of families are raised just above the povertyline. Accordingly, the SSA has also developed a "near poor" standardaveraging about one-third higher than the poverty line but still less thanone-half of median income for many types of families. Near-poor incomestandards are shown in Table 14.

The SSA poverty definitions have some limitations. Since they are mul-tiples of food costs, the poverty lines change only when food prices change,and these prices do not necessarily parallel the prices of other essentials.Regional differences in living costs are not reflected in the poverty line. Theincome data take no account of income in kind such as health care, subsidizedhousing, and foodstuffs (except for food grown on farms). No adjustmentis made for either net assets or fluctuating incomes, and yet families withsavings or temporary income interruptions have different problems than thechronically poor.

These problems are currently under study in an effort to refine the povertyconcept. A different threshold could affect the distribution of measuredpoverty among various groups but would probably show much the sametrend in total poverty over the long run.

POVERTY TRENDS

With the general rise in family incomes in the postwar period, the inci-dence of poverty—the percentage of persons in poor households relative tothe total population—has declined sharply from 30 to less than 12 percent(see Chart 10). The number of persons in poverty declined about 20 mil-lion over the past 20 years, including a drop of 12 million since 1963—anestimated 4 million in 1968 alone.

Along with the reduction in the number of poor households, the "povertygap"—the difference between the actual incomes of the poor and the in-comes necessary to place them above the poverty line—has been reduced.The poverty gap fell from $13.7 billion in 1959 to $9.7 billion in 1967,measured in current dollars.

Distribution by Community Type

The incidence of poverty is highest—23 percent—in those rural areasnot in metropolitan counties, with the heaviest concentrations in the Southand Appalachia. The incidence is also quite high—19 percent—in thesmaller cities and towns outside of major metropolitan areas. In the cen-tral cities, the incidence is 16 percent and in their suburbs about 9 percent.

Racial and Ethnic Distribution

Most of the poor are white. In 1967 (the latest year for which detaileddata on the poor are available), 71 percent of all poor families and 83 per-cent of all poor unrelated individuals were white. The incidence of poverty


Chart 10

Number of Poor Persons and Incidence of Poverty

MILLIONS OF PERSONS PERCENT

50

40

30

20

10

0

-

V NUMBER OF POOR PERSONS

• \ _ _ 7

INCIDENCE OF POVERTY J / ^(Right scale)

I I I I I I I I I I I I I I I

-

-

I I I

- 50

- 40

- 30

- 20

10

1948 50 52 54 56 58 60 62 64 66 68

-I/POOR PERSONS AS PERCENT OF TOTAL NONINSTITUTIONAL POPULATION.

N0TE._P0VERTY IS DEFINED BY THE SOCIAL SECURITY ADMINISTRATION POVERTY-INCOME STANDARD.SOURCES: DEPARTMENT OF COMMERCE, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,

OFFICE OF ECONOMIC OPPORTUNITY, AND COUNCIL OF ECONOMIC ADVISERS.

is far higher among nonwhites: about one household in three comparedwith about one in seven among whites.

Of the 2.4 million nonwhite households in poverty, 2.3 million areNegroes; the remainder are mostly the original Americans—Indians andEskimos. A 1964 survey revealed that 74 percent of the 55,000 families livingon Indian and Eskimo reservations had incomes under $3,000.

Only recently has the reduction of poverty among nonwhites matchedthe reduction among whites. Between 1959 and 1962, the number of whitesin poverty declined 2.8 million, but during the same period the number ofpoor nonwhites rose by 0.9 million. Between 1962 and 1967, white povertywas reduced another 7 million or about 28 percent, while poverty amongnonwhites fell by 3.2 million—also about 28 percent.

The relative position of nonwhite families, after deteriorating in the late1950's, has improved since 1961. (See Appendix Table B-20.) Only since1966 has nonwhite median family income as a fraction of white medianfamily income surpassed its previous peak of 57 percent in 1952. Unemploy-ment among nonwhite men age 25 to 54 has recently fallen below 1951-53levels, but unemployment rates for nonwhite women and nonwhite teenagemales are much higher than during the early 1950's.

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Most poor white families in the United States are not members of identi-fiable ethnic groups; however, two groups—Mexican-Americans, livinglargely in southwestern States, and Puerto Ricans, concentrated in New YorkCity—exhibit disproportionately high incidences of poverty. In 1966, unem-ployment rates among Mexican-Americans in southwestern cities ranged be-tween 8 percent and 13 percent, two to three times the national average.Subemployment—the sum of unemployment, employment producing earn-ings too low to provide an escape from poverty, and nonparticipation in thelabor force by individuals who have given up hope of finding work—ranged from 42 to 47 percent in the Mexican-American sections of south-western cities. And while Puerto Ricans constitute only about 8 percentof the New York City population, they have been estimated to representover one-third of the recipients of welfare and about one-third of alloccupants of substandard housing.

STRATEGIES FOR REDUCING POVERTY

A program for reducing poverty has four principal economic dimensions.First, sustained high employment and economic growth—key objectives

of economic policy for a wide variety of reasons—are prime essentials.Second, education, training, medical assistance, and access to well-paying

jobs are needed by many of the poor to escape from chronic unemploymentand low-paying dead end jobs.

Third, three-fifths of the heads of poor households cannot easily enter thelabor force because of age or disability, or because they are mothers withsole responsibility for the care of young children. Some workers with largefamilies are not likely—even with training and other types of employmentassistance—to earn an income sufficient to pull their families out of poverty.Because increased employment opportunities will not eliminate povertyamong these groups, some form of income maintenance is required.

Fourth, poverty is concentrated in "pockets"—city "ghettos" and certainrural areas. The numbers of poor in poverty pockets can be reduced bypromoting public and private investment in these communities and byproviding relocation assistance to those with employment opportunitieselsewhere.

In addition to economic policies, social and psychological strategies havean important role to play. These include information about family planningfor those who request it, legal assistance, and the encouragement of self-helporganizations. Such programs lie outside the purview of this Report.

PROSPERITY AND THE REDUCTION OF POVERTY

Virtually all the progress in reducing poverty over the past 20 yearshas occurred during periods of general prosperity. In three periods of sus-tained economic expansion—1949-53, 1954-56, and 1961 to the present—

155


the annual decline in the number of individuals in poverty averaged twomillion or more a year. In contrast, during recessions the number of poorpeople has increased. The brief recession of 1954 wiped ou,t half of thegains of the preceding 4-year expansion, and several successive years ofsluggish economic performance in the late 1950's increased the number ofpersons in poverty to about the level of 7 years earlier. (See Chart 10.)

EFFECTS OF PROSPERITY

Poor families are affected unequally by economic growth and high em-ployment, depending upon their ability to take advantage of expanded em-ployment opportunities. Recent trends in poverty reduction for differentgroups are shown in Table 15.

Households with Heads of Working Age

Economic expansion has caused significant reductions in poverty amonghouseholds headed by a working-age man. Tightening labor markets raisewages for the poor who are employed, and provide better employmentopportunities for the unemployed and for those with very low-paying orpart-time jobs. Furthermore, when prosperity pushes unemployment ratesto low levels among skilled workers, business is more inclined to train poorlyqualified workers for skilled jobs. From 1964 to 1966, the number of poorhouseholds headed by a working-age man with work experience fell 400,000a year; in contrast, there had been no decline from 1959 to 1961.

The number of poor households headed by a working-age woman withjob experience has not changed during the 1960's. The decline in the in-cidence of poverty among this group reflected a rise in the total number ofhouseholds headed by working-age women.

Prosperity is less effective in reducing poverty among households headedby women for several reasons. Women are far less likely to be employedthan men; only about three-fifths of the women who head families havesome job experience, compared to about 90 percent for male family heads.Many women who head families, being the adult solely responsible for youngchildren, are unable to accept full-time employment unless day care is pro-vided for their children. Furthermore, women are far less likely to escapepoverty even if they do work, because their employment is less steady andthey earn lower wages. Nonwhite families are more than twice as likely—and white families are more than three times as likely—to be poor if headedby a woman than if headed by a man.

Elderly Households

During the 1960's, the number of poor elderly households fell slightly,while the incidence of poverty among this group decreased substantially.High employment has some immediate effect on poverty among the aged

156


TABLE 15.—Number of poor households and incidence of poverty, selected years,1959-67

Characteristic of headof household 1959 1961 1964

19661

Origi-nallypub-

lished

Revised

1967

Number of poor households:2

Total

Head 65 years and over..

Unrelated individuals-Families 3

Head under 65 years

Unrelated individuals.

WhiteMale___Female.

Nonwhite...Male. . .Female.

Families«

WhiteMale. . .Female.

Nonwhite...Male—.Female.

Incidence of poverty:5

Total households2..

Head 65 years and over..

Unrelated individuals-Families 3

Head under 65 years

Unrelated individuals..


Nonwhite__.Male. . .Female.

Families *_


Nonwhite...Male...Female.

Millions

13.4

3.9

2.51.4

9.4

2.6

1.9.6

1.3

.7

.3

.4

6.8

4.93.81.1

1.91.3.6

13.0

3.9

2.51.3

9.1

2.4

1.8.6

1.2

.7

.3

.4

6.7

4.73.71.0

2.01.3.7

11.9

3.8

2.81.1

8.0

2.3

1.8.6

1.2

.5

.2

.3

5.7

4.03.01.0

1.71.1.6

10.9

3.9

2.71.2

7.0

2.1

1.6

ill.5.2.3

4.9

3.32.31.0

1.6.9.7

10.7

4.0

2.71.2

6.8

2.1

1.6.6

1.0

.5

.2

.3

4.7

3.12.2.9

1.5.9.7

24.0

48.6

68.132.5

19.8

36.8

32.924.639.1

54.847.163.5

16.8

13.411.435.9

48.642.171.3

Percent

22.6

43.8

64.427.2

18.8

33.9

29.722.835.2

55.045.566.8

16.1

12.610.733.9

47.840.272.8

19.9

40.0

59.921.6

16.0

31.0

28.322.033.0

45.134.658.1

13.3

10.48.5

31.2

27.832.362.4

17.8

38.5

55.323.0

13.7

28.3

25.820.130.0

41.729.154.1

11.2

8.46.5

29.1

34.325.961.2

17.5

38.9

56.323.1

13.3

28.7

25.521.028.8

45.335.555.1

10.6

7.96.1

27.9

33.425.160.3

10.2

3.8

2.71.1

6.4

2.2

1.6.5

1.1

.5

.2

.3

4.2

2.82.0

.8

1.4.7.7

16.2

36.3

53.420.3

12.2

27.0

24.418.029.0

40.129.451.7

9.5

7.15.4

25.3

29.920.954.9

1 The revised estimates differ slightly from those originally published because of the use of a somewhat differentestimating procedure. For an explanation of the two methods, see "Current Populat.on Reports Series P-60, No. 54."

2 Households are defined here as the total of families and unrelated individuals.3 Consists only of two-person families whose head is 65 years or over. All other families included in "head under 65

years."* All families other than two-person families whose head is 65 years or over.s Poor households as percent of total households in the category.

Note.—Poverty is defined by the Social Security Administration poverty-income standard; it takes into account familysize, composition, and place of residence. Poverty-income lines are adjusted to take account of price changes during theperiod.

Detail will not necessarily add to totals because of rounding.

Sources: Department of Commerce and Department of Health, Education, and Welfare.

157323-166 0—69- -11


by providing more jobs for elderly individuals wishing to continue work.This opportunity is particularly important for those with retirement incomebelow the poverty line.

Over the longer run, prosperity permits more workers to accumulateassets and to achieve higher pension rights prior to retirement. At present,an individual earning the minimum wage and working full-time in a jobcovered by social security is entitled to old-age benefits of approximately$120 a month upon retirement—only about $10 a month below the povertyline.

Reflecting both the higher lifetime earnings of the aged and statutoryimprovements, social security retirement benefits have increased greatlyand have been the most important factor in reducing poverty among theelderly. Since 1961, legislation has increased social security retirement bene-fits 21 percent across the board,—substantially greater than the increase inconsumer prices. The minimum benefit increased 37 percent.

The Disabled

The ill and disabled have benefited least from recent prosperity andother efforts to alleviate poverty. Although the incidence of poverty amonghouseholds whose heads are under 65 and not working for health reasonsfell from 1959 to 1967, the number actually rose. Some disabled can be re-trained, and these individuals can obtain jobs more readily when unem-ployment is low. But many who are ill or disabled cannot take advantageof job opportunities.

The Near-Poor

Table 16 shows the number of households and the number of personswho were in the near-poor category in 1959 and 1967.

The compositions of the poor and the near-poor categories differ con-siderably. Most striking is the difference in the proportion of nonelderlyhouseholds headed by a working-age woman. These households account for46 percent of all nonelderly poor households; among the near-poor, theyaccount for 22 percent. Except for the elderly, most near-poor families areheaded by men who are employed, but at low wages.

The number of near-poor showed a considerable decline between 1959 and1967. Many who rose from poverty were added to the near-poor, but at thesame time an even larger number of the former near-poor moved to a higherincome level.

PROSPECTS FOR FURTHER PROGRESS

As indicated above, prosperity has played a key role in reducing povertyand is essential to further progress. But sustained growth and high em-ployment—in the absence of other more direct efforts to help the poor—can-not maintain the recent rate of decline in poverty.

158


TABLE 16.—Number of near-poor households and incidence of near-poverty by ageand sex of head of household, 1959 and 1967

Age and sex of head of household

Near-poor households2

Families

Head 65 years and oversHead under 65 years4

Male headFemale head

Unrelated individuals

Head 65 years and overHead under 65 years

Male headFemale head._ . . . .

Addendum:Near-poor persons

Number (millions)

1959

4.3

3.8

.73.1

3.4.4

.5

.2

.3

.2

.3

15.8

1967

3.7

2.9

.82.1

2.4.5

.8

.5

.3

.3

.5

12.0

Incidence of near-poverty(percent) *

1959

7.7

8.3

15.27.6

8.48.2

5.1

6.14.6

5.54.9

9.0

1967

5.9

5.8

14.04.8

5.58.7

6.0

9.14.0

5.86.1

6.1

* Near-poor households as percent of total number of households in the category; near-poor persons as percent oftotal persons.

2 Households are defined here as the total of families and unrelated individuals.3 Consists only of two-person families whose head is 65 years or over. All other families included in "head under 65

years."4 All families other than two-person families whose head is 65 years or over.Note.—Near-poverty is defined by the Social Security Administration near-poverty-income standards; it takes into

account family size, composition, and place of residence. Near-poverty-income lines are adjusted to take account of pricechanges during the period.

Detail will not necessarily add to totals because of rounding.

Sources: Department of Commerce and Department of Health, Education, and Welfare.

If the 1961-68 reductions in the number of poor persons could be con-tinued, poverty would be eliminated entirely in about 10 years. If the recordof 1968 could be continued, poverty would be eliminated in about 5^2 years.Maintenance of these rapid reductions will become increasingly difficultbecause, as poverty declines, an increasing fraction of the remaining poorare members of households whose economic status is least affected by pros-perity. Households headed by women with children, disabled persons, orelderly persons accounted for 6.0 million or 59 percent of all poor householdsin 1967.

Much of the progress in the 1960's has been due to the lowering of theunemployment rate. As that rate fell, further declines were increasinglyeffective. The hard-core unemployed, the educationally disadvantaged, andthe victims of discrimination are the last to be hired during a return to highemployment and the first to be fired during a slowdown. Upgrading theunskilled and uneducated to fill shortages in skilled labor takes time. Con-sequently, if high employment is maintained, these adjustments will con-tinue to reduce poverty, but their effects will gradually diminish. In theabsence of increased direct assistance to the poor or further reductions inunemployment, present annual declines in poverty must be expected tobecome smaller.

The elimination of poverty will be long in coming if the incomes of the

159


poor grow only at the same pace as the incomes of other households. If thereal income (including transfer payments) of each poor household were togrow at 3 percent a year—approximately the average gain for all house-holds during normal conditions of economic growth—eliminating only halfof poverty would take 12 years for poor families and 17 years for unrelatedindividuals. To shorten substantially the period needed to reduce poverty,the incomes of the poor must grow faster than average income—some redis-tribution to the poor must be made from the benefits of growth.

INCOME DISTRIBUTION

Only a relatively small redistribution of the benefits of growth is neededto speed greatly the reduction in poverty. If the approximately 85 percentof households that are not poor and receive about 95 percent of total incomeare willing to make only a small sacrifice of the estimated 3 percent yearlygrowth in their real income per capita, the prospects for poverty reductioncan be greatly transformed. If the increase in real income for the nonpooris lowered merely from 3 percent to 2*/2 percent a year and if that differentialof about $2.8 billion annually is effectively transferred to those in poverty,then family incomes for those now poor can grow about 12 percent annually.This redistribution would eliminate the 1967 "poverty gap" of $9.7 billion inless than 4 years. Since any program of redistribution would be likely toreach some of the near-poor and might raise some poor families substantiallyabove the poverty line before others are affected, perhaps a better projectionof the time required would be 6 to 8 years.

The rapid reductions in poverty during the 1960's paralleled a significantrise in the share of total family income going to the lowest income groups.In part, this shift in distribution has been accomplished by increased em-ployment of poor adults at higher wages.

The combined effect of the tax and transfer payment systems at all levelsof Government also operates to redistribute income to the poor. The netgain or burden from the public sector for any group depends on the differ-ence between all the benefits received from government expenditures andall the taxes paid. Many programs—like national defense—have benefits thatare difficult to allocate by groups; however, the benefits of transfer pay-ments—such as social security benefits, welfare payments, and unemploy-ment compensation—can be allocated and compared with the tax burden.The impact of Federal, State, and local taxes and of transfer payments onthe distribution of income in 1965 is shown in Chart 11.

The tax system by itself redistributes income away from the poor. Asa share of income, higher taxes are paid by households in the lower in-come classes than by those with incomes between $6,000 and $15,000.This reflects the heavy tax burden on low-income families from State andlocal taxes—primarily sales, excise, and property taxes. Federal taxes alsocontribute to this burden through the social security payroll tax.

The poor receive nearly as much from transfer payments as from all other

160


Chart 11

Taxes and Transfer Payments as Percent ofIncome (Excluding Transfers), by Income Class,1965

PERCENT

60

40

20

0

- TAXES AS PERCE

_

-

NIT OF INCOME

DERAL TAXES

' STATE AND LOCAL TAXES/

/

///A ///A '///At V///) YAAA

-

—

60

40

20

0

20

40

60

80

TAXES LESS TRANSFER F

-

-

-

-

AYMENTS AS PERCENT OF INCOME

-

-

-

Under2,000

2,000-3,999

4,000-5,999

INCOME CLA

6,000-7,999

SS (DOLLARS)

8,000-9,999

10,000-14,999

15,000& Over

SOURCE: COUNCIL OF ECONOMIC ADVISERS, BASED ON DATA FROM A VARIETY OFSOURCES. DESCRIPTION AVAILABLE ON REQUEST.

sources. While these payments do not go exclusively to the poor, they do havea powerful redistributive impact. The ratio of receipts to household income(excluding transfers) is very high in the lowest income classes. As house-hold incomes rise, the proportion of transfers to other income falls sharply.

When government transfer payments and taxes are combined, the con-centration of transfer payments in the lower income groups much morethan offsets their tax burden. But since average transfer payments fallrapidly as income rises, the excess of taxes over transfer payments as a frac-tion of income rises much more sharply from $0 to $4,000 than in higherincome classes.

EDUCATION, JOBS, AND TRAINING

Education and training measures can improve job opportunities for thepoor and their children.

161


EDUCATION AND POVERTY

Education can help prevent the children of the poor from remainingpoor when they grow up. They are already better schooled than theirparents. About three-fourths of poor youths between 16 and 21 eitherare attending school or are high school graduates, whereas more than halfof their parents had no high school education. Yet these youths still haveless schooling than their more fortunate contemporaries, 90 percent ofwhom are in school or are high school graduates.

Although most poor children of all ages are now in school, inferiorfacilities and poorly qualified teachers lower the value of the educationmany of them receive. Even schools equivalent to those of the prosperouswould not yield equal education. Poverty imposes handicaps that childrenof more prosperous families do not have.

Children of the poor are less likely to receive good health care and goodnutrition, both of which affect success in school. They are also less likelyto receive the verbal and intellectual stimulation in their early years thatprepares them to master school work. They start school somewhat behindother youngsters, and they receive less parental assistance. Since school doesnot meet the challenge of helping them catch up, it becomes a place ofdefeat, leading many to drop out.

Poor children from minority groups suffer another handicap, segregation.More than 60 percent of all Negro pupils in the first grade attend elementaryschools in which at least 90 percent of the students are Negro. Not onlyare facilities and instruction inferior in many of these schools, but studiesof educational performance suggests that segregation itself has an adverseeffect on school performance.

If poor children are to have equal opportunity to compete successfullyfor good jobs, they need special help in the preschool years. They alsoneed compensatory education, with expenditures exceeding those made onother pupils. Finally, they need financial help and other encouragement tostay in school and continue their education.

Major efforts have been made to upgrade education provided childrenof the poor in programs such as the Elementary and Secondary EducationAct, the Economic Opportunity Act, and the Vocational Education Amend-ments of 1968. Head Start, Title I of the Elementary Education Act, andFollow Through are comprehensive programs, combining health care, nu-trition, and the involvement of the child's family, as well as education.Most of these special Federal efforts have been in operation for 3 years orless. While too little experience has been gained to allow a full evaluation,enough positive results are evident to justify continuing the programs.

HIRING STANDARDS

Poverty is perpetuated by hiring standards that arbitrarily discriminateagainst the disadvantaged.

162


Racial Discrimination

The persistence of racial discrimination in hiring frustrates the effortsof nonwhites to realize full returns from schooling and discourages theyoung from remaining in school. For example, a larger portion of whitemale dropouts 16 to 21 years of age secure skilled and semiskilled jobs thannonwhite males who graduate from high school, and the average earningsof nonwhite high school graduates are lower than those of white dropouts.

Attacks are being made on discrimination in higher level occupations,although most of the initial progress is in clerical jobs. The public sectorhas a better record than the private sector in eliminating discriminationin hiring. For example, 20 percent of the Federal and municipal white col-lar workers in metropolitan New York City are Negro. In contrast, Negroeshold only 6 percent of the white collar jobs in large private firms in NewYork City.

Restrictive Hiring Practices

Arbitrary hiring standards and customary employment practices, as wellas outright racial discrimination, curtail work opportunities. During WorldWar II, industry successfully adjusted standards and restructured workpatterns to fit jobs to the level of workers' skills.

All too often, recruitment and testing procedures currently used by Gov-ernment and business do not take sufficient account of innate intelligenceand aptitude.

TRAINING AND JOB ACCESS

On-the-job training is an important route to employment. Consequently,the Government increased the number of on-the-job trainees financed un-der the Manpower Development and Training Act from 11,000 in fiscal1965 to 125,000 in fiscal 1968. By the end of 1968, half the trainees had lessthan 4 years of high school, and 53 percent were from families with in-comes below the poverty line.

Through the Job Opportunities in the Business Sector (JOBS) programsponsored by the National Alliance of Businessmen, nearly 12,000 cooperat-ing business firms have helped disadvantaged workers find employment. Thepremise of the program is that the best job training is a job. JOBS encour-ages waiving of some hiring standards and provides counseling and trainingto raise the productivity of the trainees. The interim goal of employerspledging to place 100,000 disadvantaged persons by June 1969 has alreadybeen met far ahead of schedule. JOBS contracts have been issued to about800 employers who are reimbursed an average of $3,000 per trainee forthe extra costs.

163


The rapidly growing public sector has no counterpart to the JOBSprogram. Such a program would usefully supplement the present expan-sion of job opportunities in the private sector.

Two other major programs are designed for young workers. The JobCorps helps the most severely disadvantaged youths without job prospects.As of mid-1968, the program had provided health care, food, and jobtraining for 195,000 enrollees since 1965. From 1965 to 1968 the Neighbor-hood Youth Corps provided jobs for over 1.3 million youngsters from low-income areas. While the part-time and summer work is too low skilled toprovide useful job training, the modest pay helps youths from low-incomefamilies stay in school.

IMPROVEMENTS IN INCOME MAINTENANCE

The United States now has a substantial commitment to income main-tenance, spending about $60 billion in fiscal 1968 (Table 17). Each pro-gram serves the special needs of a particular group, and many are not de-signed specifically to help the poor. Individuals who can normally earnan adequate living are served by social insurance systems which protectagainst loss of income through death, disability, and unemployment, andwhich provide retirement income. Individuals with inadequate earning

TABLE 17.—Selected major income maintenance programs, fiscal year 1969

ProgramTotal outlays

(millionsof dollars)

Beneficiaries *

Number(thousands)

Percent inhouseholds with

income lessthan $3,300 2

All programs3

Aid to families with dependent children

Unemployment insurance:Federal-State unemployment compensation..Federal employees and ex-servicemenRailroad.

Disability programs:Workmen's compensationFederal employeesVeterans'compensation _Railroad ._Social securityAjd to the blindAid to the permanently and totally disabled

Assistance to those 65 years and over:Social security retirement and survivors' benefits.Old-age assistanceMilitary retirementCivil service retirementRailroad retirementVeterans' pensions

General assistance _

Assistance-in-kind«

58,679

3,206

2,30011152

* 1,68657

2,61177

2,69192

726

24,6811,8332,2652,3641,5422,127

32

10,226

6,146 100

5,19648992

402,39041

2,27884721

21,9312,123681918969

2,252

(*)

(*)

<*)

2010

1524

39100100

31100

3480

700 100

* Estimated.2 income including cash benefits.3 Data exclude State and local government retirement systems and all private retirement and charitable programs.* Not available.5 Estimate by Council of Economic Advisers.6 Federal outlays only. See Table 18.Source: Bureau of the Budget (except as noted).

164


ability may be assisted by welfare, veterans pensions, in-kind payments (suchas food stamps or public housing), and manpower training allowances.

Despite recent improvements, existing income maintenance progams pro-vide neither adequate coverage nor sufficient benefits to prevent poverty.

Rarely are able-bodied working-age individuals, or families headed byhealthy, nonelderly men, eligible for existing cash benefit programs yet,these groups make up two-thirds of poor nonelderly households. Even amongsome of the groups for which programs are available, coverage is much lessthan complete.

Benefits are rarely adequate to raise households above the poverty line.The average Aid to Families with Dependent Children (AFDC) paymentin mid-1968 was just over $2,000 a year per family; in five States, it wasless than $1,000 a year. Average benefits in mid-1968 for a retired coupleunder old-age insurance were about $1,800—below the poverty line for suchfamilies by about $200.

WELFARE PROGRAMS

Important improvements in public assistance have been made. The courtshave overturned the controversial "man in the house" rule, which had de-nied AFDG benefits to children when a man not legally responsible for theircare lived with the family. Courts have also declared invalid some Stateresidency requirements for public assistance. States have recently been in-structed to determine income need by affidavit, rather than personal in-vestigation, a change to a more efficient and less demeaning method. Thework incentive principle was introduced in the 1967 Social Security Amend-ments, which call for welfare benefits for AFDC mothers to be reduced byless than the full amount of earnings. Finally, the average AFDC benefitrose $17 per family (11 percent) between mid-1967 and mid-1968.

These improvements have led to the paradox of growing welfare rollsand costs amidst a general reduction in poverty. Not only have welfare ap-plications increased, but between 1960 and 1967, the fraction of applicantsdeclared eligible for benefits rose dramatically. Reform of eligibility rulesand increased awareness of welfare programs by the poor have probably beenresponsible for the substantial rise in applications.

The Freeze on AFDC Rolls

While the welfare system generally has been improved in recent years,the enactment of a sharp limitation on the number of AFDC beneficiaries,now scheduled to take effect July 1, 1969, was a major step backward. The"freeze" forbids Federal financing for any increase in a State's ratio ofdeserted or illegitimate children receiving AFDC assistance to the totalchild population.

In all States, the freeze places a very tight limit on the expansion ofwelfare rolls; in some it will even cause a decline, unless the States arewilling to assume the Federal share of the costs. Eligibility for federally aided

165


public assistance should not be determined on the basis of the place of afamily in the waiting line at the welfare agency, but upon the need of thefamily. Repeal of the AFDC freeze is the most urgently required steptoward a more humane and rational welfare system.

Raising and Equalizing Welfare Benefits

In federally assisted welfare programs—AFDC, old-age assistance, aid tothe blind, and aid for the disabled—benefits vary widely among States butare well below the poverty line nearly everywhere. For example, the monthlyAFDC benefits for a family of four range among the States from a low of$40 to a high of $290 but exceed the poverty threshold in only one State.

Establishing minimum welfare benefits—wholly financed by the FederalGovernment—could raise the lowest benefits significantly. This minimumcould be modest initially and then increased until benefits are adequate inall States. Since poverty is a national problem which happens to be geo-graphically concentrated, federalization of most of the cost of welfareexpenditures, perhaps including even administrative costs, would be desirableover the long run. Federal administration would reduce the difficulties arisingfrom major differences in local standards of benefits, eligibility, andadministration.

Improving Work Incentives in AFDC

Currently, if a State elects, mothers receiving AFDC may earn up to$30 a month without having their welfare benefits reduced. Beyond $30,benefits are reduced by two-thirds of additional earnings. By July 1, 1969,all States must adopt this work incentive formula. While these new pro-visions are an important advance, work incentives are still too small anddo not extend to other welfare categories.

If child-care facilities are available, welfare mothers may be requiredto work or to accept training in order to receive benefits. At present,shortages of child-care facilities and training assignments limit the impactof this provision. Nevertheless the rule raises fundamental social issues:whether children are better off in a child-care center or at home with theirmothers, and whether a mother should be required to work while alsoperforming household tasks for her family.

These issues are not easily resolved. Nevertheless an equitable systemshould not penalize those who work and should provide adequate bene-fits to those who cannot work.

BENEFITS IN KIND

Many assistance programs provide goods and services rather than cash.In-kind assistance is often designed to promote those types of consumption

166


by the poor that also benefit other members of society. For example, societymay subsidize housing or health care because eliminating poor housing andill health benefits the community as a whole. Some in-kind programs, suchas school lunches, provide specific goods and services especially important tothe young.

In-kind benefits often reflect the standards, tastes, and values of themajority and their desire to influence the consumption patterns of recipients.The well-being of the poor is raised by such programs, but the poor wouldprobably consider themselves better off if they had equivalent amounts incash and the accompanying freedom of choice.

Present Programs

Outlays in fiscal 1969 for the major in-kind programs which directlybenefit the poor are summarized in Table 18.

Health. Medicare and Medicaid account for 84 percent of in-kind ex-penditures. Medicaid benefits go primarily to the poor, and one-third ofMedicare beneficiaries are poor. Because of high maternal and infant mor-tality rates among the poor, expansion of comprehensive health care formothers and babies in poor families is especially desirable.

Food. The next largest in-kind program is food assistance, which in-cludes food stamps, school lunches, and the distribution of commoditiesfrom surplus stocks. Food programs reach a significant number of the poorbut as few as 20 percent in some concentrated poverty areas. The coverage

TABLE 18.—Major Federal income-in-kind programs substantially benefiting thepoor, fiscal year 1969

ProgramFederaloutlays

(millions ofdollars)

Beneficiaries1

Number(millions)

Percent inhouseholds with

income lessthan $3,3002

Total programs

Food programs...

Food stampsChild nutritionSpecial supplemental rOther direct distribution

Housing programs..

Public housingRent supplements..

Health service programs-

MedicareMedicaidMaternity and infant carePublic Health Service medical programs:

Indians, seamen, etcNeighborhood health centers

10,226

665

273128

9255

484

45628

9,077

6,2222,384

193

175103

11.3

3.63.9.23.6

2.9

2.8.1

3.6

100100100100

5767

9.59.5

3 3.2

.6

367570

5575

1 Estimated.2 Income including cash benefits.31 ncludes children and mothers benefiting from more than one service of the Children's Bureau.

Source: Bureau of the Budget.

167


of the food stamp program will expand from 2.8 to 3.6 million persons by themiddle of 1969, largely as a result of expansion into new areas and lowerstamp charges. The child nutrition program, providing free or low-costschool lunches, is now being expanded.

Housing. Two programs to be expanded significantly under the Hous-ing Act of 1968 are directed toward low-income groups—rent supplementsand public housing. By midyear, 19,000 families—nearly all poor—will bereceiving rent supplements. In fiscal 1969, the number of public housing unitsavailable will increase by 75,000, bringing the total to 780,000. Roughly halfthe occupants are poor.

The average monthly rental in public housing is about $50, more thanmany poor families can afford. In the North, the lowest income families inpublic housing spend more than 30 percent of their income on rent. Incontrast, occupants with incomes over $5,000 pay about one-sixth of theirincome in rent. Only in the South are the majority of nonelderly publichousing tenants below the poverty line.

Public housing could be made more accessible to the very poor in a numberof ways. First, higher welfare benefits would help recipients pay present rents.Second, rents could be lowered if the Federal Government subsidized a largershare of public housing costs. Third, rents for the poorest families could bereduced if rents for all tenants were more closely tied to income.

SOCIAL INSURANCE SYSTEMS

For the vast majority of Americans, social insurance guards against a fallin income due to retirement, disability, survivorship, or unemployment.These programs prevent much of the poverty that in the past resulted frominterruptions in wage income. They make remaining poverty problems moremanageable.

Retirement

The largest American income maintenance program is social security.About 22 million Americans now receive about $25 billion in annualbenefits from Old Age and Survivors Insurance. The goal of providing everyelderly American citizen with a decent retirement income is becoming areality. Similarly, more and more widows with young children and disabledindividuals are being supported above the poverty line.

Rising prices should not be permitted to erode the purchasing power ofthe retired. Social security benefits should now be increased 10 percent acrossthe board, in line with changes in the cost of living since benefits were lastraised and to allow for additional improvement. A revised method of com-puting benefits, effective in fiscal 1971, would provide another increase.

Many individuals receiving low social security benefits have little if anyother income. Increasing the monthly minimum benefit from $55 to $80—

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and to $100 for workers with 20 years of coverage—would reduce povertyby more than half a million persons.

The earnings test should be liberalized. At present every dollar earned inexcess of $1,680 a year reduces benefits by 50 cents; earnings over $2,880reduce benefits dollar for dollar. Because earnings are subject to other taxes,additional earnings above $2,880 actually reduce total after-tax income. Thetax-free earnings allowance should be raised to $1,800. Fifty percent ofearnings beyond $1,800 up to $3,000 and 75 percent of earnings thereafterwould be deducted from benefits.

Virtually all workers are now covered either by social security or similarretirement programs. Regular employment will provide retirement benefitsabove the poverty line for all but the very lowest-paid workers. Most futurerecipients of low social security benefits will be either individuals coveredby other retirement programs or housewives with only a few years of workexperience. Neither group will constitute an extensive poverty problem. Themost efficient mechanism for assisting the elderly poor is either expansionof Old Age Assistance or establishment of an income-related social securityminimum—perhaps financed out of general revenues—far above the stand-ard minimum. Under the latter proposal, social security benefits could behigh enough, together with other income, to bring all the elderly above thepoverty line.

Disability

The number of poor households headed by the disabled has not declinedsince 1959. Better Disability Insurance under social security can improvethis record.

At present, to qualify for benefits, workers must be disabled 6 months, andthe disablement must be expected to last another 6 months or to result indeath. To remove this hardship, the waiting period for benefit eligibilityshould be reduced from 6 to 3 months, and eligibility should not be limitedto disabilities which last more than 1 year.

The burden of unusually high medical expenses could be lifted by ex-tending Medicare to the permanently and totally disabled.

The other major disability income program is workmen's compensation,intended to pay medical expenses and provide income for workers (andtheir survivors) disabled through work-related accidents and diseases.Workmen's compensation is governed by State laws which require em-ployers to obtain insurance from private companies or a State fund, or toestablish self insurance.

The present weaknesses of workmen's compensation are inadequate bene-fits and the exclusion of large groups of workers.

In 1966 the maximum cash benefit (including dependents' allowances)under workmen's compensation was below the poverty line for a four-person family in 39 States; over half the States have maximum benefitsless than 50 percent of income prior to disability. About 11 million workers—

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mostly domestics, agricultural employees, and employees of small busi-nesses—currently are not covered at all by workmen's compensation.

Improvements in workmen's compensation ought to come through Statelaws. To provide an incentive for such action and to protect workers in itsabsence, Federal action may be required. Consideration should be given tolegislation requiring States to extend coverage and to improve benefits. IfStates fail to act, the law might require employers to purchase insuranceproviding additional coverage and higher benefits.

Unemployment Insurance

Unemployment insurance contributes significantly to the prevention ofpoverty by providing income to regular members of the labor force dur-ing periods of involuntary unemployment. Yet more than a fifth of the em-ployed labor force are excluded, a large number of whom are in low-wageoccupations such as domestic service and farm work.

The original aim of unemployment insurance was to restore at least halfof wages lost. Average weekly benefits—about $42 in 1966—are roughly athird of weekly earnings in covered industries. Most States now pay benefitsfor a maximum of 26 weeks in a single year; over one-fifth of the recipientsexhaust their benefits, even in periods of high employment.

For a fair and modern unemployment insurance system, legislation isneeded to broaden protection, ensure higher and more uniform benefits,provide special training, and eliminate abuses.

MAJOR REFORM

Proposals for more fundamental reforms of the income maintenance sys-tem merit consideration along with the more evolutionary suggestions out-lined above.

Major reform can be undertaken in two ways. First, the categorical ap-proach can be expanded and improved by reforming eligibility requirements,raising benefit levels, and—in particular—adding programs for poor familiesheaded by a working man and for other groups not now covered. Alterna-tively, present welfare programs could be replaced by a single universalFederal program—supplemented by social insurance—having no eligibilityrequirements other than low income.

Benefits for Poor Families Headed by Working-Age Men

The largest omission from the present income maintenance system is aprogram to assist families headed by able-bodied working males who arenot eligible for unemployment insurance or who have exhausted its bene-fits. Unconditional cash benefits to working-age men are often opposedon the grounds of possible adverse effects on work incentives. Whatever so-ciety's attitude toward fathers in poverty, failure to assist their childrenmakes the children likely candidates for a new generation of poor. Further-

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more, under the present system a father can often increase the income ofhis family by deserting them to make them eligible for welfare.

Children's Allowances. Children's allowances are systematic payments bythe Government to families with children. The United States is the onlyWestern industrialized nation without a children's allowance. The programhas been adopted in some nations as a vehicle for both providing incometo the poor and promoting population growth.

Children's allowances can take several forms. To channel aid effectivelyto the poor, the allowances have to be related to family income. If children'sallowances are not income-related but go to all families, they are an exceed-ingly inefficient way to help the poor.

An income-related children's allowance is one method of attacking povertyamong two categories of poor households—those with moderate incomes andlarge families and those with low incomes and average-size families.

Guaranteed Work. A program of guaranteed work opportunity for poor,employable fathers is especially attractive because it offers a workable com-promise between those who favor income maintenance and those who favorexpanded employment as a vehicle for ending poverty among these families.Fathers suffering from long term unemployment would certainly be eligiblefor the program. Eventually others with very low incomes might be included.Each enrollee would receive cash benefits and would be required to par-ticipate in steps—including acceptance of placement services or training—leading to private employment paying at least minimum wages. Those forwhom private employment could not be found would be given meaningfulpublic service jobs at minimum wages that provide opportunities foradvancement.

The guaranteed work program could ultimately allow any man to earnthe minimum wage, which at present would bring families of 4 or fewernear the poverty line. By itself, this would not solve the problem of povertyfor large families. Nevertheless, the largest gap in the present income main-tenance system would be closed in a manner consistent with the traditionalAmerican attitude toward welfare for able-bodied fathers.

The Negative Income Tax. The negative income tax would provide aminimum-income guarantee to all individuals. Benefits would be reducedby a fraction of income, as is currently the practice for AFDC mothers andindividuals receiving social security.

A minimum-income guarantee would end society's attempts to distin-guish between the "deserving" and ' 'undeserving" poor, establishing theprinciple of social responsibility to aid those in need without questioningwhether the fault was individual or social.

As a substitute for other income maintenance programs, the negativeincome tax is bound to be expensive. If the guaranteed income is set at ornear the poverty line—and if the proportion of earnings by which benefitsare reduced is low enough to provide adequate work incentives—substantial

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benefits must be provided to middle-income families, swelling the cost. Toillustrate, suppose the minimum-income guarantee for a family of four is$3,300—about the income required to escape poverty in 1967. Suppose thatevery dollar earned reduces benefits' by 50 cents—a reduction that probablyapproaches the maximum consistent with providing work incentives. Underthis plan, a family earning $5,000 a year would have benefits reduced byone-half of $5,000 (or $2,500), leaving the family eligible for $800. Allfamilies of four with less than a $6,600 income would receive some assistance.Adoption of this particular plan now would cost about $20 billion over andabove present income maintenance outlays; roughly half would go to familiesnot now in poverty.

The cost can be reduced by increasing the rate at which benefits go downas income increases. But this approach would reduce work incentives. Thecost could also be reduced by setting the guaranteed minimum income wellbelow the poverty line; however, if a low-income guarantee were adopted,poverty would not be eliminated. To deal with this problem, the incomeguarantee could be supplemented by State—or even Federal—welfare pro-grams for particular categories. But then attempts to distinguish betweenthe "deserving" and "undeserving" poor would not have been eliminated.

Another way of dealing with the problem of different categories of thepoor within the framework of the negative income tax is to establish sep-arate minimum-income guarantees and benefit-rate reductions for varioustypes of households. Again such modification would introduce complexitiesand reduce the appeal of the plan as simple and universal.

Nevertheless, a minimum-income plan may be acceptable both in termsof cost and of the beneficiaries served. If the guaranteed minimum incomeis at or close to the poverty line, and if the rate of benefit reduction is lowenough to limit adverse incentive effects, the plan would meet the tests of agood income maintenance system.

The Commission on Income Maintenance has been asked to study indetail the appropriate long-run direction of policy in this area. The Com-mission will report at the end of this year.

SPECIAL PROBLEMS OF POVERTY POCKETS

Poverty in the United States is unevenly distributed, both racially andgeographically. Two particularly visible concentrations of poverty are bigcity ghettos and declining rural areas.

Many difficulties faced by residents of poverty pockets are simply virulentlocal outcroppings of national problems. Others are peculiar to the com-munity in which the concentrations of poor occur. The discussion belowseparates the elements of poverty problems in ghettos and rural commu-nities into those amenable to general, national solutions and those thatrequire special programs aimed at the areas in question.

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STRATEGIES FOR ATTACKING GHETTO PROBLEMS

The most visible—and certainly most explosive—concentration of povertyis in the ghettos of large cities. Here deteriorating physical facilities, inade-quate public services, low income, and high unemployment combine withhigh population density to create a dehumanizing, hostile environment.

The ghetto contains a concentration of people whose health, age, familystatus, and limited training are obstacles to full-time employment in well-paying jobs. It has vastly inferior educational and health services. Theseare national problems, and strategies discussed elsewhere in this chaptercould produce significant rewards in the ghetto.

Other ghetto problems—and the programs required to deal with them—are unique. First, unemployment is extremely high. The Department ofLabor reported that in the fall of 1966 the unemployment rate in the low-income neighborhoods of eight large cities was 9.3 percent. More striking,subemployment was an additional 23 percent.

The second problem of ghetto areas is extensive deterioration of thephysical environment—housing, commercial buildings, even open spaces.

Restoration of the cities will be expensive, whether publicly or privatelyfinanced, but a large-scale facelifting of urban America offers the oppor-tunity for a rational, coherent attack on the problems of the ghetto.

Fiscal Disparities Within Metropolitan Areas

Roughly an eighth of welfare benefit costs, half of elementary and secon-dary education expenditures, and virtually all police, fire protection, andsanitation costs are borne by local government. Central cities, with theirlarge concentrations of poor, have difficulty meeting these costs. The prop-erty tax base per capita is substantially higher in the suburbs than in thecentral cities, but suburbs collect less total tax revenue per capita and spendfar less per capita on social services—health care, welfare, police, fire protec-tion, recreation, and sanitation. Suburbs spend far more per capita (and perstudent) on education than does the central city. Responding to lower taxesand better educational systems, a stream of middle income families flowsfrom the central city to suburban communities. Central cities must then cutback on services or raise taxes even higher, in either case increasing incen-tives to leave the city. The heavy burden of providing services to the poorthus threatens the viability of the central city.

Access to Employment

The residential patterns of the poor affect their opportunities for em-ployment. Because few lower income families can afford automobiles,their mobility is severely limited. Jobs, shopping, health care, and socialcontacts must all be within walking distance or accessible through inexpensivepublic transportation.

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Total Employment. Most jobs are in the central cities. Even in sectorssuch as manufacturing, wholesale and retail trade, nonprofessional businessservices, entertainment, and government, with relatively more jobs in lowerskill occupations, the ratio of employment to population is over 40 percenthigher in the cities than their suburbs. Employment in the city is also lessphysically dispersed than in the suburbs, and public transportation is morereadily available.

For the foreseeable future, most ghetto residents will continue to have agreater chance of finding a job in the central city. Job vacancies createdby normal attrition are far more numerous than those created by entirelynew positions, and consequently the number of job openings is greater inthe city with its much larger total employment. Some big city ghettos—such as Watts—are isolated from the areas of greatest employment density,but Harlem and Bedford-Stuyvesant are only a few minutes on the subwayfrom the most dense center of employment in the world. Job problemsin such areas are not explained by physical isolation from sites of employment.

Job Growth. Most of the growth in employment is occurring in thesuburbs, and job opportunities for low-income people will continue to growthere. Many ghetto residents already hold suburban jobs. A recent study ofcommuting patterns in Pittsburgh indicated that employed, low-income Ne-groes, on balance, traveled away from the central city to reach their jobs,while whites in the same employment class traveled toward the central city—and traveled fewer miles.

Access for ghetto residents to the growing number of suburban jobs canbe improved by both better transportation and less discrimination in sub-urban housing. The transportation requirements for those taking better pay-ing suburban jobs are greatest in the first few months of employment. Afterthat, workers tend to buy their own cars or form car pools. Transportationneeds of domestics and other low-paid workers are not so easily solved.

Suburban housing is already becoming more available to ghetto residents.Between 1966 and 1968, the number of Negroes residing in the suburbsgrew by half a million, although Negroes continued to account for onlyabout 5 percent of the suburban population. Access to suburban housingshould continue to improve as the fair housing provisions of the Civil RightsAct of 1968 become effective.

Living Costs for the Poor

The central city ghetto is an expensive place to live. Ghetto residents of-ten pay higher prices for comparable merchandise and are frequently soldinferior goods. To some extent, these higher prices reflect higher selling costsresulting from smaller average purchases, increased pilferage, slower turn-over of perishable items, and higher insurance rates. Easy credit, along withhigh-pressure salesmanship and door-to-door selling techniques, also adds

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to the costs of ghetto retailers. A Federal Trade Commission study of Wash-ington, D.C., furniture and appliance stores revealed that prices in ghettostores averaged $255 for each of $100 of wholesale cost, compared to $159in the rest of the city. Even so, net return on investment was considerablylower than for retailers elsewhere.

If ghetto residents had greater access to general market retailers, theywould pay significantly lower prices. This access requires improved trans-portation facilities in some cities and education—educating general retailersthat low-income families can carry moderate amounts of installment credit,and educating low-income shoppers about price differentials.

The Role of Private Enterprise in Ghetto Development

Reconstruction of the cities will require deeper involvement of privateenterprise.

The major asset of private business is its efficiency in accomplishing spe-cific tasks at minimum cost. The Federal Government has recognized thecontribution business can make. For example, local housing authorities arenow permitted to turn over much of the planning, site acquisition, andsupervision of construction of public housing to private developers. This"Turnkey" policy has reduced costs and greatly cut the time required toproduce public housing.

Without government inducements, profits are low in ghetto areas—adeterrent to private investment. Despite higher prices, retail businesshas difficulty thriving in the ghetto. Investing in new housing for low-incomefamilies—particularly in big cities—is usually a losing proposition. Indeed,the most profitable investment is often one that demolishes the homes of low-income families to make room for businesses and higher income families.Much of the blemished reputation of early urban renewal programs camefrom pursuing the most profitable development of renewal areas.

Many business leaders are willing to sacrifice some profits in order toinvest in the ghetto, but they cannot be expected to shoulder the major partof a financial burden that is properly the responsibility of all society.

Participation by the private sector is also limited by the large scale normallyneeded to make a ghetto project economically viable. Costs are far lower andprospects for permanent improvement far greater if redevelopment of anentire neighborhood is undertaken in a relatively short period. Only thelargest corporations are likely to be able to afford efficient renewal efforts.

Government aid to provide profit opportunities will be needed to inducesignificant participation by the private sector. The Federal Governmentcan provide such aid by direct subsidies to firms willing to build under itsprogram specifications. Alternatively, a tax credit or a deduction from tax-able income could be given for a broad class of ghetto developmentexpenditures.

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Three considerations bear on the choice of the proper techniques forattracting private enterprise into ghetto reconstruction.

First, the efficiency of Federal assistance is reduced if subsidies are paidfor activities that would have been undertaken anyway. Tax incentives auto-matically apply to all investment in the subsidized category. Even in themost depressed urban areas, some investments are still being made withoutsubsidies.

Second, a dollar of direct expenditure and a dollar of tax incentive haveidentical effects upon the budget, requiring either a reduction in otherFederal programs or an increase in taxes. One technique adds to Federalexpenditures; the other lowers Federal tax receipts.

Finally, tax incentives are not effective for encouraging indigenous busi-nesses. Large corporations, earning profits in other operations, benefit fromtax incentives, but firms operating only in the ghetto—where profits arelow—receive less benefit. New firms often receive no benefits from taxincentives since fledgling enterprises typically earn low profits. Since sup-port of new, ghetto-owned businesses is a particularly promising vehicle forpromoting ghetto development, a more direct form of assistance for thesefirms is necessary. Such firms need loans and management assistance as wellas the subsidies that would be provided to established businesses through taxincentives.

The Federal Government has moved to assist indigenous businesses.Projects in Model Cities areas must, where possible, be constructed by laborand businesses from the "model neighborhood." The Small Business Ad-ministration, through federally guaranteed loans and technical assistance,aided 2,300 minority-owned businesses in fiscal 1968. It plans to raise thisnumber to 6,500 new firms in fiscal 1969 and 14,000 in fiscal 1970.

The Federal Government can also assist in establishing other socialinstitutions. Community Action Agencies, supported by the Office of Eco-nomic Opportunity, provide a fulcrum for involving the residents of low-income areas in the revitalization of their neighborhoods. These agenciesalso provide a single, knowledgeable source of information on the programsavailable to assist the poor, as well as supplying many of these servicesthemselves.

STRATEGIES FOR REDUCING RURAL POVERTY

Over two-fifths of America's poor live in rural communities, eventhough only about one-fourth of the population is rural. Rural poverty,though not as visible as urban poverty, is a major national concern.

Rural communities face two special problems. First, average family in-comes in these areas are often low. Rural communities have difficulty makingsufficient investments in public facilities and schools. Expansion of Federalsupport for income maintenance, education, and other social services forthe poor would relieve rural communities of some of the burden of caringfor their relatively large dependent population.


The second special problem stems from the persistent outmigration ofthe past half century. Migration to the city occurs largely because of declinesin the principal sources of rural job opportunities—agriculture, mining,and foresty. Most migrants improved their living conditions by moving. Inareas where jobs were limited and migration took place, those who stayedobtained more employment at better wages than if migration had notoccurred.

A reduced rural population creates serious problems of public finance.Those who leave tend to be more employable, more highly skilled, bettereducated, and younger than those who remain. Some rural communitiesare thus left with a skilled labor force too small to support new industries.In many areas, excess capacity has developed in public facilitiesbuilt for larger populations than currently exist. The cost of maintainingthese facilities limits the ability of local governments to finance otherpublic services.

Other rural communities are growing vigorously. Manufacturing em-ployment is increasing more rapidly in the less urbanized States than inthose containing large urban centers. Furthermore, from 1962 to 1966 non-farm employment grew most rapidly in the counties with the smallest pop-ulation centers.

Net migration out of most rural counties is continuing, but at a slowerpace than in the 1950's, particularly in the rural South and Midwest. Forexample, of the 100 nonmetropolitan counties in Kansas, only 7 gained inpopulation through migration in the 1950Js; 32 have done so since 1960.Annual net migration from nonmetropolitan counties in the South hasfallen from 400,000 between 1950 and 1960 to 50,000 since 1960. Thesetrends indicate that a selective rural development policy, concentrating onthose counties which have begun to grow in the 1960's can produce substan-tial economic progress in much of rural and smalltown America.

The Federal Role In Rural Communities

Federal aid for education, planning, and public facilities overcomes bar-riers to future development arising from the low income of rural com-munities. Title I of the Elementary and Secondary Education Act providesfunds to defray part of the costs of education in areas with high concentra-tions of poverty. About 30 percent of these funds go to rural areas.

The Federal Government has also taken an active role in promotingareawide planning in rural areas. Forty million Americans reside inseven areas served by Regional Action Planning Commissions establishedunder the provisions of the Public Works and Economic Development Act.These agencies help to plan over-all regional economic development and tocoordinate Federal, State, and local community assistance.

The Department of Agriculture provides technical assistance to privateand public groups in rural areas undertaking coordinated planning and de-

177


velopment activities. Loans, grants, and technical aid to low-income ruralareas from the major Federal Departments amounted to over $1 billion infiscal 1968.

Diversification of the Rural Economy

Since economic development programs are more effective if some growthhas already taken place, Federal rural development assistance should beoriented toward more densely settled "growth centers," such as smallergrowing cities or small metropolitan areas. With a population ofviable size, a community can diversify its economy and cushion itself againstemployment fluctuations in one industry. As more firms settle in an area,they interact with mutual benefit by forming a sufficient market for thegrowth of business services and of cheaper communications and trans-portation—increasing the attractiveness of the community for furtherbusiness development.

This strategy has largely been adopted by the Department of Agricultureand the Economic Development Administration in aiding depressed, non-metropolitan regions. In addition, Federal agencies should give explicitconsideration to the development effects of Federal installations. Militarybases and scientific installations, for example, have a profound effect onthe community in which they locate.

Some rural communities, suited only for traditional resource-based in-dustries, will continue to decline. The Federal Government should ensurethat the remaining population is not required to carry the whole burden ofdeclines in the industries many rural communities have depended upon.Adequate income maintenance, support for education, and federalization ofother costs associated with economic and population decline are the mostequitable steps that can be taken to assist these areas. Federal support for thecosts of moving low-income individuals to employment opportunities else-where is also desirable in certain situations. Job training and job locationservices are also needed to help both migrants and those who remain. Theselast two measures are discussed in Chapter 3.

FULFILLING THE NATIONAL COMMITMENT

With a "poverty gap" of slightly more than 1 percent of GNP, the UnitedStates can—if it will—rapidly reduce poverty. This effort will require thatthe incomes of the poor grow faster than average income. Otherwise, con-quering poverty will take a long time indeed.

The long-run objective should be to reduce dependency, as well aspoverty. To this end, education and training will be required so that allAmericans can qualify for a decent job. In addition, programs are needed toexpand employment opportunities in poverty pockets. But many of theseefforts will take years to become fully effective.


To meet the most pressing income needs of the poor promptly, expan-sion of income maintenance is required. Welfare and social insurance pro-grams have brought us a long way in combating poverty among the coveredgroups; further benefit increases can close the poverty gap among thosecovered.

The most difficult policy issues pertain to families headed by an able-bodied man, for whom no major income support programs now exist. Mostof these men now work but with insufficient earnings to take their families—particularly large families—out of poverty.

Maintaining high employment is essential to eliminating poverty amongfamilies headed by a working man. Continued prosperity will raise the in-comes of some of these men above the poverty line. For the rest, a desirablepolicy could be compounded out of job training, placement, income support,and public employment. The poverty gap in 1967 for these families—con-taining 10.7 million persons—was $2.7 billion. The actual costs of a programto assist this group would exceed this amount. Supplementary employmentservices and, for reasons of equity and work incentive, some benefits for thenear-poor, would have to be provided.

Federalization of more of the costs of providing the poor with welfare,education, health care, training, and public facilities would spread the costsof combating poverty more equitably. Caring for the poor now places asevere financial burden on communities with concentrated poverty.

The choice as to how poverty will be eliminated has begun to enter intopublic discussion and debate. A number of good alternatives are available.After appropriate and intensive deliberation, the American public mustfind mechanisms for effectively attacking poverty—mechanisms and pro-grams that can command widespread support. The success of any programis jeopardized if assistance is handed out begrudgingly and becomes demean-ing to the recipients. Beyond this, the most essential requirement is a pro-gram of a scale adequate to guarantee rapid progress toward ending poverty.

Fulfilling the Nation's commitment is far more important than the detailsof the precise tactics used.

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REPORT TO THE PRESIDENT

FROM THE CABINET COORDINATING COMMITTEE

ON ECONOMIC PLANNING

FOR THE END OF VIETNAM HOSTILITIES

181



WASHINGTON, D.C.,

December 31, 1968.

T H E PRESIDENT:

SIR: The Cabinet Coordinating Committee on Economic Planning forthe End of Vietnam Hostilities herewith submits its report on the studiesyou requested in your memorandum of March 1, 1967.

Respectfully,

JOSEPH W. BARR

Secretary of the Treasury.

CLARK M. CLIFFORD

Secretary of Defense.

C. R. SMITI

Secretary of Commerce.

WlLLARD WlRTZ ^

Secretary of Labor.

IARLES J. ZWIGK

Director, Bureau of the Budget.

ARTHUR M. OKUN

Chairman, Council of Economic Advisers.

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CONTENTSPage

SUMMARY OF FINDINGS 189

FISCAL-MONETARY POLICIES DURING DEMOBILIZATION 189

RESOURCES AND PRIORITIES 189

POLICIES T O ASSIST PARTICULAR COMMUNITIES AND INDIVIDUALS . 190

LOOKING FORWARD TO PEACE 191

FISCAL-MONETARY POLICIES DURING DEMOBILIZA-TION 191

DEMOBILIZATION SCENARIO 191

ECONOMIC IMPACT 193

FISCAL-MONETARY ADJUSTMENT 195

RESOURCES AND PRIORITIES 198

PROJECTIONS OF THE PRIVATE ECONOMY 198

BASELINE FEDERAL EXPENDITURES 199

THE PEACE-AND-GROWTH DIVIDEND 200

ALTERNATIVE USES OF THE DIVIDEND 201

POLICIES TO ASSIST PARTICULAR COMMUNITIES ANDINDIVIDUALS 207

THE MAGNITUDE OF THE READJUSTMENT 207

READJUSTMENT OPERATIONS COMMITTEE 208

FUNDING READJUSTMENT PROGRAMS 209

ASSISTING DEFENSE-DEPENDENT AREAS 210

ASSISTING DISPLACED INDIVIDUALS 210

List of Tables and ChartsTables1. Illustrative Projections for Fiscal Year 1972 and Recent Ex-

perience 1992. Estimated Gap Between Amounts Currently Authorized and

Funded 2023. Illustrative New Programs or Major Expansions of existing

Federal Civilian Programs, Fiscal Year 1972 (derived fromProposals of Task Forces and Study Groups) 204

4. Estimated First Year Cost of Readjustment Programs 209

Charts1. Federal Purchases for National Defense 1882. Illustrative Reduction in Defense Spending with a Vietnam

Demobilization 1923. Illustrative Paths of Defense Spending With and Without a Viet-

nam Demobilization 194


Report to the President

FROM THE CABINET COORDINATING COMMITTEEON ECONOMIC PLANNING

FOR THE END OF VIETNAM HOSTILITIES

IN MARCH 1967 you asked the Secretaries of Treasury, Defense, Com-merce, and Labor; the Director of the Bureau of the Budget; and the

Chairman of the Council of Economic Advisers to form a committee to co-ordinate the economic planning for the end of hostilities in Vietnam.

As initial terms of reference, you instructed the Committee to

—consider possibilities and priorities for tax adjustment—prepare, with the Federal Reserve Board, plans for quick adjustments

of monetary and financial policies—determine which high priority programs can be quickly expanded—determine priorities for the longer range expansion of programs to

meet the needs of the American people, both through new andexisting programs

—study and evaluate the future direction of Federal financial supportto our States and local governments

—examine ways in which the transition to peace can be smoothed forthe workers, companies, and communities now engaged in supplyingour defense needs, and for the men released from our armed forces.

Vietnam hostilities first became a significant economic influence in thesummer of 1965, at a time when the economy was remarkably well-balancedand was in the midst of the longest peacetime expansion in history. Theincrease in the military budget required for Vietnam (evident in Chart 1)complicated the tasks of fiscal-monetary policies. The economy was sub-jected to inflationary strains. Although the American economic systemdemonstrated the strength and adaptability necessary to carry the extraload without major disruption and without jeopardizing its fundamentalhealth, the cost of war has been a load for the economy to carry—not a sup-porting "prop." Prosperity has not depended on the defense buildup and willnot need high military spending to support it in peacetime. On the contrary,peace will provide the Nation with welcome opportunities to channel intocivilian use manpower and material resources now being devoted to war.

187


Chart 1

Federal Purchases for National Defense

BILLIONS OF DOLLARS

80

60

40

20

0

LEVEL

ii

i- i

it# .

# /- # /

# /# /# /

i i I

*

1 1

1968 PRICES-1-7

/

1 1 1 1

\

—

IN CURRENT PRICES

1 1 1 1 1 1

*7

/

—

—

I 1 1

1950 52 54 56 58 60 62 64 66 68

PERCENT

15

10

5

0

AS PERCENT OF G N P ^ 7

- '

I I I I I I I I

-

I I I I I I I I I I

1950 52 54 56 58 60 62 64 66

I/CURRENT PRICES DIVIDED BY IMPLICIT PRICE DEFLATOR FOR TOTAL FEDERAL PURCHASES.

2/BASED ON CURRENT PRICES.

NOTE: DATA RELATE TO PURCHASES OF GOODS AND SERVICES.

SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS.

68

188


SUMMARY OF FINDINGS

A self-contained summary of the findings of the Committee is presentedinitially under three major headings. It is followed by more detailed dis-cussion of each major section.

FISCAL-MONETARY POLICIES DURING DEMOBILIZATION

Sustaining prosperity during the demobilization and seizing the welcomeopportunities of peacetime will depend upon the careful and forward-look-ing management of fiscal and monetary policies. If demobilization shouldproduce a major and rapid decline in defense spending, and if policies werenot adjusted, the Federal budget would have an excessively restrictive effecton the economy.

An illustrative pattern of demobilization was developed on the assumptionthat, within 6 months after cessation of hostilities, a genuine peace would besecured and a full withdrawal of troops could be initiated. In such a rapiddemobilization, the use of real resources for defense purposes would dropby $16 billion (annual rate in 1968 prices) below the previously plannedpath over a period of six quarters following the truce and, ultimately, by $19billion at the end of 10 quarters. If there were no compensating fiscal-monetary policy actions, the Nation could be threatened with a recessionsimilar to that at the end of Korean hostilities.

The magnitude and the timing of the policy adjustment best suited to pro-mote steady and healthy economic growth will depend on the strength of pri-vate demand at the time peace arrives and on the specific profile of thedefense cutback. The best possible projections of these elements will beneeded in order to guide fiscal-monetary policy.

A number of possible compensating measures can be foreseen now. Ifthe current 10 percent income tax surcharge is still in effect when hostilitiesend, its early expiration (or phasing out) could provide a major offsettingelement. A detailed plan to speed up expenditures on established high pri-ority projects should be available for the President's consideration. Iffurther stimulus is appropriate, new program initiatives could be launched.The objectives of the compensating fiscal action should receive the supportof monetary policy, but credit conditions probably should not be pushedinto a posture of aggressive ease. Meanwhile, the objectives of an improvedprice-cost performance and balance-of-payments equilibrium should bepursued intensively.

RESOURCES AND PRIORITIES

The choices among alternative fiscal adjustments during the demobiliza-tion period should be guided by longer run priorities. Such priorities shouldbe weighed in advance so that the Nation will be ready to take full advan-tage of any opportunities to launch important new programs, to strengthenhigh-priority existing programs, or to reduce taxes.

189323-166 0—69 13


As revenues expand in a growing peacetime economy, the elbow roomin the budget increases. But about one-half of the growth in revenuesis preempted by essentially built-in commitments of existing expenditureprograms to meet the needs of a growing population and an expandingeconomy. These commitments are reflected in the estimated "baseline"budget for both defense and nondefense expenditures in fiscal 1972. Theseestimates assume that the transition to peace is essentially completed by1972, and that the current 10 percent income tax surcharge and certainexcise taxes have expired by that time.

According to the illustrative calculations, the "peace-and-growth divi-dend"—available for Federal programs above the baseline or for tax reduc-tion—would amount to $22 billion by fiscal 1972, and would increase $7 to$8 billion a year thereafter. The peace-and-growth dividend must be used inorder to maintain healthy economic growth, and it can be used constructively.

Some possible uses of the dividend are set forth to illustrate the con-siderable pressures, demands, and opportunities for Federal efforts in theyears ahead. Some liberalization of social insurance and other cash bene-fits—in part, to keep up with the cost of living—is viewed as a significantclaim on the dividend. In addition, the full funding of existing civilian pro-grams to authorized levels would cost $6 billion a year.

Beyond that, a variety of major expansions in existing programs andof new programs are highly eligible claimants. A selection of such items,based largely on proposals which have been made by experts or study groups,adds up to $40 billion a year. And other more ambitious, new proposals,which are currently receiving widespread public discussion must also berecognized. Furthermore, tax reduction merits consideration as an effectiveway to share part of the dividend broadly among Americans.

It is clear that the Nation cannot carry out all these activities—fundingexisting programs, undertaking new program initiatives, and reducingtaxes—in the next few years from the peace-and-growth dividend; difficultchoices based on a careful determination of priorities will be necessary. Butfor those objectives placed at the top of society's priority list, progress can bemade in a peaceful environment of prosperity and reasonable price stability.

As noted above, our calculations allow for expiration of temporary taxesnow in effect. In view of the urgent needs of the public sector, the Com-mittee would not recommend further large-scale Federal tax reductions inthe years immediately following the end of Vietnam hostilities.

POLICIES TO ASSIST PARTICULAR COMMUNITIES AND INDIVIDUALS

The economic impact of the war has been broadly diffused among allStates and most industries. Only a relatively small number of areas andindustries are likely to be specially affected by the demobilization or toencounter significant transitional problems. The Committee recommends

190


certain measures to aid people in those areas and industries, including:community redevelopment assistance, homeowner assistance, and—mostimportantly—the strengthening of job placement and training.

We also recorrimend the early establishment of a coordinating group,which might be called the Readjustment Operations Committee, to assumeresponsibility for detailed planning of Federal readjustment assistance, towork with State and local authorities responsible for demobilization plan-ning, and to coordinate Federal readjustment programs during demobili-zation.

The steps we propose for readjustment assistance are limited and relativelyinexpensive, reflecting our conviction that the maintenance of generalprosperity is far and away the major part of the economic problem of thetransition. In our dynamic and flexible free market economy, most areas andindustries should be able to make a prompt and healthy adjustment solong as the Federal Government promotes noninflationary prosperity.

LOOKING FORWARD TO PEACE

We also wish to stress the importance of a responsible and responsivefiscal policy during the remaining period of hostilities. Only in recent months,through the enactment of the 1968 program of fiscal restraint, have ourNation's finances become adequately adjusted to the defense emergencysituation. Maintenance of appropriate fiscal and monetary policy is abso-lutely essential both to preserve prosperity and to minimize the problem oftransition at the end of hostilities.

FISCAL-MONETARY POLICIES DURING DEMOBILIZATION

Peace may "break out" in any number of ways. For example, hostilitiesmay decline gradually, accompanied by reduced expenditures on armamentand manpower. Alternatively, there could be a lengthy armed truce whichwould permit no significant reduction in our forces in Southeast Asia.

DEMOBILIZATION SCENARIO

In the calculations underlying this report, defense activities in Vietnam areassumed to continue at essentially present levels until hostilities cease. It isfurthermore assumed that, within 6 months after a truce, there will be agenuine assurance of peace and hence the beginnings of a full withdrawalof troops from Vietnam with accompanying cutbacks in other outlays.

An illustrative demobilization scenario developed by the Department ofDefense points to the reductions in manpower, materials, and outlays de-scribed below. These are the amounts by which defense activities wouldfall short of the path that they would have followed had hostilities con-tinued.


1. The armed services would decline by about 800,000 persons, averaging200,000 a quarter starting in the third quarter following the truce andterminating after the sixth quarter.

2. Civilian personnel in the Department of Defense would be reducedby 170,000, also declining smoothly between the third and sixth quarters.

3. As a result of the manpower reduction, military and civilian compensa-tion would be reduced by $7 billion (annual rate) at 1968 pay rates by theend of the sixth quarter.

4. Other operating expenditures (annual rate in 1968 prices) woulddecline by $4 billion over a slightly longer period.

5. Expenditures for procurement would be reduced by $8 billion over aninterval of 10 quarters. This reduction would take longer in order to re-build inventories held by the Department of Defense.

6. Total real defense spending (annual rate in 1968 prices) would thus bereduced by $8 billion at the end of four quarters, $16 billion at the end ofsix quarters, and $19 billion at the end of 10 quarters.

The time profile of the assumed reduction in real expenditures is shownin Chart 2.

Chart 2

Illustrative Reduction in Defense SpendingWith a Vietnam Demobilization

BILLIONS OF DOLLARS, 1968 PRICES (ANNUAL RATES)

2 0 -

15 -

10 -

5 -

0 1 2 3 4 5 6 7 8 9 10 11 12

QUARTERS FOLLOWING TRUCE

NOTE—DATA RELATE TO FEDERAL PURCHASES OF GOODS AND SERVICES FORNATIONAL DEFENSE.

SOURCE: COUNCIL OF ECONOMIC ADVISERS BASED ON ESTIMATES OF DEPARTMENTOF DEFENSE.

TOTAL REDUCTIONIN DEFENSE SPENDING

M^PROCUREMENT^X^^^^^^g

PERSONNEL COMPENSATION

1 1 I } 1

iiii ~

•"t

192


This is a rapid demobilization—probably the most rapid that could realis-tically be assumed. Demobilization may in fact turn out to be smaller ormore gradual as a result of any one of at least three developments:

1. A gradual decline in military activity prior to the truce,2. A long period of uncertainty between the attainment of the truce and

the decision for redeployment, or3. The need to maintain significant residual forces in Vietnam, even in

peacetime.The rapid pattern of demobilization is assumed because it represents the

sharpest test of the Nation's ability to adapt to peace—not because it appearsmost probable. If the Nation is ready to meet the challenge of rapid demo-bilization, the lesser challenge of a more gradual transition can surely behandled.

The estimated decline in defense expenditures is significantly less thanthe $29 billion a year currently estimated as the cost of the war. Of resourcescurrently used for Vietnam, $10 billion would be required in other militaryuses in peacetime.

The reduction in Vietnam outlays during the demobilization will appearas a shortfall from an otherwise increasing path of defense spending. Ifhostilities were to continue with undiminished intensity, the total defensebudget would probably continue to rise at least enough to cover increasesin military pay scales and gradual advances in prices paid for defense goods.

A hypothetical example is presented in Chart 3 to illustrate the relation-ship between the paths of defense spending with and without the demobiliza-tion. In this illustration, defense purchases are assumed to be $80 billioninitially and to be rising at the rate of $1 billion a quarter to cover priceand pay increases and to provide for a very modest real growth. In theabsence of peace, defense purchases would reach $86 billion after six quar-ters and $90 billion after 10 quarters. The demobilization scenario aboveimplies that defense purchases would be pulled below this rising path byabout $16 billion six quarters after the cessation of hostilities, and by about$19 billion after 10 quarters. The absolute decline from the initial level of$80 billion would be considerably less, reaching $10 billion at the end of sixquarters.

ECONOMIC IMPACT

The economic impact of the demobilization (and the required fiscal-monetary adjustment) can be most readily appraised by supposing that thefiscal program had been appropriately designed initially, under the assump-tion of continuing hostilities, to promote a balance between aggregatedemand and the economy's supply capabilities. In this situation, a majorpolicy adjustment would be required to offset the shortfall resulting fromdemobilization.

The impact of demobilization on the balance between aggregate demandand the economy's productive capacity has three aspects.

X93


Chart 3

Illustrative Paths of Defense Spending With andWithout a Vietnam Demobilization

BILLIONS OF DOLLARS (ANNUAL RATES)

DEFENSE SPENDING

90

85

80

75

70

65

UNDER HYPOTHETICALCONTINUATION OF HOSTILITIES

UNDERDEMOBILIZATION

0 1 2 3 4 5 6 7 8 9 10QUARTERS FOLLOWING TRUCE

N0TE._DATA RELATE TO FEDERAL PURCHASES OF GOODS AND SERVICES FORNATIONAL DEFENSE.

SOURCE: COUNCIL OF ECONOMIC ADVISERS BASED ON ESTIMATES OF DEPARTMENTOF DEFENSE.

1. The reduced use of resources by the Federal Government, reflectedin the decline of defense spending described above.

2. The short-run downward adjustments of inventories by defense sup-pliers as their production is adjusted to declining orders and falls belowdeliveries to the Government. The economic impact would occur even beforeFederal expenditures declined, and would remain significant for only aboutfour quarters after the truce.

3. An increase in the Nation's potential output resulting from the po-tential additional employment of released military personnel in civilianjobs, where productivity is substantially greater. Some women will withdrawfrom the labor force when their husbands return to civilian life, and someveterans will return to school before entering the civilian labor force. Afterallowing for these elements, the cumulative net induced increase in theprivate labor force is estimated at about 600,000 after six quarters.

This shift toward higher productivity would add about $4 or $5 billionto potential GNP. To absorb this increment, action would be required toadd nearly $2 billion directly to total demand. The resulting additional

194


incomes could be expected to generate the necessary additional $2 to $3billion increment in demand.

With no policy offset whatsoever, the direct shortfall of demand by thesixth quarter following the truce could amount to $18 billion: $16 billionfor the real decline in military spending and $2 billion for the direct incre-ment in demand needed to make use of the addition to potential output.

Shifts in the strength of private demand might either reduce or add to thisgap, but they would be unlikely to change the picture dramatically. Withoutcompensatory stabilization action, the gap would be multiplied throughinduced further cutbacks in demand that spread through the private sector.Eight quarters after the truce, the total multiplied shortfall below the po-tential output of the economy could reach $40 billion. Inaction would thusthreaten a recession similar to the 1953-54 experience following the Koreanhostilities.

FISCAL-MONETARY ADJUSTMENT

The instruments of fiscal and monetary policy must be available forprompt and decisive use to promote noninflationary prosperity and economicgrowth. These instruments are clearly capable, in principle, of offsettingthe restrictive fiscal impact of demobilization. Indeed, an excessive or pre-mature stimulative fiscal-monetary program could overdo the job andgenerate an inflationary boom. A major challenge will be to determine andcarry out a policy adjustment of proper size and timing.

Determining the Magnitude

The above projections merely suggest the general magnitude of the policyrequirements during a rapid demobilization. The specific dimensions canonly be appraised when peace comes and much more is known about theprospects for private demand, the budget, and the time-path of the militarycutback. Nevertheless, some important guides can be provided to the prob-lems and procedures involved in determining the magnitude of the com-pensating actions.

1. When peace comes, the President and the Congress will need advicebased on detailed projections of the GNP, prices, unemployment, and thebalance of international payments. Despite the inherent limitations of pro-jections, prudent reliance on quantitative forecasts—carefully weighed andinterpreted—is preferable to a policy of wait-and-see, a resort to predeter-mined rules of policy adjustment, or a simple extrapolation of existingeconomic conditions.

2. Efforts should begin now to strengthen the quality of statistical infor-mation about the economy's performance—such as those improvements rec-ommended in the budget program for fiscal 1969. Information of thistype may be critical in determining the appropriateness of policy duringthe demobilization.


3. For the same reasons, the Department of Defense should continue in-tensive efforts to improve projections of military orders and outlays so as toaid economic policy during demobilization. Assessing the time-path of themilitary cutback will be subject to uncertainties similar to those that wereencountered in appraising the initial defense buildup in Vietnam.

4. Flexibility of fiscal and monetary policy decisions will be important tothe success of adjustment. Even with the best efforts, gauging private de-mand and defense outlays will be difficult. During the demobilization, pre-diction of private spending will be complicated by the substantial psychologi-cal impacts of peace on private decisionmakers. It is a safe judgment thatAmericans will be delighted by peace, but it does not follow that they willtherefore spend more, or alternatively that they will save more. Hence asuccessful transition program—marked by steadiness and stability in thegrowth, employment, and price performance of the Nation—may requirecontinuing adjustments in the budgetary balance and in the behavior ofmonetary and credit flows.

5. Fiscal-monetary policies for the transition should take into account theinitial economic situation. If the economy is advancing too rapidly whenpeace comes, the restrictive effect of demobilization should not be entirelyoffset. If the economy is initially sluggish, the adjustment of stabilizationpolicies should more than compensate for the impact of demobilization.

Types of Compensatory Action

In the event of a rapid demobilization, the required policy adjustmentmay be large. This extraordinary "dividend" would be fully available toprovide for "controllable" expenditures or tax reductions, unlike the normalfiscal dividend from growing tax revenues which must, in part, finance thebuilt-in growth of Federal expenditures. The various types of action whichmight be undertaken should be considered in advance.

1. If the cessation of hostilities occurs while the income tax surcharge isstill in effect, its early expiration (or phasing out) could provide a majorelement in the required fiscal offset. Acceleration of the currently scheduledreductions in excise taxes on automobiles and telephone service could serveas another element in the fiscal adjustment.

2. There should be available, for the President's consideration, a pro-gram of accelerated expenditures that could be initiated on short noticefollowing the cessation of hostilities. These should be confined to high-priority public expenditures which, in any event, would be made in thenear future. It is currently estimated that such a program could add toFederal expenditures (at annual rates) by as much as $3 billion in 6months and $7.5 billion in 12 months following its activation.

3. Decisions on Federal expenditures, as part of the program of fiscaladjustment, should be made in light of the promptness with which varioustypes of outlays will add to total demand. For example, according to ourstaff studies, some—although not all—Federal grant programs to States

196


and localities involve a significant lag between the expenditure of the fundsby the Federal Government and their translation into additional purchasesby the recipients. Programs with long lags are not ideal for supporting de-mand during the transition. In contrast, other Federal programs generateorders or contracts to the private sector which would increase employmentand economic activity promptly even before expenditures are incurred bythe Federal Government.

4. While the precise assignment of responsibilities between fiscal andmonetary policies should be made in full light of the circumstances asso-ciated with peace, monetary policy should be expected to play a supportiverole to the fiscal program. Credit policies can undoubtedly help significantlyto ensure an adequate supply of mortgage credit to meet the needs for ad-ditional housing. But placing a heavy readjustment burden on monetarypolicy would be inadvisable; it probably should not shift toward extremeease to provide a maximum economic stimulant. For one thing, balance-of-payments considerations are likely to limit, to some degree, the easingof credit. Also, the flexibility inherent in monetary policy makes it a usefulinstrument to hold in reserve as a means of compensating for deficienciesor excesses that might develop in the fiscal program or for unforeseendevelopments in private demand.

5. In general, fiscal policy adjustments during the transition should ad-vance longer range national objectives. One basic choice will concern therelative importance in the fiscal program of tax reduction and of increasedFederal expenditures. This decision should not be governed by considera-tions of economic stabilization; various mixes of increased spending andreduced taxes can be equally satisfactory from that standpoint. Rather thechoice should depend upon the extent to which the Nation wishes tochannel resources from defense uses into the other areas of the publicsector. Given the allocation between tax cuts and increased civilian pro-grams, further choices will be required to set priorities among variousexisting programs and possible new programs. These priorities should beestablished in advance.

6. In the event that the Administration plans to initiate, during thetransition, any new programs which would require major legislation, suchlegislation might be submitted to the Congress in the near future for dis-cussion and debate and perhaps even for enactment on a standby basis.Thus these programs could be ready when needed.

Other Objectives

In addition to the objective of steady and sustainable growth at highemployment, policies during the transition should be directed at the priceperformance of the economy and the balance of payments.

1. During the transition period, efforts should be redoubled to combatthe troublesome inflationary tendencies of a high-employment economy. Theefforts could include various measures which have been explored recently by


the Cabinet Committee on Price Stability: to strengthen manpower pro-grams, to improve the price performance of particularly troublesome sectorssuch as construction and medical care, to increase the efficiency of the pri-vate economy generally, to minimize any inflationary effects of the FederalGovernment's own activities, and to achieve, through cooperative efforts,patterns of collective bargaining and of business price determination thatare consistent with over-all price stability.

2. Intensive efforts should be made to take full advantage of the oppor-tunities that peace may bring for improvement in the U.S. balance of pay-ments. The direct foreign exchange cost of our military presence in SoutheastAsia is now about $1.6 billion a year higher than in 1965. Reduction in thisoutflow could be reinforced by other measures to yield a more compre-hensive solution to our lingering international payments problem.

RESOURCES AND PRIORITIES

Many of the choices that will have to be made during transition should beguided by a longer range view. To build the best bridge to peacetime pros-perity, we should know in advance where we want to go when we cross thatbridge. The following projections are intended to provide an indication ofthe resources that will become available in the next few years, and to serveas an aid in making critical choices about the uses of these resources.

The projections are focused on fiscal 1972. They are based on the assump-tion that the transition will be essentially completed by that time, anassumption that is reasonably consistent with the demobilization scenario ifa truce occurs during calendar 1969.

PROJECTIONS OF THE PRIVATE ECONOMY

Underlying the post-demobilization outlook are some fairly detailed eco-nomic projections prepared by our staff. While these projections are surelynot to be regarded as precise forecasts of economic conditions, they provideuseful rough indications, on the basis of reasonable assumptions, of what theeconomic situation might be.

The economic framework was based on an unemployment rate of 3.8percent and an over-all rate of price increase which gradually declines toabout 2 percent a year by 1972. These assumptions represent neither a fore-cast nor a judgment that these rates will necessarily be feasible or appro-priate. Lower unemployment would result in a higher GNP and increasedbudgetary resources. Greater price stability would also be highly desirable.What combination of price stability and high employment will prove feasibledepends upon the success of measures to help reconcile these two objectives.

The time-path of real GNP was estimated, using labor force, employment,and productivity projections supplied by the Bureau of Labor Statistics. Onthe basis of the projected path of the over-all price index of GNP, theestimated GNP (in current dollars) for fiscal 1972 is $1,100 billion(Table 1).

198


TABLE 1.—Illustrative projections for fiscal year 1972 and recent experience[Billions of dollars]

ItemCalendar year1968, second

half *Fiscal year

1972 projected

Gross national product

Federal receipts.._ _ _.

Federal expenditures and dividend.

Baseline expenditures _.

Defense purchases..Other expenditures.

879

185

186

186

80106

Peace-and-growth dividend.

Federal surplus or deficit ( - ) . _ _ -1

1,100

226

222

200

73127

22

4

i Seasonally adjusted annual rates; preliminary.Note.—Federal receipts, expenditures, and surplus or deficit are the concepts used in the Federal Government sector of

the national income and product accounts.Detail will not necessarily add to totals because of rounding.Sources: Department of Commerce and Council of Economic Advisers.

This GNP estimate served as the basis for projecting anticipated Federalrevenue in 1972, in line with the assumed growth of incomes. Projectedrevenues are augmented by scheduled increases in social security taxes, andreduced by the assumed expiration of the current 10 percent income taxsurcharge and of excise taxes on telephone service and automobiles. The netresult of these calculations is an estimate of Federal receipts in fiscal 1972 of$226 billion.

Next the various components of private demand were projected, allowingfor the effect of tax payments on private incomes and assuming that theindicated GNP was in fact achieved. Specific allowances for the impact ofthe Housing Act of 1968 were incorporated into the projection of residentialconstruction activity. Additional estimates were also made for anticipatedState and local government expenditures.

BASELINE FEDERAL EXPENDITURES

A baseline level of Federal expenditures was then projected.

Defense

Baseline defense expenditures for fiscal 1972 are calculated on the assump-tion that non-Vietnam programs now funded or approved will be carriedout on schedule with no stretchout or cancellation. No allowance is madefor possible new defense programs. These baseline defense expenditures areconsistent with the demobilization scenario outlined earlier. The estimatefor defense purchases is $73 billion in fiscal 1972, compared to $80 billion inthe second half of calendar 1968. The $7 billion decline is the result of thereduction in spending associated with Vietnam (which amounts to $19 bil-

199


lion at 1968 prices, as shown in Chart 2), offset in part by allowances forhigher pay scales, some upcreep in prices paid for defense items, and programadjustments following the end of the war.

In constant prices, the baseline estimate for fiscal 1972 is nearly 20 percentbelow current real defense outlays. Compared with the pre-Vietnam averagelevel of 1960-64, real baseline expenditures for fiscal year 1972 are roughly15 percent higher. The calculations of cost increases are necessarily imprecisebecause the character of defense equipment and programs changes markedlyover time. After 1972, baseline defense expenditures would move up slowly,mainly to keep pace with rising costs.

Nondefense

Baseline Federal nondefense expenditures rise over time for several rea-sons. Some gradual increases must be expected in the prices of the things theGovernment buys, and the pay of civilian Government employees must beraised about in pace with wages and salaries elsewhere. More veteransbecome eligible for pensions; more Government employees qualify for retire-ment benefits; a growing population increases the workload of many Govern-ment agencies, such as the Post Office Department and the National ParkService; and so on. Social security benefits rise even with an unchangedbenefit formula, as more persons become eligible for benefits and as the aver-age past income of applicants rises. As a result, baseline nondefense expendi-tures will rise nearly $7 billion per year to reach $127 billion in fiscal 1972.

THE PEACE-AND-GROWTH DIVIDEND

The peace-and-growth dividend may be defined as the additional totaldemand—over and above normal private demand and baseline Federalexpenditures—needed to achieve the specified GNP target. Estimated totaldemand for goods and services—including that in the baseline Federalbudget—adds up to $1,078 billion for fiscal 1972. The difference of $22billion between the target GNP of $1,100 billion and estimated total demandis the peace-and-growth dividend. It represents the additional total demandthat would have to be forthcoming to achieve the GNP target.

For the years following 1972, the annual peace-and-growth dividend maybe expected to grow $7 or $8 billion a year, as annual Federal revenues ex-pand by roughly $15 billion and baseline expenditures absorb about halfof that growth.

The peace-and-growth dividend can be viewed in another way. Be-tween now and fiscal 1972, the $19 billion decline in defense expendituresresulting from peace in combination with normal revenue growth providessufficient Federal budgetary resources to cover built-in defense and nonde-fense commitments, to permit removal of the surcharge, and to allow for afurther $22 billion addition to total demand through expansionary policyactions.

2OO


The peace-and-growth dividend is thus a rough measure of the resourcesavailable for expansionary action. A dollar of this dividend may be "used up"either by a dollar of increased Federal purchases or by a dollar of addi-tional private purchases. The latter could be induced by a reductionin taxes, an increase in Federal transfer payments, or an easing of monetarypolicy.

An increase in transfer payments or a reduction in taxes of one dol-lar will generally not increase private spending by a full dollar; to the ex-tent that these instruments are used, the total of expansionary fiscal actioncan be somewhat greater than the peace-and-growth dividend.

The projections implicitly assume certain monetary conditions and in-terest rates. The appropriate Federal Reserve policy may be either morerestrictive or more stimulative than assumed, thus affecting fiscal policyrequirements.

The appropriate budget deficit or surplus in any given year is determinedby the fiscal action needed to support private demand in light of monetaryconditions. The above calculations imply a $4 billion surplus (national in-come accounts basis) in fiscal 1972. Private demand may be either weaker orstronger than assumed, thereby calling for a different budgetary policy. Ifprivate demand is weaker, smaller surpluses (or possibly deficits) will beneeded, and the peace-and-growth dividend in fiscal 1972 will be larger than$22 billion. Conversely, if private demand is stronger, larger surpluses willbe needed and the dividend will be smaller.

ALTERNATIVE USES OF THE DIVIDEND

The peace-and-growth dividend must be used in some fashion if thegrowth and employment targets are to be achieved. And it surely can beused productively by strengthening valuable Federal programs, enacting taxreductions, and easing monetary policy. Indeed, the problem will be tochoose among many worthy alternatives.

There is no limit to the portion of the peace-and-growth dividend thatcould, in principle, take the form of a lighter tax burden on individuals andbusinesses. This use of the dividend would contribute effectively to achiev-ing the growth and employment targets. Our national experience from1962 to 1965 demonstrates the effectiveness of the stimulus from a markedlylightened Federal tax burden. But the use of the dividend to reduceFederal taxes must compete with compelling needs for strengthened andnew public expenditure programs. The ultimate national decisions on priori-ties must focus on the allocation of the dividend between these two basicroutes.

Some of the possible increases in Federal expenditures are spelled outbelow. Two areas of expenditure that would appear to have a significantclaim are: increases in benefits needed to maintain standards under socialsecurity and related Federal programs, and the full funding of existing pro-grams which are currently operating below authorized levels.

201


Maintaining Standards Under Cash Benefit Programs

The baseline expenditure projections allow for growth in social securityand other transfer benefits resulting from an increased number of recipientsand an increase in the lifetime earnings of recipients under the presentbenefit formula. But they make no allowance for statutory liberalization ofbenefit formulas under Old Age and Survivor's Insurance, unemploymentinsurance, Federal retirement, railroad retirement, veterans benefits, andpublic assistance programs. If, in fact, there were no legislative liberaliza-tion, social insurance trust funds would accumulate a substantial surplus,while benefits would shrink in terms of purchasing power. A legislatedincrease of $4 billion by fiscal 1972 in these benefit formulas would ensurethat benefits at least keep pace with assumed increases in the cost of living.

Full Funding of Existing Programs

Several Federal programs, particularly ones adopted recently, are operat-ing below levels authorized by the Congress. To fund these programs fully,thus making appropriations match authorizations, would cost about $6billion a year as distributed in Table 2. These programs are already makingimportant contributions to the solution of major social and environmentalproblems, and increasing their appropriations to authorized levels wouldprobably command high priority. Nevertheless, in establishing priorities, therelative value of each of these programs should be weighed against those ofnew or expanded programs and of tax reduction.

TABLE 2.—Estimated gap between amounts currently authorized and funded

ProgramBillions of

dollarsper year

Total full cost..

Elementary and secondary education .,Higher educationHousing and community developmentWater and air pollution controlCrime control and preventionArea redevelopment _._Health training and research, etc __.Agricultural conservation and adjustment.

6.0

2.01.3.6.5.2

'.A.5


New Efforts in Civilian Programs

A variety of new efforts—entirely new programs or major expansionsof existing civilian programs—are also eligible claimants for a shareof the peace-and-growth dividend. A review of recent recommendationsby task forces or study groups indicates the possible desirability of newdomestic programs in the fields of education, health, job and manpowertraining, social insurance, welfare, urban development, crime prevention,

202


air and water pollution control, natural resource development, transporta-tion, space technology, and science.

Table 3 contains a list of programs that have been prominently andgenerally discussed recently as desirable to meet the needs of the Nationduring the next several years. The table is presented for illustrative purposesonly and does not indicate any program priorities. It sets forth quantitativeestimates of the expenditures that might take place in each of these programsduring fiscal 1972. In many instances, the dollar amounts shown in the tableare considerably below the recommendations of recent task forces or studygroups. By many standards, the list is incomplete and inadequate. Yet, ittotals $40 billion—nearly double the entire estimated peace-and-growthdividend for that year. The clear lesson emerging from this table—and thereason for its inclusion in this report—is that some very difficult choiceswill have to be made.

New Defense Programs

Depending upon international developments affecting our national secu-rity and upon technological changes in weapon systems, added expendi-tures on new defense programs may be needed. If these are essential to ournational security, they must be given a top priority claim on the peace-and-growth dividend. At the same time, it is clear that the possibilitiesfor expansion in the defense area are virtually unlimited, and that utmostefficiency will continue to be needed in budgeting for defense. Forillustrative purposes, the staff of the Department of Defense has assembleda package of $6j/i billion (annual rate) of expenditures on new DOD pro-grams which may come up for consideration in the next few years. Themajor elements in the package are expenditures of $2 billion for aircraftdevelopment and modernization in connection with major new programs,$0.8 billion for the construction of defense installations and family housingprojects, $0.7 billion for shipbuilding and modernization of naval forces,and $2 billion for advanced strategic and general purpose weapon systems.

Major New Initiatives

The proposals listed in Table 3 essentially expand or build upon existingprograms. More elaborate proposals have also been advanced as alternativesto this piecemeal approach.

A comprehensive income maintenance plan, such as the "negative in-come tax," has been widely discussed as a simple and equitable device toassist the poor. A negative income tax that succeeded in making majorinroads on poverty while preserving work incentives might cost as much as$15 to $20 billion a year. Such a program would protect people against theravages of poverty, but it would still need to be reinforced by efforts inhousing, health, education, and job training aimed at the long-run sourcesand causes of poverty.

203


TABLE 3.—Illustrative new programs or major expansions of existing Federal civilianprograms, fiscal year 1972 {derived from proposals of task forces and studygroups)

ProgramHypotheticalexpenditures(billions of

dollars)

Total expenditures..

EducationPreschoolElementary and secondary..Higher..Vocational

HealthKiddie-careMedicare for disabledComprehensive health centersHospital construction and modernization..

Nutrition

Community service programs.

Jobs and manpowerPublic jobsManpower Development Training Act.Employment service

Social security and income supportUnemployment insurancePublic assistanceSocial security improvements

Veterans

Economic, area, and other special development programs..Entrepreneurial aidArea redevelopmentRural developmentIndian assistance

Crime, delinquency, and riotsViolence and riot preventionSafe streets programs — —Rehabilitation of offenders and delinquents

Prevention of delinquency and crime by special measures for delinquency-prone youth-

Quality of environment -Air pollution prevention and controlPublic water supply construction programsWater pollution control and sewage treatmentSolid waste disposalNatural beautification, environmental protection, and recreational development

Natural resource development and utilizationLand and forest conservation...Water resources and related programsMineral and energy (excluding hydroelectric) developmentNatural environmental development _ ___

Urban development __ ___.New citiesLand acquisition and financial planning (suburban)..Urban mass transportationModel cities _Other urban facilities and renewal

Transportation _Airway and airport modernization _Rapid interurban ground transit.. _Modernization of merchant marineMotor vehicle and transportation safety research and safety grants ._

Science and space explorationPost-Apollo space program _Scientific research in oceanography, communications, social and behavioral sciences, and natural

sciences _

Foreign economic aid

39.7

7.01.02.53.0

3.8.5

1.81.0

1.0

.8

2.51.8.5.2

9.52.04.03.5

.3

2.2

L0

1.0.1.3.3.3

1.7

!31.0.1.2

1.4

!5.2.5

5.5

.5

.52.02.0

1.0.4.1

.3

1.0

.5

1.0

See Notes at end of table.

204


TABLE 3.—Illustrative new programs or major expansions of existing Federal civilianprograms, fiscal year 1972 (derived from proposals of task forces and studygroups)—Continued

NOTESEducation. The preschool program, an extension of Head Start, would provide full-time preschool education for about

500,000 children.The elementary and secondary education funds would about double the Federal support in that area. Thefunds proposed for higher education would more than double current Federal support.The vocational education funds wouldraise Federal support about halfway toward the recommendation of the 1968 Advisory Council on Vocational Education.

Health. The "kiddie-care" proposal would provide health care for needy mothers and infants. Medicare offered tobeneficiaries of social security disability insurance on a contributory basis would potentially reach 2.2 million persons in1972. About 350 additional comprehensive neighborhood health care centers a year could be established for the amountshown. The added funds for health facilities would enable the Federal Government to double the rate of output of suchfacilities, in line with estimates of national needs.

Nutrition. Nutritional supplements for needy pregnant women, nursing mothers, and small infants account for about$200 million, while the remainder would allow a doubling of existing food assistance programs.

Community service programs. This would provide for expanded daycare centers for children of needy working mothersand for expansion of coordinated services through neighborhood centers.

Jobs and manpower. The funds for jobs in the public sector would permit expansion of about 500,000 jobs to providepublic service employment for the chronically disadvantaged; this program would reinforce expansion in education, healthservices, and urban and area redevelopment. The increase in MDTA training would support expansion of the JOBS pro-gram and would reinforce efforts to lower unemployment while improving the Nation's price performance. It would alsoprovide trained manpower for construction. The growth in employment service operations envisions strengthening, decen-tralizing, and computerizing manpower activities; developing a rural manpower service; and enlarging services to thedisadvantaged.

Social security and income support. The unemployment insurance funds would provide for higher benefits, extendedbenefits during recessions, and aid to the unemployed through retraining and mobility assistance. The public assistancefunds could permit revision of benefit standards and extended coverage, or the adoption of a modest new program of in-come aid with objective standards. The added expenditure could fill as much as 40 percent of the current poverty incomegap. Expansion of the WIN program would provide more job and training opportunities for welfare recipients. The socialsecurity expenditure couid provide a higher minimum benefit for those dependent on social insurance benefits as themain source of income, and liberalization of eligibility requirements for disability insurance, as well as some general im-provement in benefit levels.

Veterans. The higher priority recommendations made by the Veterans' Advisory Commission in March 1968 could beinstituted with these funds.

Economic, area, and other special development programs. The entrepreneurial assistance program could help minoritygroups—so-called "black capitalism." Area redevelopment programs would assist growth centers in less populated areas,while rural redevelopment programs would concentrate on small communities, providing community facility development,special housing, and family farm assistance.

Crime, delinquency, and riots. Federal aid to State and local governments could be provided to help prevent violenceand riots and permit a higher degree of Federal readiness to cope with such emergencies. The safe streets program fundswould be used to work towards the objectives of the National Crime Commission with respect to strengthening the policeand courts. Rehabilitation of offenders and delinquents would be pursued by intensive retraining and other services.

Quality of environment. Federal funds for pollution abatement may be required to enforce standards, investigate claims,or abate pollution caused by government or not readily attributable to particular private individuals. Assistance in expandingthe Nation's water supply system would provide a small fraction of the $2.5 billion annual requirement over the next 10years. Provision of more recreational areas near population centers would be made possible.

Natural resource development and utilization. Department of the Interior, Corps of Engineers, and Department of Agri-culture programs relating to land, mineral, energy, forest, recreational, and other fields have large backlogs of useful pro-jects, many already planned and authorized but held back for budgetary reasons.

Urban development. Metropolitan development assistance would support improved planning and coordinated advanceland acquisition. Each of these programs emphasizes these requirements, whether in new communities, suburbs, or oldercentral cities. The allowances represent only a fractional contribution to the reconstruction and development of the cities.

Transportation. Such expanded investments in the improvement of the principal elements of the Nation's transportationsystem would serve the objectives of economic development, safety, and national defense.

Science and space exploration. The allowances would permit the science and space agenices to fund some of the researchopportunities not covered in the stringent budgets of recent years.

Foreign economic aid. This additional amount would help to meet growth targets in Southeast Asia and under theAlliance for Progress as well as to cover other aid requirements. Even this increase would leave our foreign assistanceprogram below levels of a few years back.


205323-166 0—69 14


An alternative major program initiative would provide guaranteed em-ployment opportunities for persons willing and able to work but unable tofind jobs. Depending on eligibility criteria and the techniques of implementa-tion, such a program might cost $2 to $10 billion a year.

Another area of mounting public concern is the financial pressure onState and local governments. As a means of reducing the relative importanceof the more onerous State and local taxes, the Federal Government mightadopt some general scheme of revenue sharing—such as a return of somepersonal tax revenues to the States (or localities) or a Federal tax creditfor State income taxes. Some suggested plans would cost $5 to $10 billiona year. A specific but more limited proposal along these lines would be theestablishment of a trust fund to finance a generalized Model Cities program.

Another major proposal that has much support is the establishment ofan Urban Development Bank, which would raise its funds in the privatecapital market. This institution would lend to State and local govern-ments at reduced cost, thereby relieving the pressure on the marketfor tax-exempt securities. It would place only a minimal burden on theFederal budget since the interest subsidies would be offset, at least in part,by increased Treasury receipts from reduced use of the tax exemption. Butthe charge against national resources—and therefore against the peace-and-growth dividend—would be substantial, depending upon the extent to whichthe Bank finances projects that would not otherwise have been undertaken.

There have also been proposals for replacing the present military draftwith a more equitable and efficient method of obtaining the manpowerneeded for national defense. One such proposal, which might cost $5 to$10 billion a year, would be the adoption of a fully volunteer army. Anotherwould be the establishment of a National Service Corps, in which everyyoung person would be expected to give at least 2 years of service to theNation either as a member of the Armed Forces or in a civilian assignmentthat would contribute to the solution of important national problems.

Conclusion

The problems of poverty, human resource development, and the pressingneed to improve our physical environment will impose very heavy demandson the Federal budget in the years ahead. The end of the struggle in Viet-nam, together with increased tax revenues resulting from economic growth,will make a sizable volume of real resources available to deal with theseproblems. But, for years and years ahead, the peace-and-growth dividendis dwarfed by the magnitude of the needs. Difficult choices must be made—choices between increased expenditures and tax reductions, between defensespending and nondefense programs, and among competing civilian pro-grams. The above calculations allow for tax reduction from present ratelevels through the expiration of the 10 percent surcharge and certain excisetaxes. These funds would permit the private sector to engage in extra private

206


consumption or investment above the normal growth of private demand,But in view of the vast and urgent needs for services that can best be sup-plied through the public sector, we would not recommend further large-scale Federal tax reductions in the years immediately following the end ofVietnam hostilities.

POLICIES TO ASSIST PARTICULAR COMMUNITIES ANDINDIVIDUALS

Demobilization will require some shifts in employment patterns—fromthe Armed Forces to civilian jobs, from defense industries to those producingcivilian goods and services, and from one community or area to another.Shifts in the composition of activity will not be new or unusual. They area regular feature of the highly mobile and dynamic U.S. economy. Astechnology and the pattern of demand evolve, the free choices of businesses,workers, and consumers operate through markets to shift resources amongindustries and geographic areas. These movements are largely self-adjustingand do not usually pose major problems either to workers or communities.When support is needed, various Federal agencies stand ready to assistthrough community development activities, job information, and man-power training. The Office of Economic Adjustment in the Departmentof Defense has been dealing since 1961 with the specific economic impactassociated with closings of defense installations and other major changes inmilitary outlays.

The experience of these activities provides a guide for policies to assist inthe adjustment problems of those communities and individuals likely to beseverely affected by demobilization. Measures to assist in specific adjust-ments can complement fiscal-monetary policy in producing a smooth, non-inflationary transition.

THE MAGNITUDE OF THE READJUSTMENT

Under the particularly rapid demobilization scenario assumed above, anestimated 600,000 persons would be added to the private labor force duringthe six quarters following the truce. In addition, as many as 750,000 civilianemployees could be required to shift jobs as defense purchases from privatebusinesses decline. Altogether, an additional 1.3 million workers may seeknew civilian employment over a period of six quarters—an average of about75,000 job shifts a month over and above those normally taking place. Theshifts would be unevenly spaced during the period and might exceed 100,000in some months.

This is a significant—but not enormous—addition to the normal amountof job shifting. To provide perspective, in 1966-67 the average number oflayoffs per month in manufacturing alone was about 250,000, and voluntary

207


separations averaged about 470,000 a month, while manufacturing work-ers were hired at an average monthly rate of 730,000 in 1966 and 640,000in 1967. While no comparable data exist for nonmanufacturing sectors,layoffs and hirings for the total economy must be far larger.

The figures indicate the dynamism and the normal adaptations of thelabor market. While specific problems of dislocation in certain areas willoccur, the figures do indicate that the magnitude of the demobilizationproblem should be manageable if fiscal-monetary policies ensure that over-all demand remains strong.

Particular measures to facilitate the structural transitions of demobilizationshould include community redevelopment assistance, homeowner assistance,and, most importantly, the strengthening of job placement and job train-ing. Efficient planning and implementation of these measures will requirethe establishment of a coordinating committee.

READJUSTMENT OPERATIONS COMMITTEE

A Readjustment Operations Committee should be established in thenear future to assume responsibility for detailed planning of Federal re-adjustment assistance and to work closely with State and local authorities.The Committee should include the Secretaries of Defense, Commerce, andLabor; the Director of the Bureau of the Budget; the Chairman of theCouncil of Economic Advisers; and the Director of the Office of EmergencyPreparedness.

Prior to demobilization, the Committee should be responsible for:1. Planning for demobilization, including frequent updating of the esti-

mated expenditures required for adjustment assistance,2. Undertaking and supporting research on characteristics of individual

communities likely to require special readjustment assistance and in par-ticular developing a system of "early warning,"

3. Providing technical advice and information for State and local govern-ment demobilization planning authorities, and

4. Coordinating an inventory by the Departments of Defense, Commerce,and Labor of the skills and training of defense industry workers and armedservices personnel, and of the skill requirements of potential sources ofemployment in defense-dependent areas.

During the demobilization period, the Readjustment Operations Com-mittee should be responsible for: (1) Coordinating Federal assistance pro-grams to communities and individuals with severe readjustment problems,(2) Identifying areas experiencing, or likely to experience, high unemploy-ment during demobilization, through advance notification by the Depart-ment of Defense of impending contract cancellations and military baseclosings, and through a careful monitoring of economic developments inkey areas by the Departments of Labor and Commerce, and (3) De-

208


termining, in cooperation with State and local governments, the appropriatesize and mix of Federal assistance programs, and recommending specificprograms and budget allocations for dealing with the problems of severelydisrupted areas.

FUNDING READJUSTMENT PROGRAMS

The activities to assist a smooth transition will rely mainly on existingprograms designed to aid communities faced with structural adjustmentsor to help workers gain new skills. How much these programs must be ex-panded will depend upon many factors which cannot be estimated pre-cisely, but the approximate initial size of the programs is shown in Table 4.

TABLE 4.—Estimated first year cost of readjustment programs

[Millions of dollars]

Program

Total cost

EDA community development assistanceSBA loansHUD homeowner emergency loans _ . . . .MDTA trainingEmployment serviceRelocation assistanceVeterans assistance-

Estimated first year cost

Low

120

20

15374

30

High

?88

5010

14C?n1550

Note.—Abbreviations used in this table represent the following: EDA (Economic Development Administration), SBA(Small Business Administration), HUD (Department of Housing and Urban Development), and MDTA (Manpower De-velopment and Training Act).


Once hostilities cease or prospects for demobilization appear, supplementalappropriations for readjustment purposes should be sought promptly. Allexpenditures from special appropriations should be coordinated by theReadjustment Operations Committee.

When demobilization plans are definitely known, more exact programexpenditures should be determined by the Readjustment Operations Com-mittee. Initial appropriations should be at the low end of the estimatedrange with the understanding that additional funds may be needed. Theseprogram supplements should be reserved for uses directly related to thepost-Vietnam transition. In addition, funds should be requested to providereturning servicemen with veterans benefits under existing programs and toassist State unemployment insurance programs in cases of high localizedunemployment.

Even before demobilization, important permanent improvements shouldbe made in some existing institutions to make them more effective bothin the transition to peace and in the long run. The Unemployment In-surance program should be strengthened by increasing coverage, raisingbenefits, lengthening the possible duration of payments, and improving the

209


financial base of the system. And minimum standards of vesting of privatepension plans should be established, so that as the economy shifts to a peace-time footing, workers can change jobs without losing their benefits.

ASSISTING DEFENSE-DEPENDENT AREAS

One major measure to be coordinated by the Readjustment OperationsCommittee is Federal assistance for communities that will experience amajor decline in employment opportunities due to the closing or curtail-ment of a defense plant or military base. The possible scope of this task issuggested by the growth in defense employment during the buildup forVietnam. From 1965 to 1967, 38 local areas experienced increases in defenseemployment exceeding 5 percent of their total work force. A few of theselocalities are moderately large metropolitan areas, but some are predomi-nantly rural counties with no urban center exceeding 12,000 population;these rural areas may be especially vulnerable to defense cutbacks duringdemobilization.

The Federal Government can assist severely affected communities withredevelopment potential to reorient their economies through programs of theEconomic Development Administration and the Small Business Adminis-tration. Initial-year funds required for these specific purposes might rangefrom $20 to $50 million for the Economic Development Administration andfrom $5 to $10 million for the Small Business Administration.

These agencies would help defense-dependent communities modernizepublic facilities, develop industrial sites, convert defense installations toother uses, and otherwise make themselves attractive to new industry.

ASSISTING DISPLACED INDIVIDUALS

While most of the individuals who lose defense jobs or who are releasedfrom military service will be readily employable, some will not possess therequired skills, while others will be geographically isolated from job oppor-tunities. Federal programs should be undertaken to ease the impact ofdemobilization upon the most seriously affected individuals.

Strengthening the Federal Employment Service

Demobilization will greatly enlarge demands on the resources of theFederal-State Employment Service. Prior to demobilization, plans shouldbe made for expanding the staff of the Employment Service offices: toensure their capacity for handling veterans and laid-off defense workers,to improve the flow of information about job opportunities outside the locallabor market, and to station staff temporarily at locations convenient to mili-tary personnel about to be discharged. The Employment Service may require$7 to $20 million in the first year to provide these activities.

2 I O


Expanding Manpower Training

Some individuals dislocated from defense employment will need retrain-ing. The preliminary estimate is that $53 million will be needed to prepareabout 26,000 servicemen for civilian employment through Project Transitionand to train about 20,000 enrollees in other MDTA programs. Furtherappropriations of up to $140 million may be required for the two programs.

Providing Relocation Assistance

A relocation assistance fund should be established to help low- and middle-income workers move out of defense-dependent communities with in-adequate reemployment opportunities. The program should be administeredby the Department of Labor, which should develop general policy on reloca-tion assistance—including eligibility criteria—in cooperation with the Read-justment Operations Committee. The program should provide full grantassistance for workers taking low-income jobs, and a mix of loans and grantsfor those obtaining higher paying jobs.

Relocation assistance should be available only to individuals directlyaffected by cutbacks in specified defense-dependent communities. The num-ber assisted could range between 10,000 and 30,000 families, requiringexpenditures between $4 and $15 million.

Funding Veterans Assistance

Current programs available to veterans are generally adequate to coverthe needs of returning servicemen; however, the accelerated separations asso-ciated with demobilization will require additional appropriations for theseprograms—especially employment consultation services and the educationalassistance program. Adequate financing of veterans programs may cost$30 to $50 million a year during demobilization.

Providing Homeowner Assistance

The Federal Government should undertake to prevent a widespread lossof homes in areas suffering temporary unemployment during demobilization.The Department of Housing and Urban Development should establish aprogram to encourage private lenders to declare moratoria on mortgagepayments on homes owned and occupied by individuals dislocated by a de-fense cutback. When an extension of mortgage payments cannot be obtained,the Department of Housing and Urban Development should be authorizedto lend the homeowner funds at a reasonable interest rate to cover mortgagepayments. Expenditures of about $2 million should be ample for thisprogram.

2 1 1


Appendix A

REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THE

COUNCIL OF ECONOMIC ADVISERS DURING 1968

213



COUNCIL OF ECONOMIC ADVISERS,Washington, D.C., December 31, 1968.

T H E PRESIDENT.

SIR : The Council of Economic Advisers submits this report on its activi-ties during the calendar year 1968 in accordance with the requirements ofthe Congress, as set forth in section 4 (d) of the Employment Act of 1946.

Respectfully,

Arthur M. Okun,Chairman.

Merton J. Peck.Warren L. Smith.

215


Report to the President on the Activities of theCouncil of Economic Advisers During 1968

During the year 1968, the activities of the Council of Economic Adviserswere dominated by the urgent need to preserve the enormous benefits ofprosperity and to head off the threats of serious inflation and internationalmonetary instability.

It was clear, as the year began, that the delay in enacting your fiscal pro-posals was contributing to inflationary pressures and jeopardizing the founda-tions of prosperity. The Council devoted much of its energy during the firsthalf of the year toward the enactment of the Revenue and Expenditure Con-trol Act, which you signed on June 28. The Council's efforts in the area offiscal policy continued to be carried out with the closest coordination andcooperation of the Treasury Department and the Bureau of the Budget. Theuncertain fiscal situation created a major problem for monetary policy, andthe Council engaged in frequent consultations and exchanges of informationwith the Board of Governors of the Federal Reserve System.

Much of the Council's work to meet the challenge of price stabilityfocused on the fundamental long-run aspect of inflationary tendencies in ahigh employment economy. The newly established Cabinet Committee onPrice Stability and its staff studied inflationary tendencies in individual sec-tors of the economy and ways these could be modified by the structural im-provement of freely operating markets. The Cabinet Committee also provedto be an excellent institution for intensifying, coordinating, and broadeningthe base of the Administration's efforts to improve price performance—bothby structural efforts and by enlisting cooperation for voluntary restraint inprice and wage decisions. Particularly in the second half of the year, after anappropriate fiscal policy was implemented, the Council and the other agenciesof the Committee intensified these efforts, both publicly and privately.

The progress and the strains in the international financial system during1968 placed a high premium on studies in this area. The Council conductedanalyses and evaluations of a variety of proposals which have been advancedas ways LU strengthen the system.

Throughout the year, the Council continued to conduct studies andevaluate programs and proposals on a wide range of economic and socialissues. The most important of these efforts were centered on the challengeof reducing poverty and drawing disadvantaged groups into the mainstreamof economic life.

217


Another significant activity was the study of preparations for achieving asmooth economic transition to peace after hostilities cease in Vietnam. Otherimportant efforts dealt with the analysis of domestic financial markets, in-dustrial markets, housing, collective bargaining, agricultural policy, man-power training and development, and various social insurance and incomemaintenance programs.

COUNCIL MEMBERSHIP

On February 15, 1968, Merton J. Peck from Yale University joined theCouncil, replacing Gardner Ackley, who became Ambassador to Italy; andArthur M. Okun, who had served as a Member since November 16, 1964,was designated to succeed to the Chairmanship previously held by Mr.Ackley. On July 1, Warren L. Smith from the University of Michigan re-placed James Duesenberry, who returned to his duties at Harvard University.

Following is a list of all past Council members and their dates of service:

Name

Edwin G. NourseLeon H. Keyserling

John D. Clark.... _

Roy Blough _Robert C. TurnerArthur F. Burns...NeilH.JacobyWalter W. StewartJoseph S. DavisRaymond J. Saulnier

Paul W. McCrackenKarl BrandtHenry C. WallichJames TobinKermit GordonWalter W. HellerGardner Ackley

John P. LewisOtto EcksteinJames S. Duesenberry

Position

ChairmanVice ChairmanActing ChairmanChairmanMemberVice ChairmanMemberMemberChairman.MemberMemberMemberMember _Chairman.Member...MemberMemberMemberMember... _Chairman...MemberChairmanMemberMember _Member

Oath of office date

Augusts 1946 . - .August 9,1946November 2,1949May 10,1950Augusts 1946 . . .May 10,1950June 29,1950September 8,1952.March 19,1953September 15,1953December 2,1953May 2,1955April 4,1955.December 3,1956December 3,1956November 1,1958.May 7, 1959January 29,1961January 29,1961January 29,1961August 3,1962November 16,1964May 17,1963September 2,1964February 2,1966

Separation date

November 1,1949.

January 20,1953.

February 11,1953.August 20,1952.January 20,1953.December 1,1956.February 9,1955.April 29,1955.October 31,1958.

January 20,1961.January 31,1959.January 20,1961.January 20,1961.July 31,1962.December 27,1962.November 15,1964.

February 15,1968.August 31,1964.February 1,1966.June 30,1968.

COUNCIL STAFF

At the end of 1968, members of the Council's professional staff wereSusan R. Ackerman, F. Gerard Adams, Barry P. Bosworth, Frederick W.Deming, Marten S. Estey, Catherine H. Furlong, Frances M. James,Lawrence B. Krause, James W. Kuhn, David W. Lusher, Thomas G. Moore,Saul Nelson, Roger G. Noll, David J. Ott, Courtenay M. Slater, Luther T.Wallace, Charles B. Warden, Jr., and G. Paul Wonnacott.

Each year a number of staff members who have joined the Council on atemporary basis return to their posts in private life or in Government. Thoseleaving the Council in 1968 were John F. Burton, Jack W. Carlson,Christopher K. Clague, Thomas F. Dernburg, Peter P. Dorner, RaymondW. Goldsmith, Hendrik S. Houthakker, Saul H. Hymans, Carey P. Modlin,Joseph D. Mooney, and Frank W. Schiff.

218


Continuing its practice of asking leading members of the economics pro-fession to assist in the analysis of economic problems, the Council in 1968called on the following consultants: Henry J. Aaron, James T. Bonnen,William H. Branson, William Capron, Richard N. Cooper, John T. Dunlop,Otto Eckstein, Stephen M. Goldfeld, Kermit Gordon, Walter W. Heller,Allen H. Lerman, Paul MacAvoy, Edwin S. Mills, Joseph Pechman, GeorgeL. Perry, Paul Samuelson, Charles A. Taff, James Tobin, and Lloyd Ulman.

The Council continued its graduate student intern program, which wasstarted in 1961. Those working with the Council for various periods in 1968were Robert E. Anderson, Lucy A. Cardwell, Albert J. Eckstein, MorrisGoldstein, Stephen P. Magee, Richard W. Nelson, David M. Nienhaus,David F. J. Piachaud, Charles G. Plourde, Craig E. Swan, C. Daniel Vencill,and William D. Watson, Jr. Research assistants included Rosanna M. Cof-fey, Katherine Champe, Charles E. Kurlansky, Rosemary D. Marcuss,Roselee N. Roberts, Joanne C. Turner, and Carolyn T. Welch.

As in the past, the Council received loyal and energetic assistance fromits nonprofessional staff. Members of this staff at the end of 1968 were TeresaD. Bradburn, Judson A. Byrd, II, Gladys R. Durkin, Mary C. Fibich, JamesW. Gatling, Elizabeth F. Gray, Laura B. Hoffman, Christine L. Johnson,Roberta R. Kirk, Helen H. Knox, Bessie M. Lafakis, Betty Lu Lowry,V. Madge McMahon, Eleanor A. McStay, A. Keith Miles, Joyce A. Pilker-ton, Dorothy L. Reid, Earnestine Reid, Lucille F. Saverino, Bettye T. Siegel,Nancy F. Skidmore, Barbara E. Skolnik, Margaret L. Snyder, and Eliza-beth A. Zea.

In preparing its Annual Report, the Council relied upon the editorialskills of Robin Elliott.

COUNCIL ACTIVITIES

The Council of Economic Advisers was established as an agency of theFederal Government nearly 22 years ago by the Employment Act of 1946.Under the Act the Council is charged with the responsibility of analyzingand interpreting economic developments and of recommending economicpolicies that will promote the goals of "maximum employment, production,and purchasing power."

The Council's chief responsibility is to keep the President fully informedof economic developments and emerging problems which may affect theNation's economy. To meet this responsibility, the Council continuously re-views economic conditions, undertakes special studies of particular problemareas, and makes recommendations concerning Government programs andpolicies. The Council confers regularly with all major Government agencieshaving responsibilities in the economic field.

The Secretary of the Treasury, the Director of the Bureau of the Budget,and the Chairman of the Council and their respective staffs (the "Troika")

219


provide the President with a continuous joint assessment of the economicand budgetary outlook for the current and subsequent fiscal years. The headsof the "Troika" agencies and their associates, together with the Chairmanof the Board of Governors of the Federal Reserve System, meet as the "Quad-riad" with the President to discuss domestic and international monetaryproblems.

In addition to its regular and informal consultations with other Govern-ment agencies, the Council and its staff in 1968 participated with otheragencies in a large variety of more formal committees, task forces, and studies.

The Council and its staff represent the United States in a number of im-portant international conferences. The Council Chairman heads the U.S.delegation to the meetings of the Economic Policy Committee of the Organi-zation for Economic Cooperation and Development (OECD), and membersof the Council and its staff this year participated in many other internationalmeetings under the auspices of the OECD. The Chairman also met with theChairman and staff of the Economic Council of Canada in Ottawa, andthe Council was involved in activities of the United Nations EconomicCommission for Europe.

An important responsibility of the Council is to explain and clarify theAdministration's economic policies, both within the Government and tothe public at large. This is done through numerous speeches, articles, pressbriefings, statements, Congressional testimony, its Annual Report, and byassisting the President in the preparation of his Economic Report. TheCouncil meets frequently and informally with many individuals and groups,both from the United States and abroad, including businessmen, bankers,labor leaders, government officials, university scholars and students, mem-bers of the press corps, and interested private citizens, and more formallywith a number of advisory groups, including the President's Advisory Com-mittee on Labor-Management Policy and the Business Council's LiaisonCommittee with the Council of Economic Advisers.

The Council prepares two documents for publication. One is theEconomic Report of the President, together with the Annual Report of theCouncil of Economic Advisers. Over 66,000 copies of the 1968 Report weredistributed to Members of the Congress, Government officials, the press, anddepository libraries, or sold to the public by the Superintendent of Docu-ments. The second is the monthly Economic Indicators. This important com-pilation of current economic statistics has been prepared since 1948 at theCouncil under the direction of Miss Frances M. James, and is published bythe Joint Economic Committee of the Congress. More than 12,000 copiesare furnished to Members of the Congress and depository libraries or soldto the public every month.

220


Appendix B

STATISTICAL TABLES RELATING TO INCOME,

EMPLOYMENT, AND PRODUCTION

221

323-166 0—69 15


CONTENTSNational income or expenditure:

B-l. Gross national product or expenditure, 1929-68 227B-2. Gross national product or expenditure, in 1958 prices, 1929-68 228B-3. Implicit price deflators for gross national product, 1929-68 230B-4. Gross national product by major type of product, 1929-68 232B-5. Gross national product by major type of product, in 1958 prices,

1929-68 233B-6. Gross national product: Receipts and expenditures by major economic

groups, 1929-68 234B-7. Gross national product by sector, 1929-68 236B-8. Gross national product by sector, in 1958 prices, 1929-68 237B-9. Gross national product by industry, in 1958 prices, 1947-67 238B-10. Personal consumption expenditures, 1929-68 239B-l 1. Gross private domestic investment, 1929-68 240B-12. National income by type of income, 1929-68 241B-l 3. Relation of gross national product and national income, 1929-68. . . . 242B-14. Relation of national income and personal income, 1929-68 243B-l 5. Disposition of personal income, 1929-68 244B-l6. Total and per capita disposable personal income and personal con-

sumption expenditures, in current and 1958 prices, 1929-68 245B-l 7. Sources of personal income, 1929-68 246B-18. Sources and uses of gross saving, 1929-68 248B-19. Saving by individuals, 1946-68 249B-20. Number and money income (in 1967 prices) of families and unrelated

individuals, by color of head, 1947-67 250

Population, employment, wages, and productivity:B-21. Population by age groups: Estimates, 1929-68, and projections,

1970-85 251B-22. Noninstitutional population and the labor force, 1929-68 252B-23. Civilian employment and unemployment, by sex and age, 1947-68. . 254B-24. Selected unemployment rates, 1948-68 255B-25. Unemployment by duration, 1947-68 256B-26. Unemployment insurance programs, selected data, 1940-68 257B-27. Wage and salary workers in nonagricultural establishments, 1929-68. 258B-28. Average weekly hours of work in selected nonagricultural industries,

1929-68 260B-29. Average gross hourly earnings in selected industries, 1929-68 261B-30. Average gross weekly earnings in selected nonagricultural industries,

1929-68 262B—31. Average weekly hours and hourly earnings, gross and excluding over-

time, in manufacturing industries, 1939-68 263B-32. Average weekly earnings, gross and spendable, total private non-

agricultural industries, in current and 1957-59 prices, 1947-68. . . 264B-33. Average weekly earnings, gross and spendable, in manufacturing

industries, in current and 1957-59 prices, 1939-68 265B-34. Indexes of output per man-hour and related data, private economy,

1947-63 266

223


Production and business activity: Page

B-35. Industrial production indexes, major industry divisions, 1929-68. . . . 267B—36. Industrial production indexes, market groupings, 1947—68 268B-37. Industrial production indexes, selected manufactures, 1947-68 269B-38. Manufacturing output, capacity, and utilization rate, 1948-68 270B-39. Business expenditures for new plant and equipment, 1939 and 1945-

69 271B-40. New construction activity, 1929-68 272B-41. New housing starts and applications for financing, 1929-68 274B-42. Sales and inventories in manufacturing and trade, 1947-68 276B-43. Manufacturers' shipments and inventories, 1947-68 277B-44. Manufacturers' new and unfilled orders, 1947-68 278

Prices:B-45. Consumer price indexes, by major groups, 1929-68 279B-46. Consumer price indexes, by special groups, 1935-68 280B-47. Consumer price indexes, selected commodities and services, 1935-68. 281B-48. Wholesale price indexes, by major commodity groups, 1929-68 282B-49. Wholesale price indexes, by stage of processing, 1947-68 284

Money supply, credit, and finance:

B-50. Money supply, 1947-68 286B-51. Bank loans and investments, 1929-68 287B-52. Selected liquid assets held by the public, 1946-68 288B-53. Federal Reserve Bank credit and member bank reserves, 1929-68. . . 289B-54. Bond yields and interest rates, 1929-68 290B-55. Short- and intermediate-term consumer credit outstanding, 1929-68. 292B-56. Instalment credit extended and repaid, 1946-68 293B-57. Mortgage debt outstanding, by type of property and of financing,

1939-68 294B-58. Mortgage debt outstanding, by lender, 1939-68 295B-59. Net public and private debt, 1929-68 296

Government finance:

B-60. Federal budget receipts and outlays, 1929-70 297B-61. Federal budget receipts, outlays, financing, and debt, 1959-70 298B-62. Relation of the Federal Budget to the Federal sector of the national

income and product accounts, 1967-70 300B-63. Receipts and expenditures of the Federal Government sector of the na-

tional income and product accounts, 1946-70 301B-64. Public debt securities, by kind of obligation, 1929-68 302B-65. Estimated ownership of public debt securities, 1939-68 303B-66. Average length and maturity distribution of marketable interest-bear-

ing public debt, 1946-68 304B-67. Receipts and expenditures of the government sector of the national

income and product accounts, 1929-68 305B-68. Receipts and expenditures of the State and local government sector

of the national income and product accounts, 1946-68- • •• 306

B-69. State and local government revenues and expenditures, selected fiscalyears, 1927-67 307

224


Corporate profits and finance: PageB-70. Profits before and after taxes, all private corporations, 1929-68 308B-71. Sales, profits, and stockholders' equity, all manufacturing corpora-

tions (except newspapers), 1947-68 309B-72. Relation of profits after taxes to stockholders' equity and to sales, all

manufacturing corporations (except newspapers), by industry group,1947-68 310

B-73. Sources and uses of funds, nonfarm nonfinancial corporate business,1957-68 312

B-74. Current assets and liabilities of United States corporations, 1939-68. 313B-75. State and municipal and corporate securities offered, 1934-68 314B-76. Common stock prices, earnings, and yields, and stock market credit,

1939-68 315B-77. Business formation and business failures, 1929-68 316

Agriculture:B-78. Income from agriculture, 1929-68 317B-79. Farm production indexes, 1929-68 318B-80. Farm population, employment, and productivity, 1929-68 319B-81. Indexes of prices received and prices paid by farmers, and parity ratio,

1929-68 320B-82. Selected measures of farm resources and inputs, 1929-68 322B-83. Comparative balance sheet of agriculture, 1929-69 323

International statistics:B-84. United States balance of payments, 1946-68 324B-85. United States merchandise exports and imports, by commodity groups,

1958-68 326B-86. United States merchandise exports and imports, by area, 1962-68. . 327B-87. United States overseas loans and grants, by type and area, fiscal years

1962-68 328B-88. International reserves, 1949, 1953, and 1963-68. 329B-89. United States reserve assets: Gold stock, holdings of convertible foreign

currencies, and reserve position in the International MonetaryFund, 1946-68 330

B-90. Price changes in international trade, 1960-68 331B-91. Consumer price indexes in the United States and other major in-

dustrial countries, 1957-68 332

General Notes

Detail in these tables will not necessarily add to totals because of rounding.Unless otherwise noted, all dollar figures are in current prices.

Symbols used:" Preliminary.__ Not available (also, not applicable).* Amount insignificant in terms of the particular unit (e.g., less than

$50 million where unit is billions of dollars).

225


NATIONAL INCOME OR EXPENDITURETABLE B-l.—Gross national product or expenditure, 1929-68

[Billions of dollars]

Year or quarter

1929..

1930..1931..1932..1933-1934..1935..1936..1937..1938..1939..

1940..1941..1942..1943-1944..1945-1946..1947..1948..1949-

1950..1951..1952..1953..1954..1955..1956..1957..1958..1959..

1960..1961-1962..1963-1964..1965..1966..1967..1968 p.

1966: L .II-III.IV.

1967: I.

III.IV..

1968: I....II...III...IV P..

Totalgross

nationalproduct

103.1

90.475,858.055.665.172.282.590.484.790.5

99.7124.5157.9191.6210.1211.9208.5231.3257.6256.5

284.8328.4345.5364.6364.8398.0419.2441.1447.3483.7

503.7520.1560.3590.5632.4684.9747.6789.7860.7

Per-sonal

sump-tion

expend-itures^

77.2

69.960.548.645.851.355.761.966.563.966.8

70.880.688.599.3

108.3119.7143.4160.7173.6176.8

191.0206.3216.7230.0236.5254.4266.7281.4290.1311.2

325.2335.2355.1375.0401.2432.8465.5492.2533.7

Grossprivate

do-mesticinvest-ment2

16.2

10.35.61.01.43.36.48.5

11.86.59.3

13.117.99.85.77.1

10.630.634.046.035.7

54.159.351.952.651.767.470.067.860.975.3

74.871.783.087.194.0

108.1120.8114.3127.5

Netexportsof goods

andserv-ices 3

1.1

1.0

]4.4.6

!l.3

1.31.1

1.71.3

- 2 . 0- 1 . 8- . 67.5

11.56.46.1

1.83.72.2.4

1.82.04.05.72.2.1

4.05.65.15.98.56.95.14.82.4

Government purchases of goods and services

Total

8.5

9.29.28.18.09.8

10.012.011.913.013.3

14.024.859.688.696.582.327.025.131.637.8

37.959.174.781.674.874.278.686.194.297.0

99.6107.6117.1122.5128.7137.0156.2178.4197.1

Federal*

Total

1.3

1.41.51.52.03.02.94.94.75.45.1

6.016.951.981.189.074.217.212.516.520.1

18.437.751.857.047.444.145.649.553.653.7

53.557.463.464.265.266.977.490.6

100.0

Nationaldefense5 Other

1.3

1.41.51.52.03.02.94.94.75.4

1.2

2.213.849.479.787.473.514.79.1

10.713.3

14.133.645.948.741.238.640.344.245.946.0

44.947.851.650.850.050.160.672.478.9

3.9

3.83.12.51.41.6.7

2.53.55.86.8

4.34.15.98.46.25.55.35.37.77.6

8.69.6

11.813.515.216.816.818.221.1

Seasonally adjusted annual rates

Stateandlocal

7.2

7.87.76.66.06.87.17.07.27.68.2

8.07.97.77.47.58.19.8

12.615.017.7

19.521.522.924.627.430.133.036.640.643.3

46.150.253.758.263.570.178.887.897.1

728.4740.4753.3768.2

772.2780.2795.3811.0

831.2852.9871.0887.8

457.8461.1469.3473.7

480.9490.3495.5502.2

519.4527.9541.1546.3

116.8121.0119.9125.7

113.0107.6114.7121.8

119.7127.3127.1136.1

6.05.24.54.5

5.25.15.43.4

1.52.03.33.0

147.8153.1159.5164.3

173.1177.3179.6183.5

190.5195.7199.6202.5

72.575.679.981.5

87.490.091.393.5

97.1100.0101.2101.6

55.358.663.065.4

70.072.172.974.6

76.879.079.680.0

17.217.016.916.1

17.417.918.419.0

20.321.021.521.6

75.377.479.782.7

85.887.288.490.0

93.495.698.4

100.8

i See Table B-10 for detailed components.2See Table B-ll for detailed components.3 See Table B-6 for exports and imports separately.* Net of Government sales.5 This category corresponds closely to the national defense classification in the "Budget of the United States Govern-

ment for the Fiscal Year ending June 30,1970."

Source: Department of Commerce, Office of Business Economics.

227


TABLE B-2.—Gross national product or expenditure, in 1958 prices, 1929-68

[Billions of dollars, 1958 prices]

Year orquarter

Totalgrossna-

tionalprod-

uct

Persona! consumptionexpenditures

TotalDura-

blegoods

Non-dura-

blegoods

Serv-

Gross private domestic investment

Total

Fixed investment

Total

Nonresidential

Total Struc-tures

Pro-ducers'durableequip-ment

Resi-dentialstruc-tures

Changein busi-

ness-inven-tories

1929..

1930..1931..1932..1933..1934..1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944..1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..1955..1956..1957..1958..1959.

196019611962196319641965.196619671968 v

1966: I . . . .

IV . . .

1 9 6 7 : I . . . .III I I . . .IV...

1968: I . . . .I I . . .III..IV p.

203.6

183.5169.3144.2141.5154.3169.5193.0203.2192.9209.4

227.2263.7297.8337.1361.3355.2312.6309.9323.7324.1

355.3383.4395.1412.8407.0438.0446.1452.5447.3475.9

487.7497.2529.8551.0581.1617.8657.1673.1706.9

139.6

130.4126.1114.8112.8118.1125.5138.4143.1140.2148.2

155.7165.4161.4165.8171.4183.0203.5206.3210.8216.5

230.5232.8239.4250.8255.7274.2281.4288.2290.1307.3

316.1322.5338.4353.3373.7397.7417.8430.5450.7

16.3

12.911.28.48.39.4

11.714.515.112.214.5

16.719.111.710.29.4

10.620.524.726.328.4

34.731.530.835.335.443.241.041.537.943.7

44.943.949.253.759.066.671.372.480.0

69.3

65.965.660.458.662.565.973.476.077.181.2

84.689.991.393.797.3

104.7110.8108.3108.7110.5

114.0116.5120.8124.4125.5131.7136.2138.7140.2146.8

149.6153.0158.2162.2170.3178.6186.9191.1197.0

54.0

51.549.445.946.046.147.950.552.050.952.5

54.456.358.561.864.767.772.173.475.877.6

81.884.887.891.194.899.3

104.1108.0112.0116.8

121.6125.6131.1137.4144.4152.5159.5167.0173.8

40.4

27.416.84.75.39.4

18.024.029.917.024.7

33.041.621.412.714.019.652.351.560.448.0

69.370.060.561.259.475.474.368.860.973.6

72.469.079.482.587.899.2

108.899.5

106.8

36.9

28.019.210.99.7

12. i15.620.924.519.423.5

28.132.017.312.915.922.642.351.755.951.9

61.059.057.260.261.469.069.567.662.468.8

68.967.073.476.781.990.194.993.699.8

26.5

21.714.18.27.69.2

11.515.818.813.715.3

18.922.212.510.013.419.830.236.238.034.5

37.539.638.340.739.643.947.347.441.644.1

47.145.549.751.957.866.373.873.776.7

13.9

11.87.54.43.33.64.05.47.15.65.9

6.88.14.62.93.85.7

12.511.612.311.9

12.714.113.714.915.216.218.518.216.616.2

17.417.417.917.919.122.323.922.622.5

12.6

9.96.63.84.35.67.5

10.311.88.19.4

12.114.27.97.29.6

14.117.724.625.722.6

24.825.524.625.824.527.728.829.125.027.9

29.628.131.734.038.744.049.951.154.3


648.6653.3659.5667.1

665.7669.2675.6681.8

692.7703.4712.3719.1

415.7414.8420.0420.6

424.8431.2431.8434.1

444.9447.5455.7454.8

72.969.271.871.4

70.173.772.673.0

77.378.982.581.4

185.5186.9187.8187.5

190.3191.6191.1191.6

196.5196.1198.5196.8

157.3158.7160.4161.7

164.4165.9168.1169.5

171.0172.6174.8176.6

106.1109.5107.4112.3

99.894.299.3

104.7

101.5107.3105.8112.5

95.894.795.593.7

91.892.094.096.7

99.597.499.0

103.4

72.272.774.875.4

74.273.373.274.0

76.574.576.679.4

24.423.824.123.4

23.822.122.222.1

23.422.121.922.5

10.4

6.35.12.72.12.94.05.15.65.78.2

9.29.84.92.92.52.8

12.115.417.917.4

23.519.518.919.621.725.122.220.220.824.7

21.921.623.824.824.223.821.119.923.1

3.5

- . 6- 2 . 4- 6 . 2- 4 . 3- 2 . 7

2.43.15.5

- 2 . 41.2

4.99.64.0

- . 2- 1 . 9- 2 . 910.0- . 24.6

- 3 . 9

8.310.93.3

.9- 2 . 0

6.4A. 81.2

- 1 . 54.8

3.52.06.05.85.89.0

13.95.96.9

47.848.950.752.1

50.351.151.052.0

53.052.454.757.0

23.622.020.718.2

17.618.720.822.7

23.022.922.424.0

10.314.712.018.6

8.02.35.28.0

2.09.96.89.1

See footnotes at end of table.

228


TABLE B-2.—Gross national product or expenditure, in 1958 prices, 1929-68—Continued


Year or quarter

1929

19301931 -193219331934193519361937 .19381939

1940194119421943194419451946194719481949

1950.195119521953195419551956. .1957.19581959

196019611962196319641965 . . . . .196619671968 v

1966- 1IIHI .IV

1967- 1IIIllIV

1968: 1IIIllIV v

Net exports of goods and services

Netexports

1.5

1.4.9.6*

.3- 1 . 0- 1 . 2- . 71.91.3

2.1. 4

—2.1- 5 . 9- 5 . 8- 3 . 8

8.412.36.16.4

2.75.33.01 l3.03.25.06.22.2

4.35 14.55.68.36.24.02.4.2

Exports

11.8

10.48.97.17.17.37.78.29.89.9

10.0

11.011.27.86.87.6

10.219.622.618.118.1

16.319.318.217.818.820.924.226.223.123.8

27.328.030.032.136.537.440.141.845.9

Imports

10.3

9.07.96.67.17.18.79.3

10.58.08.7

8.910.89.9

12.613.413.911.210.312.011.7

13.614.115.216.715.817.719.119.920.923.5

23.022.925.526.628.231.236.139.345.7

Government purchases of goods andservices

Total

22.0

24.325.424.223.326.627.031.830.833.935.2

36.456.3

117.1164.4181.7156.448.439.946.353.3

52.875.492.199.888.985.285.389.394.294.7

94.9100.5107.5109.6111.2114.7126.5140.7149.2

Federal

3.5

4.04.34.66.08.07.9

12.211.513.312.5

15.036.298.9

147.8165.4139.730.119.123.727.6

25.347.463.870.056.850.749.751.753.652.5

51.454.660.059.558.157.965.274.879.3

State andlocal

18.5

20.221.119.617.318.619.219 619 420.622.7

21.420.118 316.616.316.718 420.822.725.7

27.527.928.429.732.134.435.637.640.642.2

43.545.947.550.153.256.861.365.969.9


5.34.33.62.9

3.02.83.11.0

- . 1- . 6

.7

39.939.740.440.4

41.441.742.141.9

44.044.747.647.1

34.535.436.837.5

38.538.939.140.9

44.145.446.946.5

121.5124.7128.5131.3

138.1141.0141.4142.0

146.5149.2150.1151.0

61.864.066.967.9

72.775.175.675.6

78.180.179.579.4

59.660.761.663.4

65.466.065.866.4

68.469.170.671.6

1 Net of Government sales.


229


TABLE B-3.—Implicit price deflators for gross national product, 1929-68

[Index numbers, 1958=100]

Year or quarter

1929

19301931193219331934.. .19351936193719381939

1940194119421943194419451946194719481949

1950195119521953195419551956 —195719581959

196019611962196319641965196619671968 *»

1966: 1IIIIIIV

1967- 1IIIIIIV

1968: 1| |III . .IV v

Totalgross

nationalnrnriucti

50.6

49.344.840.239.342.242.642.744.543.943.2

43.947.253.056.858.259.766.774.679.679.1

80.285.687.588.389.690.994.097.5

100.0101.6

103.3104.6105.8107.2108.8110.9113.8117.3121.8

112.3113.3114.2115.2

116.0116.6117.7118.9

120.0121.2122.3123.5

Personal consumptior

Total

55.3

53.647.942.340.643.544.444.746.545.645.1

45.548.754.859.963.265.470.577.982.381.7

82.988 690.591.792.592 894.897 7

100.0101.3

102.9103.9104.9106.1107.4108.8111.4114.3118.4

110.1111.2111.7112.6

113.2113.7114.7115.7

116.8118.0118.7120.1

expenditures

Dur-able

goods

56.4

55.349.143.241.944.743.743.645.846.746.0

46.550.459.364.271.575.976.882.786.386.8

87.894 295.494.392.991 994.998.4

100.0101.4

100.9100.6100.8100.4100.499.698.8

100.4103.1

98.198.598.899.6

99.699.6

100:7101.7

102.2102.7103.1104.2

Non-durablegoods

54.5

51.644.137.738.042.744.544.846.444.043.2

43.847.755.662.566.268.774.383.688.585.6

86.093 394.393.994.293.694.997.7

100.099.9

101.2101.9102.8104.0104.9106.9110.6112.9116.9

109.3110.4111.0111.7

111.9112.4113.3114.0

115.2116.4117.2118.6

Serv-ices

56.1

55.752.748.343.644.344.445.046.847.747.7

47.949.852.755.357.558.762.767.972.174.3

76.380.083.687.790.092.094.697.3

100.0103.0

105.8107.6109.0110.9113.1115.1118.1122.1127.2

116.6117.6118.4119.5

120.5121.5122.5123.7

125.1126.7127.8129.1

Gross private domestic investmentl

Fixed investment

Total

39.4

37.935.231.630.633.734.334.637.838.237.7

39.042.046.549.351.151.558.566.773.974.7

77.583.185.386.686.889.094.098.5

100.0102.6

103.4103.9104.9106.0107.6109.3111.8115.6120.2

110.6111.4112.1113.0

113.9114.6116.2117.4

118.3119.6120.8121.9

Nonresident

Total

39.9

38.135.832.931.634.935.935.638.839.338.7

40.042.747.849.951.051.056.364.570.772.8

74.480.482.684.084.886.792.497 9

100.0102.2

102.9103.4104.1104.5105.7107.5110.2113.5117.2

108.9109.8110.4111.6

112.5112.9113.8114.9

115.8116.7117.6118.6

Struc-tures

35.7

34.031.127.627.928.930.630.234.433.933.1

33.936.441 346 848.649.254.464.471.571.2

72.979 383.284.986.088.193.498 6

1Q0.0102.7

104.0105.6107.1108.9111.1114.7119.0123.6129.7

117.1118.4119.8120.7

121.7122.7124.6125.5

126.3128.8131.3132.6

Pro-ducers'durableequip-ment

44.6

43.041 139.134.538.838.738.541.443.042.2

43.446.351 551.151.951.757.564.670.373.6

75.280 982.283.584.085.991.897.5

100.0102.0

102.2102.1102.3102.3103.0103.9106.0109.1112.0

104.7105.6106.0107.5

108.2108.6109.1110.3

111.2111.7112.1113.1

Resi-dentialstruc-tures

38 1

37.133 627 327.130.129.831.334.335.535.7

36.940.343 347 051.654.959.771.780.878.5

82.588 690.891.990.492.997.499.8

100.0103.1

104.5105.0106.7108.9112.3114.2117.4123.1129.9

115.9117.0118.2119.0

119.7121.4124.8125.6

126.3128.9131.7132.7


230


TABLE B-3.—Implicit price deflators for gross national product, 1929-68—Continued

[Index numbers, 1958=100]

Year or quarter

1929

1930193119321933193419351936193719381939 . . .

19401941.19421943194419451946194719481949

1950195119521953195419551956195719581959

I960 . .19611962196319641965196619671968*

1966- 1II .IllIV . . . .

1967- 1IIIIIIV

1968: l

IIIIV p . . . . . .

Exports and imports ofgoods and services1

Exports

59.5

52.341.034.733.740.642.343.446.543 844.1

48.653.061.565.269 971.375.487.392.787.0

84.997.098.895.294.394.997.5

101.3100.098.8

99.9101.9100.8100.6101.5104.7107.6109.5110.4

105.6107.1108.0109.5

109.8109.2109.3109.7

107.9111.6110.6111.2

Imports

57.3

49.039.331.528.833.636.036.740.737.938.6

40.843.048.351.253.256.464.979.486.482.2

88.7107.2103.699.1

100.8100.6102.5104.0100.099.3

101.0100.198.599.5

101.5103.4105.5104.2105.4

104.5105.4106.2105.9

104.8103.9104.0104.1

104.3105.6105.2106.5

Government purchases of goodsand services

Total

38.6

37.936.333.434.536.837.037.638.438 337.9

38.544,050.953.953 152.655.862.968.171.0

71.878.581.081.884.187.192.196.4

100.0102.4

105.0107.1109.0111.8115.7119.4123.5126.8132.1

121.7122.7124.2125.1

125.3125.7127.0129.2

130.1131.1133.0134.1

Federal

36.0

34.134.531.933.137.437.040.540.740 540.8

40.246.652.554.953 853 157.365.669 873.0

72.979.481.281.483.586.991.795.8

100.0102 2

104.2105 2105.6108 0112.2115.5118.8121.2126.1

117.3118.2119.4120.1

120.2120.0120.7123.7

124.4124.9127.2128.0

State andlocal

39.1

38.736.633.835.036.637.035.937.136 836.3

37.339.242.344.646.148.653.260.466.468.9

70.876.980.682.885.387.592.797.3

100.0102.6

105.9109.4113.2116.3119.5123.5128.4133.3138.8

126.2127.5129.3130.5

131.0132.2134.3135.5

136.6138.4139.4140.8

Gross national product bysector

Private 2

51.7

50.445.740.939.943.043.543.445.344 643.9

44.748.755.560.962.062.668.276.381.480.6

81.487.489.089.690.891.694.597.9

100.0101.4

102.8103.7104.7105.8107.0108.8111.4114.8118.9

110.1111.1111.8112.8

113.6114.1115.2116.2

117.2118.4119.3120.4

Generalgovernment

34.1

34.134.533.733.534.834.736.536.537.436.8

36.034.737.339.743.348.355.458.560.864.7

67.170.574.476.679.584.088.793.3

100.0104.2

108.6113.6116.6121.5128.4133.5139.1143.7152.1

137.4138.0139.9141.0

141.5142.4143.4147.6

149.1150.5153.4155.1

1 Separate deflators are not available for total gross private domestic investment, change in business inventories, andnet exports of goods and services.

2 Gross national product less compensation of general government employees. See also Tables B-7 and B-8.Source: Department of Commerce, Office of Business Economics.

23I


TABLE B-4-.—Gross national product by major type of product, 1929-68


Year orquarter

1929

1930193119321933193419351936.—1937..1938....1939

1940....1941....19421943194419451946194719481949

1950195119521953195419551956195719581959

196019611962196319641965196619671968 v

1966: I—.I I . . .ML.IV..

1967: I . . . .

IV..

1968: L...I I . . .ML.IV v.

Totalgrossna-

tionalprod-uct

103.1

90.475.858.055.665.172.282.590.484.790.5

99.7124.5157.9191.6210.1211.9208.5231.3257.6256.5

284.8328.4345.5364.6364.8398.0419.2441.1447.3483.7

503.7520.1560.3590.5632.4684.9747.6789.7860.7

Finalsales

101.4

90.777.060.557.265.871.281.287.985.690.1

97.5120.1156.2192.2211.1213.0202.1231.8252.9259.6

278.0318.1342.4364.1366.4392.0414.5439.8448.8478.9

500.2518.1554.3584.6626.6675.3732.8783.6853.1

3 oo| |

1.7

- . 4-1 .1- 2 . 5-1 .6- . 71.11.32.5

- . 9.4

2.24.51.8

- . 6-1 .0-1 .0

6.4- . 54.7

-3 .1

6.810.33.1.4

-1 .56.04.71.3

-1 .54.8

3.62.06.05.95.89.6

14.76.17.6

Goods output

Total

Totalgoods

56.1

46.937.426.727.034.439.945.851.545.349.0

56.072.593.6

120.4132.3128.9124.9139.7154.2147.5

162.4189.7195.6204.1197.1216.4225.4234.6230.8249.1

259.6262.3284.5298.6319.4347.2382.2396.9430.9

Finalsales

54.3

47.338.629.28.635.138.844.548.946.248.6

53.868.091.9

121.0133.3129.9118.5140.1149.4150.5

155.6179.4192.5203.7198.6210.4220.7233.3232.3244.4

256.0260.2278.5292.7313.6337.6367.5390.8423.3

I!

1.7

- . 4- 1 .-2 .5-1 .6- . 71.11.32.5

- . 9.4

2.24.51.8

- . 6-1 .0-1 .0

6.4- . 54.7

- 3 .

3.62.06.05.95.89.6

14.76.17.6

Durable goods

Total

17.5

11.47.73.64.97.49.3

12.213.99.9

12.7

16.626.835.554.257.948.936.946.048.747.8

60.473.774.679.472.185.790.394.483.695.6

99.596.5

109.0116.1127.0139.6156.0159.3176.7

Finalsales

16.1

12.59.05.75.47.38.9

11.213.110.812.4

15.423.834.554.258.550.231.644.348.049.9

56.366.873.578.574.682.787.593.186.493.2

97.496.6

106.2113.3122.8133.0145.7156.4172.2

2 =

1.4

-1 .0-1 .2-2.0- . 5

.1

.3

- . 9.3

1.23.01.0

- . 6-1 .3

5.31.7

-2 .1

4.16.91.1.9

-2 .53.02.81.3

-2.82.3

2.1- . 12.82.84.26.7

10.23.04.5

Nondurable goods

Total

38.5

35.529.723.122.127.030.633.637.635.436.3

39.345.658.166.274.480.088.093.7

105.599.7

102.0116.0121.0124.8125.0130.7135.1140.2147.2153.6

160.1165.175.5182.5192.4207.6226.3237.6254.2

Finalsales

38.2

34.829.623.623.227.829.933.335.835.436.2

38.444.257.466.874.879.786.995.9

101.5100.6

99.3112.6119.1125.2124.1127.7133.2140.2145.9151.1

158.6163.7172.2179.4190.7204.7221.8234.5251.1

1"

0.3

.1— 4

-1.1- . 9

. 7

*.1

1.01.4.7

- . 6- . 3

.21.1

-2.24.0

-1.0

2.73.42.0

- . 51.02.91.9

1.32.4

1.52.13.23.11.63.04.5

Serv-ices

35.6

34.231.727.525.727.128.331.032.333.34.0

35.440.350.362.571.876.568.070.275.780.8

87.0101.2110.8118.8123.5132.6142.3154.2163.4176.2

187.3199.5213.3226.2244.2262.9288.0

3l l| 314! 83.1 342.8

Struc-tures

11.4

9.26.73.82.93.54.05.66.76.27.5

8.311.814.08.76.16.5

15.621.427.728.3

35.437.539.141.744.249.051.552.353.158.3

56.858.362.665.768.874.877.377.987.1

Grossautoprod-uct


728.4740.4753.3768.2

772.2780.2795.3811.0

831.2852.9871.0887.8

717.5725.0740.4748.4

763.8778.0789.9802.7

829.1842.1863.5877.8

10.915.412.819.8

8.42.35.38.3

2.110.87.5

10.0

371.4378.0383.8395.1

389.9394.1398.9404.8

414.9428.4436.9443.3

360.5362.6371.0375.3

381.5391.8393.6396.5

412.8417.6429.5433.2

10.915.412.819.8

8.42.35.38.3

2.110.87.5

10.0

150.8152.1157.7163.7

154.5157.7161.1164.1

168.2175.3180.0183.1

143.3142.2147.3150.2

151.1157.1157.3159.9

166.7169.1175.1177.9

7.69.9

10.513.6

3.3.6

3.84.2

1.56.24.95.2

220.6225.9226.1231.4

235.4236.4237.8240.7

246.7253.1256.9260.2

217.3220.4223.7225.1

230.4234.7236.2236.6

246.1248.5254.4255.3

3.35.52.46.3

5.01.71.64.1

.64.62.54.9

277.5284.7292.3298.1

306.3310.9317.5324.7

330.4339.2347.6354.0

79.577.777.274.9

76.175.378.881.5

85.885.486.490.6

7.28.8

11.9

15.413.512.016.314.621.216.919.514.519.1

21.417.922.525.125.831.830.329.035.6

32.729.428.430.6

26.229.229.331.3

33.736.136.136.7


232


TABLE B-5.—Gross national product by major type of product, in 1958 prices, 1929-68

(Billions of dollars, 1958 prices]

Year orquarter

1929

1930193119321933193419351936193719381939

1940194119421943194419451946194719481949

1950195119521953195419551956..195719581959

196019611962196319641965196619671968 v

1966: I . . . .II. . .

IV....

1967: I.

III...IV...

1968: I . . . . .

I I I . . , -IV P . .

Totalgross

na-tionalprod-uct

203.6

183.5169.3144.2141.5154.3169.5193.0203.2192.9209.4

227.2263.7297.8337.1361.3355.2312.6309.9323.7324.1

355.3383.4395.1412.8407.0438.0446.1452.5447.3475.9

487.7497.2529.8551.0581.1617.8657.1673.1706.9

Finalsales

200.1

184.1171.7150.5145.9157.0167.1189.9197.8195.3208.2

222.3254.1293.8337.3363.2358.2302.6310.1319.1328.1

347.0372.5391.8411.8409.0431.6441.2451.2448.8471.1

484.2495.2523.8545.2575.2608.8643.2667.2699.9

f 1

3.5

- . 6- 2 . 4- 6 . 2- 4 . 3- 2 . 7

2.43.15.5

- 2 . 41.2

4.99.64.0

- . 2- 1 . 9- 2 . 910.0- . 24.6

-3 .9

8.310.93.3.9

- 2 . 06.44.81.2

- 1 . 54.8

3.52.06.05.85.89.0

13.95.96.9

Goods output

Total

Totalgoods

103.9

90.583.268.768.877.988.6

102.2110.2100.5110.7

124.0143.4158.1187.4204.8198.0172.1172.2178.4174.2

192.6208.4214.0225.4215.1236.1239.0239.8230.8247.7

256.0257.3277.3289.7308.6330.7355.9361.0380.3

Finalsales

100.4

91.185.774.973.280.586.299.1

104.8102.9109.5

119.0133.8154.1187.6206.7201.0162.1172.4173.8178.1

184.3197.5210.7224.5217.1229.7234.2238.5232.3242.9

252.6255.3271.3283.9302.!321.7342.0355.1373.4

3.5

- . 6- 2 . 4- 6 . 2- 4 . 3- 2 . 7

2.43.15.5

- 2 . 41.2

4.99.64.0

- . 2- 1 . 9- 2 . 910.0- . 24.6

-3.9

8.310.93.3.9

- 2 . 06.44.81.2

- 1 . 54.8

3.52.06.05.85.89.0

13.95.96.9

Durable goods

Total

33.6

22.416.38.3

11.716.921.528.731.021.127.6

35.650.057.285.695.984.354.760.161.358.0

73.484.184.691.081.996.596.596.283.694.0

97.894.9

107.0114.2124.6136.5151.1150.3162.1

Finalsales

30.9

24.519.213.413.416.720.626.329.23.427.0

32.843.554.485.297.487.446.158.660.061.0

68.376.183.289.984.893.093.595.086.491.6

95.994.9

104.1111.4120.4130.1141.5147.6158.1

I I

2.7

-2.1-3.0-5.1-1.7

.2

.92.41.9

-2.3.6

2.76.62.9.4

-1.5-3.18.61.51.2

- 3 . 0

5.28.01.51.2

- 3 . 03.43.01.2

-2.82.4

2.0*

2.82.84.16.59.62.74.0

Nondurable goods

l

Total

70.4

68.067.060.457.161.067.173.579.279.483.0

88.493.4

100.9101.7108.113.7117.4112.2117.1116.2

119.1124.3129.4134.4133.2139.7142.5143.6147.2153.7

158.2162.3170.3175.6184.1194.2204.8210.7218.2

Finalsales

69.5

66.566.561.559.863.865.672.875.779.582.5

86.290.399.7

102.4109.3113.6116.0113.8113.8117.1

116.0121.4127.6134.6132.3136.7140.7143.6145.9151.2

156.7160.3167.2172.5182.3191.6200.5207.5215.3

)ods

>>«

Inve

ntc

chan

0.8

1.5.5

-1 .1-2 .7- 2 . 8

1.5.7

3.6- . 1

.6

2.23.11.2

- . 6- . 4

.21.4

- 1 . 73.3

- . 9

3.12.91.8

- . 2.9

3.01.8

*1.32.5

1.52.03.13.11.72.64.33.23.0

Serv-ices

69.3

67.765.861.963.065.368.173.373.974.876.9

80.089.8

107.7131.8144.0144.3113.3106.5109.3112.4

117.5130.5136.3140.3141.8147.5153.0160.1163.4171.2

176.6184.0193.7200.9210.8221.9236.4249.6260.1

Struc-tures

30.3

25.320.213.79.8

11.112.817.519.117.721.8

23.230.531.917.912.412.927.231.236.137.5

45.244.444.747.050.254.354.052.653.157.0

55.055.858.860.461.665.264.862.566.4

Grossautoprod-uct


648.6653.3659.5667.1

665.7669.2675.6681.8

692.7703.4712.3719.1

638.3638.5647.6648.5

657.7666.9670.4673.8

690.7693.5705.5710.0

10.314.712.018.6

8.02.35.28.0

2.09.96.89.1

350.1353.1356.5363.9

357.2360.3361.9364.4

370.4379.2384.7386.8

339.8338.4344.6345.4

349.2358.1356.7356.4

368.4369.3378.0377.7

10.314.712.018.6

8.02.35.28.0

2.09.96.89.1

147.8147.7152.6156.4

146.7149.9151.6152.8

155.9161.2164.9166.3

140.7138.4142.9143.9

143.8149.3148.2149.0

154.5155.6160.5161.7

7.19.39.7

12.5

3.0.6

3.43.8

1.45.64.44.6

202.3205.4203.9207.5

210.5210.5210.2211.6

214.5218.0219.8220.5

199.1200.0201.6201.5

205.5208.82C8.5207.5

213.9213.7217.4216.0

3.25.42.36.1

5.01.71.84.1

.64.32.44.6

230.7234.7238.9241.3

246.1247.8251.2253.2

255.1258.7262.3264.5

67.965.564.161.8

62.361.162.564.2

67.265.565.267.7

10.311.414.8

19.115.913.518.717.124.618.620.214.518.5

21.017.522.024.725.531.830.929.034.8

33.530.029.031.0

26.629.629.230.7

33.035.435.235.4


233


TABLE B-6.—Gross national product: Receipts and expenditures by major economic groups.1929-68

(Billions of dollars]

Year orquarter

1929

1930193119321933—19341935193619371938.1939..

19401941 . .194219431944...19451946194719481949

1950195119521953195419551956195719581959

196019611962196319641965196619671968 v

1966: I . . . .I I . . .III...IV.. .

1967: 1 . . . .1 1 . . .III...IV.. .

1968: I . . . .I I . . .III...IV p..

Persons

Disposable personalincome

Total i

83.3

74.564.048.745.552.458.566.371.265.570.3

75.792.7

116.9133.5146.3150.2160.0169.8189.1188.6

206.9226.6238.3252.6257.4275.3293.2308.5318.8337.3

350.0364.4385.3404.6438.1473.2511.6546.3589.0

Less:Inter-estpaidand

trans-fer

pay-mentsto for-eigners

1.9

1.2.9

.7

.6

8̂.9.8.9

1.01.1.8.8.8

1.01.41.82.22.4

2.93.13.54.34.65.15.96.46.57.1

7.88.18.69.7

10.712.013.113.914.4

Equals:Total

exclud-ing in-terestand

trans-fers

81.4

73.363.148.044.951.757.865.570.364.669.4

74.791.6

116.1132.7145.5149.3158.6168.0186.9186.2

204.1223.5234.8248.3252.9270.2287.2302.2312.3330.3

342.3356.3376.6394.9427.4461.3498.4532.4574.5

Per-sonalcon-

sump-tionex-

pendi-tures

77.2

69.960.548.645.851.355.761.966.563.966.8

70.880.688.599.3

108.3119.7143.4160.7173.6176.8

191.0206.3216.7230.0236.5254.4266.7281.4290.1311.2

325.2335.2355.1375.0401.2432.8465.5492.2533.7

Per-sonalsaving

ordis-

saving

4.2

3.42.6

- . 6- . 9

.42.13.63.8.7

2.6

3.811.027.633.437.329.615.27.3

13.49.4

13.117.318.118.316.415.820.620.722.319.1

17.021.221.619.926.228.432.940.240.8

Government

Net receipts

Taxandnon-taxre-

ceiptsor ac-cruals

11.3

10.89.58.99.3

10.511.412.915.415.015.4

17.725.032.649.251.253.250.956.858.956.0

68.784.889.894.389.7

100.4109.0115.6114.7128.9

139.8144.6157.0168.8174.1189.1213.2227.4260.9

Less:Trans-fers,inter-

est,andsub-

sidies 2

1.8

1.93.12.62.73.13.44.13.23.84.2

4.44.04.44.76.5

10.418.517.318.821.3

22.919.919.019.521.923.425.528.733.034.0

36.541.342.844.446.749.955.362.970.2

Equals:Netre-

ceipts

9.5

8.96.36.36.77.48.08.8

12.211.211.2

13.321.028.244.444.742.832.439.540.134.7

45.864.970.874.867.876.983.586.881.695.0

103.3103.3114.2124.3127.3139.2157.9164.6190.7

Expenditures

Totalex-

pendi-tures

10.3

11.112.410.610.712.913.416.115.016.817.6

18.428.864.093.3

103.092.745.542.450.359.1

60.879.093.7

101.296.797.6

104.1114.9127.2131.0

136.1149.0159.9166.9175.4186.9211.5241.3267.3

Less:Trans-fers,inter-est,and

sub-sidies s

1.8

1.93.12.62.73.13.44.13.23.84.2

4.44.04.44.76.5

10.418.517.318.821.3

22.919.919.019.521.923.425.528.733.034.0

36.541.342.844.446.749.955.362.970.2

Equals:Pur-

chasesof

goodsand

serv-ices

8.5

9.29.28.18.09.8

10.012.011.913.013.3

14.024.859.688.696.582.327.025.131.637.8

37.959.174.781.674.874.278.686.194.297.0

99.6107.6117.1122.5128.7137.0156.2178.4197.1

Sur-plusor

deficit(-),

na-tional

in-come

andprod-

uct ac-counts

1 0

-2!s- 1 . 8- 1 . 4- 2 . 4- 2 . 0- 3 . 1

- 1 . 8- 2 . 2

- . 7- 3 . 8

-31.4-44.1-51.8-39.5

5.414.48.5

- 3 . 2

7.85.8

- 3 . 8- 6 9- 7 . 0

2.74.9.7

-12.5- 2 . 1

3.7- 4 . 3- 2 . 9

1.8—1.4

2.21.7

-13.8- 6 . 4


500.0505.5515.4525.4

534.2541.5550.0559.6

574.4586.3592.7602.5

12.713.113.213.5

13.714.214.013.9

14.114.414.514.7

487.3492.5502.2511.8

520.6527.3536.1545.7

560.3571.9578.2587.7

457.8461.1469.3473.7

480.9490.3495.5502.2

519.4527.9541.1546.3

29.531.432.938.1

39.737.040.543.4

40.844.037.141.4

204.3211.5216.5220.5

222.2223.6229.0234.8

246.6254.2267.2

53.653.155.858.8

62.062.263.463.8

66.469.871.872 9

150.8158.4160.8161.7

160.2161.4165.7171.0

180.3184.4195.4

201.3206.2215.3223.1

235.2239.5243.0247.4

256.9265.5271.3275.4

53.653.155.858.8

62.062.263.463.8

66.469.871.872.9

147.8153.1159.5164.3

173.1177.3179.6183.5

190.5195.7199.6202.5

3.05.31.2

- 2 . 6

-12 .9-15.9-14.0-12.5

-10.3-11.3- 4 . 1


234


T A B L E B—6.—Gross national product: Receipts and expenditures by major economic groups,1929-68— Continued


Yearor

quarter

192919301931-1932193319341935-1936193719381939.1940194119421943 .1944194519461947..194819491950195119521953195419551956 .195719581959I960..19611962196319641965196619671968 v

1966: 1IIIIII V . . -

1967: 1

I I I —IV

1968: 1IIIIIIV v

Business

Grossre-

tainedearn-ings 3

11.28.65.33.23.25.26.46.77.78.08.4

10.511.414.516.317.115.114.520.228.029.729.433.135.136.139.246.347.349.849.456.856.858.766.368.876.284.791.693 197.5

Grosspri-vate

domes-tic in-vest-

ment <

16.210.35.61.01.43.36.48.5

11.86.59,3

13.117.99.85.77.1

10.630.634.046.035.754.159.351.952.651.767 470.067.860.975.374.871.783.087.194.0

108.1120 8114 3127.5

Excessof in-vest-ment

- 5 . 1- 1 . 6- . 32.21.81.9

*- 1 . 8- 4 . 0

1.6- . 9

- 2 . 7- 6 . 5

4.610.610.04.6

- 1 6 . 1- 1 3 . 8- 1 8 . 0- 6 . 0

- 2 4 . 7- 2 6 . 2- 1 6 . 8- 1 6 . 5- 1 2 . 5- 2 1 . 1- 2 2 . 8- 1 8 . 1- 1 1 . 5- 1 8 . 5- 1 8 . 0- 1 3 . 0- 1 6 8- 1 8 . 4- 1 7 . 8- 2 3 . 4—29 2- 2 1 1- 3 0 . 0

International

Trans-fers to

for-eignersby per-sonsandGov-ern-ment

0.4.3.3.2.2.2

'.2.2.2.2.2.2.2.2.3.8

2.92.64.55.64.03.52.52.52.32 52.42.32 42.42.42.62.72.82.82.82 93 12.7

Net exports of goodsand services

Ex-ports

7.05.43.62.52.43.03.33.54.64.34.45.45.94.84.45.37.2

14.719.716.815.813.818.718.016.917.819.823.626.523.123.527.228.630.332.337.139 243.145.850.6

Less:Im-ports

5.94.43.12.12.02.43.13.44.33.03.43.64.64.86.57.17.97.28.2

10.39.6

12.015.115.816.615.917.819.620.820.923.323.223.025.126.428.632.338 141 048.2

Equals:Netex-

ports

1.11.0

.4

.4

.6

.'l

.31.31.11.71.3

*- 2 . 0- 1 . 8- . 67.5

11.56.46.11.83.72.2

.41.82 04.05.72.2

.14.05.65.15.98.56.95 14 82.4

Excessof

trans-fersor

of netex-

ports

- 0 . 8—.7- . 2- . 2- . 2- . 4

.1

.1— l

- 1 . 1- . 9

- 1 . 5- 1 . 1

.22.22.11.4

- 4 . 6- 8 . 9- 1 . 9- . 52.2

- . 2.3

2.1.5.5

- 1 . 5- 3 . 4

.22.3

- 1 . 7- 3 . 0- 2 . 5- 3 . 1- 5 . 7- 4 . 1- 2 . 2- 1 . 7

.3

Totalincomeor re-ceipts

102.491.275.157.755.064.572.581.390 584.189.298.7

124.1159.0193.6207.6208.0208.4230.4259.5256.2283.3325.1343.3361.6362.1395.9420.4441.1445.8484.5504.8520.8559.8590.8633.7688.0750 9793 2865.7

Statis-ticaldis-

crep-ancy

0.7- 8

.7

.3

.6

.5- . 21.2

*.6

1.31.0.4

- 1 . 1- 2 . 0

2.53.9

1.9

- 2 . 0.3

1.53.32.23.02.72 1

- 1 . 1

1.6- . 8

- 1 . 0- . 8

.5- . 3

- 1 . 3- 3 . 1—3 3- 3 5- 4 . 7

Grossna-

tionalprod-uct

or ex-pendi-ture

103.190 475 858.055.665 172.282.590 484 790.599.7

124.5157.9191 6210.1211.9208 5231.3257.6256.5284.8328.4345 5364.6364.8398 0419.2441.1447 3483.7503.7520.1560 3590.5632 4684.9747 6789 7860.7


88.990.491.995.3

91.391.993.595.9

92.897.499.9

116.8121.0119.9125.7

113.0107.6114.7121.8

119.7127.3127.1136.1

- 2 7 . 9- 3 0 . 5- 2 8 . 0- 3 0 . 4

- 2 1 . 7- 1 5 . 7- 2 1 . 2- 2 5 . 9

- 2 6 . 9- 2 9 . 9- 2 7 . 2

3.42.92.82.6

2.93.43.42.6

2.62.82.82.8

42.142.643.644.2

45.545.546.146.0

47.549.952.652.4

36.137.339.139.7

40.340.440.642.6

46.047.949.449.5

6.05.24.54.5

5.25.15.43.4

1.52.03.33.0

- 2 . 7- 2 . 3- 1 . 7- 1 . 9

- 2 . 3- 1 . 6- 2 . 1- . 8

1.1.8

- . 2

730.3744.2757.7771.3

775.0784.0798.6815.2

835.9856.5876.3

- 1 . 9- 3 . 9- 4 . 4- 3 . 1

- 2 . 8- 3 . 8- 3 . 4- 4 . 2

- 4 . 7- 3 . 6- 5 3

728.4740 4753 3768.2

772.2780 2795.3811.0

831.2852.9871 0887.8

1 Personal income less personal tax and nontax payments (fines, penalties, etc.).2 Government transfer payments to persons, foreign net transfers by government, net interest paid by government,

and subsidies less current surplus of government enterprises.2 Undistributed corporate profits, corporate inventory valuation adjustment, capital consumption allowances, and

wage accruals less disbursements.* Private business investment, purchases of capital goods by private nonprofit institutions, and residential housing.

See Table B - l l .• Net foreign investment with sign changed.Source: Department of Commerce, Office of Business Economics.


TABLE B-7.—Gross national product by sector, 1929-68


Year orquarter

1929..

1930..1931..1932..1933..1934..1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944..1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..1955..1956..1957..1958..1959..

I960..1961..1962..1963..1964..1965..1966..1967..1968 P.

1966: LIIIIL.IV

1967: I . —IIIIIIV

1968: L —

IIIV

Totalgross

nationalproduct

1

103.1

90.475.858.055.665.172.282.590.484.790.5

99.7124.5157.9191.6210.1211.9208.5231.3257.6256.5

284.8328.4345.5364.6364.8398.0419.2441.1447.3483.7

503.7520.1560.3590.5632.4684.9747.6789.7860.7

Gross private product1

Totalloiai

98.8

85.871.253.650.959.566.375.283.577.082.9

91.9115.1142.8166.0177.9176.8187.7214.6240.1237.0

263.9301.0314.3332.7332.4363.8382.6402.0405.2439.4

456.3469.2505.7532.4569.4617.1671.1704.8766.4

Total

95.1

82.468.351.348.957.464.172.981.074.580.3

89.1112.2139.5162.4173.8172.3182.7208.6233.5230.1

256.3292.8305.8323.6322.7352.9370.8389.3391.7425.0

440.7452.3487.4513.0548.2594.4646.7677.9737.4

Business

Nonfarm2

85.4

74.862.046.844.352.757.166.572.767.974.0

82.6103.3126.5147.2158.5156.4163.9188.5210.2211.4

236.3269.9283.7303.3303.1334.1352.2370.9370.9405.3

420.2431.4466.2491.5527.6570.8622.0653.7712.4

Farm

9.7

7.76.34.54.64.77.06.48.36.66.3

6.58.9

13.015.315.315.918.820.223.318.8

20.022.922.220.319.618.818.618.420.819.6

20.520.921.221.520.623.724.724.225.0

House-holds

2.9

2.72.31.91.71.81.92.02.32.22.3

2.42.52.93.23.74.14.55.15.65.9

6.46.97.27.88.19.19.8

10.511.412.2

13.214.015.016.017.318.520.222.324.0

Rest ofthe world

0.8

.7

.5

.4

.3

.3

.4

.3

.3

.4

.3

.4

.4

.4

.4

.4

.4

.6

.81.01.0

1.21.31.31.31.61.82.12.22.02.2

2.42.93.33.44.04.24.24.65.0


Grossgovern-

mentproduct^

4.3

4.54.74.44.75.65.97.36.97.67.6

7.89.4

15.125.632.235.220.816.717.419.4

20.927.431.231.932.534.236.639.142.144.3

47.550.954.758.163.067.876.584.894.3

728.4740.4753.3768.2

772.2780.2795.3811.0

831.2852.9871.0887.8

655.4665.3675.4688.2

690.4696.7709.8722.3

740.3759.9775.0790.3

631.5641.3650.8663.1

664.5670.7682.4694.1

712.4730.8745.6760.7

605.9616.5626.5639.0

640.7646.7658.0669.4

688.1706.1720.2735.2

25.624.824.224.2

23.824.024.424.8

24.324.725.525.5

19.919.720.420.7

21.822.122.522.9

23.524.224.224.2

4.04.24.14.4

4.14.05.05.3

4.44.95.25.4

73.075.177.980.0

81.883.585.488.6

90.893.096.097.6

* Gross national product less compensation of general government employees.2 Includes compensation of employees in government enterprises. Government enterprises are those agencies of

government whose operating costs are to a substantial extent covered by the sale of goods and services, in contrast to thegeneral activities of government, which are financed mainly by tax revenues and debt creation. The Post Office and publicpower systems are examples of government enterprises; on the other hand, State universities and public parks are part ofgeneral government activities.

3 Compensation of general government employees.Source: Department of Commerce, Office of Business Economics.

236


TABLE B-8.—Gross national product by sector, in 1958 prices, 1929-68

[Billions of dollars, 1958 prices)

Year orquarter

1929

1930193119321 9 3 3 . . . .193419351936193719381939

1940194119421943194419451946194719481949

195019511952195319541955195619571958 *1959

196019611962196319641965196619671968*

1966: IIIIIIIV

1967: IIIIIIIV

1968: IIIIIIIV P

Totalgross

nationalproduct

203.6

183.5169.3144.2141.5154.3169.5193.0203.2192.9209.4

227.2263.7297.8337.1361.3355.2312.6309.9323.7324.1

355.3383.4395.1412.8407.0438.0446.1452.5447.3475.9

487.7497.2529.8551.0581.1617.8657.1673.1706.9

Gross private productl

Tntal1 Oldl

190.9

170.1155.8131.0127.5138.3152.4173.1184.3172.6188.7

205.6236.6257.3272.8286.9282.5275.1281.4295.0294.1

324.2344.6353.2371.1366.2397.2404.8410.5405.2433.4

444.0452.3482.9503.2532.0567.0602.1614.0644.8

Total

182.1

161.4147.7123.8120.6131.1144.9165.4176.4164.6180.7

197.1228.1248.7264.9278.9274.6267.0272.8286.0284.7

314.2334.5343.2360.7355.4385.4392.2397.5391.7419.4

429.5436.9466.7486.6514.4548.9583.4594.0623.8

Business

Nonfarm2

165.1

145.4129.2105.8103.0116.6128.4150.5158.5146.8162.5

179.6209.3228.0245.3259.5256.5248.6255.8267.0266.2

294.9316.2324.2340.7335.0364.4371.4377.2370.9398.3

407.6414.8444.6463.8492.1525.2561.1569.9599.9

Farm

17.0

16.118.518.017.514.616.514.917.917.818.2

17.518.820.619.619.418.118.517.019.018.4

19.418.419.020.020.420.920.820.320.821.1

21.922.222.122.822.323.722.224.123.9

House-holds

7.4

7.16.66.05.76.26.46.87.16.87.1

7.67.57.87.27.17.17.17.57.98.2

8.78.88.89.19.2

10.110.610.911.411.7

12.212.412.913.213.714.014.815.516.1

Rest ofthe world

1.4

1.61.41.31.21.01.11.0.8

1.1.9

1.0.9.8.8.9.8.9

1.11.21.2

1.31.21.21.31.61.82.02.12.02.2

2.32.93.43.43.94.14.04.54.9


Grossgovern-

mentproducts

12.7

13.313.513.214.016.017.119.918.920.420.6

21.627.240.564.374.472.837.528.628.730.1

31.138.84U841.740.940.741.341.942.142.5

43.744.846.947 849.150.855.059.062.0

648.6653.3659.5667.1

665.7669.2675.6681.8

692.7703.4712.3719.1

595.5598.9603.8610.3

607.9610.6616.0621.7

631.8641.6649.7656.2

577.0580.3585.0591.1

588.5591.2595.6600.8

611.4620.5628.5634.9

554.3557.4563.6569.3

564.8567.5571.2576.3

587.8596.2604.5610.9

22.722.921.421.9

23.723.724.424.5

23.624.324.024.0

14.714.514.915.0

15.315.515.615.7

16.116.316.216.0

3.84.03.94.2

4.13.94.95.2

4.34.85.15.3

53.154.455.756.8

57.858.659.660.1

60.961.862.662.9

1 Gross national product less compensation of general government employees.2 Includes compensation of employees in government enterprises. Government enterprises are those agencies of govern-

ment whose operating costs are to a substantial extent covered by the sale of goods and services, in contrast to the generalactivities of government which are financed mainly by tax revenues and debt creation. The Post Office and public powersystems are e xamplesof government enterprises; on the other hand, State universities and public parks are part of gen-eral government activities.

3 Compensation of general government employees.SouFCe: Department of Commerce, Office of Business Economics.

237323-166 0—69- -16


TABLE B-9.—Gross national product by industry, in 1958 prices, 1947-67


Year

1947.1948.1949.

1950.1951.1952.1953.1954.

1955.1956.1957.1958.1959.

1960.1961.1962.19631964.

196519661967

Totalgross

na-tional

product

309.9323.7324.1

355.3383.4395.1412.8407.0

438.0446.1452.5447.3475.9

487.7497.2529.8551.0581.1

617.8657.1673.1

Agri-culture,fores-try,andfish-eries

17.920.019.4

20.419.520.221.221.6

22.122.021.522.022.3

23.123.423.324.023.6

25.023.525.4

Con-tractcon-

struc-tion

12.914.114.7

16.218.218.318.919.3

20.821.821.120.722.0

21.721.421.721.923.3

23.524.423.6

Manufacturing

Total

91.896.390.9

105.5116.2118.7128.6119.5

133.6134.1134.6123.7138.9

140.9140.4154.6162.4173.7

190.5205.7206.5

Dur-ablegoodsindus-tries

52.355.050.5

60.869.071.579.171.2

80.779.479.669.679.9

81.079.790.095.6

102.4

114.8124.9124.3

Non-durablegoodsindus-tries

39.441.340.4

44.747.247.349.548.3

52.954.654.954.059.0

59.960.764.766.871.3

75.780.882.2

Trans-porta-tion,com-muni-cation,

andutili-ties

29.630.428.7

30.834.334.635.736.4

38.640.541.340.643.3

44.946.048.951.954.7

59.264.468.0

Whole-salesaieandretail

trade

52.754.255.2

60.461.462.964.965.5

71.673.875.175.180.8

82.383.588.992.898.9

104.8111.7113.6

Finance,insur-ance,andreal

estate

35.636.537.8

41.042.944.746.849.8

52.754.857.059.261.4

64.167.171.274.478.3

83.187.290.1

Serv-ices

30.631.932.1

33.134.034.535.335.4

38.240.241.842.945.1

46.748.350.852.254.7

57.760.562.7

Gov-ern-mentand

govern-mententer-prises

32.433.234.7

35.943.947.247.146.1

46.046.246.947.347.9

49.250.652.653.956.1

58.062.266.9

Allother i

6.77.1

10.6

12.113.014.014.313.5

14.412.713.116.014.1

14.716.317.917.417.8

15.817.416.3

i Mining, rest of world, and residual (the difference between gross national product measured as sum of final productsand gross national product measured as sum of gross product by industries).


238


TABLE B-10.—Personal consumption expenditures, 1929-68


Yearor

quarter

1929

193019311932—.1933193419351936193719381939

194019411942194319441945.. . .1946—.1947.. . .1948.. . .1949

195019511952.. . .1953195419551956195719581959

196019611962. . . .1963.- . .1964..- .1965196619671968 p . -

1 9 6 6 : 1 . . .II .III.IV.

1 9 6 7 : 1 . . .II-III.IV.

1 9 6 8 : L .II.IIIIV

co

"S.1

n

= 3

i '

per

soT

ota

l

77.

69.60.48.45.51.55.61.66.63.66.

70.80.88.99.08.19.43.60.73.

53

\

2

9568379598

865337476

76.8

91.206.216.

037

230.0236.254.

54

266.7281.290.311.

412

325.2335.355.375.401.432.465.492533.

457461469473

480

21028527

8137

.9490.3495502

519527541546

.5

.2

.4

.9

.1

.3

To

tal

9.2

7.25.53.63.54.25.16.36.95.76.7

7.89.66.96.66.78.0

15.820.422.724.6

30.529.629.333.232.839.638.940.837.944.3

45.344.249.553.959.266.370.572.682.5

71.668.271.071.1

69.873.473.174.2

79.081.085.184.8

Durable goods

ex.XJ

03n

ob

ile

Au

tor

3.2

2.21.6.9

1.11.41.92.32.41.62.2

2.73.4.7.8.8

1.04.06.27.59.9

13.111.611.114.213.618.416.418.315.419.5

20.118.422.024.325.830.330.430.436.5

31.828.930.330.5

28.131.231.031.4

34.635.438.138.0

•

Istu

rea

d e

qu

1 F

urn

i|

ho

i

4.8

3.93.12.11.92.22.63.23.63.13.5

3.94.94.73.93.84.68.6

10.911.911.6

14.114.414.314.915.016.617.517.317.118.9

18.919.320.522.225.026.929.831.434.3

29.329.030.430.4

31.131.231.431.8

33.333.935.434.4

Oth

er

1.

1.

l!

l!

1.1.1.1.2.2.3.3.3.

2

1965678090

146925234

3.2

3. 33.63.94. 14.24.5.5.5.

6024

5.9

6.667.8.9

101011

10101010

10111011

11111112

359551397

53

.3

.2

.6

.0

.8

.1

.1

.7

.5

.3

To

tal

37.7

34.029.022.722.326.729.332.935.234.035.1

37.042.950.858.664.371.982.490.596.294.5

98.1108.8114.0116.8118.3123.3129.3135.6140.2146.6

151.3155.9162.6168.6178.7191.1206.7215.8230.2

Nondurable goods

8-ooaa

dm era;

excl

uic

bev

Fo

od

,ho

i

19.5

18.014.711.410.912.213.615.316.515.615.7

16.619.223.327.429.933.239.043.746.344.8

46.052.154.755.556.558.160.463.966.668.4

70.172.174.476.580.585.892.794.9

101.3

1-a

ing

anC

loth

9.4

8.06.95.14.65.76.06.66.86.87.1

7.48.8

11.013.414.416.518.218.820.119.3

19.621.221.922.122.123.124.124.324.726.4

27.327.929.630.633.535.939.842.145.8

'5T3

ine

anG

aso

l

1.8

1.71.51.51.51.61.71.92.12.12.2

2.32.62.11.31.61.83.03.64.45.0

5.46.16.87.78.29.09.8

10.611.011.6

12.312.412.913.514.015.316.618.119.8

Oth

er

7.

6.5.4.5.7.7.9.9.9.

0

378329185

10.1

10. 712.214. 416.518.420.522. 124.425.25.

27.29.30.31.31.33.34.36.3740.

41.434548.

44

1356519792

6570

50.65457.6063.

1563


202.8206.3208.3209.3

212.9215.3216.4218.4

226.5228.2232.7233.5

91.493.193.393.2

94.494.494.796.2

98.6101.0102.2103.1

39.239.440.540.3

40.942.442.842.3

44.644.847.246.5

16.016.416.717.1

17.717.818.318.6

19.719.420.020.2

56.2575758

5960

487

97

60.661

63636363

3

6036

To

tal

30.3

28.726.22.

02

20.120.21.22.24.24.

43843

25.0

26.28.

01

30.834.37.39.

228

45.349.854.757. 6

62.467.73.79.85.91.

94944

98.5105.0112.120.

128.135143152163175188

03

7104353

203.8221

183186190193

198201205209

213218

o

4703

2696

97

223.4228.0

ooc

Ho

usi

11.5

11.010.39.07.97.67.78.08.58.99.1

9.410.211.011.512.012.513.915.717.519.3

21.323.926.529.331.733.736.038.541.143.7

46.348.752.055.459.363.567.370.976.2

66.066.867.668.8

69.770.471.272.2

74.075.476.978.6

Services

ion

s1•I

Ho

usi

4.

3.3.3.2.3.3.3.3.3.3.

4.4.

0

9508024768

03

4.85.25.96.46.7.

85

8.18.

9.10.11.

5

541

12.012. 614.015.16.17.18.

20.20.22.23.24.

2235

08013

25.627.129.31.

26262727

02

2958

28.1282929

729

30.3313131

059

o

I

Tra

ns

2.

2.

6

21.91.1.1.1.1.2.1.2.

2.2.

i3.4.

65679090

147470

5.05.35.5.

6.6.7.7.7.

89

27189

8.28.69.9

10

10

031

810.61111111213

04666

15.016.6

13131313

14141515

16

3668

7815

216.31617

81

Oth

er

12.2

11.510.38.67.98.28.79.5

10.29.9

10.1

10.411.212.314.015.616.819.721.423.323.9

25.426.928.730.833.235.538.641.344.348.0

51.654.958.062.568.173.880.488.997.0

77.979.481.382.9

85.787.790.492.0

93.395.998.2

100.5

1 Quarterly data are estimates by Council of Economic Advisers.2 Includes standard clothing issued to military personnel.s Includes imputed rental value of owner-occupied dwellings.Source: Department of Commerce, Office of Business Economics (except as noted).

239


TABLE B-1I.—Gross private domestic investment, 1929-68


Year orquarter

Totalgross

privatedomestic

invest-ment

Fixed investment

Total

Nonresidential

Total

Structures

Total Non-farm

Producers'durable

equipment

Total Non-farm

Residential structures

Total Non-farm Farm

Change inbusiness

inventories

Total Non-farm

1929..

1930..1931-1932..1933..1934..1935..1936..1937..1938...1939...

1940...1941..1942...1943...1944...1945...1946...1947...1948...1949...

1950...1951...1952...1953...1954...1955...1956...1957...1958...1959...

1960...1961...1962...1963—1964...1965—1966...1967...1968*..

16.2

10.35.61.01.43.36.48.5

11.86.59.3

13.117.99.85.77.1

10.630.634.046.035.7

54.159.351.952.651.767.470.067.860.975.3

74.871.783.087.194.0

108.1120.8114.3127.5

14.5

10.66.83.43.04.15.37.29.27.48.9

11.013.48.16.48.1

11.624.234.441.338.8

47.349.048.852.153.361.465.366.562.470.5

71.369.777.081.388.298.5

106.1108.2120.0

10.6

8.35.02.72.43.24.15.67.35.45.9

7.59.56.05.06.8

10.117.023.426.925.1

27.931.831.634.233.638.143.746.441.645.1

48.447.051.754.361.171.381.383.690.0

5.0

4.02.31.2.9

1.01.21.62.41.92.0

2.32.91.91.31.82.86.87.58.88.5

9.211.211.412.713.114.317.218.016.616.7

18.118.419.219.521.225.528.527.929.2

4.8

3.92.31.2.9

1.01.21.62.41.81.9

2.22.81.81.21.72.76.16.78.07.7

8.510.410.511.912.313.616.517.215.815.9

17.417.718.518.820.524.927.827.128.4

5.6

4.32.71.51.52.22.94.04.93.54.0

5.36.64.13.75.07.3

10.215.918.116.6

18.720.720.221.520.623.826.528.425.028.4

30.328.632.534.839.945.852.855.760.8

4.9

3.72.41.31.31.82.43.34.12.93.4

4.65.63.53.24.26.39.2

14.015.513.7

15.717.717.618.618.021.224.225.922.025.4

27.725.829.431.236.341.648.151.055.8

4.0

2.31.7.7.6.9

1.21.61.92.02.9

3.43.92.11.41.31.57.2

11.114.413.7

19.417.217.218.019.723.321.620.220.825.5

22.822.625.327.027.127.224.824.630.0

3.8

2.21.6

'.S.8

1.11.51.81.92.8

3.23.71.91.21.11.46.7

10.413.612.8

18.616.416.417.219.022.720.919.520.124.8

22.222.024.826.426.626.724.324.029.4

0.2 1.7

- . 4-1 .1- 2 . 5-1 .6- . 71.11.32.5

- . 9.4

2.24.51.8

- . 6- 1 . 0- 1 . 0

6.4- . 54.7

-3 .1

6.810.33.1

- L 56.04.71.3

-1 .54.8

3.62.06.05.95.89.6

14.76.17.6


1966:

1967:

IIIIIIV . . . . .

IIIIllIV . . . . .

1 9 6 8 : IIII I I . . . . .

116.8121.0119.9125.7

113.0107.6114.7121.8

119.7127.3127.1136.1

105.9105.6107.0105.9

104.6105.4109.3113.5

117.6116.5119.6126.0

78.679.882.684.2

83.582.783.385.0

88.687.090.194.2

28.628.128.928.2

29.027.227.727.7

29.628.528.829.8

27.927.428.227.5

28.326.427.026.9

28.827.728,029.0

50.051.753.755.9

54.555.555.657.3

59.058.5.61.364.4

45.547.249.350.4

49.850.750.952.6

54.353.656.459.0

27.325.824.421.7

21.122.726.028.5

29.129.529.531.8

26.825.223.921.1

20.522.125.427.9

28.528.928.931.2

0.5.5.6.6

.6

.6

.6

.6

.6

.6

.6.6

10.915.412.819.8

8.42.35.38.3

2.110.87.5

10.0

1.8

- . 1-1 .6-2 .6-1 .4

.2

.42.11.7

-1 .0.3

1.94.0.7

- . 6- . 6- . 66.41.33.0

-2 .2

6.09.12.11.1

-2 .15.55.1.8

-2 .34.8

3.31.75.35.16.48.6

14.95.67.2

10.715.413.320.2

8.32.24.87.1

1.610.47.39.2


24O


TABLE B-12.—National income by type of income, 1929-68


Year orquarter

1929

1930193119321933193419351936193719381939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

196019611962196319641965196619671968 v

1966: 1 . . .||III .IV..

1967: L__II...IIIIV..

1968' 1IL..IllIV P.

Totalna-

tionalin-

come1

86.8

75.459.742.840.349.557.265.073.667.472.6

81.1104.2137.1170.3182.6181.5181.9199.0224.2217.5

241.1278.0291.4304.7303.1331.0350.8366.1367.8400.0

414.5427.3457.7481.9518.1564.3620.8652.9712.8

Compensation ofemployees

Total

51.1

46.839.831.129.534.337.342.947.945.048.1

52.164.885.3

109.5121.2123.1117.9128.9141.1141.0

154.6180.7195.3209.1208.0224.5243.1256.0257.8279.1

294.2302.6323.6341.0365.7393.8435.6468.2513.6

Wagesandsala-ries

50.4

46.239.130.529.033.736.741.946.143.045.9

49.862.182.1

105.8116.7117.5112.0123.0135.4134.5

146.8171.1185.1198.3196.5211.3227.8238.7239.9258.2

270.8278.1296.1311.1333.7358.9394.6423.4463.5

Sup-ple-

mentsto

wagesandsala-ries 2

0.7

.7

.6

.6

.5

.6

.61.01.82.02.2

2.32.73.23.84.55.65.95.95.86.5

7.89.6

10.210.911.513.215.217.317.920.9

23.424.627.529.932.035.041.144.850.1

Business and pro-fessional income

Total

9.0

7.65.83.63.34.75.56.77.26.97.4

8.611.114.017.018.219.221.620.322.722.6

24.026.127.127.527.630.331.332.833.235.1

34.235.637.137.940.242.444.846.347.8

In-come

ofunin-corpo-ratedenter-prises

8.8

6.85.13.33.94.85.56.87.26.77.6

8.611.714.417.118.319.323.321.823.122.2

25.126.526.927.627.630.531.833.133.235.3

34.335.637.137.940.342.845.146.648.4

Inven-toryvalu-ation

adjust-ment

0.1

.8

.6

.3- . 5- . 1

*- . 1*

.2- . 2

*- . 6- . 4- . 2

-A- 1 . 7- 1 . 5- . 4

.5

- 1 . 1- . 3

.2- . 2

- . 2- . 5- . 3- . 1- . 1

****

- . 1- . 4- . 3- . 3- . 6

In-come

offarmpro-prie-tors 3

6.2

4.33.42.12.63.05.34.36.04.44.4

4.56.49.8

11.711.612.214.915.217.512.7

13.515.815.013.012.411.411.411.313.411.4

12.012.813.013.112.114.815.914.415.1

Rentalin-

comeof

per-sons

5.4

4.83.82.72.01.71.71.82.12.62.7

2.93.54.55.15.45.66.6

s!o8.49.4

10.311.512.713.613.914.314.815.415.6

15.816.016.717.118.019.019.820.321.0

Corporate profitsand inventory

valuationadjustment

Total

10.5

7.02.0

- 1 . 3- 1 . 2

1.73.45.66.84.96.3

9.815.220.324.423.819.219.325.633.030.8

37.742.739.939.638.046.946.145.641.151.7

49.950.355.758.966.376.183.980.489.2

Corpo-rate

profitsbeforetaxes •

10.0

3.7- . 4

- 2 . 31.02.33.66.36.84.07.0

10.017.721.525.124.119.724.631.535.228.9

42.643.938.940.638.348.648.847.241.452.1

49.750.355.459.466.877.885.681.692.3

Inven-toryvalu-ation

adjust-ment

0.5

3.32.41.0

- 2 . 1- . 6- . 2- . 7

IK

1.0- . 7

- . 2- 2 . 5- 1 . 2- . 8- . 3- . 6

- 5 . 3- 5 . 9- 2 . 2

1.9

- 5 . 0- 1 . 2

1.0- 1 . 0- . 3

- 1 . 7- 2 . 7- 1 . 5- . 3- . 5

.2- . 1

.3- . 5

- L 7- 1 . 7- 1 . 2- 3 . 1

Netinter-

est

4.7

4 95.04.64.14.14.13 83.73.63.5

3.33.23.12 72.32.21.51.91.81.9

2.02.32.62.83.64.14.65.66.87.1

8.410.011.613.815.818.220.823.326.3


604.0615.1626.7637.3

638.6645.1656 9670.9

688 1705.4722.5

420.6430 8441.4449.7

456.7461.8471.5482.7

^96 8507.1519.7530.7

381.0390 2399.8407.2

413.3417.6426 3436.4

448 3457.6469.0479.0

39.640 541.542.5

43.444.245 246.2

48 449.450.751.7

44.544 744.745.2

45.746.146 646.8

47 247.848.048.2

16.916.115.515.1

14.414.414.614.3

14.614.815.415 5

19.519.719.920.0

20.120.220.420.5

20.720.921.021 2

82.783.484.285.3

79.579.680.282.3

83.889.291.6

85.285.686.785.0

79.980.380.885.4

88.991.892.7

- 2 . 6- 2 . 2- 2 . 5

.3

- . 4- . 7- . 6

- 3 . 1

- 5 . 1- 2 . 7- 1 . 0- 3 . 7

19.820.421.122.0

22.222.923.624.3

25.025.826.727.6

1 National income is the total net income earned in production. It differs from gross national product mainly in that itexcludes depreciation charges and other allowances for business and institutional consumption of durable capital goods,and indirect business taxes. See Table B-13.

2 Employer contributions for social insurance and to private pension, health, and welfare funds; compensation forinjuries; directors' fees; pay of the military reserve; and a few other minor items.

3 Includes change in inventories.* See Table B-70 for corporate tax liability and profits after taxes.Source: Department of Commerce, Office of Business Economics.

241


T A B L E B—13/—Relation of gross national product and national income, 1929—68


Year or quarter

1929-

1930..1931..1932..1933..1934..1935..1936..1937..1938-1939..

1940..1941..1942..1943..1944..1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..1955.1956.1957.1958.1959.

1960.1961.1962.1963.1964.1965.1966.1967.1968 *

Grossna-

tionalprod-uct

103.1

90.475.858.055.665.172.2

.590.484.790.5

99.7124.5157.9191.6210.1211.9208.5231.3257.6256.5

284.8328.4345.5364.6364.8398.0419.2441.1447.3483.7

503.7520.1560.3590.5632.4684.9747.6789.7860.7

Less:Capital

con-sump-

tionallow-ances

7.9

8.07.97.47.06.86.97.07.27.37.3

7.58.29.8

10.211.011.39.9

12.214.516.6

18.321.223.225.728.231.534.137.138.941.4

43.445.250.052.656.159.864.169.274.3

Equals:Netna-

tionalprod-

uct

95.2

82.468.050.748.658.265.475.483.377.483.2

92.2116.3148.1181.3199.1200.7198.6219.1243.1239.9

266.4307.2322.3338.9336.6366.5385.2404.0408.4442.3

460.3474.9510.4537.9576.3625.1683.5720.5786.4

Plus:Sub-sidiesless

currentsurplusof gov-

ern-mententer-prises

- 0 . 1

- . 1

. 3

.4*

. 1

.2

. 5

.4

.1

.2

.2

.7

.8

.9- . 2- . 1- . 1

.2

. 2- . 1- . 4- . 2- . 1

. 8

.9

.9

. 1

.21.41.4.8

1.31.32.31.6

Less:

Indirect business taxes

Total

7.0

7.26.96.87.17.88.28.79.29.29.4

10.011.311.812.714.115.517.118.420.121.3

23.325.227.629.629.432.134.937.338.541.5

45.247.751.554.758.462.565.369.675.8

Federal

1.2

1.0.9.9

1.62.22.22.32.42.22.3

2.63.64.04.96.27.17.87.88.08.0

8.99.4

10.310.99.7

10.711.211.811.512.5

13.513.614.615.316.116.515.816.217.6

Stateandlocal

5.8

6.16.05.85.45.66.06.46.86.97.0

7.47.77.77.88.08.49.3

10.612.113.3

14.515.817.318.719.721.423.625.527.028.9

31.734.136.939.442.345.949.553.458.2

Busi-ness

transferpay-

ments

0.6

.5

.6

'j.6.6.6.6.4.5

. 4

.5

.5

.5

.5

.5

.5

.6

.7

.91.01.21.11.21.41.51.61.7

1.92.02.12.32.52.73.03.13.3

Sta-tistical

dis-crep-ancy

0.7

.7

.3

.6

.5- . 21.2

*.6

1.31.0.4

- 1 . 1- 2 . 0

2.53.9.1.9

- 2 . 0.3

1.53.32.23.02.72.1

- 1 . 1

1.6

- 1 . 0- . 8

.5- . 3

- 1 . 3- 3 . 1- 3 . 3- 3 . 5- 4 . 7

Equals:Na-

tionalincome

86.8

75.459.742.840.349.557.265.073.667.472.6

81.1104.2137.1170.3182.6181.5181.9199.0224.2217.5

241.1278.0291.4304.7303.1331.0350.8366.1367.8400.0

414.5427.3457.7481.9518.1564.3620.8652.9712.8

1966: 1II .IllIV

1967: 1IIIII.IV

1968: 1II111IVP

Seasonally adjusted annual rate

728.4740.4753.3768.2

772.2780.2795.3811.0

831.2852.9871.0887.8

62.363.564.765.9

67.168.470.071.1

72.373.774.976.2

666.1676.9688.6702.4

705.1711.8725.3739.8

758.8779.1796.1811.6

1.92.22.82.3

1.81,61.51.3

.5

.71.0.7

62.964.966.067.5

68.069.070.171.2

72.874.876.779.0

15.215.916.016.1

15.916.116.316.4

17.017.517.818.1

47.849.050.051.4

52.152.853.854.7

55.857.358.960.9

2.93.03.03.0

3.13.13.23.2

3.23.33.33.3

- 1 . 9- 3 . 9- 4 . 4- 3 . 1

- 2 . 8- 3 . 8- 3 . 4- 4 . 2

- 4 . 7- 3 . 6- 5 . 3

604.0615.1626.7637.3

638.6645.1656.9670.9

688.1705.4722.5


242


TABLE B-14.—Relation of national income and personal income, 1929-68


Year or quarter

1 9 6 6 : I . . .I I . .I I I .I V . .

1 9 6 7 : I . . .I I . .I I I .I V . .

1 9 6 8 : I .

Nationalincome

III.

75.459.742.840.349.557.265.073.667.472.6

81.1104.2137.1170.3182.6181.5181.9199.0224.2217.5

241.1278.0291.4304.7303.1331.0350.8366.1367.8400.0

414.5427.3457.7481.9518.1564.3620.8652.9712.8

Less:

Corpo-rate

profitsand in-ventory

valuationadjust-ment

10.5

7.02.0

- 1 . 3- 1 . 2

1.73.45.66.84.96.3

9.815.220.324.423.819.219.325.633.030.8

37.742.739.939.638.046.946.145.641.151.7

49.950.355.758.9

Contri-butions

forsocialinsur-ance

0.2

.3

.3

.3

.3

.3

.3

.61.82.02.1

2.32.83.54.55.26.16.05.75.25.7

6.98.28.78.89.8

11.112.614.514.817.6

20.721.424.026.9

Wageaccruals

lessdis-

burse-ments

0.2- . 2

66.376.183.980.489.2

27.929.638.041.946.9

Plus:

Gov-ernmenttransfer

paymentsto per-

sons

0.9

1.02.11.41.51.61.82.91.92.42.5

2.72.62.62.53.15.6

10.811.110.511.6

14.311.512.012.814.916.117.119.924.124.9

26.630.431.233.034.237.241.048.655.3

Interestpaid

bygovern-

ment(net)

and byconsumers

2.5

1.81.81.71.61.71.71.71.91.91.9

2.12.22.22.63.34.25.25.56.16.5

7.27.68.19.09.5

10.111.212.012.113.6

15.115.016.117.619,120.522.323.625.9

Divi-dends


604.0615.1626.7637.3

638.6645.1656.9670.9

688.1705.4722.5

82.783.484.285.3

79.579.680.282.3

83.889.291.6

36.537.338.739.4

40.941.642.143.0

45.846.547.447.8

39.539.041.044.3

47.548.348.949.7

52.555.056.357.5

5.8

5.54.12.52.02.62.84.54.73.23.8

4.04.44.34.44.64.65.66.37.07.2

8.88.68.68.99.3

10.511.311.711.612.6

13.413.815.216.517.819.821.722.924.6

Busi-ness

transferpay-

ments

0.6

.5

.6

\l.6.6.6.6.4.5

.4

.5

.5

.5

.5

.5

.5

.6

.7

.8

.91.01.21.11.21.41.51.61.7

1.92.02.12.32.52.73.03.13.3

21.522.122.423.1

23.423.223.524.2

24.925.726.226.7

21.21.21.21.

22.23.23.22.

6996

5255

23.624.25.25.

424

Equals:

Personalincome

2.93.03.03.0

3.13.13.23.2

3.23.33.33.3

85.9

77.065.950.247.054.060.468.674.168.372.8

78.396.0

122.9151.3165.3171.1178.7191.3210.2207.2

227.6255.6272.5288.2290.1310.9333.0351.1361.2383.5

401.0416.8442.6465.5497.5538.9586.8628.8685.8

570.4580.3592.1604.5

614.8621.6633.7645.2

662.7678.1694.3708. 2


243


TABLE B-15.—Disposition of personal income, 1929-68

Year orquarter

Per-sonal

income

Less:Per-

sonaltaxand

nontaxpay-

ments

Equals:Dispos-

ableper-

sonalincome

Less: Personal outlays

Total

Per-sonalcon-

sump-tion

expend-itures

Interestpaid by

con-sumers

Per-sonal

transferpay-

mentsto for-eigners

Equals:Per-

sonalsaving

Percent of disposablepersonal income

Personaloutlays

Total

Con-sump-

tionexpend-

itures

Per-sonalsaving

1929..

1930..1931..1932..1933..1934..1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944..1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..1955..1956..1957..1958..1959..

I960..1961..1962..1963..1964..1965..1966..1967..1968i

1 9 6 6 : I . . .

III.IV.

1 9 6 7 : I . .I I . .

IV..

1 9 6 8 : I . .I I .

Billions of dollars Percent

85.9

77.065.950.247.054.060.468.674.168.372.8

78.396.0

122.9151.3165.3171.1178.7191.3210.2207.2

227.6255.6272.5288.2290.1310.9333.0351.1361.2383.5

401.0416.8442.6465.5497.5538.9586.8628.8685.8

2.6

2.51.91.51.51.61.92.32.92.92.4

2.63.36.0

17.818.920.918.721.421.118.6

20.729.034.135.632.735.539.842.642.346.2

50.952.457.460.959.465.775.382.596.9

83.3

74.564.048.745.552.458.566.371.265.570.3

75.792.7

116.9133.5146.3150.2160.0169.8189.1188.6

206.9226.6238.3252.6257.4275.3293.2308.5318.8337.3

350.0364.4385.3404.6438.1473.2511.6546.3589.0

79.1

71.161.449.346.552.056.462.767.464.867.7

71.881.789.3

100.1109.1120.7144.8162.5175.8179.2

193.9209.3220.2234.3241.0259.5272.6287.8296.6318.3

333.0343.3363.7384.7411.9444.8478.6506.2548.1

77.2

69.960.548.645.851.355.761.966.563.966.8

70.880.688.599.3

108.3119.7143.4160.7173.6176.8

191.0206.3216.7230.0236.5254.4266.7281.4290.1311.2

325.2335.2355.1375.0401.2432.8465.5492.2533.7

1.5

.9

.7

.5

.5

.5

.5

.6

.7

.7

.7

.8

.9

.7

.5

.5

.5

.81.11.51.9

2.42.73.03.84.04.75.45.85.96.5

7.37.68.19.1

10.111.312.513.113.7

0.3

.3

.3

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.1

.2

.4

.5

.7

.7

.7

.5

.5

.4

.4

.5

.5

.5

.8

.6

.6

.6

.5

.5

.5

.6

.6

.7

.6

.8

.7


570.4580.3592.1604.5

614.8621.6633.7645.2

662.7678.1694.3708.2

70.474.776.879.2

80.580.183.685.6

88.391.9

101.6105.7

500.0505.5515.4525.4

534.2541.5550.0559.6

574.4586.3592.7602.5

470.5474.2482.5487.3

494.6504.5509.5516.1

533.5542.3555.6561.1

457.8461.1469.3473.7

480.9490.3495.5502.2

519.4527.9541.1546.3

12.112.412.612.9

13.013.113.213.3

13.413.613.814.0

0.6.7.6.6

.71.2.8.7

7

'.8.7• 7

4.2

3.42.6

- . 6- . 9

.42.13.63.8

.72.6

3.811.027.633.437.329.615.27.3

13.49.4

13.117.318.118,316.415.820.620.722.319.1

17.021.221.619.926.228.432.940.240.8

29.531.432.938.1

39.737.040.543.4

40.844.037.141.4

95.0

95.95.

101.102.99.96.94.94.98.96.

4930336793

94.988.276.475.074. 580.390.95.92.95.

5790

93.792.92.92.93.94.93.93.93.94.

448630304

95.194. 294.495.94.94.93.92.93

94939392

9293

100661

1867

62

92.692.2

929293

957

92.7

93.894.499.8

100.698.095.293.393.497.695.0

93.686.975.774.474.079.789.694.691.893.8

92.391.090.991.191.992.491.091.291.092.3

92.992.092.292.791.691.591.090.190.6

91.691.291.190.2

90.090.590.189.7

90.490.091.3

93.1 90.7

5.0

4.64.1

- 1 . 3- 2 . 0

3̂ 75.45.31.13.7

5.111.823.625.025.519.79.54.37.15.0

6.37.67.67.26.45.77.06.77.05.6

4.95.85.64.96.06.06.47.46.9

5.96.26.47.3

7.46.87.47.8

7.17.56.36.9


244


TABLE B-16.— Total and per capita disposable personal income and personal consumptionexpenditures, in current and 1958 prices, 1929-68

Year or quarter

Disposable personal income

Total (billionsof dollars)

Currentprices

1958prices

Per capita(dollars)

Currentprices

1958prices

Personal consumption expenditures

Total (billionsof dollars)

Currentprices

1958prices

Per capita(dollars)

Current 1958prices prices

Popu-lation(thou-

sands) *

1929.

1930.1931.1932.1933.1934.1935.1936.1937.1938.1939.

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

196019611962196319641965196619671968

1966: I.

III.IV.

1967: I...II-IllIV.

1968: I...

IV p.

83.3

74.564.048.745.552.458.566.371.265.570.3

75.792.7116.9133.5146.3150.2160.0169.8189.1188.6

206.9226.6238.3252.6257.4275.3293.2308.5318.8337.3

350.0364.4385.3404.6438.1473.2511.6546.3589.0

150.6

139.0133.7115.1112.2120.4131.8148.4153.1143.6155.9

166.3190.3213.4222.8231.6229.7227.0218.0229.8230.8

249.6255.7263.3275.4278.3296.7309.3315.8318.8333.0

340.2350.7367.3381.3407.9435.0459.2478.0497.4

683

605516390362414459518552504537

573695867976

1,0571,0741,1321,1781,2901,264

1,3641,4691,5181,5831,5851,6661,7431,8011,̂ 311,905

1,9371,9832,0642,1362,2802,4322,5982,7442,928

1,236

1,1281,077

921893952

1,0351,1581,1871,1051,190

1,2591,4271,5821,6291,6731,6421,6061,5131,5671,547

1,6461,6571,6781,7261,7141,7951,8391,8441,8311,881

1,8831,9091,9682,0132,1232,2352,3322,4012,473

77.2

69.960.548.645.851.355.761.966.563.966.8

70.880.688.599.3

108.3119.7143.4160.7173.6176.8

191.0206.3216.7230.0236.5254.4266.7281.4290.1311.2

325.2335.2355.1375.0401.2432.8465.5492.2533.7

139.6

130.4126.1114.8112.8118.1125.5138.4143.1140.2148.2

155.7165.4161.4165.8171.4183.0203.5206.3210.8216.5

230.5232.8239.4250.8255.7274.2281.4288.2290.1307.3

316.1322.5338.4353.3373.7397.7417.8430.5450.7


634

567487389364406437483516492510

536604656726782855

1,0141,1151,1841,185

1,2591,3371,3811,4411,4561,5391,5851,6431,6661,758

1,8001,8241,9021,9802,0882,2242,3642,4722,653

500.0505.5515.4525.4

534.2541.5550.0559.6

574.4586.3592.7602.5

454.1454.6461.4466.6

471.9476.3479.5483.7

491.8497.1499.2501.6

2,5502,5712,6132,656

2,6932,7232,7582,798

2,8662,9182,9422,982

2,3162,3122,3402,359

2,3792,3952,4042,418

2,4542,4742,4782,483

457.8461.1469.3473.7

480.9490.3495.5502.2

519.4527.9541.1546.3

415.7414.8420.0420.6

424.8431.2431.8434.1

444.9447.5455.7454.8

2,3352,3452,3802,394

2,4242,4662,4852,511

2,5912,6282,6862,704

1,145

1,0591,016

919897934985

1,0801,1101,0791,131

1,1781,2401,1971,2131,2381,3081,4391,4311,4381,451

1,5201,5091,5251,5721,5751,6591,6731,6831,6661,735

1,7491,7551,8131,8651,9452,0442,1222,1622,240

2,1202,1102,1302,126

2,1422,1682,1652,170

2,2202,2272,2622,251

121,875

123,188124,149124,949125,690126,485127,362128,181128,961129,969131,028

132,122133,402134,860136,739138,397139,928141,389144,126146,631149,188

151,684154,287156,954159,565162,391165,275168,221171,274174,141177,073

180,684183,756186,656189,417192.120194,592196,920199.118201,166

196,096196,629197,216197,834

198,356198,852199,425200,006

200,433200,911201,462202,025

1 Population of the United States including Armed Forces overseas. Annual data are for July 1; quarterly data are formiddle of period, interpolated from monthly data.

Sources: Department of Commerce (Office of Business Economics and Bureau of the Census) and Council of EconomicAdvisers.

245


TABLE B-17.—Sources of personal income, 1929-68


Year or quarter

1929..

1930..1931..1932..1933..1934..1935..1936..1937..1938..1939..

1940..1941..1942.1943..1944.1945..1946..1947..1948.1949.

1950.1951.1952.1953.1954.1955.1956.1957.1958.1959.

1960.1961.1962.1963.1964.1965.1966.1967.1968 v

1966: IIL.III.IV..

1967: I.

1968: I. .II.

Totalper-

sonalncome

85.9

77.065.950.247.054.060.468.674.168.372.8

78.396.0

122.9151.3165.3171.1178.7191.3210.2207.2

227.6255.6272.5288.2290.1310.9333.035L1361.2383.5

401.0416.8442.6465.5497.5538.9586.8628.8685.8

Wage and salary disbursements *

lotai

50.4

46.239.130.529.033.736.741.946.143.045.9

49.862.182.1

105.6116.9117.5112.0123.0135.3134.6

146.7171.0185.1198.3196.5211.3227.8238.7239.9258.2

270.8278.1296.1311.1333.7358.9394.6423.4463.5

Commodity-piUUUUHIg

industries

Total

21.5

18.514.39.99.8

12.113.515.818.415.317.4

19.727.539.148.950.345.846.054.361.057.7

64.676.181.889.485.492.8

100.2103.899.7

109.1

112.5112.8120.8125.7134.1144.5159.4166.6180.5

Manu-factur-

ing

16.1

13.810.87.77.89.6

10.812.414.611.813.6

15.621.730.940.942.938.236.542.547.244.7

50.359.464.271.267.673.979.582.578.786.9

89.789.896.7

100.6107.2115.6128.0134.1145.4

Distrib-utive

indus-tries

15.6

14.512.59.88.89.9

10.711.813.212.613,3

14.216.318.020.122.724.831.035.237.637.7

39.944.346.949.850.253.457.760.560.864.8

68.169.172.576.081.286.993.9

100.5109.4

Serviceindus-tries

8.4

8.07.15.85.25.75.96.57.16.87.1

7.58.19.09.9

10.912.014.416.117.918.6

19.921.723.325.126.428.931.633.935.938.7

41.544.046.849.954.158.363.670.077.2

Gov-ern-ment

4.9

5.25.35.05.16.16.57.97.58.28.2

8.410.216.026.633.034.920.717.418.920.6

22.428.933,134.134.636.238.340.443.545.6

48.752.256.059.564.369.377.786.396.3

Otherlabor

in-come 1

0.6

.6

.5

.5

.4

.4

.5

.6

.6

.6

.6

.7

.7

.91.11.51.81.92.32.73.0

3.84.85.36.06.37.38.49.59.9

11.3

12.012.713.914.916.618.720.823.326.1

Propruinco

Busi-nessand

profes-sional

9.0

7.65.83.63.34.75.56.77.26.97.4

8.611.114.017.018.219.221.620.322.722.6

24.026.127.127.527.630.331.332.833.235.1

34.235.637.137.940.242.444.846.347.8

Farm 2


570.4580.3592.1604.5

614.8621.6633.7645.2

662.7678.1694.3708.2

381.0390.2399.8407.2

413.3417.6426.3436.4

448.3457.6469.0479.0

154.2158.2161.1163.9

164.7164.1167.1170.5

175.6178.6181.6186.1

123.2127.0129.7132.2

132.5132.3134.6137.1

141.2143.8146.7149.7

91.092.995.096.5

98.199.6

101.4103.1

105.6108.0111.1113.1

61.562.964.765.6

67.569.170.872.4

74.576.278.279.9

74.376.279.181.2

83.184.786.990.4

92.694.898.199.9

20.020.521.121.7

22.322.923.724.2

25.025.726.527.3

44.544.744.745.2

45.746.146.646.8

47.247.848.048.2


246


TABLE B-17.—Sources of personal income, 1929-68—Continued


Year orquarter

1929..

1930..1931..1932..1933..1934..1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944..1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..1955..1956..1957..1958..1959..

I960..1961..1962..1963..1964..1965..1966..1967..1968 p.

1967:

1968:

IILIIIIIV1II111

IV

1

I l lIV x>

Rentalncome

of per-sons

5.4

4.83.82.72.01.71.71.82.12.62.7

2.93.54.55.15.45.66.67.18.08.4

9.410.311.512.713.613.914.314.815.415.6

15.816.016.717.118.019.019.820.321.0

nit#iUIVI-

dends

5.8

5.54.12.52.02.62.84.54.73.23.8

4.04.44.34.44.64.65.66.37.07.2

8.88.68.68.99.3

10.511.311.711.612.6

13.413.815.216.517.819.821.722.924.6

Personalinterestincome

7.2

6.86.76.35.75.85.75.55.65.55.5

5.45.55.35.35.66.36.87.57.98.5

9.29.9

10.611.813.114.215.717.618.920.7

23.425.027.731.434.938.743.146.852.1

Transfer payments

Total

1.5

1.52.72.22.12.22.43.52.42.83.0

3.13.13.13.03.66.2

11.311.711.212.4

15.112.513.014.016.017.318.521.425.726.6

28.532.433.335.336.739.943.951.758.6

Old-age,survivors,disability,and healthinsurancebenefits

*

**

0.1.1.2.2.3.4.5.6.7

1.01.92.23.03.64.95.77.38.5

10.2

11.112.614.315.216.018.120.825.730.3

Stateunem-ploy-

ment in-surancebenefits

*0.4.4

.5

.3

.3

.1

.1

.41.1.8.8

1.7

1.4.8

1.01.02.01.41.41.83.92.5

2.84.02.92.82.62.21.82.12.0

Vet-erans'

benefits

0.6

.61.6.8.5.4.5

1.9.6.5.5

.5

.5

.5

.5

.92.86.76.75.85.1

4.93.93.93.73.94.34.34.44.64.6

4.64.84.85.05.35.65.76.67.2

Other

0.9

.9L.IL.4L.6L.81.9L.61.81.92.0

2.02.22.22.22.42.73.13.74.14.9

7.95.96.06.36.56.87.27.98.79.4

10.010.911.212.212.914.015.617.319.1

Less:Personalcontri-butions

for socialinsur-ance

0.1

.1

.2

.2

.2

.2

.2

.2

.6

.6

.6

.7

.81.21.82.22.32.02.12.22.2

2.93.43.84.04.65.25.86.76.97.9

9.39.6

10.311.812.513.417.820.422.9


Non-agricul-

turalpersonalincome3

19.519.719.920.0

20.120.220.420.5

20.720.921.021.2

21.621.921.921.6

22.523.223.522.5

23.624.425.225.4

41.342.443.445.1

45.646.147.248.5

49.851.452.954.3

42.442.044.047.3

50.551.452.152.9

55.758.359.560.8

19.419.621.023.2

24.525.826.026.4

28.230.530.931.6

2.01.61.81.8

2.12.12.22.0

2.21.92.12.0

5.95.45.36.3

6.56.66.56.8

7.07.17.27.4

15.215.415.816.0

17.516.917.317.7

18.418.819.319.8

16.917.318.318.6

19.720.320.620.9

22.322.823.223.4

77.6

70.860.846.743.249.853.963.066.762.666.9

72.387.8

111.0137.3151.2156.4161.0173.0189.4191.3

210.9236.4254.1271.9274.7296.4318.5336.6344.3368.5

385.2400.0425.5448.1480.9519.5566.1609.3665.4

548.8559.4571.8584.5

595.3602.3614.0625.7

642.7658.0673.5687.2

1 The total of wage and salary disbursements and other labor income differs from compensation of employees inTable B-12 in that it excludes employer contributions for social insurance and the excess of wage accruals overwage disbursements.

2 Includes change in inventories.3 Nonagricultural income is personal income exclusive of net income of unincorporated farm enterprises, farm wages,

agricultural net interest, and net dividends paid by agricultural corporations.Source: Department of Commerce, Office of Business Economics.

247


TABLE B-18.—Sources and uses of gross saving, 1929-68


Year or quarter

1929

1930193119321933193419351936193719381939

194019411942194319441945194619471948 . . . .1949

1950195119521953195419551956195719581959

I96019611962196319641965196619671968*

1966: 1.IIIllIV

1967: 1IIIIIIV

1968: 1 . . .IIIllIVP

Gross

Total

16.3

11.85.1.8.9

3.26.67.2

11.97.08.8

13.618.610.75.52.55.2

35.142.049.935.9

50.456.149.547.548.564.872.771.259.273.8

77.575.585.090.5

101.0115.3126.3119.5132.0

121.4127.1126.0130.7

118.0113.0120.1126.8

123.4130.1132.9

private saving and government surplus ornational income and product accounts

Private saving

Total

15.3

12.18.02.52.35.68.6

10.311.58.7

11.0

14.322.442.049.754.344.729.727.541.439.0

42.550.353 354.455.662.167.870.571.775.9

73.979.887.988.7

102.4113.1124.6133.3138.4

118.4121.8124.8133.3

130.9128.9134.1139.4

133.6141.4137.0

Per-sonal

saving

4.2

3.42.6

- . 6- . 9

.42.13.63.8

.72.6

3.811.027.633.437.329.615.27.3

13.49.4

13.117.318.118.316.415.820.620.722.319.1

17.021.221.619.926.228.432.940.240.8

29.531.432.938.1

39.737.040.543.4

40.844.037.141.4

Grossbusi-ness

saving

11.2

8.65.33.23.25.26.46.77.78.08.4

10.511.414.516.317.115 114.520.228.029.7

29.433.135 136.139.246.347.349.849.456.8

56.858.766.368.876.284.791.693.197.5

deficit,

Government surplusor deficit ( - )

Total

1.0

—.3- 2 . 9- 1 . 8- 1 . 4- 2 . 4- 2 . 0- 3 . 1

.3- 1 . 8- 2 . 2

- . 7- 3 . 8

- 3 1 . 4- 4 4 . 1- 5 1 . 8- 3 9 . 5

5.414.48.5

- 3 . 2

7.85.8

- 3 . 8- 6 . 9- 7 . 0

2.74.9.7

- 1 2 . 5- 2 . 1

3.7- 4 . 3- 2 . 9

1.8- 1 . 4

2.21.7

- 1 3 . 8- 6 . 4

Fed-eral

1.2

.3- 2 . 1- 1 . 5- 1 . 3- 2 . 9- 2 . 6- 3 . 6- . 4

- 2 . 1- 2 . 2

- 1 . 3- 5 . 1

- 3 3 . 1- 4 6 . 6- 5 4 . 5- 4 2 . 1

3.513.48.4

- 2 . 4

9.16.2

- 3 . 8- 7 . 0- 5 . 9

4.05.72.1

- 1 0 . 2- 1 . 2

3.5- 3 . 8- 3 . 8

.7- 3 . 0

1.2.7

- 1 2 . 4- 5 . 3

Stateandlocal

- 0 . 2

- . 6- . 8— 3- . 1

.5

.6

.5

.7

.4(2)

.61.31.82.52.72.61.91.0.1

- . 7

- 1 . 2- . 4(3 )

1- 1 . 1- 1 . 3- . 9

- 1 . 4- 2 . 3- . 8

.2- . 5

.91.21.71.01.1

- 1 . 4- 1 . 1

Gross investment

Total

17.0

11 05 81.11.63.86 48.4

11.87.6

10.2

14.619.09.63.55.09.1

35.242.947.936.2

51.859.551.650.551.366.971.671.260.773.0

76.574.785.590.399.7

112.2123.0116.0127.2


88.990.491.995.3

91.391.993.595.9

92.897.499.9

3.05.31.2

- 2 . 6

- 1 2 . 9- 1 5 . 9- 1 4 . 0- 1 2 . 5

- 1 0 . 3- 1 1 . 3- 4 . 1

2.03.7

- . 3- 2 . 8

- 1 1 . 2- 1 3 . 3- 1 2 . 9- 1 2 . 2

- 8 . 6- 1 0 . 2- 2 . 8

1.01.61.5.2

- 1 . 7- 2 . 6- 1 . 1- . 4

- 1 . 7- 1 . 1- 1 . 3

119.4123.3121.6127.6

115.2109.3116.7122.6

118.7126.5127.5136.3

Grossprivatedomes-tic in-vest-ment

16.2

10 35 61.01.43.36 48.5

11.86.59.3

13.117.99.85.77.1

10.630.634.046.035.7

54.159.351.952.651.767.470.067.860.975.3

74.871.783.087.194.0

108.1120.8114.3127.5

116.8121.0119.9125.7

113.0107.6114.7121.8

119.7127.3127.1136.1

Netforeigninvest-ment 1

0 8

7.2.2

'A—.1- . 1

.11.1.9

1.51.1

2-2 .2-2 .1-1 .4

4.68.91.9.5

-2 .2.2

- . 3-2 .1

- . 51.53.4

- . 2- 2 . 3

1.73.02.53.15.74.12.21.7

- . 3

2.72.31.71.9

2.31.62.1.8

-1 .1- . 8

.5

.2

Statis-ticaldis-

crep-ancy

0 7

— 873

.6

.5_ 21.2

.61.3

1.0.4

-1 .1-2 .0

2.53 9.1.9

-2 .0.3

1.53.32.23.02.72.1

-1 .1*

1.6- . 8

- 1 . 0- . 8

.5- . 3

-1.3-3 .1-3.3-3 .5- 4 . 7

- 1 . 9- 3 . 9- 4 . 4- 3 . 1

- 2 . 8- 3 . 8- 3 . 4- 4 . 2

-4 .7-3 .6- 5 . 3

* Net exports of goods and services less net transfers to foreigners.2 Surplus of $32 million.3 Deficit of $41 million.


248


TABLE B-19.—Saving by individuals, 7946-68 l


Year orquarter

1946194719481949

1950195119521953195419551956195719581959

19601961196219631964196519661967

1966' 1

III..IV..

1967: 1.. .I I . . .III. .IV..

1968: 1.. .I I . . .III..

Tota

24.20.23.18

?fi?924.

4

n37

888

28.224.630.1323129.?8

23.28.333441474854

142

1119

1798

90869469

6877

15.05.7

13.520.8

148

13

91

.6

Total 2

17.512.68.69.3

12.917.220 520.619.425.026 727.029.731.4

24.631.938.043.251.155.051.663.5

12.010.313.316.1

13.011.117.422.0

12.016.418.5

Increase in financial assets

Cur-rencyandde-

mandde-

posits

4.8- 1 . 1- 1 . 1- 1 . 5

1.84.41.7.4

1.8.8

1.2- . 53.3

.2

- 1 . 6.9

2.84.16.67.21.9

12.5

- 2 4- 1 . 5

1.14.7

1.91.72.76.2

- 4 . 13.64.7

Sav-ingsac-

ounts

6.33.42.32.6

2.54.57.78.39.28.89.5

12.114.011.4

12.417.423 423.023.926.519.232.4

5 75.03.45.1

9.09.97.85.6

8.15.06.2

Securitie

Gov-ern-ment

bonds*

- 1 . 52.21.1.

2

422

- 16

1

445

10

3132

- 1- 3

4

112

26

16806?7077

268?10?8

7105

7870

976

Corpo-rateandfor-eign

bonds

- 0 . 9- . 8- . 2- . 5

- . 9- . 2

- . 2- . 4

.9

.7

.8

.9**

- . 4- . 7

- 1 . 0- . 8- . 31.21.6

.7

.41.0

- . 9

c-.*31.9.4

.11.2.8

>

Corpo-rate

stock s

1.11.

11

r2.1.1

- 1- 2

- 1

- 4

- 1

- 2

1- 1- 1

1107

765971

n857

348617

1

4425

6

o87111

nsur-anceandpen-sionre-

serves

5.45.55.45.6

6.96.37.47.57.58.19.49.3

10.211.2

11.312.012.514.115.516.517.919.0

4.34.54.34.6

4.45.24.75.0

4.85.54.5

Net investment in

Non-farm

homes

4.7

11.10.

151313.

8921

?94

14.014.818.416.14.14.

7

118.2

15.1415.16.

7283

16.215.814.112

3343

5

4

03

2.12.33.84.3

344

806

Con-sumer

du-rables

5.87.57.17.0

10.25.53.66.44.99.95 94.9.6

5.5

5.12.96 78.9

11.214.814.912.1

2 63.82.66.0

.83.72.25.4

1.64.74.1

Othertan-gible

assets7

2.72 26.1

4411.1.?11

1

12131

1

1

74

9?9167

784

868101

8

9

54

2713

104

Less

Mort-gagedebton

non-farm

homes

4.14 74.94 2

7.56.87.07.69.0

12.311 08 89 5

13.0

10.911.312 915 015.816.111 410.9

3 33 22.62.5

1.91.93.33.8

3.73.64.2

Increase indebt

Con-sumercredit

2.73 22.82 9

4 11.24.83.91.16 43 52 6

26 4

4.51.75 57 38.09.46 94.4

- 83 01.63.1

- 2 . 32.31.13.3

- 1 . 43.63.3

Otherdebts

- 0 . 42 32.52 1

4.93.02.92.46.07.24 35 06 88.5

7.08.6

10 113 813.715.715 018.6

1 89 93.4

- . 4

1.68.05.63.5

.310.85.7

1 Individuals' saving, in addition to personal holdings, covers saving of unincorporated business, trust funds, andnonprofit institutions in the forms specified.

2 Includes miscellaneous financial assets, not shown separately.3 Includes shares in savings and loan associations and credit unions and time deposits at banks.4 U.S. Government and State and local obligations.s Includes investment company shares.6 Private insurance reserves, private insured and noninsured pension reserves, and government insurance and pension

reserves.7 Noncorporate business investments.s Security credit, policy loans, and noncorporate business debt.

Note.—In addition to the concept of saving shown above, there are other concepts of individuals' saving, with varyingdegrees of coverage, currently in use. The personal saving estimates of the Department of Commerce are dehved as thedifference between personal i ncome (after taxes) and personal outlays. For a reconciliation of the two series, see Securitiesand Exchange Commission "Statistical Bulletin," August 1968, and "Survey of Current Business," July 1968.

These estimates are compatible with the flow-of-funds system of accounts of the Board of Governors of the FederalReserve System. A reconciliation of these estimates with the flow-of-funds accounts will be available in the near future.

Source: Securities and Exchange Commission.

249


TABLE B-20.—Number and money income {in 1967 prices) of families and unrelated individuals,by color of head, 1947-67

Year

Families:»194719481949

1950195119521953195419551956 .195719581959 .

19601961 . .1962196319641965 .1966

19662

1967 2

Unrelated individuals:3

194719481949

19501951195219531954195519561957...19581959

196019611962196319641965. _1966

1967 2

Totalnum-ber

(mil-lions)

37.238.639.3

39.940.640.841.242.042.943.543.744.245.1

45.546.347.047.447.848.348.9

49.149.8

Total

Medianincome

$4,5314,4184,348

4,6114,7674,8935,3145,1885,5315,8825,8895,8716,210

6,3506,4186,5876,8227,0737,3577,651

7,7167,974

With incomesunder $3,000

Num-ber

(mil-lions)

10.211.011.8

11.110.410.09.5

10.39.48.78.99.08.6

8.68.78.37.97.57.16.7

6.66.2

Per-cent

27.428.529.9

27.825.724.523.024.522.020.020.420.419.1

18.918.717.716.715.714.813.7

13.412.5

Total

Totalnum-ber

(mil-lions)

8.28.49 0

9 49 19.79 59 79 99.8

10.410.910 9

11 111.211.011.212.112.112.4

13.1

Medianincome

$1,4671,4231,482

1.472I 535U 787

756,519

1,6551,7661,818,777

I 821

I 9541,9631.946l! 9692,1442,2892,340

2,391


Num-ber

(mil-lions)

4.24.44.5

4.84 54.34 44.84.74.44.64.94.8

4 74.64.54.54.74.34.4

4.5

Per-cent

50.852.350.5

50.849 644.846 249.647.145.244.245.044.0

42.341.440.640.138.835.735.3

34.6

Totalnum-ber

(mil-lions)

34.135.3

38.239.039.539.740.240.9

41.141.942.442.743.143.544.0

44.144.8

White

Medianincome

$4,7204,5974,527

4,7964,9605,1835,5205,4155,7666,1456,1306,1226,473

6,6016,7016,8877,1467,3887,6707,944

8,0188,274


Num-ber

(mil-lions)

8.39.0

8.47.56.87.07.16.7

6.86.86.56.05.85.55.3

5.14.8

Per-cent

24.125.426 9

25.022.621.320.521.819.417.317.617.616.4

16.416.215.314.313.712.811.9

11.610.8

White

Totalnum-ber

(mil-lions)

7.27.3

8 28.58.58.99.29.3

9.69.69.59.7

10.410.510.8

11.3

Medianincome

$1,5461,474J,589

1,5461,6181,9221,8541,6431,7691,8191,9181,8771,924

2,0982,1132,0832,0712,2612,3832,430

2,431


Num-ber

(mil-lions)

3.63.7

3.93.93.73.84.03.9

3.93.73.73.73.93.53.7

3.7

Per-cent

49.350.748.6

49.448 443.045 147.645.244.342.343.342.1

40.139.133.438.237.134.234.0

33.2

Nonwhite

Totalnum-ber

(mil-lions)

3.13.3

3.83.94.04.04.04.2

4.34.54.64.84.84.84.9

5.05.0

Medianincome

$2,4182,4532 315

2,5912,61b2,9413,0933,0033,1853,2413,2783,1343,336

3,6443, 5633,6803,7974,1334,2564,749

4,7785,141


Num-ber

(mil-lions)

1.92.0

1.91.91.91.91.91.9

1.81.91.81.91.71.61.4

1.51.4

Per-cent

62.460.563 1

57.757.051.148.550.147.546.546.748 345.6

42.042.840.039.234.433.029.2

29.227.1

Nonwhite

Totalnum-ber

(mil-lions)

1.01.1

1 51.41.31.51.61.6

1.51.61.51.51.61.71.6

1.8

Medianincome

$1,1191,1071,165

1,1471,2561,335J.460,133

l|4141,307

?93,?97

,?7fi1,316

391,416

1̂ 7691,781

1,834


Num-ber

(mil-lions)

0.6.7

.9

.8

.7

.8

.9

.9

.8

.9

.8

.8

.8

.8

.7

.8

Per-cent

61.663.261.3

60.155 955.351.260.858.752.255 956. 755.6

56.655 653.752.548.744.844.9

43.7

!The term "family" refers to a group of two or more persons related by blood, marriage, or adoption and residingtogether; all such persons are considered members of the same family.

2 Based on revised methodology.3 The term "unrelated individuals" refers to persons 14 years of age and over (other than inmates of institutions) who

are not living with any relatives.

Source: Department of Commerce, Bureau of the Census.

25O


POPULATION, EMPLOYMENT, WAGES, ANDPRODUCTIVITY

TABLE B-21.—Population by age groups: Estimates, 1929-68, and projections, 1970-85[Thousands of persons]

July 1 Total

Age (years)

Under 5 5-13 14-19 20-24 25-44 45-64 65 andover

Estimates:1929..

1930..1931..1932..1933..1934..

1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944..

1945..1946..1947..1948..1949..

1950..1951..1952.1953.1954.

1955.1956.1957.1958.1959.

1960.1961.1962.1963.1964.

1965.1966.1967.1968.

Projections:»1970: Series C.

Series D.

1975: Series C.Series D.

1980: Series C.Series D_

1985: Series C.Series D.

121,767

123,077124,040124,840125,579126,374

127,250128,053128,825129,825130,880

132,122133,402134,860136,739138,397

139,928141,389144,126146,631149,188

152,271154,878157,553160,184163,026

165,931168,903171,984174,882177,830

180,684183,756186,656189,417192,120

194,592196,920199,118201,166

206,039204,923

219,366215,367

235,212227,665

252,871241,731

11,734

11,37211,17910,90310,61210,331

10,17010,04410,00910,17610,418

10,57910,85011,30112,01612,524

12,97913,24414,40614,91915,607

16,41017,33317,31217,63818,057

18,56619,00319,49419,88720,175

20,36420,65720,74620,75020,670

20,40419,81119,19118,521

18,74017,625

21,21118,323

24,29820,736

26,64523,030

22,131

22,26622,26322,23822,12921,964

21,73021,43421,08220,66820,253

19,93619,67419,42719,31919,246

19,32619,62520,11820,99021,634

22,42322,99824,50125,70126,886

27,92528,92929,67330,65131,767

32,98533,29633,94334,60635,301

35,88936,54436,96537,239

} 37,224

35,31934,209

36,68032,695

41,87535,933

13,796

13,93713,98014,01514,07014,163

14,29614,44214,55814,68014,748

14,77014,68214,53414,38114.264

13,94213,59713,44713,17113,006

12,83912,72712,80712,98613,230

13,50113,98114,79515,33715,816

16,21717,56518,48419,07519,812

20,63721,58221,69722,106

} 23,136

}24,

132

10,694

10,91511,00311,07711,15211,238

11,31711,37511,41111,45311,519

11,69011,80711,95512,06412,062

12,03612,00411,81411,79411,700

11,68011,55211,35011,06210,832

10,71410,61610,60310,75610,969

11,11611,40811,88912,62013,154

13,67914,06315,19715,788

621

23,282 ;21,699 I

35,862

36,30936,65436,98837,31937,662

37,98738,28838,58938,95439,354

39,86840,38340,86141,42042,016

42,52143,02743,65744,28844,916

45,67246,10346,49546,78647,001

47,19447,37947,44047,33747,192

47,13447,06146,96846,93246,881

46,80746,85547,07747,614

21,076

21,57322,03122,47322,93323,435

23,94724,44424,91725,38725,823

26,24926,71827,19627,67128,138

28,63029,06429,49829,93130,405

30,84931,36231,88432,39432,942

33,50634,05734,59135,10935,663

36,20836,75637,31637,86938,438

39,01539,60140,19440,768

} 17,261 } 48,276 j} 41,817

} 19,299

}20,997

1 nfiR1'068

| !

| 53,881 } 43,364

} 62,374 || 43,180| 72,083 I) 42,940 }

6,474

6,7056,9287,1477,3637,582

7,8048,0278,2588,5088,764

9,0319,2889,5849,86710,147

10,49410,82811,18511,53811,921

12,39712,80313,20313,61714,076

14,52514,93815,38815,80616,248

16,65917,01317,31117,56517,863

18,16218,46418,79819,129

19,585

21,159

23,063

24,978

i Two of four series projected by the cohort method and based on different assumptions with regard to completedfertility, which moves gradually toward a level of 2,775 children per 1,000 women for Series C and 2,450 children per1,000 women for Series D. For further explanation of method of projection and for additional data, see "Population Esti-mates, Current Population Reports, Series P-25, No. 381," December 1967.

Note.—Data for Armed Forces overseas included beginning 1940


251


TABLE B-22.—Noninstitutional population and the labor force, 1929-68

Year or month

1929

19301931193219331934

19351936_193719381939

1940.1941194219431944

194519461947

194719481949

19501951195219531954.

19551956 .19571958 . .1959

19601961196219631964

1965196619671968

Nonin-stitu-tionalpopu-lation

Totallaborforce

(includ-ing

armedforces)

Armedforces

Civilian labor force

Total

Employment

TotalAgri-cul-tural

Non-agri-cul-tural

Unem-ploy-ment

Thousands of persons 14 years of age and over

100,380101,520102,610103,660104,630

105,530106,520107,608

49,440

50,08050,68051,25051,84052,490

53,14053,74054,32054,95055,600

56,18057,53060,38064,56066,040

65,30060,97061,758

260

260260250250260

270300320340370

5401,6203,9709,020

11,410

11,4403,4501,590

49,180

49,82050,42051,00051,59052,230

52,87053,44054,00054,61055,230

55,64055,91056,41055,54054,630

53,86057,52060,168

47,630

45,48042,40038,94038,76040,890

42,26044,41046,30044,22045,750

47,52050,35053,75054,47053,960

52,82055,25057,812

10,450

10,34010,29010,17010,0909,900

10,11010,0009,8209,6909,610

9,5409,1009,2509,0808,950

8,5808,3208,256

37,180

35,14032,11028,77028,67030,990

32,15034,41036,48034,53036,140

37,98041,25044,50045,39045,010

44,24046,93049,557

1,550

4,3408,020

12,06012,83011,340

10,6109,0307,700

10,3909,480

8,1205,5602,6601,070

670

1,0402,2702,356


103,418104,527105,611

106,645107,721108,823110,601111,671

112,732113,811115,065116,363117,881

119,759121,343122,981125,154127,224

129,236131,180133,319135,562

60,94162,08062,903

63,85865,11765,73066,56066,993

68,07269,40969,72970,27570,921

72,14273,03173,44274,57175,830

77,17878,89380,79382,272

1,5911,4591,617

1,6503,1003,5923,5453,350

3,0492,8572,8002,6362,552

2,5142,5722,8282,7382,739

2,7233,1233,4463,535

59,35060,62161,286

62,20862,01762,13863,01563,643

65,02366,55266,92967,63968,369

69,62870,45970,61471,83373,091

74,45575,77077,34778,737

57,03958,34457,649

58,92059,96260,25461,18160,110

62,17163,80264,07163,03664,630

65,77865,74666,70267,76269,305

71,08872,89574,37275,920

7,8917,6297,656

7,1606,7266,5016,2616,206

6,4496,2835,9475,5865,565

5,4585,2004,9444,6874,523

4,3613,9793,8443,817

49,14850,71349,990

51,76053,23953,75354,92253,903

55,72457,51758,12357,45059,065

60,31860,54661,75963,07664,782

66,72668,91570,52772,103

2,3112,2763,637

3,2882,0551,8831,8343,532

2,8522,7502,8594,6023,740

3,8524,7143,9114,0703,786

3,3662,8752,9752,817

Totallabor

force aspercentof non-institu-tionalpopu-lation

Unem-ploy-ment

as per-cent ofcivilianlaborforce

Percent

56.056.758.862.363.1

61.957.257.4

3.2

8.715.923.624.921.7

20.116.914.319.017.2

14.69.94.71.91.2

1.93.93.9

Percent

58.959.459.6

59.960.460.460.260.0

60.461.060.660.460.2

60.260.259.759.659.6

59.760.160.660.7

3.93.85.9

5.33.33.02.95.5

4.44.14.36.85.5

5.56.75.55.75.2

4.53.83.83.6


252


TABLE B-22.—Noninstitutional population and the labor force, 1929-68—Continued

Year or month

1967: Jan.Feb.Mar.Apr.May.June

July.Aug.Sept.Oct..Nov.Dec.

1968:Jan..Feb..Mar.Apr..May.June.

July.Aug.Sept.Oct__Nov.Dec.

1967:Jan...Feb_..Mar . .Apr...May..June..

July..Aug..Sept..Oct..Nov..D e c .

1968:Jan...Feb-Mar_.Apr...May..June..

July..Aug. .Sept..Oct...Nov..D e c .

Nonin-stitu-tionalpopu-lation

Totallaborforce

(includ-ing

armedforces)

Armedforces

Civilian labor force

Total

Employment

TotalAgri-cul-tural

Non-agri-cul-tural

Unem-ploy-ment


132,295132,448132,627132,795132,969133,168

133,366133,645133,847134,045134,224134,405

134,576134,744134.904135,059135,249135,440

135,639135,839136,036136,221136,420136,619

78,70679,10778,94979,56079,55182,464

82,92082,57180,98281,59581,58281,527

79,81180,86980,93881,14181,77084,454

84,55083,79282,13782,47782,70282,618

3,3863,4183,4363,4493,4563,444

3.4493,4593,4563,4633,4693,470

3,4643,4673,4913,5073,5363,567

3,5863,5893,5913,6033,5173,500

75,32075,68975,51376,11176,09579,020

79,47179,11277,52678,13278,11378,057

76,34777,40277,44777,63478,23480,887

80,96480,20378,54678,87479,18579,118

72,16072,50672,56073,44573,63775,391

76,22176,17074,63175,18175,21875,338

73,27374,11474,51775,14375,93177,273

77,74677,43275,93976,36476,60976,700

3,3353,2813,4103,7213,8254,395

4,5164,3783,9314,0333,7593,545

3,3663,4623,5373,8513,9964,516

4,4764,1073,8363.7673,6073,279

68,82669,22569,14969,72469,81270,996

71,70571,79270,70071,14871,46071,793

69,90870,65370,98071,29271,93572,757

73,27073,32572,10372,59673,00173,421

3,1603,1832,9542,6662,4573,628

3,2502,9422,8952,9512,8942,719

3,0743,2882,9292,4912,3033,614

3,2172,7722,6062,5112,5772,419

Totallabor

force aspercentof non-institu-tionalpopu-lation

Unem-ploy-ment

as per-cent ofcivilian

laborforce

Percent

Seasonally adjusted

80,31980,33980,11280,26379,95880,658

80,94481,05781,26381,53581,45981,942

81,38682,13882,15081,84982,14982,585

82,57282,27982,42282,40782,54982,956

76,93376,92176,67676,81476,50277,214

77,49577,59877,80778,07277,98978,473

77,92378,67278,65878,34378,61379,018

78,98578,69078,83178,80479,03279,456

74,09474,06373,82273,93973,55074,169

74,47874,66474,63874,73575,00575,577

75,16775,73175,80275,63675,82976,048

76,03875,92975,95775,95276,38976,867

3,9903,8763.8583,8433,7283,739

3,8473,9563,6973,7183,8394,216

4,0034,1274,0143,9803,8933,851

3,8363,7333,6023,4813,6763,874

70,10470,18769,96470,09669,82270,430

70,63170,70870,94171,01771,16671,361

71,16471,60471,78871,65671,93672,197

72,20272,19672,35572,47172,71372,993

2,8392,8582,8542,8752,9523,045

3,0172,9343,1693,3372,9842,896

2,7562,9412,8562,7072,7842,970

2,9472,7612,8742,8522,6432,589

59.559.759.559.959.861.9

62.261.860.560.960.860.7

59.360.060.060.160.562.4

62.361.760.460.560.660.5

4.24.23.93.53.24.6

4.13.73.73.83.73.5

4.04.23.83.22.94.5

4.03.53.33.23.33.1

3.73.73.73.73.93.9

3.93.84.14.33.83.7

3.53.73.63.53.53.8

3.73.53.63.63.33.3

Note.—Labor force data in Tables B-22 through B-25 are based on household interviews and relate to calendar weekincluding the 12th of the month. For definitions of terms, area samples used, historical comparability of the data, com-parability with other series, etc., see "Employment and Earnings and Monthly Report on the Labor Force."

Source: Department of Labor, Bureau of Labor Statistics.

253323-166 O—69 17


TABLE B—23.—Civilian employment and unemployment, by sex and age, 1947—68

[Thousands of persons 16 years of age and over]

Year ormonth

Employment

Total

Males

Total 16-19years

20yearsandover

Females

Total 16-19years

20yearsandover

Unemployment

Total

Males

Total 16-19years

20yearsandover

Females

Total 16-19years

20yearsandover

194719481949

19501951195219531954.

19551956.1957.1958.1959.

1960.1961.1962.1963.1964.

1965.1966.1967.1968.

1967: JanFeb. . . .Mar. . . .Apr. . . .May....June...

July....AugSept....OctNov... .D e c . . .

1968: JanF e b . . . .Mar.. . .Apr.Vlay.June

57,039 40,99458,344 4157,649 40,

1,7260,926

2,218 38,7762,345 39,3822,124 38,803

16,04516,61816,723

1,691 14,3541,683 14,9371,588 15,137

58,920 4159,962 4160,254 4161,18160,'"1,110 41

,580,780,684

42,431"",620

2,186 39,394 172,156 39,6262,106 39,578 18i2,135 40,2961,985 39,634

,34018,18218,57018,75018,490

1,5171,611

15,82416,570

1,612 16,9581,584 17,1641,490 17,000

:, 802 43,62,17163,80264,07163,036 4264,630 43;

42,62143,38043,357"!, 423

1,466

2,095 40,526 12,164 41,216 20;-2,117 41,239 20,,2,012 40,411

19,550"0,422

1,714. 20,613

2,198 41,267 21,164

1,548 18, 0021,654 18,7671,663 19,0521,570 19,0431,640 19,524

65,778 43,65,746 43,66,702 44,67,762 44,69,305 45,

71,088 46,72,895 46,74,372 47,75,920 48,

1,9041,656

\,mi,657.,474;, 340i, 919,4791,114

2,360 41,543 212,314 41,342 222,362 41,815 222,406 42,2512,587 42,886 23;

,874!,090!, 525

23,105"1,831

2,918 43,422 24,3,252 43,667 25,3,186 44,293 26,3,254 44,859 27,

t, 748i, 9761,893,807

1,769 20,1051,793 20,2961,833 20,6931,849 21,2571,929 21,903

2,118 22,6302,469 23,5072,496 24,3972,525 25,281

2,3112,2763,637

3,2882,0551,8831,8343,532

2,8522,7502,8594,6023,740

3,8524,7143,9114,0703,786

3,3662,8752,9752,817

1,6921,5592,572

2,2391,2211,1851,2022,344

1,8541,7111,8413,0982,420

2,4862,9972,4232,4722,205

1,9141,5511,5081,419

270255352

318191205184310

274269299416398

425479407500487

479432448427

1,4221,3052,219

1,9221,029980

1,0192,035

1,5801,4421,5412,6812,022

2,0602,5182,0161,9711,718

1,4351,1191,060993

619717

1,065

1,049834698632

1,188

9981,0391,0181,5041,320

1,3661,717",488,598,581

,452,324,468,397

Seasonally adjusted

74,094 47,74,063 47;73,822 47,73,939 47,73,550 47,74,169 47,

74,478 47,74,664 47,174,638 47, i74,735 47,

,537',630',603',532

75; 005 47,55347,88575,577

AprMay....

75,16775,7317 5 , " "

75,829 48,76,048 48,

July..Aug..Sept..Oct...Nov..Dec...

,437,417,339,256,147,419

47,79048,056

802 48,05975,636 48,083

,017:, 111

76,038 48,75,929 48,75,95775,952 48',76,389 48,14576,867 48,622

1,160i, 216

48,079,002

3,294 44,143 26,6573,241 , .,3,314 44,025 26,3,204 44,3,158 43,3,245 44,

3,191 44,346 26,9413,209 44,42127,0343,135 44,468 27,0353,072 44,460 27,2033,047 44,506 27,4523,110 44,775 27,692

3,3,3,3,3,275 443,253 44;

44,176 26,646' 025 26,483

052 26,683989 26,403174 26,750

050 44,740 27,377214 44,842 27,675276 44,783 27,743325 44,758 27,553

3,239 44,92127,878" 309 44,907 27,713

244 44,835 27,878249 44,753 27,950

28,244309 45; 313 28,245

t, 742 27,812^ 858 27,937

2,590 24,2,594 24,2,

2,503 23i2,582 24,

1,067' 2,839'i,052 2,8581,924 2,8541,061 2,8751,900 2,952•,168 3,045

2,505 24,4362,457 24,5772,395 24,6402,392 24,8112,416 25,0362,419 25,273

2,575 24,8022,639 25,0362,615 25,1282,584 24,9692,580 25,2322,622 25,315

2,514 25,3642,528 25,1852,475 25,4032,448 25,5022,447 25,7972,378 25,867

3,0172,9343,1693,33712,9842,896

2,7562,9412,8562,7072,7842,970

2,9472,7612,8742,8522,6432,589

1,4341,4511,452;1,4941,5431,600

1,5211,5141,4691,6711,5701,431

1,4331,5051,4461,3441,3551,545

1,4521,3771,4001,4871,3611,256

4091 1,025446 1,005407 1,0454371 1,057443 1,100465 1,135

437446431533498423

403438437386384480

442388390455426432

1,0841,0681,0381,1381,0721,008

1,0301,0671,009958971

1,065

1,010989

1,0101,032935824

1,4051,4071,4021,3811,4091,445

1,4961,4201,7001,6661,4141,465

1,3231,4361,4101,3631,4291,425

1,4951,3841,4741,3651.2821,333

144152223

195145140123191

176209197262256

286349313383386

395404390412

475564841

854689559510

.997

823832821

1,2421,063

1,0801,3681,1751,2161,195

1,056919

1,078985

328'395381360383383

403425422414382390

315402444414462443

466407431371365386

1,0771,0121,0211,0211,0261,062

1,093995

1,2781,2521,0321,075

1,0081,034966949967982

1,029977

1,043994917947

Note.-See Note, Table B-22.


254


TABLE B-24.—Selected unemployment rates, 1948-68

[Percent]

Year or monthAll

work-ers

By sex and age

Bothsexes,16-19years

Men,20

yearsandover

Wom-en, 20yearsandover

By cclor

White Non-white

By selected groups

Expe-riencedwageand

salaryworkers

Mar-ried

men*

Full-time

work-ers2

Blue-collarwork-ers3

Laborforce

time lost *

1948..1949..

1950..1951.1952.1953.1954.

1955.1956.1957.1958.1959.

1960.1961.1962.1963.1964.

1965.1966.1967.1968-

1967: Jan..Feb.Mar.Apr.May.June.

July.Aug..Sept.Oct..Nov.Dec.

1968: Jan..Feb_Mar.Apr.May.June.


3.85.9

5.33.33.02.95.5

4.44.14.36.85.5

5.56.75.55.75.2

4.53.83.83.6

9.213.4

12.28.28.57.612.6

11.011.111.615.914.6

14.716.814.717.216.2

14.812.712.912.7

3.25.4

4.72.52.42.54.9

3.83.43.66.24.7

4.75.74.64.53.9

3.22.52.32.2

3.65.3

5.14.03.22.95.5

4.44.24.16.15.2

5.16.35.45.45.2

4.53.84.23.8

3.55.6

4.93.12.82.75.0

3.93.63.86.14.8

4.96.04.95.04.6

4.13.33.43.2

5.98.9

9.05.35.44.59.9

8.78.37.912.610.7

10.212.410.910.89.6

8.17.37.46.7

3.76.2

5.63.22.92.66.2

4.84.44.67.25.7

5.76.85.65.55.0

4.33.53.63.4

3.5

4.61.51.41.74.0

2.62.32.85.13.6

3.74.63.63.42.8

2.41.91.81.6

5.4

5.02.62.5

5.2

3.83.74.07.2

4.28.0

7.23.93.63.47.2

5.85.16.210.27.6

6.7

5.54.9

4.33.43.53.1

7.89.27.47.36.3

5.34.24.44.1

Seasonally adjusted

3.73.73.73.73.93.9

3.93.84.14.33.83.7

3.53.73.63.53.53.8

3.73.53.63.63.33.3

11.112.611.812.012.712.7

12.913.313.414.813.912.8

11.312.613.011.912.613.6

13.612.012.612.712.212.6

2.32.22.32.32.42.5

2.42.32.32.52.42.2

2.32.32.22.12.12.3

2.22.22.22.32.01.8

4.34.04.14.14.14.2

4.33.94.94.84.04.1

3.94.03.73.73.73.7

3.93.73.93.83.43.5

3.33.33.23.33.43.5

3.53.43.63.73.43.3

3.23.33.23.13.23.3

3.33.23.23.23.02.9

6.77.27.47.27.77.7

7.36.88.08.87.36.9

6.47.26.96.76.47.2

6.96.26.77.46.56.0

3.53.43.43.43.63.8

3.73.63.94.13.73.5

3.33.53.43.23.13.6

3.63.43.43.43.23.0

1.71.71.81.91.91.9

1.81.91.81.91.71.7

1.61.71.71.51.61.7

1.61.61.61.71.61.4

3.23.23.33.43.53.6

3.63.63.63.83.53.3

3.33.43.23.13.23.3

3.33.33.23.23.02.7

4.24.24.24.64.64.6

4.64.44.64.94.44.3

4.34.34.43.93.74.2

4.34.24.14.13.83.6

5.15.38.16.6

6.78.06.76.45.8

5.04.24.24.0

4.14.14.14.03.84.4

4.24.34.64.74.24.1

4.04.24.03.73.64.3

4.34.04.03.93.73.6

1 Married men living with their wives. Data for 1949 and 1951-54 are for April; 1950, for March.2 Data for 1949-61 are for May.3 Includes craftsmen, operatives, and nonfarm laborers. Data for 1948-57 are based on data for January, April, July,

and October.* Man-hours lost by the unemployed and persons on part time for economic reasons as a percent of potentially available

labor force man-hours.



255


TABLE B-25.— Unemployment by duration, 1947-68

194719481949

195019511952.19531954

19551956195719581959

19601961.1962.19631964

1965.19fifi19671968.

1967:

1968

Year or month

JanFeb. .M a r . . . .AprMay.. .June . . . .

JulyAug . . . .SeptOct . . . . . . . . . . . .NovDec . . . .

JanFeb . . . .MarApr . . . . . . . .MayJune . . . .

JulyAugSept . .OctNovDec. . . . .

Total un-employ-

ment Less than5 weeks

Duration of unemployment

5-14weeks

15-26weeks


2,3112,2763,637

3,2882,0551,8831,8343,532

2,8522,7502,8594,6023,740

3,8524,7143,9114,0703,786

3,3662,8752,9752,817

2,8392,8582,8542,8752,9523,045

3,0172,9343,1693,3372,9842,896

2,7562,9412,8562,7072,7842,970

2,9472,7612,8742,8522,6432,589

1,2101,3001,756

1,4501,1771,1351,1421,605

1,3351,4121,4081,7531,585

1,7191,8061,6591,7511,697

1,6281,5351,6351,594

704669

1,194

1,055574516482

1,116

815805891

1,3961,114

1,1761,3761,1341,2311,117

983804893810

234193428

425166148132 j495

366301321785469

503728534535491

404295 !271 i256 ;

Seasonally adjusted

1,4961,6061,6281,6181,7041,713

1,6621,5721,7831,7891,6091,418

1,3601,7211,6891,5071,6961,753

1,6561,6291,6471,5571,5271,352

794789833871871909

895934937

1,105930968

840776755830718841

860767819915791841

276257256250291291

266234111305307259

302286268241283260

275237235260226171

27 weeksand over

164116256

3571378478

317

336232239667571

454804585553482

351241177156

200190180184142150

170211163170178186

186169180157127163

178161134128128152



256


TABLE B-26.— Unemployment insurance programs, selected data, 1940-68

Year or month

All programs

Cov-eredem-ploy-

ment i

Insuredunem-ploy-ment

(weeklyaver-

age) 23

Totalbenefits

paid(mil-lions

of dol-lars) 2 *

State programs

Insuredunem-ploy-

ments

Initialclaims

Ex-haus-tions s

Insured unem-ployment as per-cent of covered

employment

Unad-justed

Season-ally ad-justed

Benefits paid

Total(mil-

lions ofdol-

lars)*

Aver-age

weeklycheck(dol-lars) e

Thousands Weekly average, thousands Percent

19401941_.19421943194419451946194719481949

195019511952195319541955 .19561957.. .19581959 . . . .

196019611962 . .196319641965196619671968 v

1967: JanFebMarAprMayJune

JulyAugSept . .OctNovDec

1968: JanFebMarApr . .MayJune. ._

July . .AugSeptOctNovDec p

24,29128,13630,81932,41931,71430,08731,85633,87634,64633,098

34,30836,33437,00638,07236,62240,01842,75143,43644,41145,728

46,33446,26647,77648,43449,63751,58054,73956,341

54,76954,66755, 094

*>55,581P 5 5 , 9 7 7*57,004

*56,933P 5 7 , 3 5 4P57,199*56,818*57,1178 57,577

1,331842661149111720

2,8041,7931,4462,474

1,6051,0001,0691,0672,0511,3991,3231,5713,2692,099

2,0712,9941,946

M,9731,7531,4501,1291,2701,180

1,6311,6541,6031,4231,1971,071

1,2471,123

956953

1,0681,339

1,7191,6531,4801,2161,026

944

1,0581,024

868861985

1,245

534.7358.8350,480.567.2

574.92,878.51,785.51,328.72,269.8

1,467.6862.9

1,043.51,050.62,291.81,560.21,540.61,913.04,290.62,854.3

3.022.84,358.13.145.13.025.92,749.22,360.41,890.92,220.02.213.2

235.8230.9270.1210.5193.1165.4

155.3184.0132.3133.0146.6171.8

264.8259.4247.5207.2170.2139.3

156.9162.8133.4138.7134.9174.3

1,282814649147105589

1,295997980

1,973

1,513969

1,044990

1,8701,2651,2151,4462,5261,684

1,9082,2901,7831,8061,6051,3281,0611,2051,110

1,5581,5821,5321,3601,1421,019

1,1841,059

894889997

1,259

1,6241,5561,3901,142

964883

991955802794913

1,170

2141641223629

116189187200340

236208215218304226227270369277

331350302

7 297268232203226200

300267239244188186

288187158180208278

316227183183156157

240174141154189261

5.63.02.2.5.4

2.14.33.13.06.2

4.62.82.92.85.23.53.23.66.44.4

4.85.64.44.33.83.02,32.52.2

3.33.43.32.92.42.1

2.42.21.81.82.02.6

3.33.22.82.32.01.8

2.01.91.61.61.82.3

2.32.52.62.62.72.6

2.82.62.52.42.32.3

2.42.32.32.12.22.2

2.32.32.22.12.12.2

518.7344.3344.179.662.4

445.91,094.9

775.1789.9

1,736.0

1,373.1840.4998.2962.2

2,026.91,350.31,380.71,733.93,512.72,279.0

2,726.73,422.72,675.42,774.72,522.12,166.01,771.32,101.02,060. 0

224.8219.5257.5200.6183.6156.1

147.3172.8122.6122.1135.0159.2

248.5243.7231.1195.1159.1129.1

145.6150.0121.8126.0122.5163.8

10.5611.0612.6613.8415.9018.7718.5017.8319.0320.48

20.7621.0922.7923.5824.9325.0427.0228.1730.5830.41

32.8733.8034.5635.2735.9237.1939.7541.2543.25

41.7041.9742.0741.8140.9940.00

40.1041.0840.1040.7041.1941.85

42.6043.5843.6443.1242.4242.26

42.3943.7343.7844.3744.7245.50

1 includes persons under the State, UCFE (Federal employee, effective January 1955), and RRB (Railroad RetirementBoard) programs. Beginning October 1958, also includes the UCX program (unemployment compensation for ex-service-men).

2 Includes State, UCFE, RR, UCX, UCV (unemployment compensation for veterans, October 1952-January I960), andSRA (Servicemen's Readjustment Act, September 1944-September 1951) programs. Also includes Federal and Stateprograms for temporary extension of benefits from June 1958 through June 1962, expiration date of program.

3 Covered workers who have completed at least 1 week of unemployment.* Includes benefits paid under extended duration provisions of State laws, beginning June 1958. Annual data are net

amounts and monthly data are gross amounts.6 Individuals receiving final payments in benefit year.* For total unemployment only.7 Programs include Puerto Rican sugarcane workers for initial claims and insured unemployment beginning July 1963.8 Preliminary; December 1967 is latest month for which data are available for all programs combined. Workers covered

by State programs account for about 88 percent of the total.

Source: Department of Labor, Bureau of Employment Security.

257


TABLE B-27.—Wage and salary workers in nonagricultural establishments, 1929-68

[All employees; thousands of persons]

Year ormonth

1929

1930193119321933.. . .1934

19351936193719381939

19401941 .194219431944

19451946194719481949.. . . . .

19501951195219531954

19551956195719581959

19601961 . . . .196219631964

1965196619671 9 6 8 P

Totalwageand

salarywork-

ers

31,339

29,42426,64923 62823,71125,953

27,05329,08231,02629.20930,618

32,37636,55440 12542,45241,883

40,39441,67443,88144,89143,778

45,22247,84948,82550,23249,022

50,67552,40852,89451,36353,313

54,23454,04255, 596

! 56,70258,332

60,83264,03466,03068,134

Manufacturing

Total

10,

9,8,6

702

562170

7,3978,501

9,0699,827

10,7949 440

10,278

10,98513,19215 28017,17,

15,1415,15,14

1516161716

1617171516

1616161617

602328

524703545582441

24139363?549314

88?243174945675

7963?6853995?74

18.062191919

214434

,734

Dura-ble

goods

4,

6,8

11,10,

9,78,87

899

10

715

363968

084856

07474?385326489

094089349110

9,129

99q89

q9q9q

10iiiin

541834856830373

459070480616816

406?844??

,574

Non-dura-ble

goods

5,

6,6

564

6??225458

6,5186,472

6,4506,9627,7,6,

7,7777

77777

77777

7788

159256953

147304?84438185

340409319116303

336?f>6373380458

65693001?

,160

Min-ing

1,087

1,009873731744883

897946

1,015891854

925957992925892

836862955994930

901929898866791

792822828751732

712672650635634

632627616625

Con-tractcon-

struc-tion

1,497

1,3721,214

970809862

9121,1451,1121 0551,150

1,2941,7902 1701,5671,094

1,1321,6611,9822,1692,165

2,3332,6032,6342,6232,612

2,8022,9992,9232,7782,960

2,8852,8162,9022,9633,050

3,1863,2753,2033,256

Trans-porta-tionandpub-lic

utili-ties

3,916

3,6853,2542 8162,6722,750

2,7862,9733,1342 8632,936

3,0383,2743,4603,6473,829

3,9064,0614,1664,1894,001

4,0344,2264,2484,2904,084

4,1414,2444,2413,9764,011

4,0043,9033,9063,9033,951

4,0364,1514,2714,346

Whole-saleand

retailtrade

6,123

5,7975,2844 6834,7555,281

5,4315,8096,2656 1796,426

6,7507,7,6,7,

7,88,9,9,

9,9,

10,

210118982058

314376955272264

386742004

10,24710

1010,101011

111111111?

1?131314

?35

535858886750127

391337566778160

716?45613115

Fi-nance,insur-ance,andreal

estate

1,509

1,4751,4071 3411,2951,319

1 335,388

1,432L 4251,462

1,5021,5491,538L.5021,476

1,4971,6971,7541,8291,857

1,9191,9912,0692,1462,234

2,3352,4292,4772,5192,594

2,6692,7312,8002,8772,957

3,0233,1003.2173,357

Serv-ices

3,

3,3,

2,3,

3,3,3,

3,

i4,4,4,

4,45,5,5,

5,5,556

66,667

77888

99

440

376183931873058

142326518473517

681921084148163

241719050206264

382576730867002

?74536749806130

6640?83?5709

087551

10.06010 504

(

1

1

22

2

111

12

?

?

2

2

7

/

///

government

:ed-eral

533

526560559565652

753826833829905

996,340

^905,928

,808?54

,892,863,908

,928,3024?0305188

187,209

191,233

770?79340

,358348

,378,564719

',736

Stateandlocal

2,532

2,6222,7042 6662,6012,647

2,7282,8422,9233,0543,090

3,2063,3203,2703,1743,116

3,1373,3413,5823,7873,948

4,0984,0874,1884,3404,563

4,7275,0695,3995,6485,850

6,0836,3156,5506,8687,249

7,7148,3078,8979,462


258


TABLE B-27.—Wage and salary workers in nonagricultural establishments,1929-68— Continued

[All employees; thousands of persons)

Year ormonth

1966: Jan.. .Feb...Mar..A p r -May..June..

July. .Aug. .Sept. .Oct. . .Nov. .Dec—

1967: Jan. . .Feb.. .Mar..A p r -May..June-

Jury..Aug_.Sept..Oct. . .Nov. .Dec...

1968: Jan. . .F e b . .Mar_.Apr...May..June..

Juiy_.Aug. .Sept..Oct. . .NOVP.Dec p.

Totalwageand

salarywork-

ers

62,53562,88463,25363,45663,71464,141

64,27364,43864,53964,77965,00065,272

65,52465,64665,67265,61965,67765,821

65,92066,18666,12366,28666,77867,060

67,05867,60067,65667,75567,79268,039

68,17068,31468,38268,70168,92069,186

Manufacturing

Total

18,64118,81818,92819,04619,14319,272

19,28919,40419,40919,49119,54419,585

19,62819,57319,51719,42519,34619,356

19,28819,40719,28519,30219,51819,593

19,61219,61219,60719,65719.69319,777

19,77619,74819,75519,80719,85419,918

Dura-ble

goods

10,85210,97611,05911,14911,22611,305

11,33411,42311,46311,52111,53611,558

11,57611,55411,51111.41811,38911,369

11,33511,43311,27211,26411,46311,498

11,54111,51411,49511,53311,54511,571

11,61911,56311,57711,60311,64711,685

Non-dura-

blegoods

7,7897,8427,8697,8977,9177,967

7,9557,9817,9467,9708,0088,027

8,0528,0198,0068,0077,9577,987

7,9537,9748,0138,0388,0558,095

8,0718,0988,1128,1248,1488,206

8,1578,1858,1788,2048,2078,233

Min-ing

Con-tractcon-

struc-tion

Trans-porta-tionandpub-lic

utili-ties

Seasonally adjusted

633630633593627629

632634630628625625

627626626623622621

626610606603603603

604608609632631632

638638639591635638

3,3083,3163,3663,3213,2623,299

3,2923,2573,2403,2183,2003,251

3,2623,3073,2273,2043,1593,131

3,1683,1653,1823,1843,2143,275

3,1073,3883,3303,3133,2453,174

3,1893,1953,2523,2853,2733,353

4,0914,1094,1224,1264,1424,160

4,1364,1194,1834,1954,2154,221

4,2474,2544,2554,2164,2734,276

4,2964,2884,2784,2674,2974,302

4,3174,3424,3324,3314,2814,336

4,3464,3584,3654,3744,3944,369

Whole-saleand

retailtrade

13,01613,04713,09413,15613,19513,267

13,30913,32613,33913,36613,39413,403

13,44413,46113,49513,52913,56413,573

13,61013,64813,68413,72913,79113,793

13,81813,92013,99914,00914,04914,086

14,11714,18114,22214,29814,33114,310

Fi-nance,insur-ance,andreal

estate

3,0663,0673,0803,0833,0913,101

3,1103,1113,1153,1163,1243,138

3,1463,1593,1723,1863,1993,214

3,2233,2413,2513,2613,2733,289

3,2913,3043,3113,3233,3343,335

3,3503,3763,3873,4113,4253,441

Serv-ices

9,3299,3719,4129,4419,4869,535

9,5729,6209,6349,6829,7479,800

9,8499,8989,9569,9709,996

10,032

10,05610,11010,13910,17110,27010,316

10,33110,40510,41510,40210,42510,467

10,49810,54810,54510,61010,69510,758

Government

Fed-eral

2,4282,4532,4772,4982,5232,575

2,5822,5922,5972,6202,6242,650

2,6672,6762,6882,6882,7012,747

2,7432,7402,7182,7182,6922,709

2,7212,7212,7182,7172,7212,795

2,7882,7512,7162,7052,6962,697

Stateandlocal

8,0238,0738,1418,1928,2458,303

8,3518,3758,3928,4638,5278,599

8,6548,6928,7368,7788,8178,871

8,9108,9778,9809,0519,1209,180

9,2579,3009,3359,3719,4139,437

9,4689,5199,5019,6209,6179,702

ing establishments and relate to full- and;ed during, or received pay for, any part of

Note.—Data in Tables B-27 through B-33 are based on reports from emplipart-time wage and salary workers in nonagricultural establishments who woithe pay period which includes the 12th ot the month.

Not comparable with labor force data (Tables B-22 through B-25), which include proprietors, self-employed persons,domestic servants, and unpaid family workers, and which count persons as employed when they are not at work becauseof industrial disputes, bad weather, etc.

For description and details of the various establishment data, see "Employment and Earnings and Monthly Report onthe Labor Force."


259


TABLE B—28.—Average

Year or month

1929.. .

19301931 .1932 . . . . .1933193419351936193719381939.. .

1940. . . . .19411942194319441945 . .1946194719481949

1950195119521953195419551956195719581959

1960 . . .1961. . .1962196319641965196619671968 v

1967: JanFebMarAprMayJuneJulyAugSeptOctNov.. . .Dec

1968: JanFebMarAprMay-JuneJulyAugSeptOctNov pDec p

Totalnon-agri-

culturalpri-

vate i

40.340.039.4

39.839.939.939.639.139.639.338.838.539.0

38.638.638.738.838.738.838.638.037.8

38.438.038.037.937.937.938.038.038.137.938.037.837.637.937.837.637.837.937.937 938.037 737.537.6

joeekly hours of work i

Manufacturing

Total

44.2

42.140.538.338.134.636.639.238.635.637.738.140.643.145.045.243.540.340.440.039.140.540.640.740.539.640.740.439.839.240.339.739.840.440.540.741.241.340.640.7

41.040.340.440.540.540.440.540.640.940.740.740.740.240.840.740.140.940.940.940.741.141 040.840.7

Durablegoods

32.534.733.837.240.939.934.937.939.242.045.046.546.544.040.440.540.439.441.141.541.541.240.141.341.040.339.540.740.140.340.941.141.442.042.141.241.4

Non-durablegoods

41.940.035.136.137.737.436.137.437.038.940.342.543.142.340.540.239.638.939.739.539.739.639.039.939.639.238.839.739.239.339.639.639.740.140.239.739.8

n selected nonagricultural industries, 1929-68

Con-tractcon-

struc-tion

38.238.137.737.438.138.937.937.237.137.537.036 837.036.736.937.037.337.237.437.637.737.3

Seasonally adjusted

41.640.941.141.041.041.041.141.141.441.241.241.340.941.441.440.741.541.741.541 141.741 641.641.4

40.039.539.539.739.539.639.639.740.039.739.939.939.240.039.839.239.840.039.939.940.139 939.739.9

38.337.637.437.436.837.437.437.438.037.239.437.236.037.936.837.837.237.637.337.537.937 536.037.9

Retailtrade

43.443.242.841.840.941.040.941.3

3 40.340.240.440.440.439.839.139.239.038.638.138.138.238.037.637.437.337.036.635.935.334.7

35.535.335.435.335.235.435.435.435.335.135.235.134.834.934.734.834.634.934.934 934.734 534.434.3

Whole-sale

trade

41.642.943 142.341.841.341.141.442.343.042.841.641.141.040.840.740.840.740.640.540.740.540.340.240.640.540.540.640.640.640.840.740.340.0

40.640.540.440.440.240.340.340.340.340.240.240.140.040.039.939.939.840.340.140 340.240 140.039.8

Bitumi-nouscoal

mining

38.1

33 328.127.029.326 826.228.527 723.326.827.830 732.436.343.042.041 340.337.732.334.734.933.834.132.337.337.536.333.335.835.835.9

«37.0< 38.9*39.2*40.2M0. 8M0.8«39.5

41.140.039.740.140.541.7

41.140.640.341.841.340.740.641.040.440.541.5

40.940.629.939.3

Class 1rail-

roads

43.744.345 847.048.748 948.546 046.446.243.740.841.040.640.640.841.941.741.741.641.941.742.342.642.943.543.643.943.2

Tele-phonecom-muni-cation

38 838 939.139.540 140.541.942 3

2 41.739 437.439.238.538.939.138.538.738.939.639.539.038.439.239.639.439.940.040.240.440.639.339.8

Unadjusted

43.144.143.741.944.143.941.444.042.743.143.842.644.344.042.744.345.043.044.7

39.539.838.839.138.939.439.639.039.739.739.439.339.239.139.138.638.139.940.239.940.640.641.1

Mn addition to industries shown separately, total includes other mining; other transportation and public utilities;finance, insurance, and real estate; and services.

2 Nine-month average, April through December, because of new series started in April 1945.3 Beginning 1947, data include eating and drinking places. Comparable figure excluding eating and drinking places is

41.0 hours for 1947.4 Eleven-month average; excludes data for July.Note.—Hours and earnings data in Tables B-28 through B-33 relate to production workers in manufacturing and mining,

to construction workers in contract construction, and generally, to nonsupervisory employees in other industries. See TableB 31 for unadjusted weekly hours in manufacturing. See also Note, Table B 27.


260


TABLE B-29.—Average gross hourly earnings in selected industries, 1929-68

Year or month

1929._

1930..1931..1932..1933-1934..1935..1936..1937..1938..1939..

1940-1941..1942..1943..1944..1945.1946..1947..1948..1949..

1950..1951-1952..1953..1954..1955.1956-1957..1958.1959.

1960...1961 —1962...1963—1964...1965-__1966...1967...1968 p.

Totalnon-

agricul-tural

private !

1967:JanFeb. . . .Mar..__AprMay.. . .June

JulyAugSept....OctNov_.__Dec

1968:JanFeb . . . .Mar. . .AprMay-June

JulyAugSeptOct..._NOVP. .

$1,1311.2251.275

1.3351.451.521.611.651.711.801.891.952.02

2.092.142.222.282.362.452.562.682.85

2.622.632.632.642.662.67

2.692.692.722.722.732.73

2.762.782.792.802.832.85

2.862.862.912.922.922.93

Manufacturing

Total

$0.560

.546

.509

.441

.437

.526

.544

.550

.617

.620

.627

.655

.726

.851

.9571.0111.016.075.217.328.378

.440

.56

.65

.74

.781.861.952.052.112.19

2.262.322.392.462.532.612.722.833.01

2.782.792.792.802.812.82

2.822.822.852.852.882.91

2.942.942.962.972.993.00

3.002.993.053.063.083.10

Durablegoods

$0.492.467.550.571.580.667.679.691

.716

.799

.9371.0481.1051.0991.1441.2781.3951.453

1.5191.651.751.861.901.992.082.192.262.36

2.432.492.562.632.712.792.903.003.19

2.962.962.962.972.992.99

3.003.003.033.033.053.09

3.133.123.143.153.183.18

3.183.173.233.253.273.29

Non-durablegoods

$0,412.419.505.520.519.566.572.571

.590

.627

.709

.787

.844

.886

.9951.1451.2501.295

1.3471.441.511.581.621.671.771.851.911.98

2.052.112.172.222.292.362.452.572.74

2.512.532.542.552.552.56

2.572.572.612.612.622.64

2.672.682.692.702.722.73

2.752.752.782.792.802.82

Con-tractcon-

struc-tion

$1,5411.7131.792

1.8632.022.132.282.392.452.572.712.822.93

3.083.203.313.413.553.703.894.114.38

4.034.024.004.004.044.03

4.104.114.204.224.224.25

4,344.274.284.274.324.29

4.344.384.474.504.524.52

Retailtrade

$0.484

.494

.518

.559

.606

.653

.699

.7974.838

.901

.951

.9831.061.091.161.201.251.301.371.421.47

1.521.561.631.681.751.821.912.012.16

1.97L981.981.992.002.01

2.012.002.032.042.052.04

2.092.112.122.132.142.16

2.162.162.192.202.212.20

Whole-sale

trade

$0.610.628.658.674

.711

.763

.828

.898

.948

.9901.1071.2201.3081.360

1.4271.521.611.701.761.831.942.022.092.18

2.242.312.372.452.522.612.732.883.05

2.812.832.842.862.862.87

2.882.872.912.912.932.95

2.963.003.013.023.043.05

3.043.053.103.093.123.15

Bitu-minouscoal

mining

$0.659

.662

.626

.503

.485

.651

.720

.768

.828

.849

.858

.854

.9601.0301.1011.1471.1991.3571.5821.8351.877

1.9442.142.222.402.402.472.722.922.933.11

3.143.12

5 3.125 3.155 3.305 3.495 3.665 3.755 3.84

3.793.713.723.773.733.75

3.743.763.753.733.79

3.813.773.773.763.763.80

3.763.783.754.09

Class Irail-

roads

$0.730

.733

.743

.837

.852

.948

.9551.0871.1861.3011.427

1.5721.731.831.881.931.962.122.262.442.54

2.612.672.722.762.803.003.093.24

3.193.263.173.233.193.21

3.253.223.273.263.313.33

3.333.383.353.353.343.40

3,46

Tele-phonecom-

munica-tion

$0.774.816.822

.827

.820

.843

.870

.9113.9621.1241.1971.2481.345

1.3981.491.591.681.761.821.861.952.052.18

2.262.372.482.562.622.702.792.883.03

2.862.882.872.872.882.89

2.882.872.902.902.892.91

2.902.902.912.892.963.05

3.043.063.143.163.18

Agri-cul-

tures

$0.241

.226

.172

.129

.115

.129

.142

.152

.172

.166

.166

.169

.206

.268

.353

.423

.472

.515

.547

.580

.559

.561

.625

.661

.672

.661

.675

.705

.728

.757

.798

.818

.834

.856

.880

.904

.9511.031.121.21

1.14

"."998

1.10

"i.'iif

1.24

i."07~

1.18

1.27

* For coverage, see footnote 1, Table B-28.2 Weighted average of all farm wage rates on a per hour basis.s Nine-month average, April through December, because of new series started in April 1945.4 Beginning 1947, data include eating and drinking places. Comparable figure excluding eating and drinking places is

$0,901 for 1947.s Eleven-month average; excludes data for July.Note—See Note, Tables B-27 and B-28.

Sources: Department of Labor (Bureau of Labor Statistics) and Department of Agriculture.

26l


T A B L E B-30.—Average

Year or month

1929

193019311932193319341935193619371938 . . . .1939

194019411942194319441945194619471948 .1949

1950195119521953195419551956195719581959

19601961 TIT:1962196319641965196619671968 p

1967: JanFebMarAprMay . . .June

JulyAugSeptOctNovDec


JulyAugSeptOctNov v

Dec v

Totalnon-

agricul-turalpri-

vate*

$45. 5849.0050.24

53.1357.8660.6563.7664.5267.7270.7473.3375.0878.78

80.6782.6085.9188.4691.3395.0698.82

101.84107.73

99.8299.1599.4199.26

100. 55101 73

103 03103.30103 90103.36103.74103. 74

102.95104 53104.90104. 44106.69108 59

109.25109 54110 87110 38109 50110.75

gross weekly earnings i

Manufacturing

Total

$24.76

23.0020.6416.8916.6518.2019.9121 5623.8222.0723.64

24.9629.4836.6843 0745.7044 2043 3249.1753.1253.88

58.3263.3467.1670.4770.4975.7078.7881.5982.7188.26

89.7292.3496.5699.63

102.97107. 53112.34114.90122.51

113.42111.88112.44112.56113.81114 49

113.65114.49116 85116.28117.50119.60

117.60119 36120.18118.21122.29123 30

122.10121 69125 66125 77125 97127.41

Dura-ble

goods

$26.84

24.4220.9815.9916.2018.5921.2423 7226.6123.7026.19

28.0733.5642.1748.7351.3848 3646.2251.7656.3657.25

62.4368.4872.6376.6376.1982.1985.2888.2689.2796.05

97.44100.35104.70108.09112.19117.18122.09123.60132.07

122.84120.47121.36121.18122.89122 89

122.40123.30125 75125.44125.66129.16

127.70128. 54129.68127.58132.29132.92

131.02130.29135.01135 85136 03137.85

Non-durablegoods

$22.47

21.4020.0917.2616.7617 7318.7719 5721 1720.6521.36

21.8324.3928.5733 4536.3837 4840 3046.0349.5050.38

53.4856.8859.9562.5763.1866.6370.0972.5274.1178.61

80.3682.9285.9387.9190.9194.6498.49

102.03109. 05

99.6599.18

100.08100. 22100.73101 63

102. 03102.80104.92104.14105.06105. 86

103.86106.40106.79104.76108. 26109.47

110.00110 55112.03111 88111 72113.08

n selected nonagricultural industries, 1929-68

Con-tractcon-

struc-tion

$58.8765.2767.56

69.6876.9682.8686.4188.9190.9096.38

100.27103.78108.41

113.04118.08122.47127.19132.06138.38146. 26154.95163. 37

149.92144. 32147.20147.60150.29153.95

158.67159.06162.96160.78161.63155.13

151.90154.57154.94159.27162.43164.74

167.52169.94172.99172 80158.20168.14

Retailtrade

$21.01

21.3422.1723.3724 7926.7728 5932.92

3 33.7736.2238.42

39.7142.8243.3845.3647.0448.7550.1852.2054.1056.15

57.7658.6660.9662.6664.7566.6168.5770.9574.95

69.1569.1069.3069.4569.8071 56

72.9672.6071.6671.2071.3472.22

72.1172.8072.9373.4973.4075.82

77.3377.3375.9975 4675.1476.12

Whole-sale

trade

$26.7525.1925 4425.3826 9628.3628.5128.76

29.3631.3634.2837.9940.7642 3746 0550.1453.6355.49

58.0862.0265.5369.0271.2874.4878.5781.4184.0288.51

90.7293.5696.2299.47

102.31106.49111.11116.06122. 00

113.81114.05114.45114.97114.97115 66

116.93115.95117.27116.98117.79119.18

118.10119.40119.80119.89120.99122.92

122.82123.22124.62123.91124.80126. 32

Bitumi-nouscoal

mining

$25.11

22.0417 5913.5814.2117 4518.8621 8922.9419.7822.99

23.7429.4733.3739.9749.3250 3656.0463.7569.1860.63

67.4674.6975.0481.8477.5292.13

102.00106. 0097.57

111.34

112.41112.01114.46121.43128.91140.26149.74153. 00151.68

155. 77148.40147.68151.18151.07156 38

157.00153.71152.66151.13155.91156. 53

155.07153.06154. 57151.90152.28157.70

157.29153.78153.47112 13160.74

Class 1rail-

roads

$31.90

32.4734.0339.3441.4946.3646 3250.0055.0360.1162.36

64.1470.9374.3076.3378.7482.1288.4094.24

101. 50106.43

108.84112.94115.87118.40121.80130. 80135.65139.97

137.49143.77138. 53135. 34140.68140.92

134.55141.68139.63140. 51144.98141.86

147.52148.72143.05148.41150.30146.20

154.66

Tele-phonecom-mu-nica-tion

$30 0331.7432.14

32.6732.8834.1436.4538.54

2 40 1244 2944.7748.9251.78

54.3858.2661.2265.0268.4672.0773.4776.0578.7285.46

89.5093.3898.95

102.40105.32109.08113.27113.18120.59

112.97114.62111.36112.22112.03113.87

114.05111.93115.13115.13113.87114.36

113.68113.39113.78111.55112.78121.70

122.21122.09127.48128.35130.70

1 For coverage, see footnote 1, Table B-28.2 Nine-month average, April through December, because of new series started in April 1945.3 Beginning 1947, data include eating and drinking places. Comparable figure excluding eating and drinking places is

$36.94 for 1947.Note.-See Note, Tables B-27 and B-28.Source: Department of Labor, Bureau of Labor Statistics.

262


T A B L E B-31.—Average weekly hours and hourly earnings, gross and excluding overtime, inmanufacturing industries, 1939—68

Year or month

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

19601961 - -1962196319641965196619671968 '




JulyAugSeptOctNov p

Dec *_

Ai manufacturing

Averageweeklyhours

Gross

37.7

38.140.643.145.045.243.540.340.440.039.1

40 540.640.740.539 640 740.439.839.240.3

39.739.840.440 540.741 241.340.640.7

40.840.140.340.240 540.6

40.340.641.040.840.841.1

40.040.640.639.840.941.1

40.740.741.241.140.941.1

Ex-clud-

ingover-time

37.637.537.237.6

37.337.437.637.737.637 637.437.237.1

37.436.937.137.137 337.3

37.137.237.337.337.437.5

36.737.337.336.937.337.4

37.237.137.237.237.137.2

I industries

Average hourlyearnings

Gross

$0 627

.655

.726

.851

.9571.0111.0161.0751.2171.3281.378

1.4401.561.651.741.781.861.952.052.112.19

2.262.322.392.462.532.612.722.833.01

2.782.792.792.802.812.82

2.822.822.852.852.882.91

2.942.942.962.972.993.00

3.002.993.053.063.083.10

Ex-clud-ing

over-time

$0.691793

.881

.9333.9491.0351.181.291.34

1.391.511.591.681.731.791.891.992.052.12

2.202.252.312.372.442.512.592.722.88

2.672.682.692.702.702.71

2.712.712.732.732.762.79

2.832.832.852.862.872.87

2.882 872.902.922.942.96

Adjustedhourly

earnings,(1957-

59=100)i

32.2

2 33.42 37.52 40.82 43.72 45.52 50.4

57.863.266.1

68.273.677.481.684.386.991.596.2

100.2103.4

106.8109.9112.7115.5118.4121.5125.6131.5139.5

128.9129.5129.8130.4130.6131.0

131.4131.7132.6133.0133.9134.7

136.1136.9137.5138.2138.6138.8

139.1139.8141.2141.7142.5143.4

Durable goods manufac-turing industries

Averageweeklyhours

Gross

37.9

39.242.045.046.546.544.040.440.540.439.4

41.141.541.541.240.141.341.040.339.540.7

40.140.340.941.141.442.042.141.241.4

41.540.741.040.841.141.1

40.841.141.541.441.241.8

40.841.241.340.541.641.8

41.241.141.841.841.641.9

Ex-clud-

ingover-time

38.037.937.638.0

37.738.038.138.238.138.137.837,737.6

37.837.337.637.637.837.7

37.537.637.637.737.738.0

37.337.837.837.537.837.9

37.637 437.637.637.537.7

Averagehourly

earnings

Gross

$0.691

.716

.799

.9371.0481.1051.0991.1441.2781.3951.453

1.5191.651.751.861.90i.992.082.192.262.36

2.432.492.562.632.712.792,903.003.19

2.962.962.962.972.992.99

3.003.003.033.033.053.09

3.133.123.143.153.183.18

3.183.173.233.253.273.29

Ex-clud-

ingover-time

$0.762.872.966

1.0193 1.031

1.1111.241.351.42

1.461.591.681.791.841.912.012.122.212.28

2.362.422.482.542.602.672.762.883.05

2.842.842.852.862 872.88

2.882.882.892.902.932.96

3.003.003.023.033.043.04

3.053 033.083.093.123.13

Nondurable goods manu-facturing industries

Averageweeklyhours

Gross

37.4

37.038.940 342.543.142.340.540.239.638.9

39.739.539.739.639.039.939 639,238.839.7

39.239.339.639.639.740 140.239.739.8

39.739.239 439 339 539.7

39.740.040.239.940.140.1

38.939.739.738.839.840.1

40.040 240.340.139 940.1

Ex-clud-

ingover-time

37.237.036.637.0

36.736.836.936.936.836 936.836.636.5

36.736.336 536.436 536.6

36.636.736.636.536.836.8

35.936.736.636.136.636.7

36.636 736.536.636 436.7

Averagehourly

earnings

Gross

$0.571

.590

.627

.709

.787

.844

.886

.9951.1451.2501.295

1.3471.441.511.581.621.671.771.851.911.98

2.052.112.172.222.292 362.452.572.74

2.512.532 542 552 552.56

2.572.572.612.612.622.64

2.672.682.692.702.722.73

2.752 752.782.792 802.82

Ex-clud-ing

over-time

$0,613.684.748.798

3.841.962

1.111.211.26

1.311.401.461.531.581.621.721.801.861.92

1.992.052.092.152.212.272.352.472.63

2.422.442.452.462.462.46

2.472.472.502.502.522.54

2.572.582.592.612.622.62

2.632.642.662.672.692.70

1- Earnings in current prices, adjusted to exclude the effects of overtime and interindustry shifts.2 Annual average not available; April used.3 Eleven-month average; August 1945 excluded because of VJ Day holiday period.

Note.—See Note, Tables B-27 and B-28.See Table B-28 for seasonally adjusted average gross weekly hours.


263


TABLE B—32.—Average weekly earnings, gross and spendable, total private nonagriculturalindustries, in current and 1957-59 prices, 1947-68

Year or month

194719481949

1950195119521953...1954195519561957 . .19581959

196019611962196319641965. . . . .19661967 __1968 v

1967- JanFebMar.Apr... . .MayJune . . .

JulyAug... . . . . . .SeptOctNovD e c . . . .


July.. .AugSept . . . .OctNov pDec p

Average gross weeklyearnings

Currentprices

$45.5849.0050.24

53.1357.8660.6563.7664.5267.7270.7473.3375.0878.78

80.6782.6085.9188.4691.3395.0698.82

101.84107. 73

99.8299.1599.4199.26

100. 55101.73

103.03103.30103.90103.36103.74103.74

102.95104. 53104.90104.44106.69108. 59

109. 25109. 54110.87110.38109. 50110.75

1957-59prices i

$58. 5958.4760.53

63.4063.9365.5768.4168.9372.5874.7074.8374.5677.62

78.2479.2781.5582.9184.4986.5087.3787.57

3 89.11

87.0386.3786.4486.0986.9887.70

88.4488.3788.7387.9788.0687.77

86.8087.8487.7887.1188.6989.82

89.9289.8690.7389.8188.74

Average spendable weekly earnings2

Workers with nodependents

Currentprices

$39.1643.1144.15

46.0248.6850.0752.4553.7656.2758.6360.4761.8364.52

65.5967.0869.5671.0575.0478.9981.2983.3886.71

81.8581.3581.5481.4382.4183.30

84.2984.4984.9584.5484.8284.82

84.2385.4285.7083.9185.5786.97

87.4687.6788.6588.2987.6488.57

1957-59prices *

$50.3351.4453.19

54.9253.7954.1356.2857.4460.3161.9161.7061.4063.57

63.6264.3866.0066.5969.4271.8771.8771.69

3 71.72

71.3670.8670.9070.6271.2971.81

72.3572.2872.5471.9572.0071.76

71.0271.7871.7269.9871.1371.94

71.9871.9272.5571.8471.02

Workers with threedependents

Currentprices

$44.6448.5149.74

52.0455.7957.8760.3160.8563.4165.8267.7169.1171.86

72.9674.4876.9978.5682.5786.3088.6690.8695.28

89.2688.7288.9388.8189.8490.78

91.8192.0392.5092.0792.3892.38

91.7593.0193.3092.6894.4095.85

96.3696.5897.5997.2296.5597.50

1957-59prices *

$57.3857.8959.93

62.1061.6562.5664 7165.0167.9669.5069.0968.6370.80

70.7771.4873.0573.6376.3878.5378.3978.13

3 78. 81

77 8277.2877.3377.0377.7278.26

78.8178.7378.9978.3678.4278.16

77.3678.1678.0877.3078.4779.28

79.3179.2379.8679.1078.24

* Earnings in current prices divided by the consumer price index.2 Average gross weekly earnings less social security and income taxes.3 Estimates based on 11-month average of the consumer price index.

Note.—"Total private" consists of manufacturing; contract construction; retail and wholesale trade; mining; transporta-tion and public utilities; finance, insurance, and real estate; and services.

See also Note, Tables B-27 and B-28.


264


TABLE B—33.—Average weekly earnings, gross and spendable, in manufacturing industries, incurrent and 1957-59 prices, 1939-68

Year or month

1939

19401941194219431944194519461947 . .19481949

1950195119521953195419551956195719581959

196019611962196319641965 . .1966 .19671968 v

1967* JanFebMarAprMay. . . .June

July . . . .AugSeptO c t . : : : . : ; : : : : : : : : : : : : : : :NovDec


JulyAugSeptOctN o vD e c

Average gross weeklyearnings

Currentprices

$23.64

24.9629.4836.6843.0745.7044.2043.3249.1753.1253.88

58.3263.3467.1670.4770.4975.7078.7881.5982.7188.26

89.7292.3496.5699.63

102.97107. 53112.34114.90122.51

113.42111.88112.44112.56113.81114.49

113.65114.49116.85116.28117.50119.60

117.60119.36120.18118.21112.29123.30

122.10121.69125.66125.77125.97127.41

1957-59prices1

$48.84

51.1557.4764.5871.4374.5570.4963.7163.2063.3964.92

69.5969.9972.6175 6175.3181.1483.1983.2682.1486.96

87.0288.6291.6193.3795.2597.8499.3398.80

3 101.33

98.8897.4697.7797.6298.4598.70

97.5597.9499.7998.9699.75

101.18

99.16100.30100.5798.59

101.65101.99

100.4999.83

102.83102.34102.08

Average spendable weekly earnings2

Worker with nodependents

Currentprices

$23.37

24.4627.9631.8035.9537.9936.8237.3142.1046.5747.21

50.2652.9755.0457.5958,4562.5164.9266.9367.8271.89

72.5774.6077.8679.8284.4089.0891.5793.2897.70

92.1691.0091.4291.5192.4692.97

92.3492.9794 7694.3395.2696.85

95.3396.6697.2994.0797.0897.83

96.9496.6499.5799.6599.80

100. 86

1957-59prices1

$48.29

50.1254.5055.9959.6261.9758.7254.8754.1155.5756.88

59.9858.5359.5061.7962.4567.0068.5568.3067.3570.83

70.3971.5973.8774.8178.0881.0680.9680.21

3 80. 81

80 3579.2779.5079.3779.9880.15

79.2679.5380 9280.2880.8781.94

80 3881.2381.4178.4680 7080.92

79.7979.2881.4881.0880.88

Worker with threedependents

Currentprices

$23.40

24.7129.1936.3141.3343.7642.5942.7947.5852.3152.95

56.3660.1862.9865.6065.6569.7972.2574.3175.2379.40

80.1182.1885.5387.5892.1896.7899.45

101.26106.75

100.0898.8699,3099.40

100.39100.93

100.27100.93102 83102.37103.35105.04

103.43104.85105.50103.23106.38107.16

106 23105.91108.98109.06109.22110.33

1957-59pricesl

$48.35

50.6456.9063.9368.5471.3967.9362.9361.1662.4263.80

67.2665.5068.0970.3970.1474.8076.2975.8374.7178.23

77.7078.8781.1582.0885.2788.0687.9387.07

3 88.30

87.2586.1186.3586.2186.8487.01

86.0786.3487.8187.1287.7388.87

87.2188.1188.2886.1088.4388.64

87.4386.8889.1888.7488.51

* Earnings in current prices divided by the consumer price index.2 Average gross weekly earnings less social security and income taxes.3 Estimates based on 11-month average of the consumer price index.Note.—See Note, Tables B-27 and B-28.Source: Department of Labor, Bureau of Labor Statistics.

265


TABLE B-34.—Indexes of output per man-hour and related data, private economy, 1947-6

11957-59=100)

Year

Output per man-hour

Totalpri-vate

Farm

Nonfarm industries

Total

Man-ufac-tur-ing

Non-man-ufac-tur-ing

Output^

Totalpri-vate

Farm

Nonfarm industries

Total

Man-ufac-tur-ing

Non-man-ufac-tur-ing

Man-hours 2

Totalpri-vate

Farm

Nonfarm industries

Total

Establishment basis 3

1947...1948...1949...

1950...1951...1952...1953...1954...

1955...1956—1957...1958...1959—

1960...1961...1962___1963...1964...

1965...1966...1967...1968 p.

1947...1948...1949...

1950...1951...1952...1953...1954...

1955...1956...1957...1958...1959...

69.072.074.2

80.382.784.387.889.9

93.994.196.999.8

103.4

105.0108.6113.8117.9122.5

126.6131.4133.5137.9

49.858.056.5

64.464.770.379.683.7

84.488.093.3

103.0104.8

110.7119.4122.2133.1135.5

148.1152.9171.7172.1

74.176.579.5

84.486.387.089.691.6

95.795.297.299.7

103.1

104.4107.4112.3115.7120.0

123.6127.7129.0133.4

72.376.479.3

85.086.987.390.291.8

97.296.298.298.1

103.7

105.5107.9114.3118.9124.7

129.8131.6132.5136.2

75.176.379.6

84.185.686.788.891.5

94.794.396.7

100.6102.9

103.9107.4111.5114.3118.0

120.5125.4127.1131.9

67.670.870.6

77.982.884.889.187.9

95.497.298.697.3

104.1

106.6108.6116.0120.8127.8

136.2144.6147.5154.9

82.191.888.9

93.788.991.896.698.6

101.0100.598.1

100.5101.9

105.8107.2106.8110.1107.7

114.5107.2116.4114.9

66.869.869.7

77.082.584.588.887.4

95.197.198.697.2

104.2

106.7108.7116.5121.4128.8

137.3146.6149.1157.0

69.372.768.7

79.787.889.797.190.3

100.9101.3101.793.4

104.9

106.4106.0116.8122.7131.2

143.9155.3156.0163.0

65.668.370.2

75.779.881.984.586.0

92.294.997.199.1

103.9

106.8110.1116.3120.8127.7

134.0142.2145.7154.0

98.098.495.1

97.0100.1100.6101.597.8

101.6103.3101.897.5

100.7

101.5100.0101.9102.5104.3

107.5110.1110.5112.3

164.8158.4157.3

145.6137.5130.6121.4117.8

119.6114.2105.197.697.2

95.689.887.482.779.5

77.370.167.866.8

90.191.387.7

91.295.697.199.195.4

99.4102.0101.497.5

101.1

102.2101.2103.7104.9107.3

111.1114.8115.6117.7

95.895.186.6

93.8101.0102.7107.798.4

103.8105.3103.695.2

101.2

100.998.2

102.2103.2105.2

110.9118.0117.7119.7

Labor force basis *

87.489.588.2

90.093.294.595.294.0

97.4100.6100.498.5

101.0

102.8102.5104.3105.7108.2

111.2113.4114.6116.8

67.970.271.9

78.582.184.588.490.8

94.794.697.299.4103.4

1960.19611962.19631964...

1965..1966.1967.1968 v_

104.5 110.7

49.858.056.1

64.164.369.979.183.3

84.087.593.3

103.1104.7

107.3 119.9113.0 |122.3116.7 133.5121.0 135.8

72.974.576.8

82.485.787.590.492.8

96.795.997.799.2

103.1

103.1105.9111.4114.4118.4

121.8126.4128.1

67.670.870.6

77.982.884.889.187.9

95.497.2

97.3104.1

82.191.888.9

93.788.9

896.698.6

101.0100.598.1

100.5101.9

66.869.869.7

77.082.584.5

87.4

95.197.198.97.2

104.2

106.6 105.8 106.7108.6 107.2 108.7116.0 106.8 116.5120.8 110.1 121.4

99.6100.898.2

99.2 146.2100.9 138.3

164.8158.2158.6

100.4 1131.3100.8 122.196.8 118.3

100.7102.7101.497.9

100.7

102.0101.2102.7103.5105.6

108.9110.9111.1

120.3114.9105.297.597.3

95.689.487.3

91.693.790.8

93.496.396.698.294.2

98.3101.2100.998.0

101.1

102.8102.6104.6

82.5 106.179.3 108.127.8 107.7 128.8

125.0130.4132.7138.2

148.3152.7171.4174.0

136.2 114.5144.6 107.2147.5 116.4

137.3146.6149.1

77.270.267.966.1

112.8115.9116.4117.7133.3 154.9 114.9 157.0 112.1

1 Output refers to gross national product in 1958 prices.2 Hours worked by all persons in private industry engaged in production, including man-hours of proprietors and unpaid

family workers.3 Man-hours estimates based primarily on establishment data.4 Man-hours estimates based primarily on labor force data.

Note.—For information on sources, methodology, trends, and underlying factors influencing the measures, see Bureauof Labor Statistics, Department of Labor, Bulletin No. 1249 "Trends in Output per Man-Hour in the Private Economy,1909-58," December 1959.


266


PRODUCTION AND BUSINESS ACTIVITYTABLE B—35.—Industrial production indexes, major industry divisions, 1929-68

[1957-59=100]

Year or month

1929..

1930..1931..1932..1933..1934..1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944..1945..1946..1947..1948..1949..

1950.1951..1952..1953..1954..1955..1956..1957..1958..1959..

I960..1961..1962..1963..1964..1965..1966..1967..1968*.

1967: Jan..Feb..Mar.Apr.May.June.


1968: Jan..Feb..Mar.Apr..May.June.

July.Aug.Sept.Oct..Nov.Dec i

Totalindustrialproduction

38.4

32.026.520.724.426.630.736.339.731.438.3

43.956.469.382.981.770.559.565.768.464.7

74.981.384.391.385.896.699.9

100.793.7

105.6

108.7109.7118.3124.3132.3143.4156.3158.1165.3

Manufacturing

Total

158.3156.7156.6156.7155.6155.7

156.4158.3156.8157.2159.8162.1

161.2162.0163.0162.5164.2165.8

166.0164.6165.1165.7167.4168.9

38.6

31.725.919.923.726.030.636.439.730.537.9

43.858.373.188.786.373.060.066.468.965.1

75.881.985.292.786.397.3

100.2100.893.2

106.0

108.9109.6118.7124.9133.1145.0158.6159.7166.8

Durable Nondurable

38.2

28.419.511.915.518.824.131.235.222.631.4

40.057.779.9

102.9100.978.254.764.367.060.9

74.183.588.599.988.4

101.9104.0104.090.3

105.6

108.5107.0117.9124.5133.5148.4164.8163.7169.9

38.3

34.832.828.932.833.837.441.644.139.144.9

47.357.663.770.768.265.664.867.269.568.3

76.078.580.083.683.691.695.496.796.8

106.5

109.5112.9119.8125.3132.6140.8150.8154.6162.8

Mining

Seasonally adjusted

160.2158.5158.3158.3157.2157.1

157.4159.5158.1158.5161.3164.1

162.7163.6164.6163.7165.8167.3

167.4165.7166.3167.0168.7170.1

165.5162.9162.6162.5162.2161.4

162.3163.6161.0160.7164.1168.1

167.2167.6168.2167.2169.8171.0

170.8167.8168.7169.3171.4172.6

153.5153.0153. 0153.0151.0151.6

151.3154.4154.5155.8157.7159.0

157.1158.6160.0159.5160.8162.7

163.0163.0163.3165.0165.3167.0

54.2

47.040.333.638.540.343.750.356.749.053.8

60.164.867.069.074.273.072.279.984.074.5

81291.390.592.990.299.2

104.8104.695.699.7

101.6102.6105.0107.9111.5114.8120.5123.8126.3

Utilities

123.9123.1121.9122.5120.8123.6

127.7128.2124.5122.8124.1122.8

121.6123.9126.2127.1126.9129.2

130.0129.4127.0120.7126.5127.1

12.7

13.112.511.711.512.213.214.916.416.518.3

20.322.825.628.330.130.631.836.540.843.4

49.558.461.266.871.880.287.993.998.1

108.0

115.6122.3131.4140.0151.3160.9173.9184.9202.1

180.2180.2181.8183.0183.2183.9

184.6185.4185.6188.7191.5192.6

196.7199.0198.0196.5196.1197.9

199.3202.1204.8208.4210.0212.5


267


T A B L E B—36.—Industrial production indexes, market groupings, 1947—68

[1957-59=1001

Year or month

194719481949

19501951195219531954. .

19551956195719581959..

196019611962... .19631964

1965196619671968 P

1967: JanFeb . . .MarAprMayJune

JulyAugSeDtOctNovDec

1968- JanFebMarAprMayJune

JulyAugSeptOctNovDec P

Totalindus-trialpro-duc-tion

65.768.464.7

74.981.384.391.385.8

96.699.9

100.793.7

105.6

108.7109.7118.3124.3132.3

143.4156.3158.1165.3

158.3156.7156.6156.7155.6155.7

156.4158.3156.8157.2159.8162.1

161.2162.0163.0162.5164.2165.8

166.0164.6165.1165.7167.4168.9

Final products

Total

64.266.664.5

72.878.684.389.985.7

93.998.199.494.8

105.7

109.9111.2119.7124.9131.8

142.5155.5158.3165.0

158.3157.0157.2157.6156.4156.8

156.8158.6156.9157.0160.1162.1

160.8162.0163.5161.7163.0165.2

164.7164.8165.7166.4167.4168.2

Consumer goods *

Total

67.169.268.8

78.677.879.585.084.3

93.395.597.096.4

106.6

111.0112.6119.7125.2131.7

140.3147.5148.5156.6

148.3146.2146.8147.6146.1147.0

146.9149.1147.0148.2150.2153.0

151.3152.9155.0153.5154.6156.8

156.4156.8157.3158.5158.9159.4

Auto-motiveprod-ucts

69.472.672.0

90.680.172.191.385.0

118.397.8

105.286.7

108.1

123.2111.8131.1141.2145.1

167.2163.0149.1174.2

147.0135.7144.6151.3145.8151.2

155.2161,1142.1145.2152.4170.0

164.2162.7173.4168.7178.1180.7

180.4177.1175.6178.9180.2177.3

Homegoods

68.871.766.3

91.478.778.890.286.0

97.3100.996.692.8

110.7

110.8112.2122.2129.6141.1

154.8168.9166.0175.5

Equipment

Total,includ-

ingdefense

55.458.352.0

56.478.494.1

100.588.9

95.0103.7104.691.3

104.1

107.6108.3119.6124.2132.0

147.0172.6179.4182.9

Seasonally adjusted

168.0164.1162.7158.9158.5156.6

157.3163.6164.4166.4170.8168.3

169.1171.5172.9170.1170.4173.4

171.5174.6175.9176.7178.4

179.9180.3179.6179.1178.4177.9

178.2179.1178.1176.0181.5181.5

181.4181.6181.8179.4181.1183.2

182.6181.9183.6183.3185.7187.1

Busi-ness

69.972.663.5

68.083.194.196.685.1

91.9104.7105.389.8

104.9

110.2110.1122.1128.3139.1

156.7181.2182.8184.9

186.9186.6184.4183.5182.1181.3

180.8181.4179.8176.9183.5183.4

183.3182.9183.3180.9182.5184.3

183.4182.4185.2187.1190.0192

Materials

Total

67.070.264.8

76.983.884.392.685.9

99.0101.6101.992.7

105.4

107.6108.4117.0123.7132.8

144.2157.0157.8165.7

158.4156.2155.4155.9154.6155.2

155.9158.1157.1157.7160.1162.0

161.7161.8162.8163.1165.2166.7

167.4164.2165.1165.5167.5169.6

Dura-ble

goods

68.271.064.2

79.587.888.9

100.788.4

104.7105.3104.890.0

105.1

106.6104.8114.1121.2131.2

144.3156.9151.9157.8

155.4151.8151.1151.0149.7149.1

149.3151.8148.6148.6152.4155.1

154.9155.4156.7157.1159.4160.4

159.8153.3153.3155.3158.0160

Non-durablegoods

64.968.264.2

73.378.879.084.183.3

93.097.798.995.4

105.7

108.7112.2120.0126.3134.4

144.1157.2163.9173.8

161.6160.8159.8161. C159.7161.4

162.7164.6166. C167.0168.1169.2

168.7168.3169.1169.3171.2173.9

175.3175.5177.2176.0178.3180

* Also includes apparel and consumer staples, not shown separately.Source: Board of Governors of the Federal Reserve System.

268


TABLE B—37.—Industrial production indexes, selected manufactures, 1947—68

[1957-59=100]

Year ormonth

194719481949

195019511952.. .19531954

19551956195719581959

19601961196219631964

1965196619671968 v

1967: JanF e b . . . .MarAprMay.. . .June

Ju ly . . . .AugSept . . . .Oct . . . . .NovDec

1968: JanF e b . . . .MarApr.. .May. . . .June

Ju ly . . . .AugSeptOctNov. . . .Dec p . . .

Pri-mary

metals

90.794.379.4

99.9108.799.3

112.591.3

118.4116.4112.287.5

100.4

101.398.9

104.6113.3129.1

137.6142.7132.5137.1

132.6131.9129.2129.0128.9129.0

128.7129.5129.0131.7134.9140.9

136.3139.3140.2143.3148.5148.6

145.8122.8120.6123.0129.6136

Fabri-catedmetalprod-ucts

75.977.269.8

85.491.289.0

100.390.2

98.398.8

101.592.9

105.5

107.6106.5117.1123.4132.7

147.8163.0161.9168.2

166.7165.0162.9161.0160.7160.8

159.8159.1158.1158.2159.8162.4

163.9165.7166.6161.4165.0166.1

166.2166.3167.6172.2173.6175

Durable manufactures

Ma-chinery

65.366.559.0

72.783.092.1

100.587.7

96.5107.1104.288.8

107.1

110.8110.4123.5129.2141.4

160.5183.8183.4184.5

190.3186.8184.5182.1180.5177.5

180.0182.9182.2179.6183.2182.2

183.4183.2183.3179.4179.9181.7

182.7183.8186.4186.1188.4189

Trans-porta-tion

equip-ment

42.946.947.1

56.462.973.191.783.8

102.097.4

106.489.5

104.0

108.2103.6118.3127.0130.7

149.2166.9165.7179.6

162.6157.5162.6165.7167.5169.3

170.8171.9159.2159.2165.6177.5

175.6175.1177.6175.3180.4182.6

183.2181.7180.5180.4179.9179

Instru-ments

and re-latedprod-ucts

53.755.249.2

57.365.778.185.382.9

88.795.498.092.1

109.9

116.5115.8123.0130.2136.4

151.4176.5184.8184.2

Clay,glass,and

lumber

75.879.772.3

87.792.089.392.789.6

100.7102.097.594.1

108.5

105.7104.5109.3114.4121.1

127.6132.9130.7137.1

Furni-tureand

miscel-laneous

73.577.471.6

83.780.282.489.786.8

97.9101.097.693.3

109.0

113.3114.1124.5129.1138.4

151.8165.0162.6169.8

Seasonally adjusted

186.2183.4185.8187.6185.3184.1

182.9183.2183.1183.2185.4186.3

186.7184.7183.8181.4181.2181.3

179.2182.6184.3185.8188.3190

128.6128.9128.3129.7127.9126.8

127.4127.0129.6131.4132.4137.0

132.5130.7128.8138.0137.7137.1

136.2135.5138.8139.7140.0142

166.3163.9162.4162.9162.3161.5

159.1159.9161.4160.9161.5163.3

165.2166.9166.9166.5169.8169.5

169.5170.1170.9171.3171.7172

Nondurable manufactures

Textile,apparel,

andleatherprod-ucts

81.084.580.6

89.187.489.590.786.9

95.598.096.995.0

108.1

107.5108.4115.1118.5125.2

135.8141.6139.4145.2

140.6137.7136.9135.7135.5134.7

134.9137.2138.8140.1142.8146.0

141.0141.9143.9142.9144.1145.2

144.2144.1144.8146.2147.2148

Paperand

printing

66.769.469.3

76.779.477.782.685.0

92.597.197.897.0

105.2

109.0112.4116.7120.1127.5

135.3146.4149.6155.4

148.4148.7149.5149.9149.1149.4

148.6150.3148.5148.6149.9149.7

148.6150.6152.0151.6154.5155.2

155.6156.5156.8157.6158.6160

Chem-ical,

petro-leum,and

rubberprod-ucts

47.550.849.4

60.767.469.975.274.7

86.891.495.695.5

108.9

113.9118.9131.2141.8152.5

164.6181.9190.0207.2

186.6187.0186.9186.5182.2184.1

184.7191.7192.9195.3197.6199.5

197.7200.2201.6200.9203.1206.6

208.2207.6207.9211.7212.5215

Foods,bever-ages,and

tobacco

80.780.080.8

83.685.487.388.289.8

93.196.696.799.4

103.9

106.6110.2113.3116.8120.8

123.4128.1131.7134.1

131.5131.1131.3132.9131.0131.3

130.0131.0130.1131.4132.1133.4

132.0133.1133.7133.6132.9134.5

134.2134.4134.5134.7133.4135


269323-166 O—69- -18


TABLE B-38.—Manufacturing output, capacity, and utilization rate, 1948-68

PeriodOutput Capacity»

Utilization rate 2

Total Advancedproducts

Primaryproducts

1957-59 output=100 Percent

1948.1949.

1950.1951.1952.1953.1954.

1955.1956.1957.1958.1959.

I960.1961.1962.1963.1964.

1965.1966.1967.1968

1962: l.._-II —IIIIV

1963: I—-II—III..IV...

1964: I . . . .I I . . .III..IV...

1965: I . . . .I I . . .III. .IV...

1966: I - . .I I . . .III. .IV...

1967: I . . .II . . .III..IV...

1968: I v...II *..III*.IV p.

68.965.1

75.881.985.292.786.3

97.3100.2100.893.2

106.0

10a.910!). 6118.7124.9133.1

145.0158.6159.7166.8

116.6118.6119.7119.9

121.3124.9126.0127.2

129.4132.5134.7135.9

141.4143.5146.1148.9

154.5157.7159.9161.7

159.0157.5158.3161.3

163.6165.6166.5168.7

76.881.1

84.387.492.798.4

103.3

108.4114.3120.7125.8130.1

134.9139.6144.4149.8155.6

164.0175.0186.1196.8

89.780.2

90.494.091.394.283.5

90.087.783.674.081.5

80.678.582.183.385.7

88.590.585.384.4

87.980.3

87.391.091.994.183.8

87.886.082.373.681.0

81.178.982.583.184.4

87.690.585.983.7

92.280.0

94.898.190.494.483.0

93.290.185.374.682.1

80.078.181.683.687.4

89.790.584.685.5

Seasonally adjusted

142.4143.7145.1146.4

147.8149.1150.5151.8

153.3154.9156.4158.0

160.1162.7165.3167.9

170.7173.6176.5179.3

182.1184.8187.5190.1

192.8195.5198.2200.9

82.082.482.481.8

82.083.983.783.7

84.585.786.386.2

88.588.488.588.6

90.590.890.690.0

87.185.084.384.8

84.984.884.084.1

81.482.883.382.5

82.282.983.683.7

83.884.784.984.4

87.287.187.488.7

90.290.490.690.6

87.886.285.184.3

84.483.683.583.2

82.781.981.180.7

81.785.283.983.8

85.587.188.388.8

90.290.190.188.5

90.991.490.689.1

86.283.483.285.6

85.586.584.685.3

» For description and source of data see "A Revised Index of Manufacturing Capacity," Frank de Leeuw, Frank E. Hopkins,and Michael D. Sherman, "Federal Reserve Bulletin," November 1966, pp. 1605-1615. See also McGraw-Hill surveys on"Business Plans for New Plants and Equipment" for data on capacity and operating rates.

2 Output as percent of capacity; based on unrounded data.

Source: Board of Governors of the Federal Reserve System (output) and sources in footnote 1 (capacity and utilizationrate).

270


TABLE B-39.—Business expenditures for new plant and equipment, 1939 and 1945-69


Year or quarter

1939

19451946194719481949

1950195119521953 .1954

19551956195719581959

1960196119621963 . . .1964

1965 .1966196719683

1966' 1

IIIIV

1967: 1

IIIIV

1968: 1IIIIIIV3

1969: |311 3 _

Total i

5.51

8.6914.8520.6122.0619.28

20 6025.6426.4928.3226.83

28.7035.0836.9630.5332.54

35.6834.3737.3139.2244.90

51.9660.6361.6664.53

58.0060.1061.2562.80

61.6561.5060.9062.70

64.7562.6563.4567.25

71.1569.80

Manufacturing

Total

1.94

3.986.798.709.137.15

7 4910 8511.6311.9111.04

11.4414.9515.9611.4312.07

14.4813.6814 6815.6918.58

22.4526.9926.6926.78

25.6026.8027.5527.75

27.8527.0026.1526.00

26.3525.8026.6528.10

29.6029.70

Dura-ble

goods

0.76

1.593.113.413.482.59

3 145.175.615.655.09

5.447.628.025.475.77

7.186.277 037.859.43

11.4013.9913.7013.58

13.1513.8514.3514.50

14.2013 7513.5013.50

13.6512.8013.6514.15

15.1015.40

Non-durablegoods

1.19

2.393.685.305.654.56

4 365.686.026.265.95

6.007.337.945.966.29

7.307.407.657.849.16

11.0513.0013.0013.19

Mining

0.33

.38

.43

.69

.88

.79

.71

.93

.98

.99

.98

.961.241.24.94.99

.99

.981.081.041.19

1.301.471.421.49

Transportation

Rail-road

0.28

.55

.58

.891.321.35

1 111.471.401.31.85

.921.231.40.75.92

1.03.67.85

1.101.41

1.731.981.531.51

Other

0.36

.57

.921.301.28.89

1 211 491.501.561.51

1.601.711.771.502.02

1.941.852.071.922.38

2.813.443.884.46


12.4512.9513.2013.25

13.7013.2512.6512.55

12.7013.0013.0513.90

14.5014.30

1.401.551.451.45

1.401.301.451.50

1.551.401.351.60

1.55

1.752.001.852.35

1.801.551.401.40

1.651.451.401.50

1.80

3.303.503.403.50

3.053.904.104.45

4.353.654.605.35

4.30

Publicutili-ties

0.52

.50

.791.542.543.12

3.313.663.894.554.22

4.314.906.206.095.67

5.685.525.485.656.22

6.948.419.88

11.38

8.258.308.558.50

9.209.709.80

10.65

11.6011.6510.9011.45

13.20

Com-mer-cialand

other ^

2.08

2.705.337.496.905.98

6 787.247.098.008.23

9.4711.0510.409.81

10.88

11.5711.6813.1513.8215.13

16.7318.3618.2518.91

17.7017.9518.4519.25

18.3018.0517.9518.70

19.2018.7018.5019.25

20.65

40^10

1 Excludes agriculture.2 Commercial and other includes trade, service, finance, communications, and construction.' Estimates based on anticipated capital expenditures reported by business in late October and November 1968. The

quarterly anticipations include adjustments, when necessary, for systematic tendencies in anticipatory data.Note.—Annual total is the sum of unadjusted expenditures; it does not necessarily coincide with the average of seasonally

adjusted figures.These figures do not agree precisely with plant and equipment expenditures included in the gross national product

estimates of the Department of Commerce. The main difference lies in the inclusion in the gross national product of in-vestment by farmers, professionals, institutions, and real estate firms, and of certain outlays charged to current account.

These series are not available for years prior to 1939 and for 1940 to 1944.Sources: Department of Commerce (Office of Business Economics) and Securities and Exchange Commission.

271


TABLE B-40,—New construction activity, 1929-68[Value put in place, millions of dollars]

Year or month

1929 . .

19301931193219331934 . . . . .19351936193719381939

1940194119421943194419451946

Mew series5

194619471948 .1949

195019511952195319541955 . .195619571958 . . .1959

1960196119621963

New series «196219631964 . . . .1965196619671968 7

Totalnewcon-

struc-tion

10,793

8,7416,4273,5382,8793,7204,2326,4976,9996,9808,198

8,68211,95714,0758,3015,2595,809

12,627

14,30820,04126,07826,722

33,57535,43536,82839,13641,38046,51947,60149,13950,15355,305

53,94155,44759,57662,755

59,66763,42366,20072,31975,12076,16084,167

Private construction

i

Total

8,307

5,8833,7681,6761,2311,5091,9992,9813,9033,5604,389

5,0546,2063,4151,9792,1863,411

10,396

12,07716,72221,37420,453

26,70926,18026,04927,89429,66834,80434,86935,08034,69639,235

38,07838,29941,70743,859

41,79844,05745,81050,25351,12050,58756,611

Residential build-ing (nonfarm)

Total*

3,625

2,0751,565

630470625

1,0101,5651,8751,9902,680

2,9853,5101,715

885815

1,2764,752

6,2479,850

13,12812,428

18,12615,88115,80316,59418,18721,87720,17819, 00619,78924,251

21,70621,68024,29225,843

24,29226,18726,25826,26823,97123,73628,422

Newhous-

ingunits

3,040

1,5701,320

485290380710

1,2101,4751,6202,270

2,5603,0401,440

710570720

3;300

4,7957,765

10, 50610,043

15, 55113,20712,85113,41114,93118,24216,14314,73615,44519,233

16,41016,18918,63820,064

18,63820,38520,35420,35117,96417,88522,374

Nonresidential building and otherconstruction

Total

4,682

3,8082,2031,046

761884989

1,4162,0281,5701,709

2,0692,6961,7001,0941,3712,1355,644

5,8306,8728,2468,025

8,58310,29910,24611,30011,48112,92714,69116, 07414,90714,984

16,37216,61917,41518,016

17,50617,87019, 55223,98527,14926,85128,189

Com-mer-cial 2

1,135

893454223130173211290387285292

3484091553356

2031,153

1,153957

1,3971,182

1,4151,4981,1371,7912,2123,2183,6313,5643,5893,930

4,1804,6744,9555,200

5,1444,9955,3966,7396,8796,9828,297

In-dus-trial

949

53222174

176191158266492232254

442801346156208642

1,689

1,6891,7021,397

972

1,0622,1172,3202,2292,0302,3993,0843,5572,3822,106

2,8512,7802,9492,962

2,8422,9063,5655,1186,6796,1315,649

Others

2,598

2,3831,528

749455520620860

1,1491,0531,163

1,2791,4861,199

9051,1071,2902,802

2,9884,2135,4525,871

6,1066,6846,7897,2807,2397,3107,9768,9538,9368,948

9,3419,1659,5119,854

9,5209,969

10,59112,12813,59113,73814,243

Public construction

Total

2,486

2,8582,6591,8621,6482,2112,2333,5163,0963,4203,809

3,6285,751

10,6606,3223,0732,3982,231

2,2313,3194,7046,269

6,8669,255

10,77911,24211,71211,71512,73214,05915,45716,070

15,86317,14817,86918,896

17,86919,36620,39022,06624,00025,57327,556

Fed-erallyowned

155

209271333516626814797776717759

1,1823,7519,3135,6092,5051,737

865

865840

1,1771,488

1,6242,9814,1854,1393,4282,7692,7262,9743,3873,724

3,6223,8793,9133,970

3,9134,0103,9054,0183,9573,5123,415

Stateand

locallyowned *

2,331

2,6492,3881,5291,1321,5851,4192,7192,3202,7033,050

2,4462,0001,347

713568661

1,366

1,3662.4793,5274,781

5,2426,2746,5947,1038,2848,946

10,00611,08512,07012,346

12,24113,26913,95614,926

13,95615,35616,48518,04820,04222,06124,141


272


TABLE B-40.—New construction activity, 1929-68—Continued[Value put in place, millions of dollars]

Year or month

1967: JanF e b . . . .Mar. . . .AprMay.. . .June . . .

July . . . .AugSept. . . .Oct . . . . .N o v . . . .Dec

1968: JanF e b . . . .Mar. . . .AprMay. . . .June . . .

July . . . .AugSept . . . .Oct . . . . .Nov *>.._Dec 7... .

Totalnewcon-

struc-tion

Private construction

Total

Residential build-ing (nonfarm)

Total*New

hous-ing

units

Nonresidential building and other

Total

construction

Com-mer-cial 2

In-dus-trial

Others

Public

Total

construction

Fed-erallyowned

Stateand

locallyowned4


74,56174,52573,38272,80173,65573,774

75,73876,74178,25378,88379,60981,207

82,87383,88483,57285,29985,70782,050

81,32883,55184,50487,15186,73087,600

48,77748,27747, 55747,02348,07648,737

50,38051,64152,84153,52053,94653,965

55,31655,38056,05557,40357,26054,981

54,65856,49757,24259,45558,87859,600

19,87320,14820,65220,92421,63822,631

23,85025,01525,77026,42727,22227,635

26,98826,75427,69829,32029,62828,187

27,44028,14029,14830,01930,36331,050

14,20314,53115,07015,51416,29817,042

17,76018,68819,52320,40621,28621,757

21,22621,28221,67722,30022,31221,450

21,24821,91922,77123,56223,89824,550

28,90428,12926,90526,09926,43826,106

26,53026,62627,07127,09326,72426,330

28,32828,62628,35728,08327,63226,794

27,21828,35728,09429,43628,51528,500

7,8047,5257,1987,0007,0626,779

6,7826,5766,7326,9967,0186,688

7,7218,3288,2588,5128,1118,122

8,2728,6418,5348,9397,9627,950

7,2186,9626,0985,7375,8505,807

6,1336,0616,3956,1735,6815,822

6,3305,7405,5285,4845,2754,852

4,7525,5755,4926,0966,3986,400

13,88213,64213,60913,36213,52613,520

13,61513,98913,94413,92414,02513,820

14,27714,55814,57114,08714,24613,820

14,19414,14114,06814,40114,15514,150

25,78426,24825,82525,77825, 57925,037

25,35825,10025,41225,36325,66327,242

27,55728, 50427,51727,89628,44727,069

26,67027,05427,26227,69627,85228,000

3,7393,4733,5123,2273,4093,272

3,7043,5663,5283,4863,6033,655

3,5283,6923,5613,3813,4363,287

3,0523,3843,3403,5393,4583,400

22,04522,77522,31322, 55122,17021,765

21,65421,53421,88421,87722,06023,587

24,02924,81223,95624,51525,01123,782

23,61823,67023,92224,15724,39424,650

1 Total includes additions and alterations and nonhousekeeping units not shown separately.2 Office buildings, warehouses, stores, restaurants, and garages.3 Farm, institutional, public utilities, and all other private.4 Includes Federal grants-in-aid for State and locally owned projects.* New series in 1946 reflects differences due to the new higher level series of housing starts and farm construction ex-

penditures and the reduced level value in place series for public utilities. See "Construction Report C30-61 (Supplement)"for a description of the differences.

6 New series differs from old in that it reflects differences in 1962 due to the introduction of new series for private non-residential buildings and differences in 1963 due to the introduction of new series for State and locally owned publicconstruction. See "Construction Report C30-65S" for a description of the differences.

7 Preliminary estimates by Council of Economic Advisers.

Source: Department of Commerce, Bureau of the Census, except as noted.

273


TABLE B-41.—New housing starts and applications for financing, 1929-68[Thousands of units]

Year ormonth

1929

1930193119321933193419351936193719381939

1940194119421943 . .-1944

New series19451946194719481949

19501951195219531954195519561957 .19581959

19601961196219631964 _196519661967First 11 months:19671968 v

1967:JanF e b . . . .Mar. . . .AprMayJune


Housing starts

Private andpublic i

Total(farm

andnon-

farm)

1,553.5

1,296.01,365.01,492.41,642.01,561.61,509.61,196.21,321.9

1,238.81,442.7

61.763.292.9

115.9134.2131.6

126.1130.2125.8137.0120.283.1

Non-farm

509.0

330.0254.0134.093.0

126.0221.0319.0336.0406.0515.0

602.6706.1356.0191.0141.8

326.11,023.21,268.51,362.11,466.1

1,951.91,491.01,503.91,437.61,550. 51,646.01,349.11,223.91,382. 01,531.3

1,274.01,336.81,468.71,614.81,534.71,487.51,172.81,298.8

1,216.71,419.5

60.462.090.7

114.2131.9129.6

124.9126.5123.4134.6118.682.1

Private i

Total (farm and nonfarm)

Total

1,516.8

1,252.11,313.01,462.71,610.31,529.31,472.91,165.01,291.6

1,211.51,406.0

Type ofstructure2

Onefamily

1,234.1

994.7974.4991.3

1,020.7971.5963.8778.5843.9

796. 8843.7

Two ormore

families

282.7

257.4338.6471.4589.6557.8509.1386.5447.7

414.7562.3

Nonfarm

Total

509.0

330 0254.0134.093.0

126.0215.7304.2332.4399.3458.4

529.6619.5301.2183.7138.7

324.91,015.21,265.11,344.01,429.8

1,908.11,419.81,445.41,402.11,531.81,626.61,324.91,174.81,314.21,494.6

1,230.11,284.81,439.01,582.91,502.31,450.61,141.51,268.4

1,189.31,382.8

Governmenthome programs

FHA3

13.248.857.0

106.8144.7

176.6217.1160 2126.183.6

38.967.1

178.3216.4252.6

328.2186.9229.1216.5250.9268.7183.4150.1270.3307.0

225.7198.8197.3166.2154.0159.91?9.1141.9

132.7137.2

VA

7 8.891.8

160.371.190.8

191.2148.6141.3156.5307.0392.9270.7128.3102.1109.3

74.683.377.871.059.249.436.852.5

8 56.0

Newprivatehousing

unitsauthor-ized <

1,208.3

998.01,064.21,186.61,334.71,285.81,239.8

971.91,141.0

1,055.91,234.6

Monthly totals, unadjusted

59.161.491.5

113.7132.0125.4

125.3127.4121.9135.4118.480.1

40.240.366.679.887.387.6

82.383.778.281.769.147.0

18.921.124.933.944.737.8

43.043.743.753.749.333.1

57.760.289.2

112.0129.7123.4

124.0123.6119.5133.1116.879.1

8.68.3

11.111.014.814.3

12.313.912.614.111.79.4

3.12.93.94.14.75.2

4.85.64.85.34.53.6

58.557.091.499.5

111.2115.5

97.1110.6103.4111.899.885.2

Proposedhome con-struction s

Appli-cations

forFHAcom-mit-

ments 3

6 20 647 849 8

131 1179.8

231.2288 5238.5144 462.9

56.6121.7286.4293.2327.0

397.7192.8267.9253.7338.6306.2197.7198.8341.7369.7

242.4243.8221.1190.2182.1188.9153.0167.2

s 168. 5

Re-quests

forVAap-

prais-als

164.4226.3251.4535.4620.8401.5159.4234.2234.0

142.9177.8171.2139.3113.6102.199.2

124.3

8131.7

10.110.716.614.816.016.3

12.717.114.615.312.910.2

7.17.7

10.311.010.912.8

12.211.610.812.59.57.9


274


TABLE B-41.—New housing starts and applications for financing, 1929-68—Continued

[Thousands of units]

Year ormonth

1968: JanFebMar. . . .AprMay... .J u n e . . .

JulyAugSept. . . .Oct p . . .Nov p . . .Dec p

1967' JanFebMarAprMayJune

JulyAugSeptOctNov . .Dec

1968: Jan..FebMarApr.May.. . .June

July .-AugSept.. .Oct pNOVP . .Dec p

Housing starts

Private andpublic^

Total(farmandnon-

farm)

82.787.2

128.6165.2145.1142.9

142.5141.0139.8142.5125.0

Non-farm

82.085.3

126.0162.2143.3141.1

140.0138.9138.0139.8123.0

Private1

Total (farm and nonfarm)

Total

80.584.6

126.6162.0140.9137.9

139.8136.6134.3140.0122.7

1,1111 1491,0941,1161,2741,233

1 3691,4071 4451 4961,5901,250

1,4561,5371,5111,5911,3641,365

1,5311,5181,5921,5621,677

Type ofstructure2

Onefamily

Two ormore

families

Nonfarm

Total

Governmenthome programs

FHA3

Monthly totals, unadjusted

45.255.479.398.086.881.4

86.482.580.285.163.3

806802774759839849

862875923913952797

9121,075

920922838790

904867944960885

35.329.247.364.054.156.5

53.454.154.154.959.4

79.882.8

123.9159.1139.0136.0

137.3134.5132.4137.3120.7

9.710.612.014.313.812.3

12.913.612.114.511.4

VA

3.44.14.55.45.55.0

4.94.84.65.34.24.3

Newprivatehousing

unitsauthor-ized*

73.488.8

115.5132.4130.5113.9

118.0113.7116.3127.6101.2


305347320357435384

507532522583638453

544462591669526575

627651648602792

1,0791,1321,0671,0991,2541,214

1 3561,3811 4151,4781,5671,235

1,4301,4991,4791,5621,3451,348

1,5071,4961,5701,5331,649

146134126125143144

140141150155154149

157164149147133137

134144145153158

504749504951

535756585455

526363595754

495154555364

1,010946985

1,0891,0931,174

1,1591,1891 2231,2531,2221,390

1,1481,3941,4161,3401,2801,281

1,2891,2901,3931,3781,390

Proposed

struction5

Appli-cations

forFHAcom-mit-

ments 3

11.212.415.914.715.713.7

13.215.113.917.113.512.0

153137151159162169

155180176185189162

163152160144161157

146167168198211184

Re-quests

forVAap-

prais-als

8.410.611.612.411.010.4

12.511.510.412.711.49.0

109107103122109135

146122131151136125

122141127126110120

135127125147172135

1 Military housing starts, including those financed with mortgages insured by FHA under Section 803 of the NationalHousing Act, are included in publicly financed starts but excluded from total private starts and from FHA starts.

2 Not available prior to 1959 except for nonfarm for 1929-44.3 Units are for 1-4 family housing.< Data beginning 1967 cover approximately 13,000 permit-issuing places. Data for 1963-66 are based on 12,000 places

and 1959-62,10,000 places. The addition of approximately 1,000 permit-issuing places contributed an increase of 3 percentin total permit authorizations.

8 Units in mortgage applications or appraisal requests for new home construction.6 FHA program approved in June 1934: all 1934 activity included in 1935.7 Monthly estimates for September 1945-May 1950 were prepared by Housing and Home Finance Agency.8 January-December average.Sources: Department of Commerce (Bureau of the Census), Department of Housing and Urban Development, Federal

Housing Administration (FHA), and Veterans Administration (VA), except as noted.

275


TABLE B-42.—Sales and inventories in manufacturing and trade, 1947—68

[Amounts in millions of dollars]

Year or month

1947..1948..1949-

1950..195U.1952..1953-1954..

1955..1956..1957..1958..1959..

I960..1961..1962..1963..1964..

1965...1966...1967_..1968 4.

1967: JanFeb. . . .M a r . . .Apr .—M a y - . .June—

July . . .Aug--_Sept..-Oc t . . . .Nov . . .Dec.—

1968: Jan._-_Feb. . . .M a r . . .Apr . . . .M a y . . .June...

Ju ly . . .A u g . . .Sept--.Oc t . . . .Nov *._Dec p...

Total manufacturingand trade

Sales i

35,26033,788

38,59643,35644, 84047,98746,443

Inven-tories 2

52,50749,497

59,82270,24272,37776,12273,175

51,694 79,51654,063 87,30455,879 89,05254,233 86,92259,661 91,891

60,74661,13365,41768,96973,685

80,27687,184 137;88,96297,127

94,74795,728101,149105, 525111,548

121,140,184

143,772153,193

Ratio 3

1.421.53

1.361.551.581.581.60

Manufacturing

Sales i

15,51317,31616,126

Inven-tories 2

25,89728,54326,321

18,634 31,07821,714 39,30622,529 41,13624,843 43,94823,355 41,612

1.47 26,4801.55 27,7401.59 28,736

45,06950,642

.-, _-,.--, 51,871

.60 27,280 50,070

.50 30,219 52,707

.56

.54

.511.491.47

1.451.481.581.53

30,79630,89633,11335,03237,335

41,00344,87645,71250,447

53,81454,94358,21260,02763,370

68,17978,12582,81988,182

Ratio 3

1.581.571.75

1.481.661.781.761.81

1.621.731.801.841.70

1.791.741.721.691.64

1.601.621.771.70

Merchant wholesalers

Sales i

6,!6,514

7,6958,5978,7829,0528,993

9,89310,51310,47510,25711,491

11,65611,98812,67413,38214, 527

15,59516,97917,09918,338

Inven-tories2

7,9577,706

9,2849,88610,21010,68610,637

11,67813,26012,73012,73913,879

14,12014,48814.93616,04816,977

18,27420,69121,63522,523

Ratio 3

1.131.19

1.071.161,121.171.18

1.131.191.231.241.15

1.221.201.161.151.13

1.141.141.22

Retail trade

Sales i

10,20011,13511,149

12,26813,04613,52914,09114,095

15,32115,81116,66716,69617,951

18,29418,24919,63020, 55621,822

23,67725.33026,151

1.20. 28,342

Inven-tories 2

14,24116,00715,470

19,46021,05021,03121,48820,926

22,76923,40224,45124,11325,305

26,81326,29728,00129,45031,201

34,68738,36839,31842,488

Ratio 3

Seasonally adjusted

87,987 138,25187,365 138,72987,664 139,14987,684 139,68187,998 139,92489,292 139,866

88,679 140,33690,135 140,89589,987 141,24689,043 141,46190,759 142,55491,970 143,772

93,077 144,10693,821 144,81994,612 145,15394,436 146,48796,043 147,80897, 554 148, 522

98,496 149- 06397,360 149,92399,096 150,72599,684 152,122100,442 153,193

1.571.591.591.591.591.57

1.581.561.571.591.571.56

1.561.541.531.551.541.52

1.511.541.521.53

-..1.53

45,01144,94845,02144,74445,28145,579

79,08479,73080,12880,61281,20381,119

45,038 81,47846,471 81,85345,884 81,71945,748; 81,96846,955 82,38947,961 82,819

48,44748, 35648,44648,75550,01450,729

51,42549, 82551,44152,56052,685

T

82,89083,40883,75984,38285,27885, 582

85,82986,71387,10987,56688,182

1.761.771.781.801.791.78

1.811.761.781.791.751.73

1.711.721.731.731.711.69

1.671.741.691.671.67

17,23916,89716,85316,97216,76917,117

17,14517.19817,33017,19517,41917,641

17,69417,95318,02118,00617,89718,374

18,26918,49818, 79218,41818,866

20,78020,74220,85920,78520,58720,599

20,51120,78920,81020,94521,06121.635

21,64121,62321,61821,86321,92422,098

22,16922,20022,19222,33622,523

1.211.231.241.221.231.20

.20

.21

.20

.22

.211.23

1.221.201.201.211.221.20

1.211.201.181.211.19

25,73725,52025,79025,96825,94826, 596

26,49626,46626,77326,10026,38526,368

26,93627,51228,14527,67528,13228,451

28,80229,03728, 86328,70628,89128,273

38,38738,25738,16238,28438,13438,148

38,34738,25338,71738,54839,10439,318

39,57539,78839,77640,24240,60640,842

41,06541,01041,42442,22042,488

1.261.391.41

1.381.641.521.531.51

1.431.471.441.431.40

1.451.441.381.391.40

1.401.441.471.44

1.491.501.481.471.471.43

1.451.451.451.481.481.49

1.471.451.411.451.441.44

1.431.411.441.471.47

1 Monthly average for year and total for month.2 Seasonally adjusted, end of period.3 Inventory/sales ratio. For annual periods, ratio of weighted average inventories to average monthly sales; for monthly

data, ratio of inventories at end of month to sales for month.< Where December data not available, data for year calculated on basis of no change from November.

Note.—The inventory figures in this table do not agree with the estimates of change in business inventories includedin the gross national product since these figures cover only manufacturing and trade rather than all business, and showinventories in terms of current book value without adjustment for revaluation.

Source: Department of Commerce (Office of Business Economics and Bureau of the Census).

276


TABLE B-4r3.—Manufacturers' shipments and inventories, 1947-68


Year or month

194719481949

19501951195219531954

19551956195719581959

196019611962 . .19631964

1965 ___.19661967 - -1968 3

1967: JanFebMarA p r . . . . .MayJune

JulyAugSept__-O c t —NovDec

1968: JanFebMarAprMay....June

JulyAugSept... .OctNov ".—

Shipmentsl

Total

15,51317,31616,126

18,63421,71422,52924,84323,355

26,48027,74028,73627,28030,219

30,79630,89633,11335,03237,335

41,00344,87645,71250,447

Dura-ble

goodsindus-tries

6,6947,5797,191

8,84510,49311,31313,34911,828

14,07114,71515,23713,57215,544

15,81715,54417,10318,24719,634

22,21624,63524,97327,694

Non-durablegoodsindus-tries

8,8199,7388,935

9,78911,22111,21611,49411,527

12,40913,02513,49913,70814,675

14,97915,35216,01016,78617,701

18,78820,24020,73922,753

Inventories 2

Total

25,89728,54326,321

31,07839,30641,13643,94841,612

45,06950,64251,87150,07052,707

53,81454,94358,21260,02763,370

68,17978,12582,81988,182

Durable goods industries

Total

13,06114,66213,060

15,53920,99123,73125,87823,710

26,40530,44731,72830,09531,839

32,36032,51834,60935,80738,433

42,20449,79753,54057,124

Mate-rialsandsup-plies

8,9667,894

9,19410,41710,6089,847

10,585

10,28610,24110,80310,99711,928

13,28515,48415, 59216,695

Workin

process

10,7209,721

10,75612,31712,83712,29412,952

12,78013,22114,21015,00016,254

18,14421,97624,67526,198

Fin-ishedgoods

6,2066,040

6,3487,5658,1257,7498,143

9,1909,0569,5969,810

10,251

10,77512,33713,27314,231

Nondurable goods industries

Total

12,83613,88113,261

15,53918,31517,40518,07017,902

18,66420,19520,14319,97520,868

21,45422,42523,60324,22024,937

25,97528,32829,27931, 058

Mate-rialsandsup-plies

8,3178,167

8,5568,9718,7758,6719,089

9,1139,4639,8379,999

10,179

10,47811,26611,24711,557

Workin

process

2,4722,440

2,5712,7212,8642,8002,928

2,9353,1923,3033,4123,519

3,8234 2554,4964,854

Fin-ishedgoods

7,4097,415

7,6668,6228,6248,4988,857

9,3539,770

10,46310,80911,239

11,67412,80713,53614,647

Seasonally adjusted

45,01144,94845,02144,74445,28145,579

45,03846,47145,88445,74846,95547,961

48,44748,35648,44648,75550,01450,729

51,42549,82551,44152,56052,685

24,57524,48524,51624,20724,65524,979

24,41725,75925,17124,80225, 53826,610

26,92526,71126,84426,88827,50927,633

28,21126,83727,98528,96028,917

20,43620,46320,50520,53720,62620,600

20,62120,71220,71320,94621,41721,351

21,52221,64521,60221,86722,50523,096

23,21422,98823,45623,60023,768

79,08479,73080,12880,61281,20381,119

81,47881,85381,71981,96882,38982,819

82,89083,40883,75984,38285,27885,582

85,82986,71387,10987, 56688,182

50, 53851,05051,34051,64652,07852,035

52,46152,80152,58252,86753,28353,540

53,52554,00954,29554,72455,23455,442

55,46156,06956,45856,65757,124

15,64315,66715,64315,54415,46015,377

15,47915,51015,36915,44615,53215,592

15,48915,64815,84016,07116,37916,498

16,75316,78116,70416,76316,695

22,39022,73322,91923,16023,53823,553

23,75523,90523,95424,17324,42824,675

24,64124,92625,07825,21425,39225,490

25,23725,54425,77225,82526,198

12, 50512,65012,77812,94213,08013,105

13,22713,38613,259

$313,27313,39513,43513,37713,43913,46313,454

13,47113,74413,98214,06914,231

28,54628,68028,78828,96629,12529,084

29,01729,05229,13729,10129,10629,279

29,36529,39929,46429,65830,04430,140

30,36830,64430,65130,90931,058

11,32411,33711,41411,37611,42711,435

11,44611,43111,39211,32011,28011,247

11,30611,24911,12811,22811,31211,333

11,36611,50811,51111,60911,557

4,2934,3094,3294,3534,3644,393

4,3714,3934,3694,3964,4444,496

4,4824,4974,5084,5224,6044,619

4,6824,7294,6794,7244,854

12,92913,03413,04513,23713,33413,256

13,20013,22813,37613,38513,38213, 536

13,57713,65313,82913,90914,12814,188

14,32014,40714,46114,57614,647

1 Monthly average for year and total for month.2 Book value, seasonally adjusted, end of period.3 Where December data not available, data for year calculated on basis of no change from November.Source: Department of Commerce, Bureau of the Census.

277


TABLE B-44.—Manufacturers* new and unfilled orders, 1947-68

[Amounts in millions of dollars]

Year or month

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

1965...1966..1967 - . -1968*

1967: Jan..Feb..Mar..Apr_.May-June.

July..Aug..Sept.Oct..Nov_.Dec.

1968: Jan..Feb..Mar..Apr..May..June.

July...Aug...Sept..Oct...Nov *>-

New orders1

Total

15,25617,69215,614

20,11023,90723,20323,53322,313

27,42328,38327,51426,90130,679

30,11531,08533,00535,32237,952

41,80345,93845,92850,672

Durable goodsindustries

Total

6,3888,1266,633

10,16512,84112,06112,10510,743

14,95415,38114,07313,17015,951

15,22315,69817,02618,52220,258

22,98625,71025,18927,924

Machin-ery andequip-ment

2,0841,770

2,4992,8702,5662,3542,878

2,7912,8543,0903,4123,935

4,4355,2685,2505,822

Non-dura-ble

goodsindus-tries

I

8,8689,5668,981

9,94511,06611,14211,42811,570

12,46913,00213,44113,73114,728

14,89215,38715,97916,80017,694

18,81720,22820,73922,748

Unfilled orders 2

Total

34,41530,71724,506

43,05569,78575,64961,17843,266

60,00467,37553,18348,88254,494

46,13348,48547,35150,96058,536

68,20881,07283,68685,684

Dura-ble

goodsindus-tries

28,53226,60120,018

36,83865,83572,48058,63745,250

56,24163,88050,35245,73950,654

43,40145,33644,53147,98055,652

64,98077,98780,57882,607

Non-dura-

blegoodsindus-tries

5,8834,1164,488

6,2173,9503,1692,5413,016

3,7633,4952,8313,1433,840

2,7323,1492,8202,9802,884

3,2283,0853,1083,077

Unfilled orders-ship-ments ratio 3

Total

3.42

3.633.873.352.602.85

2.582.522.462.412.50

2.632.922.83

Dura-ble

goodsindus-tries

Seasonally adjusted

4.12

4.274.554.003.493.44

3.213.022.962.892.99

3.133.503.39

Non-dura-ble

goodsindus-tries

44.36244,52643,96644,55345,87646,332

45,60646,65445,94246,65547,32049,463

48,35348,45349,56649,23749,65049,850

50,18150,20151,87753,93153,384

23,94524,14823,54024,03925,30125,768

24,92125,87925,17725,67925,85228,056

26,83726,81428,00527,37327,17226,701

26,92527,32928,38130,28029,635

5,0725,0224,9825,0815,0905,376

5,3765,4715,3505,3145,3725,495

5,4665,3805,3825,4925,4475,968

5,7146,0275,9166,5506,263

20,41720,37820,42620,51420,57520,564

20,68520,77520,76520,97621,46821,407

21,51621,63921,56121,86422,47823,149

23,25622,87223,49623,65123,749

80,42380,00178,94678,75579,35080,103

80,67180,85480,91281,81982,18483,686

83,59283,68984,80985,29184,92784,048

82,80683,18483,61784,99185,684

77,35777,02076,04475,87676,52277,311

77,81577,93577,94178,81879,13280,578

80,49080, 59381,75482,23981,90280,970

79,68480,17780,57281,89482,607

3,0662,9812,9022,8792,8282,792

2,8562,9192,9713,0013,0523,108

3,1023,0963,0553,0523,0253,078

3,1223,0073,0453,0973,077

2.922.922.882.922.902.90

2.942.842.902.942.862.83

2.802.792.822.832.782.72

2.642.792.672.642.66

3.513.503.463.533.503.48

3.543.403.483.543.443.39

3.373.363.393.413.363.28

3.173.383.243.193.21

0.96

1.121.04.85.55

.63

.75

.68

.65.59

.62

.56

.53

0.56.55.54.53.52.51

.52

.53

.54

.53

.53

.53

.52

.52

.52

.50

.49

.50

.50

.50

.48

.48

.48

1 Monthly average for year and total for month.2 Seasonally adjusted, end of period.3 Ratio of unfilled orders at end of period to shipments for period. Annual figures relate to seasonally adjusted data

for December.* Where December data not available, data for year calculated on basis of no change from November.Source: Department of Commerce, Bureau of the Census.

278


PRICES

TABLE B^-5.—Consumer price indexes, by major groups, 1929-68

For city wage earners and clerical workers

[1957-59 = 100)

Year or monthAllems

59.7

58.253.047.645.146.647.848.350.049.148.4

48.851.356.860.361.362.768.077.883.883.0

83.890.592.593.293.693.394.798.0

100.7101.5

103.1104.2105.4106.7108.1109.9113.1116.3120.9

114.7114.8115.0115.3115.6116.0

116.5116.9117.1117.5117.8118.2

118.6119.0119.5119.9120.3120.9

121.5121.9122.2122.9123.4

Food

55.6

52.943.636.335.339.342.142.544.241.039.9

40.544.251.957.957.158.466.981.388.284.7

85.895.497.195.695.494.094.797.8

101.9100.3

101.4102.6103.6105.1106.4108.8114.2115.2119.2

114.7114.2114.2113.7113.9115.1

116.0116.6115.9115.7115.6116.2

117.0117.4117.9118.3118.8119.1

120.0120.5120.4120.9120.5

Housing

Total Rent

Appareland

upkeep

Trans-porta-

tion

Medicalcare

'ersonalcare

Readingand

recrea-tion

Othergoodsand

services

1929..

1930..1931..1932..1933..1934..1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944..1945,1946-.1947.1948.1949-

1950.1951.1952,1953.1954,1955.1956.1957.1958.1959.

1960--.1961...1962...1963.-.1964...1965...1966..1967-..1968 1..

1967: Jan..Feb..Mar..Apr..May..June.

July..Aug..Sept..Oct...Nov..D e c .

1968: J a n . .F e b . .Mar . .Apr_.May__June-July. .Aug. .Sept.Oc t . .Nov. .

56.357.159.160.159.7

59.961.464.264.966.467.569.374.579.881.0

83.288.289.992.393.494.195.598.5

100.2101.3

103.1103.9104.8106.0107.2108.5111.1114.3118.8

113.1113.3113.3113.6113.9114.1

114.3114.7115.0115.3115.5116.0

116.4116.9117.2117.5117.8118.7

119.5120.1120.4120.9121.7

85.4

83.178.770.660.857.056.958.360.962.963.0

63.264.365.765.765.966.166.568.773.276.4

79.182.385.790.393.594.896.598.3

100.1101.6

103.1104.4105.7106.8107.8108.9110.4112.4114.9

111.4111.7111.8111.9112.1112.2

112.4112.6112.8113.0113.2113.5

113.7113.9114.2114.4114.6114.9

115.1115.4115.7116.0116.3

55.3

54.149.243.642.146.146.546.949.349.048.3

48.851.159.662.266.770.176.989.295.091.3

90.198.297.296.596.395.997.899.599.8

100.6

102.2103.0103.6104.8105.7106.8109.6114.0119.8

111.3111.9112.6113.0113.8113.9

113.7113.8115.1116.0116.6116.8

115.9116.6117.6118.4119.5119.9

119.7120.3122.2123.3124.0

49.449.850.651.049.8

49.551.255.755.555.555.458.364.371.677.0

79.084.089.692.190.889.791.396.599.7

103.8

103.8105.0107.2107.8109.3111.1112.7115.9119.6

113.4113.8114.2115.1115.5115.7

116.2116.4116.8117.7118.3117.9

118.7118.6119.0119.0119.1119.7

119.8120.0119.5120.6121.2

49.449.650.050.250.2

50.350.652.054.556.257.560.765.769.872.0

73.476.981.183.986.688.691.895.5

100.1104.4

108.1111.3114.2117.0119.4122.3127.7136.7144.6

132.9133.6134.6135.1135.7136.3

136.9137.5138.5139.0139.7140.4

141.2141.9142.9143.5144.0144.4

145.1145.5146.4147.4148.2

42.643.245.746.746.5

46.447.652.257.661.763.668.276.279.178.9

78.986.387.388.188.590.093.797.1

100.4102.4

104.1104.6106.5107.9109.2109.9112.2115.5120.0

113.8114.1114.4114.9115.0115.3

115.5116.1116.4116.5116.9117.2

117.6117.6118.4119.0119.6120.1

120.4120.9121.5122.1122.8

50.251.052.554.354.4

55.457.360.065.072.075.077.582.586.789.9

89.392.092.493.392.492.193.496.9

100.8102.4

104.9107.2109.6111.5114.1115.2117.1120.1125.5

118.5118.6118.9119.4119.6119.7

119.8120.0120.5121.4122.0122.2

122.7123.0124.2124.9125.3125.6

125.9126.3126.7127.5128.0

52.752.654.054.555.4

57.158.259.963.064.767.369. r

75.478.981.2

82.686.190.692.894.394.395.898.599.8

101.8

103.8104.6105.3107.1108.8111.4114.9118.2123.5

116.2116.3116.4116.6116.7116.9

117.8118.8119.7120.3121.0121.4

121.9122.1122.4122.5122.6123.5

123.9124.2124.4125.1125.4

i January-November average.


279


TABLE B-46.—Consumer price indexes, by special groups, 1935-68


[1957-59=100]

Year ormonth All

items

47.848.350.049.148.4

48.851.356.860.361.362.768.077.883.883.0

83,890.592.593.293.693.394.798.0

100.7101.5

103.1104.2105.4106.7108.1109.9113.1116.3120.9

114.7114.8115.0115.3115.6116.0

116.5116.9117.1117.5117.8118.2

118.6119.0119.5119.9

, 120.3| 120.9

121.5121.9122.2122.9123.4

Allitemslessfood

52.553.054.955.555.1

55.356.960.962.665.066.569.475.881.382.1

83.188.490.592.392.893.194.797.9

100.1102.0

103.7104.8106.1107.4108.9110.4113.0116.8121.7

114.8115.2115.4115.9116.3116.5

116.8117.1117.7118.2118.7118.9

119.3119.7120.2120.6121.0121.6

122.1122.6123.0123.8124.4

Allitemsless

shel-ter

46.146.748.246.846.0

46.349.155.359.560.562.168.479.485.684.1

84.791.893.693.993.993.494.797.8

100.7101.5

103,0104.2105.4106.7108.0109.6112.9115.9120.4

114.2114.3114.6114.8115.1115.6

116.1116.5116.7117.1117.5117.7

118.2118.5119.1119.6120.0120.4

120.8121.2121.5122.2122.5

Commodities

Allcom-modi-ties

45.045.647.445.644.7

45.148.255.260.160.862.669.483.489.487.1

87.695.596.796.495.594.695.598.5

100.8100.9

101.7102.3103.2104.1105.2106.4109.2111.2115.1

109.9109.9110.0110.2110.5111.0

111.5111.9112.0112.4112.6112.9

113.2113.5113.9114.3114.7115.1

115.5115.9116.1116.8117.1

Food

42.142.544.241.039.9

40.544.251.957.957.158.466.981.388.284.7

85.895.497.195.695.494.094.797.8

101.9100.3

101.4102.6103.6105.1106.4108.8114.2115.2119.2

114.7114.2114.2113.7113.9115.1

116.0116.6115.9115.7115.6116.2

117.0117.4117.9118.3118.8119.1

120.0120.5120.4120.9120.5

Commodities less food

Ail

50.250.853.053.052.1

52.455.061.263.867.370.074.483.990.389.0

88.995.696.496.695.694.995.998.899.9

101.2

101.7102. 0102.8103.5104.4105.1106.5109.2113.0

107.3107.6107.8108.4108.7108.9

109.1109.4110.0110.6111.1111.1

111.2111.5111.9112.2112.5113.0

113.2113.5113.9114.7115.3

Dura-ble

47.147.850.851.750.6

50.253.660.962.968.773.977.383.889.991.2

92.299.2

100.599.897.395.495.498.5

100.0101.5

100.9100.8101.8102.1103.0102.6102.7104.3107.4

102.7102.8102.9103.4103.9104.1

104.4104.7104.8105.7106.0106.1

106.3106.4106.6106.9106.9107.4

107.6107.7107.6108.5109.3

Non-dura-

ble

48.849.251.250.950.1

50.652.858.460.964.066.371.181.788.086.3

86.292.793.294.094.494.496.599.199.8

101.0

102.6103.2103.8104.8105.7107.2109.7113.1117.5

111.0111.5111.8112.4112.7112.7

112.8113.2114.1114.5115.2115.2

115.1115.6116.1116.4117.0117.5

117.6118.1118.9119.7120.2

Totalnon-

dura-ble

44.545.146.844.743.8

44.347.454.359.059.561.268.082.088.085.4

85.994.095.194.994.894.195.498.4

101.0100.6

101.9102.8103.6104.9106.0107.9111.8114.0118.2

112.7112.7112.9113.0113.2113.8

114.3114.8114.9115.1115.3115.6

116.0116.4116.9117.3117.8118.2

118.7119.2119.6120.2120.3

Services

All;ervices

52.252.854.455.455.5

55.756.458.259.360.761.562.765.369.472.6

75.078.982.486.088.790.592.896.6

100.3103.2

106.6108.8110.9113.0115.2117.8122.3127.7134.0

125.5125.9126.3126.6127.0127.4

127.7128.2128.7129.1129.6130.1

130.8131.3132.1132.5133.0133.9

134.9135.5136.0136.6137.4

Rent

56.958.360.962.963.0

63.264.365.765.765.966.166.568.773.276.4

79.182.385.790.393.594.896.598.3

100.1101.6

103.1104.4105.7106.8107.8108.9110.4112.4114.9

111.4111.7111.8111.9112.1112.2

112.4112.6112.8113.0113.2113.5

113.7113.9114.2114.4114=6114.9

115.1115.4115.7116.0116.3

Ailserv-iceslessrent

49.349.049.549.949.9

50.050.652.855.257.959.161.264.368.071.4

73.477.881.584.987.489.491.996.1

100.2103.6

107.4110.0112.1114.5117.0120.0125.0131.1138.2

128.8129.2129.5130.0130.4130.8

131.2131.7132.3132.7133.2133.8

134.6135.2136.1136.6137.1138.1

139.3140.0140.5141.2142.0

1 January-November average.Source: Department of Labor, Bureau of Labor Statistics.

28O


TABLE B-47.—Consumer price indexes, selected commodities and services, 1935-68


(1957-59 = 100)

Year ormonth

19351936 . . .193719381939 . . .

19401941 . . .194219431944 .19451946194719481949

19501951 .195219531954 . .195519561957 .19581959

19601961196219631964 . . .19651966 .19671968 3

1967: Jan___Feb. . .Mar.._Apr__.May...June. .

July...Aug...Sept. .Oct . . .Nov...D e c . .

1968: J a n . . .Feb . . .Mar...Apr. . .May...June. .

July...Aug...Sept . .Oct . . .Nov...

Durable commodities

Total i

47.147.850.851.750.6

50.253.660.962.968.773.977.383.889.991.2

92.299.2

100.599.897.395.495.498.5

100.0101.5

100.9100.8101.8102.1103.0102.6102.7104.3107.4

102.7102.8102.9103.4103.9104.1

104.4104.7104.8105.7106.0106.1

106.3106.4106.6106.9106.9107.4

107.6107.7107.6108.5109.3

Newcars

40.340.641 443.442.4

42.545.7

67.974.281.2

81.885.793.194.092.589.291.796.599.6

103.9

102.5102.5102.1101.5101.299.097.298.1

100.6

97.697.397.297.096.996.8

97.096.996.1

101.1101.4101.3

101.0100.8100.6100.3100.3100.1

99.899.198.4

102.8103.8

Usedcars

108.492.287.283.994.097.4

108.8

101.6105.6115.2116.6121.6120.8117.8121.5

113.0114.0115.9118.8121.4122.4

124.8125.2126.2126.0125.6124.8

125.8123.6

126." 3"126.7

126.7"

House-holddura-bles

51.252.156 756 755.6

54.958.765.768.274.680.384.993.999.997.2

98.4107 8105.0103.8101.098.397.999.6

100.3100.2

100.198.998.898.598 496.996.898.2

101.2

97.697.797.898.098.198.0

98.198.298.498.798.899.1

99.699.9

100.4100.8101.1101.3

101.5101.6102.0102.3102.8

Housefur-nish-ings

48.048.852 852 451.3

50.954 461.963.669.173.980.693 499.195.7

96.3106 8104.2103.7101.9100.098.9

100.599.899.8

100.199.598.998.598 497.998.8

100.8104.6

99.7100.0100.3100.6100.6100.7

100.8100.8101.2101.5101.8102.1

102.6103.1103.8104.2104.4104.7

104.8104.9105.4105.9106.5

Nondurable commod-ities less food

Total

48.849.251 250.950.1

50.652.858.460.964.066.371.181.788.086.3

86.292.793.294.094.494.496.599.199.8

101.0

102.6103.2103.8104.8105.7107.2109.7113.1117.5

111.0111.5111.8112.4112.7112.7

112.8113.2114.1114.5115.2115.2

115.1115.6116.1116.4117.0117.5

117.6118.1118.9119.7120.2

Apparelcom-mod-ities

46.747.249 849 448.6

49.251.760.463.267 671.278.590 996.592.7

91.6100 299.198.097.597.098.699.799.7

100.6

102.0102.6103.0104.0104 9105.8108.5113.0118.9

110.1110.7111.5111.9112.7112.8

112.6112.7114.1115.1115.7115.9

114.8115.6116.6117.6118.7119.1

118.9119.5121.5122.7123.4

Non-dura-bleslessfoodand

apparel

51.451.953 253.152.4

52.954.757.860.261.963.165.874.981.881.9

82.587 689.391.692.592.895.198.899.9

101.3

102.8103.3104.2105.3106.2108.0110.3113.1116.6

111.6111.9112.0112.7112.6112.7

113.0113.4114.1114.2114.8114.7

115.3115.5115.8115.8116.0116.6

116.9117.3117.4117.9118.3

Services less rent

Total

49.349.049 549.949.9

50.050.652.855.257.959.161.264.368.071.4

73.477.881.584.987.489.491.996.1

100.2103.6

107.4110.0112.1114.5117.0120.0125.0131.1138.2

128.8129.2129.5130.0130.4130.8

131.2131.7132.3132.7133.2133.8

134.6135.2136.1136.6137.1138.1

139.3140.0140.5141.2142.0

House-holdserv-iceslessrent

90.495.7

100.8103.6

108.0109.2110.6113.0114.8117.0121.5127.0134.0

125.1125.5125.6126.0126.5126.7

127.0127.5128.1128.4128.6129.1

129.9130.6131.1131.5132.1133.7

135.6136.7137.0137.6138.5

Trans-porta-tionserv-ices

46.646.245.946.246.4

46.346.649 149.149.049.150 151.757.764.2

68.474.880.185 288.989 190.594.8

100.8104.3

107.0109.5111.2112.4115.0119.3124.3128.4133.2

126.9127.2127.4127.6127.7128.1

128.3128.8128.9129.2130.0130.4

131.5131.9132.4132.7132,9133.3

133.5133,6133.8134.6135.2

Med-icalcareserv-ices

46.346.547.147.247.3

47.347.649.051.653.755.258.463.367.670.1

71.775.380.183.085.588.091.495.3

100.0104.8

109.1113.1116.8120.3123.2127.1133.9145.6155.8

140.6141.6142.9143.6144.4145.2

146.0146.7148.0148.7149.6150.4

151.4152.3153.6154.3155.0155.5

156.6157.1158.2159.4160.3

Other*

93.597.2

100.2102.6

106.2109.7112.6115.3118.5121.8126.5131.5138.5

129.1129.4129.7130.3130.8131.3

131.6131.9132.4133.1133.9134.3

134.8135.3137.0137.6138.3138.9

139.2139.7140.3140.9141.5

'1ncludes certain items not shown separately.3 Includes the services components of apparel, personal care, reading and recreation, and other goods and services.' January-November average.Source: Department of Labor, Bureau of Labor Statistics.

28l


TABLE B-48.— Wholesale price indexes, by major commodity groups, 1929-68

[1957-59 = 100]

Year or month

1929

19301931 - - _ .1932193319341935 . .1936193719381939 . . . . . . .

1940194119421943194419451946194719481949

19501951195219531954 .1955195619571958 . . . . . .1959

1960196119621963 . . .19641965196619671968 2


July..AugSeptOctNovDec

1968: JanFebMarAprMayJune . _

JulyAug_ . . .SeptOct .NovDec P.

All com-modities

52.1

47.339.935.636.141.043.844.247.243.042.2

43.047.854.056.556.957.966.181.287.983.5

86.896.794.092.792.993.296.299.0

100.4100.6

100.7100.3100.6100.3100.5102.5105.9106.1108.7

106.2106.0105.7105.3105.8106.3

106.5106.1106.2106.1106.2106.8

107.2108.0108.2108.3108.5108.7

109.1108.7109.1109.1109.6109.8

Farmproducts

63.9

54.039.629.431.339 948.049.452.741 939.9

41.350 164.674.875 378.390.6

109.1117.1101.3

106.4123.8116.8105.9104.497.996.699.2

103.697.2

96.996.097.795.794.398.4

105.699 7

102.2

102.6101.099.697.6

100.7102.4

102.899.298.497.196.498.9

99.0101.3102.1102.1103.6102.5

103.9101.4102.8101.2103.1103.3

Processedfoods and

feeds

92.699.190.0

93.2103.5102.397.699.395.094.897.6

102.599.9

100.0101.6102.7103.3103.1106.7113.0111.7114.1

112.8111.7110.6110.0110.7112.6

113.1112.1112.7111.7110.9111.5

112.4113.3112.9112.8113.6114.6

115.9114.9115.3114.4114.7114.7

Industrial commodities

Total

51 7

48.142.439.740 244 244.044.948.146 146.0

46.850 353.954.755 656.361.775.381.780.0

82.991.589.490.190.492.496.599.299.5

101.3

101.3100.8100.8100.7101.2102.5104.7106 3109.0

105.8106.0106.0106.0106.0106.0

106.0106.3106.5106.8107.1107.4

107.8108.3108.6108.8108.6108.8

108.8103.9109.2109.7109.9110.2

Textileproducts

andapparel

105.7110.3100.9

104.8116.9105.5102.8100.6100.7100 7100.898.9

100.4

101.599.7

100 6100.5101.2101.8102.1102 1105.5

102.0102.0101.8101.8101.6101.6

101.5101.7102.0102 2103.0103.8

104.3104.6104.6104.7104.8105.2

105.8106.0106.5107.0107.2

Hides,skins,

leather,and

relatedproducts

56.6

52.044 738.042.044 946 549.554.348 249.6

52.356 161 161.060 561 370.796.597.592.5

99.9114.892.894.189.989.594 894.996.0

109.1

105.2106.2107 4104.2104.6109.2119.7115 8119.2

117.9118.0116.9115.7115.2115.6

115.2114.4114.4114 8115.4116.0

116.5116.7117.9118.3118.8118.7

119.5119.5120.7122.3122.4

Fuels andrelated

products,and

power

61.5

58.250 052.149.354 354 556.557.556 654.2

53.256 658 259.961 662 366.779.793.889.3

90.293.593.395.994.694.597 4

102.798.798.7

99.6100.7100.299.897.198.9

101.3103 6102.5

102.6103.4103.7103.3104.4104.0

103.9104.7104.5103.0102.8102.6

101.8102.5102.0102.4102.4103.7

103.3102.6102.5101.9102.0

Chemicalsand alliedproducts

46.648 850 951.253.651 050.7

51.656 162 363.163 864 269.492.294.486.2

87.5100.195.096.197.396.997.599.6

100.4100.0

100.299.197.596.396.797.497.898.498.2

98.498.598.598.898.898.5

98.398.097.998.298.298.4

98.298.198.698.898.798.5

98.298.197.997.897.8


282


TABLE B-48.— Wholesale price indexes, by major commodity groups, 1929-68—Continued[1957-59=1001

Year or month

1929

193019311932.1933193419351936..193719381939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960.19611962196319641965196619671968 2

1967: Jan...Feb...Mar..Apr...May..June..

1968: Jan...Feb...Mar..Apr...May..June.

July..Aug..Sept..Oct...Nov..Dec p.

Industrial commodities—Continued


Rubberand

rubberproducts

57.6

50.442.837.139.045.545.849.458.157.159.3

55.359.669.471.370.468.368.668.370.568.3

83.2102.192.586.387.699.2

100.6100.2100.199.7

99.996.193.393.892.592.994.897.0

100.2

95.695.895.995.995.895.8

95.897.898.298.899.199.2

99.599.599.799.799.899.9

100.7100.6100.7101.0101.1

Lumberand

woodproducts

26.4

24.119.616.920.023.522.623.627.925.426.1

28.934.537.539.742.843.449.777.488.581.9

94.1102.599.599.497.6

102.3103.898.597.4

104.1

100.495.996.598.6

100.6101.1105.6105.4118.0

102.6103.6103.6104.1104.2104.7

105.3106.1108.7107.3106.7107.6

108.6111.6113.9115.8117.0117.2

119.2120.5122.6124.9126.8

Pulp,paper,and

alliedproducts

75.378.675.2

77.191.389.088.788.891.197.299.0

100.1101.0

101.898.8

100.099.299.099.9

102.6104.0105.2

103.1103.3103.6103.9103.9103.9

104.1104.0104.1104.3104.6104.8

105.2105.7105.2105.2105.5104.7

104.9104.9105.1105.2105.2

Metalsand

metalproducts

44.1

39.735.732.33.637.137.037.843.241.641.2

41.442.242.842.742.743.448.560.268.569.0

72.780.981.083.684.390.097.899.799.1

101.2

101.3100.7100.0100.1102.8105.7108.3109.6112.3

109.4109.6109.4109.1108.9108.8

108.9109.2109.5109.9111.0111.4

112.2113.3113.8113.3111.7111.7

111.4111.3112.2112.5112.4

Machin-ery andequip-ment

46.2

46.347.147.847.447.147.251.960.065.168.2

70.578.878.980.782.184.691.597.9

100.0102.1

102.9102.9102.9103.1103.8105.0108.2111.8115.1

111.1111.2111.5111.6111.6111.6

111.6111.8111.9112.2112.6113.2

113.9114.1114.3114.8115.0115.0

115.2115.4115.8116.1116.6

Furni-tureandhouse-hold

durables

56.4

55.551.145.045.149.048.649.354.753.453.2

54.457.862.562.163.863.967.877.882.583.8

85.692.891.192.993.994.396.999.4

100.2100.4

100.199.598.898.198.598.099.1

101.0104.0

100.4100.4100.6100.6100.8100.8

100.9101.0101.2101.7102.0102.1

103.0103.3103.6103.8104.0103.9

104.1104.2104.4104.5104.7

Nonme-tallic

mineralproducts

53.4

53.249.746.549.252.652.652.753.952.251.2

51.252.454.554.755.858.161.869.174.776.7

78.683.583.586.988.891.395.298.999.9

101.2

101.4101.8101.8101.3101.5101.7102.6104.3108.0

103.6103.7103.8103.9103.8103.9

104.2104.5104.7104.9105.1105.3

106.0106.9107.3107.4107.8108.3

108.4108.7108.7108.9109.2

Trans-portationequip-ment:Motor

vehiclesand

equip-ment1

42.8

40.338.337.335.637.536.035.738.240.840.0

41.344.248.248.248.549.457.265.572.477.4

77.081.185.885.485.688.293.297.2

100.3102.5

101.0100.8100.8100.0100.5100.7100.8102.1104.7

101.6101.6101.6101.6101.6101.4

101.3101.3101.5103.7104.0104.0

104.3104.3104.3104.3104.2104.5

104.2104.4104.1106.5106.6

Miscel-laneousproducts

80.383.685.2

86.691.791.293.694.494.595.898.6

100.6100.8

101.7102.0102.4103.3104.1104.8106.8109.2111.7

107.9108.0107.7108.0108.0109.6

109.7110.0110.2110.5110.6110. 7

111.0111.3111.5111.8111.8111.8

111.5111.6111.9112.0112.5

1 Index tor total transportation equipment not available.2 Where December data not available, January-November average.


283


TABLE B-49.—Wholesale price indexes, by stage of processing, 1947-68

[1957-59=100)

Year or month

1947 .19481949

19501951195219531954

19551956195719581959

1960196119621963—1964

1965_. _.1966196719684 _ _ _


JulyAugSeptOct_NovDec


JulyAugSeptOctNovDeep

Ailcom-modi-ties

81.287.983.5

86.896.794.092.792.9

93.296.299.0

100.4100.6

100.7100.3100.6100.3100.5

102.5105.9106.1108.7

106.2106.0105.7105.3105.8106.3

106.5106.1106.2106.1106.2106.8

107.2108.0108.2108.3108.5108.7

109.1108.7109.1109.1109.6109.8

Crude materials

Total

100.8110.595.6

104.2119.6109.9101.5100.6

96.797.299.4

101.699.0

96.696.197.195.094.1

98.9105.399.6

101.1

101.9100.899.798.0

100.6101.4

101.799.598.597.996.598.6

99.1100. S101.6101.4102.0101.4

102.6100.8100.9100.2101.5

Food-stuffsand

feed-stuffs

113.0122.2101.5

108.9126.0118.6106.2106.2

96.294.298.4

104.297.4

96.294.996.894.091.9

98.3107.2101.2102.5

104.2102.7101.399.2

103.1104.2

104.7101.499.999.196.198.3

99.1101.8102.6102.9104.1103.2

104.9102.0102.1101.2103.2

.1Non-foodmate-rials,

exceptfuel

86.596.287.5

100.0115.399.995.693.8

99.1102.8101.497.6

101.0

96.897.997.496.297.8

99.8101.995.597.5

97.096.595.794.694.795.1

94 694.594.394.295.998.4

98.298.498.997.696.696.7

96.897.497.797.096.8

Fuel

73.687.086.5

86.187.788.391.487.3

87.193.398.699.8

101.6

102.5102.3101.8103.0102.5

103.3106.4110.3112.5

109.4109.3109.4110.2110.3109.8

110.2110.3111.0110.9111.3111.5

111.4111.7112.2112.3112.4112.2

112.5112.4112.6113.2114.3

Intermediate materials, supplies, and componentsl

Total

76.582.779.4

83.093.090.390.891.3

93.097.199.499.6

101.0

101.0100.3100.2100.5100.9

102.2104.8105.6107.9

105.6105.5105.5105.5105.3105.4

105.4105.4105.7105.7106.1106.5

106.9107.6107.7107.9107.7107.8

107.9107.9108.3108.5108.6

Materials and components formanufacturing

Total

75.581.578.0

81.892.788.890.290.4

92.696.999.399.7

101.0

101.099.899.299.4

100.4

102.0104.0104.8107.0

104.7104.8104.6104.6104.4104.4

104.4104.5104.7104.8105.4105.8

106.3108.9107.1107.2105.9106.8

106.9106.8107.3107.4107.6

Mate-rials

for foodmanu-factur-

ing

102.6105.891.0

94.7105.5101.4101.6100.7

97.597.999.7

102.098.3

99.5102.6100.5105.5104.0

106.6111.3109.2110.6

110.1109.0108.7108.1109.1110.2

110.2109.9110.0108.6108.0108.1

108.7109.9109.6109.7110.6111.3

112.0111.3111.6110.6111.3

Mate-rials

for non-durable

manu-factur-

ing

94.099.590.7

95.2110.399.398.596.9

97.398.8

100.199.1

100.8

100.898.698.097.197.8

98.799.599.0

100.1

99.399.399.199.198.998.6

98 498.498.498.899.399.8

99.8100.199.9

100.0100.3100.0

100.0100.1100.4100.4100.5

Mate-rialsfor

durablemanu-

factur-ing

58.866.468.2

72.180.180.383.985.7

90.095.798.899.5

101.8

101.9100.5100.4100.5102.5

104.6106.6108.1111.6

107.6107.9107.7107.6107.4107.4

107 5107.7108.1108.4109.5109,9

110.9112.0112.7112.3110.9110.9

110.9110.9111.9112.2112.1

Com-ponents

formanu-factur-

ing

63.068.069.3

71.981.681.883.383.7

87.495.499.199.9

101.1

100.699.698.898.899.7

101.3104.9107.9110.4

107.5107.6107.9107.9107.6107.5

107 5107.9108.0108.1108.6109.1

109.4109.9110.0110.6110,5110.3

110.4110.5110.6111.0111.3

Mate-rialsand

com-ponentsfor con-struc-tion

69.677.077.2

81.288.888.289.790.1

93.798.599.199.1

101.8

101.199.799.399.6

100.6

101.4104.1105.4110.3

104.4104.7104.8104.9104.8104.9

105.2105.5106.3106.2106.3106.8

107.4108.5109.3109.9109.8110.0

110.4110.9111.7112.4112.9



TABLE B-49.—Wholesale price indexes, by stage of processing, 1947-68—Continued

11957-59=100]

Year or month

194719481949

1950 . _.195119521953 _ -1954

1955195619571958 . .1959

19601961196219631964

19651966 .196719684

1967: JanFeb..MarApr . _MayJune

JulyAug . .SeptOct. . .NovDec - .


JulyAugSeptOctNovDeep

Finished goods

Total

80.186.484.0

85.593.693.092.192.3

92.595.198.6

100.8100.6

101.4101.4101.7101.4101.8

103.6106.9108.2111,2

107.7107.6107.2107.0107.6108.4

108.7108.3108.7108.6108.9109.3

109.7110 2110.4110.5110.9111.3

111.9111.4112.0112.0112.5

Consumer finished goods

Total

86.192.688.3

89.898.297.095.495.3

94.796.198.9

101.0100.1

101.1100.9101. 2100.7100.9

102.8106.4107.0109.8

106.6106.5106.0105.7106.4107.4

107.7107.2107.6107.2107.5107.9 •

108.2108.9109.0109.0109.5110.0

110.7110.0110.7110.6111.0

Foods

90.799.091.0

92.8104.2103.397.997.1

94.794.597.8

103.598.7

100.8100.4101.3100.1100.6

104.5111.2109.5113.3

110.3109.3107.9106.9108.5110.9

111.5109.6110.5108.8109.1110.1

110.6112.0111.9111.7113.0113.6

115.3113.7115.6113.9114.8

Othernon-

durablegoods

86.592.088.2

89.696.594.195.095.3

95.897.799.999.3

100.8

101.5101.5101. 6101.9101.6

102.8104.8107.2109.3

105.8106.3106.4106.4106.9107.2

107.4108.0108.0107.8107.9108.0

108. 0108.4108.6109.0109.1109.8

110.0109.7103.9110.0110.2

Du-rablegoods

75.981.183.2

84.189.790.491.191.8

92.895.998.7

100.1101.3

100.9100.5100.099.599.9

99.6100. 2101.7103.8

101.3101.3101.3101.3101.3101.0

101.1101.2101.4102.8103.0103. 0

103.5103.5103.6103.5103.5103.5

103.3103.6103.4104.9105.0

Pro-ducer

finishedgoods

61.867.470.7

72.479.580.882.183.1

85.692.097.7

100.2102.1

102.3102.5102.9103.1104.1

105.4108.0111.5115.2

110.5110.6110.7110.8111.1111.2

111.2111.4111.6112.6113.0113.4

114.0114.2114.4114.8114.9115.1

115.2115.4115.7116.4116.9

Special groups of industrialproducts

Crudemate-rials 2

79.292.584.0

93.6102.993.192.488.0

96.6102.3100.996.9

102.3

98.397.295.694.397.1

100.9104.5100.0101.7

101.4101.1100.299.399.499.4

99.099.099.599.4

100.6101.3

101.4102.4103.1101.7100.5100.6

100.9101.0101.5102.2103.0

Inter-mediate

materials,supplies,and com-ponents s

73.479.877.8

81.491.288.389.489.8

92.597.099.699.4

101.0

101.4100.199.999.6

100.2

101.5103.6104.8107.4

104.4104.6104.6104.7104.5104.4

104.5104.6104.9105.0105.5105.9

106.3107.0107.3107.5107.3107.2

107.3107.4107.8108.1108.2

Con-sumer

finishedgoods ex-

cludingfoods

83.188.486.5

87.894.292.993.794.1

94.897.199.599.6

100.9

101.3101.2101.0101.0100.9

101.6103.2105.2107. 3

104.2104.5104.5104.6104.8104.9

105.1105.5105.6106.0106.1106.2

106.4106.7106.8107.0107.0107.5

107.5107.5107. 5108.2108.4

1 Includes, in addition to subgroups shown, processed fuels and lubricants, containers, and supplies.2 Excludes crude foodstuffs and feedstuffs, plant and animal fibers, oilseeds, and leaf tobacco.3 Excludes intermediate materials for food manufacturing and manufactured animal feeds.4 Where December data not available, January-November average.Note.—For a listing of the commodities included in each sector, see monthly report "Wholesale Prices and Price

Indexes," January-February 1967.Source: Department of Labor, Bureau of Labor Statistics.


MONEY SUPPLY, CREDIT, AND FINANCE

TABLE B-50.—Money supply, 1947-68

[Averages of daily figures, billions of dollars]

Year and month

1947: Dec.1948: Dec.1949: Dec.

1950: Dec.1951: Dec.1952: Dec.1953: Dec.1954: Dec.

1955: Dec.1956: Dec.1957: Dec.1958: Dec.1959: Dec

1960: Dec1961: Dec.1962: Dec1963: Dec1964: Dec

1965: Dec...1966: Dec...1967: Dec.1968: Dec p.

1967: Jan..Feb..Mar .Apr..May..June-July..Aug..Sept.Oct_.Nov_.Dec.

1968: Jan..Feb.-Mar._Apr .May..June-July..Aug..Sept.Oct..Nov..Dec p

Money supply

Cur-rencycom-po-

nent1

De-mand

deposilcom-

ponent

Seasonally adjusted

148.5147.6147.6

152.9160.8168.6173.3180.6

185.2188.8193.3206.6209.3

213.9228.1245.2265.2285.9

313.4328 6364.8397.3

331.3335.2339.1340.6344.5348.6

352.6356.2358.5360.8363.0364.8

366.4367.9370.1371.4373.7375.6

379.8384.0386.0389.8393.9397.3

113.1111.5111.2

116.2122.7127.4128.8132.3

135.2136.9135.9141.1141.9

141.1145.4147.4153.0159.3

166.8170.4181.3193.0

170.3171.8173.2172.5174.4176.0

177.8178.9179.1180.2181.0181.3

182.3182.7183.4184.3186.1187.4

25.026.127.327.727.4

28.929.630.632.534.2

38.538.738.939.039.139.3

39.439.539.739.940.140.4

40.640.741.141.441.642.0

107.4108.7107.6112.6113.1

112.1115.9116.8120.5125.1

130.5132.1140.9149.6

131.8133.0134.3133.5135.3136.7

35.436.036.4

— Time

Unadjusted

72.982.797.8

112.2126.6

189. 4 42. 2190.3 42.6189. 5 42. 7190.2192.0193.0

42.843.243.4

184.1185.2186.7187.1187.6188.2

190.4193.8

1196.6199.5201.9204.3

151. 0150.0150.0

155.163.171.176.183.

188.191.196.209.212.

216.231.248.268.289.

317.332.369.401

335334338342341347

350353357360363369

371367

68746

27032

82222

3717

956382

953971

41

115.9114. 3113.9

119.125.

28

130.8132.135.

138.140.139.144.145.

144.149.151.157.164

172

16

63376

74630

0175.8187199

175170171173171

12

36960

174.2

175175178180182187

187181

78

.354

.1

.6

.4369.6373.5370.9374.1

378.0381.3384.8389.7394.1401.7

182.0185.6182.5185.6

187.2186.9188.6190.6193.4199.2

26.826.225.5

25.426.627.828.227.9

28.428.828.929.229.5

29.630.231.233.135.0

37.139.141.244.3

38.538.338.538.638.839.2

39.639.639.740.040.441.2

40.540.340.741.141.341.9

42.442.742.742.943.744.3

89.88.

11

88.4

93.99

103

820

103.9107

110111

7

25

110.4115.5116.1

115.2119.2120.3124.1129.1

134.9136.7145.9154.8

136.8132.2133.4134.9132.2135.0

136.2136.2138.5140.5141.9145.9

147.1141.1141.2144.5141.1

35.1 !35.736.1

36.438.040.944.248.0

49.651.456.764.666.6

72.181.896.7

111.0125.2

145.21156.9182.0

J202.5

160.6164.0166.7168.8170.8173.0

175.2177.8179.0180.4181.3182.0

183.7185.8187.7187.9"^8.4

U.S.Gov-ern-mentde-

mandde-pos-its*

143.6

144.8144.2145.8147.7149.7154.8

188.

190.194.196.

6

842

199.1200.202.

75

1.01.82.8

2.42.74.93.85.0

3.43.43.53.94.9

4.74.95.65.15.5

4.63.45.04.7

4.25.14.94.86.64.0

5.74.35.06.35.35.0

5.07.26.64.26.45.4

5.75.55.96.14.24.7

1 Currency outside the Treasury, the Federal Reserve System, and the vaults of all commercial banks.2 Demand deposits at all commercial banks, other than those due to domestic commercial banks and the U S Govern-

bank' ™*h ' t e m S ' " p r o c e s s o f c o l l e c t i o n a n d Federal Reserve float, plus foreign demand balances at Federal Reserve

!ALm ( l ,doP2s i t s a d i u s t e d a r e t i m e deposits at all commercial banks other than those due to domestic commercial banksand the U.S. Government.

* Deposits at all commercial banks.


286


TABLE B-51.—Bank loans and investments, 1929-68[Billions of dollars]

End of year or month !

1929 5.1930 5.1931 5.1932 ».1933 5.1934 5.1935...1936__.1937._1938..1939..1940...1941._.1942..1943..1944..1945..1946..1947..1948..

1948.1949.1950.1951.1952.1953.1954.1955.1956_1957.1958.1959.1960.1961.1962'1963'1964.1965.1966.1967.1968 <1967:

1968:

JanFebMar.....AprMay.....JuneJuly.....AugSept....OctNov .....DecJanFebMarAprMayJuneJulyAugSept p...Oct p....Nov p....Decs....

All commercial banks

Total loansand invest-

ments 2

49.448.944.936.130.432.736.139.638.438.740.743.950.767.485.1

105.5124.0114.0116.3114.2

Loans 2

35.734.529.221.816.315.715.216.417.216.417.218.821.719.219.121.626.131.138.142.4

Investments

U.S. Govern-ment securities

4.95.06.06.27.5

10.313.815.314.215.116.317.821.841.459.877.690.674.869.262.6

Othersecurities

Seasonally adjusted

113.0118.7124.7130.2139.1143.1153.1157.6161.6166.4181.2185.9194.5209.6227.9246.2267.2294.4310.5346.5384.8314.3317.7321.5322.9324.7326.2332.5336.6339.1342.0344.3346.5349.9353.9352.5355.2357.3357.8365.9370.4374.8379.6381.6384.8

41.542.051.156.562.866.269.180.688.191.595.6

107.8113.8120.4134.0149.6167.7192.6

7 208.2225.4252.8210.2210.8211.9212.9213.4214.1216.5218.0219.9221.4222.7225.4227.5229.2229.0231.4232.6233.5238.4241.1243.8246.9250.4252.8

62.366.461.160.462.262.267.660.357.256.965.157.759.865.364.661.760.757.153.659.761.054.155.857.356.356.455.959.461.361.461.961.259.760.062.059.960.361.060.463.163.964.064.261.061.0

8.79.49.78.16.56.77.17.97.07.27.17.47.26.86.16.37.38.19.09.2

9.210.312.413.414.214.716.416.816.317.920.520.520.823.929.235.038.744.8

7 48.761.471.049.951.152.453.754.956.256.557.357.758.660.461.462.462.763.663.463.663.964.465.567.068.570.271.0

Weekly re-porting largecommercial

banks 3

Business loans4

5.14.24.75.37.16.36.46.57.3

11.314.715.6

15.613.917.921.623.423.422.426.730.831.831.730.732.232.935.238.842.1

3 53.160.765.874.060.460.462.062.361.863.863.762.263.463.163.765.865.065.166.567.667.169.269.268.169.469.771.274.0

1 Data are for last Wednesday of month (except June 30 and December 31 call dates used for all commercial banks).2 Adjusted to exclude interbank loans beginning 1948.3 Loans by weekly reporting large commercial banks beginning 1965 and formerly weekly reporting member banks. See

"Federal Reserve Bulletin," March 1967.* Commercial and industrial loans and prior to 1956, agricultural loans. Beginning July 1959, loans to financial institu-

tions excluded. Prior to 1943, published data adjusted to include open market paper.5 June data used because complete end-of-year data not available.6 Commercial bank data are estimates for December 31.7 Effective June 1966, balances accumulated for payment of personal loans (about $1.1 billion) are excluded from loans

at all commercial banks, and certain certificates of CCC and Export-Import Bank totaling about $1 billion are included inother securities rather than in loans.


287


TABLE B-52.—Selected liquid assets held by the public, 1946-68 i

[Billions of dollars, seasonally adjusted]

End of year or month | TotalDemanddeposits

andcurrency2

Time deposits

Com-mercialbanks3

Mutualsavingsbanks

Postalsavingssystem

Savingsandloan

shares

U.S.Govern-

mentsavingsbonds *

U.S.Govern-

mentsecuritiesmaturing

within1 year *

1946..1947.1948.1949.

1950.1951.1952.1953.1954.

1955.1956.1957.1958.1959.

1960.1961.1962.1963.1964.

1965.1966 51967.1968 6

1967: Jan...Feb..Mar..Apr..May..June.

July..Aug..Sept..OcL..Nov..D e c .

1968: Jan...Feb._Mar..Apr..May..June.

July p..Aug p..Sept p..Octp...Nov P. .

239.1246.2254.1262.1

271.4281.0296.0311.5320.3

332.5343.2356.0373.1393.9

399.2424.6459.0495.4530.5

573.1601.5650.5

605.2604.8615.2613.2619.8620.8

623.1630.3635.7638.1645.9650.5

655.9658.7665.7664.6667.9670.9

676.6679.7684.5692.6697.9

108. 5 I112.4110.5 I110.4 I

115.5 |120.9 i125.5127.3 !130.2 |

133.3134.6133.5138.8139.7

138.4 !142.6 !144.8 j149.6156.7

164.1168.6180.7

I

167.0165.9171.0168.7173.0173.7

172.0174.2176.3175.8177.9180.7

179.6178.3181.8181.1183.9 I186.8 |

186.2186.0186.3187.6189.4

33.935.335.936.3

36.638.241.244.648.2

49.752.057.565.467.4

73.182.598.1 i

112.9 |127.1 |

147.1159.3183.1

163.6165.3167.6168.6170.7172.4

55.555.956.356.857.458.0

174.7177.2178.1180.1183.8183.1

186.5187.6187.9187.6187.7187.9

191.5194.0195.9200.0204.4

16.917.818.419.3

20.120.922.624.426.3 j

28.130.031.633.934.9

36.2 !38.3 I41.4 !44.549.0

52.655.260.364.3

58.458.7 !59.1 ;

59.5 i59.960.3 j

60.661.161.4 !61.7 '62.1 j62.6

62.863.0 !63.463.864.364.3

3.33.43.33.2

2.92.72.52.42.1

1.9 ,1.6 I1.31.1.9

. 6

. 5

. 5

. 4

.3

.1

8.59.7

11.012.5

14.016.119.222.827.2

32.037.041.747.754.3

61.870.579.890.9

101.4

109.8113.4123.9130.8

113.7114.8116.3117.1118.0118.9

119.9121.0122.5123.0123.7123.9

123.6124.6125.9126.0126.5126.8

127.2128.1129.5130.0130.8130.8

48.650.953.455.0

55.855.455.755.655.6

55.954.851.650.547.9

47.047.447.649.049.9

50.550.951.952.5

51.050.951.051.151.151.2

51.351.351.451.451.551.9

51.951.851.851.851.851.9

19.416.621.625.5

26.426.829.334.430.6

31.633.238.835.648.8

41.942.646.848.146.1

48.653.950.558.5

54.251.752.950.949.546.5

46.747.848.248.349.150.5

53.655.457.056.555.954.9

51.952.052.052.052.152.5

56.956.657.459.257.058.5

1 Excludes holdings of the U.S. Government, Government agencies and trust funds, domestic commercial banks, andFederal Reserve banks. Adjusted wherever possible to avoid double counting.

2 Agrees in concept with the money supply, Table B-50, except for deduction of demand deposits held by mutual savingsbanks and savings and loan associations. Data are for last Wednesday of month.

3 Time deposits at all commercial banks other than those due to domestic commercial banks and the U.S. Government(same concept as in Table B-50). Data are for last Wednesday of month, except that June 30, and December 31 calldata are used where available.

4 Excludes holdings of Government agencies and trust funds, domestic commercial and mutual savings banks, FederalReserve banks, and beginning February 1960, savings and loan associations.

5 Effective June 1966, balances accumulated for the payment of personal loans (about $1.1 billion) are excluded fromtime deposits at all commercial banks and from total liquid assets.

6 Estimates by Council of Economic Advisers.

Source: Board of Governors of the Federal Reserve System (except as noted).

288


TABLE B-53.—Federal Reserve Bank credit and member bank reserves, 1929-63

[Averages of daily figures, millions of dollars]

Year and month

1929: Dec

1930: Dec1931: D e c .1932: Dec.1933: Dec1934: Dec1935: D e c .1936: Dec1937: Dec1938: Dec1939: D e c .

1940: Dec1941: Dec1942: D e c .1943: Dec1944: Dec1945: Dec1946: D e c .1947: Dec1948: Dec1949: Dec

1950: D e c .1951: Dec .1952: Dec1953: Dec1954: D e c .1955: Dec1956: Dec1957: Dec1958: D e c .1959: Dec

1960: Dec1961: D e c . . . . .1962: Dec1963: Dec1964: D e c . . . . .1965: Dec1966: Dec1967: Dec1968: Dec p . . .

1967: JanFebMarApr.MayJune

July . .AugSeptOctNovDec

1968: J a n . . . .FebMarApr.May.. . .June

July. .AugSept.Oct.. .Nov pDec p

Reserve Bank credit outstanding

Total

1,643

1,2731,9502,1922,6692,4722,4942,4982,6282,6182,612

2,3052,4046,035

11,91419,61224,74424,74622,85823,97819,012

21,60625,44627,29927,10726,31726,85327,15626,18628,41229,435

29,06031,21733,21836,61039,87343,85346,86451,26856, 501

46,80246,58746,52446,90247,32347,547

48,59048,21048,14748,99349,752

! 51,268

1 51,2871 50,873

51,86352, 50952,99853,813

54, 57355.04854,76955,74156,15856, 501

U.S.Govern-ment se-curities

446

644777

1,8542,4322,4302,4302,4342,5652,5642,510

2,1882,2195,549

11,16618,69323,70823,76721,90523,00218,287

20,34523,40924,40025,63924,91724,60224,76523,98226,31227,036

27,24829,09830, 54633,72937,12640,88543,76048,89152, 529

44,06644,21544,62045,08245,69945,844

46,80746,61246,39847,36748,01048, 891

49,046! 48,930

49,51150, 09050,58151,306

! 52,090i 52,646

52,22253,30053.38852,529

Memberbank

borrow-ings

801

337763281951067

1673

3

490

265334157224134118

142657

1,593441246839688710557906

87149304327243454557238765

389362199134101123

878990

126133238

237361671

i 683746692

525i 565i 515

427569765

All ;other,mainlyfloat

396

29241057

142325857474799

114180482658654702822729842607

1,1191,3801,3061,0271,1541,4121,7031,4941,5431,493

1,7251,9702,3682,5542,5042,5142,5472,1393,207

2,3472,0101,7051,6861,523

1 1,580

1,6961,5091,6591,5001,6092,139

; 2,0041,5821,6811,7361,671

i 1,815

1,9581,837

i 2,0321 2,014

2,201! 3,207

Member bank reserves

Total

i2,395

2,4152,0692,4352,5884,0375,7166,6656,8798,745

11,473

14,04912,81213,15212,74914,16816,02716,51717,26119,99016,291

17,39120,31021,18019,92019,27919,24019,53519,42018,899

2 18,932

19,28320,11820,04020,74621,60922,71923,83025,26027,165

24,07523,70923,40523,36223,28423,518

23,90723,79124,20024,60824,74025,260

25,834i 25,610

25, 58025, 54625, 50525,713

, 26,001: 26,069! 26,077

26,65326,760

i 27,165

Re-quired

2,347

2,3422,0101,909

i l , 8222,2902,7334,6195,8085,5206,462

7,4039,422

10,77611,70112,88414,53615,61716,27519,19315,488

16,36419,48420,45719,22718,57618,64618,88318,84318,38318,450

18,52719,55019,46820,21021,19822,26723,43824,91526,766

23,70223,35122,97023,05322,91423,098

23,54823,40423,84224,32224,33724,915

25,45325,21125,224

! 25,276! 25,085! 25,362

• 25,70225,694

i 25.694! 26,393i 26,472! 26,766

Excess

48

7360

5261766

1,7482,9832,0461,0713,2265,011

6,6463,3902,3761,0481,2841,491

900986797803

1,027826723693703594652577516482

756568572536411452392345399

373358435309370420

359387358286

i 403; 345

381! 399! 356

270! 420

351

299375383260

! 288399

Memberbank freereserves(excessreservesless bor-rowings)

- 7 5 3

- 2 6 4- 7 0 3

245671

1,7382,9772,0391,0553,2195,008

6,6433,3852,372

9581,0191,157

743762663685

885169

- 8 7 0252457

- 2 4 5-36

- 1 3 3-41

- 4 2 4

669419268209168- 2

- 1 6 5107

- 3 6 6

-16- 4236175269297

272298268160270107

14438

- 3 1 5- 4 1 3- 3 2 6

j - 3 4 1

- 2 2 6- 1 9 0

i - 1 3 2- 1 6 7- 2 8 1- 3 6 6

1 Data from March 1933 through April 1934 are for licensed banks only.2 Beginning December 1959, total reserves held include vault cash allowed.


289


TABLE B-54.—Bond yields and interest rates, 1929-68

[Percent per annum]

Year or month

1929

19301931193219331934

19351936193719381939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

1965196619671988 ._ - - . .

1966' JanFebMarAprMayJune

JuiyAugSeptOctNovDec

U.S

3-monthTreas-

urybills i

(6)

(6)1 402.879.515.256

.137

.143447

.053

.023

014.103.326.373.375

.375375594

1.0401.102

1.2181.5521.7661.931.953

1.7532.6583.2671.8393.405

2.9282.3782.7783.1573.549

3.9544.8814.3215.339

4.5964.6704.6264.6114.6424.539

4.8554.9325.3565.3875.3445.007

Government securities

9-12monthissues 2

0.75.79

.818288

1.141.14

1.261.731 812.07.92

1.892.833.532.094.11

3.552.913.023.283.76

4.095.174.845.62

4.834.924.964.874.904.94

5.175.525.805 575.455.10

3-5year

issues 3

2.662.12

1.291.111 40

83.59

5073

1 461.341.33

1.181 161.321.621.43

1.501.932.132.561.82

2.503.123.622.904.33

3.993.603.573.724.06

4.225.165.075.59

4.895.024.944.864.945.01

5.225.585.625.385.435.07

Taxablebonds4

2 462.472.48

2.372 192 252.442.31

2.322.572.682.942.55

2.843.083.473.434.08

4.023.903.954.004.15

4.214.654.855.26

4.434.614.634.554.574.63

4.754.804.794.704.744.65

Corporatebonds

(Moody's)

Aaa

4.73

4.554 585.014.494.00

3.603.243.263.193.01

2.842.772. S32.732.72

2.622.532.612.822.66

2.622.862.963.202.90

3.063.363.893.794.38

4.414.354.334.264.40

4.495.135.516.18

4.744.784.924.964.985.07

5.165.315.495.415.355.39

Baa

5.90

5.907 629.307.766.32

5.754.775.035.804.96

4.754.334.283.913.61

3.293 053.243.473.42

3.243.413.523.743.51

3.533.884.714.735.05

5.195.085.024.864.83

4.875.676.236.94

5.065.125.325.415.485.58

5.685.836.096.106.136.18

High-grade

munic-ipal

bonds(Stand-ard &Poor's)

4.27

4.074 014.654.714.03

3 413.073.102.912.76

2.502 102.362.061.86

1.671 642.012.402.21

1.982.002.192.722.37

2.532.933.603.563.95

3.733.463.183.233.22

3.273.823.964.51

3.523.633.723.593.683.77

3.944.174.113.973.933.83

Averagerate onshort-termbankloans

to busi-ness -

selectedcities

0)

8o

(7)(7)2.1

2.12.02.22.62.4

2.22 12.12.52.68

2.693.113.493.693.61

3.704.204.624.34

9 5.00

5.164.975.005.014.99

5.066.00

io 6.006.68

5.55

5.82

6.30

6.31

Primecom-mer-cial

paper,4-6

months

5.85

3.592 642.731.731.02

.75

.75

.94

.81

.59

.56

.53

.66

.69

.73

.7581

1.031.441.49

1.452.162.332.521.58

2.183.313.812.463.97

3.852.973.263.553.97

4.385.555.105.90

4.824.885.215.385.395.51

5.635.855.896.006.006.00

Fed-eral

ReserveBankdis-

countrate

5.16

3.042 112.822 561.54

1.501.501.331.001.00

1.001 00

8 1.008 1.008 1.00

8 1.008 1 00

1.001.341.50

1.591.751.751.991.60

1.892.773.122.163.36

3.533.003.003.233.55

4.044.504.195.17

4.504.504.504.504.504.50

4.504.504.504.504.504.50

FHAnew

homemort-gage

yields»

4.34

4.174.214.294.614.62

4.644.795.425.495.71

6.185.805.615.475.45

5.466.296.557.13

5.625.70

6.00

6.32

6.456.516.586.63

6.81


290


TABLE B-54.—Bond yields and interest rates, 1929-68—Continued

[Percent per annum]

Year or month





U.S. Government securities

3-monthTreas-

urybills i

4.7594.5544.2883.8523.6403.480

4.3084.2754.4514.5884.7625.012

5.0814.9695.1445.3655.6215.544

5.3825.0955.2025.3345.4925.916

9-12monthissues 2

4.714.644.354.034.094.40

4.985.105.215.325.555.69

5.395.375.555.636.066.01

5.685.415.405.445.566.00

3-5year

issues 3

4.714.734.524.464.684.96

5.175.285.405.525.735.72

5.535.595.775.695.955.71

5.445.325.305.425.475.99

Taxablebonds*

4.404.474.454.514.764.86

4.864.954.995.195.445.36

5.185.165.395.285.405.23

5.095.045.095.245.365.66

Corporatebonds

(Moody's)

Aaa

5.205.035.135.115.245.44

5.585.625.655.826.076.19

6.176.106.116.216.276.28

6.246.025.976.096.196.45

Baa

5.975.825.855.835.966.15

6.266.336.406.526.726.93

6.846.806.856.977.037.07

6.986.826.796.847.017.23

High-grademunic-

ipalbonds

(Stand-ard &

Poor's)

3.583.563.603.663.923.99

4.054.034.154.314.364.49

4.344.394.564.414.564.56

4.364.314.474.564.684.91

Averagerate onshort-termbankloans

to busi-ness-

selectedcities

« 6.13

5.95

5.95

5.96

6.36

6.84

6.89

6.61

Primecom-mer-cial

paper,4—6

months

5.735.385.244.834.674.65

4.925.005.005.075.285.56

5.605.505.645.816.186.25

6.195.885.825.805.926.17

Fed-eral

ReserveBankdis-

countrate

4.504.504.504.104.004.00

4.004.004.004.004.184.50

4.504.504.665.205.505.50

5.505.485.255.255.255.36

FHAnew

homemort-gage

yields »

6.776.626.466.356.296.44

6.516.536.606.636.656.77

6.816.816.786.836.94

7.527.427.357.287.297.36

1 Rate on new issues within period. Issues were tax exempt prior to March 1,1941, and fully taxable thereafter. For theperiod 1934-37, series includes issues with maturities of more than 3 months.

2 Certificates of indebtedness and selected note and bond issues (fully taxable).3 Selected note and bond issues. Issues were partially tax exempt prior to 1941, and fully taxable thereafter.4 First issued in 1941. Series includes bonds which are neither due nor callable before a given number of years as fol-

lows: April 1953 to date, 10 years; April 1952-March 1953, 12 years; October 1941-March 1952, 15 years.« Data for first of the month, based on the maximum permissable interest rate (6% percent beginning early May 1968)

and, thru July 1961, 25-year mortgages paid in 12 years and, thereafter, 30-year mortgages paid in 15 years.• Treasury bills were first issued in December 1929 and were issued irregularly in 1930.7 Not available on same basis as for 1939 and subsequent years.s From October 30, 1942, to April 24, 1946, a preferential rate of 0.50 percent was in effect for advances secured by,

Government securities maturing in 1 year or less.c Beginning 1959, series revised to exclude loans to nonbank financial institutions.10 Beginning February 1967, series revised to incorporate changes in coverage, in the sample of reporting banks, and

in the reporting period (shifted to the middle month of the quarter).

Note.—Yields and rates computed for New York City except for short-term bank loans.

Sources: Treasury Department, Board of Governors of the Federal Reserve System, Moody's Investors Service, Stand-ard & Poor's Corporation, and Federal Housing Administration.

291


TABLE B-55.—Short- and intermediate-term consumer credit outstanding, 1929-68


End of year or month

1929 .

1930193119321933193419351936193719381939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

196019611962196319641965196619671968 4

1967- JanFebMarAprMayJune_.

JulyAug . - .SeptOctNovDec . . .

1968: JanFeb . . .MarAprMayJune

JulyAug._SeptOct.NovDec4

Total

7,116

6,3515,3154,0263,8854,2185,1906,3756,9486,3707,222

8,3389,1725,9834,9015,1115,6658,384

11,59814,44717,364

21,47122,71227,52031,39332,46438,83042,33444,97145,12951,544

56,14157,98263,82171,73980,26890,31497,543

102,132112 850

96,40795,27195,23195,72596,42797,34197,63298,32498 62598,87099,648

102,132

101,260100,771100,981102,257103,411104,620

105,680107,090107,636108,643110,035112,850

Instalment credit

Total

3,524

3,0222,4631,6721,7231,9992,8173,7474,1183,6864,503

5,5146,0853,1662,1362,1762,4624,1726,6958,996

11,590

14,70315,29419,40323,00523, 56828,90631,72033,86833,64239,247

42,96843,89148,72055,48662,69271,32477,53980,92689 750

76,85576,22176,18376,36076,78477,51977,86078,55178,76579,00679,48580,926

80,37980,23380,47481,32882,31283,433

84,44885,68486,18487,05887,95389,750

Auto-mobilepaper

1,384

986684356493614992

1,3721,4941,0991,497

2,0712,458

742355397455981

1,9243,0184,555

6,0745,9727,7339,8359,809

13,46014,42015,34014,15216,420

17,65817,13519,38122,25424,93428,61930,55630,72434 15030,30430.06230,05630,13830,32130,626

30,79230,93230 74130,71130,71830,724

30,57930,68230,94231,33131,81832,364

32,87433,32533,33633,69833,92534,150

Othercon-

sumergoodspaper

1,544

1,4321,214

834799889

1,0001,2901,5051,4421,620

1,8271,9291,195

819791816

1,2902,1432,9013,706

4,7994,8806,1746,7796,7517,6418,6068,8449,028

10,631

11,54511,86212,62714,17716,33318,56520,97822,39524 750

20,74420,39820,27420 20020,23820,39520,44220 63420 87821,05521,32322,395

22,11721,76721,64421,84122,01122,248

22,45222,77722,98823,24823,66824,750

Repairand

modern-izationloans i

27

2522181537

253364219218298

371376255130119182405718853898

1,0161,0851,3851,6101,6161,6931,9052,1012,3462,809

3,1483,2213,2983,4373,5773,7283,8183,7893 950

3,7723] 7373,7223,7133,7523,7803,7893,8173,8143,8103,8103,789

3,7343,7083,6883,6973,7463,769

3,8083,8573,8813,9103,9313,950

Per-sonalloans

569

579543464416459572721900927

1,088

1,2451,322

974832869

1,0091,4961,9102,2242,431

2,8143,3574,1114,7815,3926,1126,7897,5828,1169,386

10,61711,67313,41415,61817,84820,41222,18724,01826 900

22,03522,02422,13122,30922,47322,71822,83723,16823,33223,43023,63424,018

23,94924,07624,20024,45924,73725,052

25,31425,72525,97926,20226,42926,900

Noninstalment credit

Total

3,592

3,3292,8522,3542,1622,2192,3732,6282,8302,6842,7192,8243,0872,8172,7652,9353,2034,2124,9035,4515,774

6,7687,4188,1178,3888,8969,924

10,61411,10311,48712,297

13,17314,09115,10116,25317,57618,99020,00421,20623 100

19,55219,05019,04819,36519,64319,822

19,77219,77319,86019,86420,16321,206

20,88120, 53820,50720,92921,09921,187

21,23221,40621,45221,58522,08223,100

Chargeac-

counts

1,996

1,8331,6351,3741,2861,3061,3541,4281,5041,4031,414

1,4711,6451,4441,4401,5171,6122,0762,3812,7222,854

3,3673,7004,1304,2744,4854,7954,9955,1465,0605,104

5,3295,3245,6845,9036,1956,4306,6866,9687,800

6,0315,3665,3205,5135,7615,9485,9225,9305,9565,9956,1466,968

6,4245,8595,7106,0266,2766,368

6,4576,5746,5506,6926,9647,800

Other 2

1,596

1,4961,217

980876913

1,0191,2001,3261,2811,305

1,3531,4421,3731,3251,4181,5912,1362,5222,7292,920

3,4013,7183,9874,1144,4115,1295,6195,9576,4277,193

7,8448,7679,417

10,35011,38112,56013,31814,23815,300

13,52113,68413,72813,85213,88213,874

13,85013,84313,90413,86914,01714,238

14,45714,67914,79714,90314,82314,819

14,77514,83214,90214,89315,11815,300

Adden-dum:Policy

loans bylife in-

surancecom-

panies 3

2,379

2 8073,3693,8063 7693 6583,5403,4113 3993 3893,248

3,0912,9192,6832,3732,1341,9621,8941,9372,0572,240

2,4132,5902,7132,9143,1273,2903,5193,8694,1884,618

5,2315,7336,2346,6557,1407,6789,117

10,059

9,2229,3039,3979,4999,5829,6719,7349,8059,8619,9339,996

10,080

10,16710,25810,36210,47410,59910,729

10,81310,92511,02611,117

* Holdings of financial institutions only; holdings of retail outlets are included in "other consumer goods paper."2 Single-payment loans and service credit.3 Year-end figures are annual statement asset values; month-end figures are book value of ledger assets. These loans

are not included in consumer credit series.* Preliminary; December by Council of Economic Advisers.Sources: Board of Governors of the Federal Reserve System and Institute of Life Insurance (except as noted).

292


T A B L E B—56.—Instalment credit extended and repaid, 1946—68


Year or month

1967: J a n . .Feb. .Mar .Apr. . .May . .June-July . .A u g . .Sept. .O c t . .N o v -Dec.. .

1968: J a n . .Feb.. .Mar . .Apr. . .May . .June..

July. .Aug . .Sept..Oct_.Nov. .Dec*.

1946..1947..1948..1949..

1950..1951..1952..1953..1954..

1955..1956..1957.1958..1959.

1960.1961.1962.1963.1964.

1965.1966.1967.19681.

Total

Ex-tended

8,49512,71315, 58518,108

21,55823,57629,51431,55831,051

38,97239,86642,01940,11048,048

49,79349,04856,19163,59170,670

78,58682,33584,69396,450

Re-paid

6,78510,19013,28415,514

18,44522,98525,40527,95630,488

33,63437,05639,87040,33942,603

46,07348,12451,36056.82563,470

69,95776,12081,30687,650

Automobilepaper

Ex-tended

1,9693,6925,2176,967

8,5308,95611,76412,98111,807

16,73415,51516,46514,22617,779

17,65716,02919,69422,12624,046

27,22727,34126,66731,300

Re-paid

1,4432,7494,1235,430

7,0119,05810,00310,87911,833

13,08214,55515,54515,41515,579

16,41916,55217,44719,25421,369

23,54325,40426,49927,950

Other consumergoods paper

Ex-tended

3,0774,4985,3835,865

7,1507,4859,1869,2279,117

10,64211,72111,81011,73813,981

14,52514,55115,70117,92020,821

22,75025,59126,95230,400

Re-paid

2,6033,6454,6255,060

6,0577,4047,8928,6229,145

9,75210.75811,57411,55712,402

13,61314,23514,93516,36918,666

20,51823,17825,53528,000

Repair and mod-ernization loans

Ex-tended

423704714734

835841

1,2171,3441,261

1,3931,5821,6741,8712,222

2,2152,0922,0842,1862,225

2,2662,2002,1132,300

Re-paid

200391579689

717772917

1,1191,255

1,3161,3701,4771,6261,765

1,8762,0152,0102,0462,086

2,1162,1102,1422,150

Personalloans

Ex-tended

3,0263,8194,2714,542

5,0436,2947,3478,0068,866

10,20311,05112,06912,27514,070

15,39616,37718,71021,35923,578

26,34327,20328,96132,450

Seasonally adjusted

6,7926,7356,8036,8566,7447,114

7,0597,2727,2787,2507,3047,360

7,4537,8477,9037,8638,0338,003

8,2478,1878,416'8,5338,2888,200

6,5906,6176,5666,7666,5546,794

6,8026,8746,9656,9346,9137,001

7,0547,1117,2817,2227,3017,287

7,3907,2537,7017,5867,4547,400

2,1622,1462,1702,1842,1732,277

2,2282,2592,2972,2532,2622,233

2,3852,5592,6052,5092,5902,570

2,6732,6842,7832,7822,6812,600

2,1582,2192,1562,2482,1682,235

2,1962,2152,2802,2442,1902,205

2,2542,2752,3162,2972,3272,289

2,3522,3272,4822,3912,3632,300

2,1962,1442,1342,1762,1132,213

2,2482,3202,3392,3072,3032,383

2,3392,4582,5312,5972,5352,536

2,6222,4832,5602,6452,6402,600

2,0692,0342,0532,1232,0552,097

2,1452,1722,1882,1932,1932,255

2,2232,2692,3722,3402,3122,324

2,3742,2092,4282,4512,3882,400

168179180179188193

169172169169174170

169184183189197179

195185196202191200

173181176185180185

179176180176178171

182173185176184175

181170179177175200

2,2662,2662,3192,3172,2702,431

2,4142,5212,4732,5212,5652,574

2,5602,6462,5842,5682,7112,718

2,7572,8352,8772,9042,7762,800

Re-paid

2,53d3,4053,9574,335

4,6605,7516,5937,3368,255

9,48410,37311,27611,74112,857

14,16515,31916,96919,15621,349

23,78025,42827,13029,550

2,1902,1832,1812,2102,1512,277

2,2822,3112,3172,3212.3522,370

2,3952,3942,4082,4092,4782,499

2,4832,5472,6122,5672,5282,500

i Preliminary; December by Council of Economic Advisers.

Source: Board of Governors of the Federal Reserve System (except as noted).

293


TABLE B-57.—Mortgage debt outstanding, by type of property and of financing, 1939-68


End of yearor quarter

1939..

1940..1941..1942..1943..1944..

1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..

1955.1956.1957.1958.1959.

1960.1961.1962.1963.1964.

19651966 v1967 v1968 v

1965: L...II....lIV...

1966:II p . .III p .IV p..

1967: \v,_.II p..III p.IV p..

1 968: I p__.II p_-III p.IV p

Allprop-erties

35.5

36.537.636.735.334.7

35.541.848.956.262.7

72.882.391.4

101.3113.7

129.9144.5156.5171.8190.8

206.8226.3248.6274.3300.1

325.8347.0369.8396.6

305.2312.3319.2325.8

331.9338.6343.3347.0

350.1355.8362.8369.8

375.3382.5389.4396.6

Farmprop-erties

6.6

6.56.46.05.44.9

4.84.95.15.35.6

6.16.77.27.78.2

9.09.8

10.411.112.1

12.813.915.216.818.9

21.223.325.527.8

19.520.220.721.2

21.822.523.023.3

23.724.324.925.5

26.026.827.327.8

Nonfarm properties

Total

28.9

30.031.230.829.929.7

30.836.943.950.957.1

66.775.684.293.6

105.4

120.9134.6146.1160.7178.7

194.0212.4233.4257.4281.2

304.6323.6344.3368.8

285.7292.1298.5304.6

310.2316.1320.3323.6

326.3331.4337.9344.3

349.3355.8362.1368.8

1- to 4-familyhouses

16.3

17.418.418.217.817.9

18.623.028.233.337.6

45.251.758.566.175.7

88.299.0

107.6117.7130.9

141.3153.1166.5182.2197.6

212.9223.6236.1251.3

200.6204.8209.0212.9

216.2219.6221.9223.6

224.9227.8232.0236.1

239.3243.3247.3251.3

Multi-family

5.6

5.75.95.85.85.6

5.76.16.67.58.6

10.111.512.312.913.5

14.314.915.316.818.7

20.323.025.829.033.6

37.240.143.747.2

34.335.236.237.2

38.239.039.640.1

40.841.742.643.7

44.245.246.147.2

Com-mer-cial

prop-erties i

7.0

6.97.06.76.36.2

6.47.79.1

10.210.8

11.512.513.414.516.3

18.320.723.226.129.2

32.436.441.146.250.0

54.559.964.570.3

50.852.053.254.5

55.857.558.959.9

60.661.963.264.5

65.867.268.870.3

Nonfarm properties by type of mortgage

FHA-VA underwritten

Total

1.8

2.33.03.74.14.2

4.36.39.8

13.618.1

22.126.629.332.136.2

42.947.851.655.259.2

62.365.569.473.477.2

81.284.188.2

77.978.780.081.2

82.182.683.484.1

84.485.386.488.2

89.490.792.0

1- to 4-family houses

Total

1.8

2.33.03.74.14.2

4.36.19.3

12.515.0

18.922.925.428.132.1

38.943.947.250.153.8

56.459.162.265.969.2

73.176.179.9

70.070.772.073.1

74.174.675.476.1

76.477.378.379.9

81.082.183.2

FHAin-

sured

1.8

2.33.03.74.14.2

4.13.73.85.36.9

8.69.7

10.812.012.8

14.315.516.519.723.8

26.729.532.335.038.3

42.044.847.4

39.039.740.942.0

43.043.744.444.8

45.245.746.647.4

48.148.749.6

VAguar-

anteed

0.22.45.57.28.1

10.313.214.616.119.3

24.628.430.730.430.0

29.729.629.930.930.9

31.131.332.5

31.031.031.131.1

31.130.931.031.3

31.231.531.732.5

32.933.433.6

Conventional2

Total

27.1

27.728.227.025.825.5

26.530.534.137.339.0

44.649.054.961.569.2

78.086.894.5

105.5119.4

131.7146.9164.1184.0204.0

223.4239.5256.1

207.8213.4218.5223.4

228.1233.5236.9239.5

241.9246.1251.5256.1

259.9265.0270.1

1- to 4-familyhouses

14.5

15.115.414.513.713.7

14.316.918.920.822.6

26.328.833.138.043.6

49.355.160.467.677.0

84.893.9

104.3116.3128.3

139.8147.5156.1

130.5134.1137.0139.8

142.1145.0146.5147.5

148.4150.6153.7156.1

158.3161.2164.1

1 Includes negligible amount of farm loans held by savings and loan associations.2 Derived figures.

Source: Board of Governors of the Federal Reserve System, estimated and compiled from data supplied by variousGovernment and private organizations.

294


TABLE B-58.—Mortgage debt outstanding, by lender, 1939-68

(Billions of dollars]

End of year or quarter

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

19601961 . . .19621963 _ .1964

19651966 v .__.1967 *.1968 P

1965: 1IIIIIIV

1966: 1 vII vIII v . .IV v

1967: 1 vII vIII pIV v

1968: 1 vII *III v\\v

Total

35.5

36.537.636.735.334.7

35.541.848.956.262.7

72.882.391.4

101.3113.7

129.9144.5156.5171.8190.8

206.8226.3248.6274.3300.1

325.8347.0369.8396.6

305.2312.3319.2325.8

331.9338.6343.3347.0

350.1355.8362.8369.8

375.3382.5389.4396.6

Selected financial institutions

Total

18.6

19.520.720.720.220.2

21.026.031.837.842.9

51.759.566.975.185.7

99.3111.2119.7131.5145.5

157.6172.6192.5217.1241.0

264.6280.8298.9319.3

245.8252.3258.7264.6

269.6274.7278.2280.8

282.9287.7293.4298.9

302.7308.2313.6319.3

Savingsandloan

associa-tions

3.8

4.14.64.64.64.8

5.47.18.9

10.311.6

13.715.618.422.026.1

31.435.740.045.653.1

60.168.878.890.9

101.3

110.3114.4121.9130.7

103.2105.9108.4110.3

112.3114.0114.4114.4

114.8116.9119.5121.9

123.4126.0128.4130.7

Mutualsavingsbanks

4.8

4.94.84.64.44.3

4.24.44.95.86.7

8.39.9

11.412.915.0

17.519.721.223.325.0

26.929.132.336.240.6

44.647.350.553.4

41.542.543.544.6

45.445.946.647.3

48.148.949.750.5

51.251.852.553.4

Com-mercialbanks i

4.3

4.64.74.74.54.4

4.87.29.4

10.911.6

13.714.715.916.918.6

21.022.723.325.528.1

28.830.434.539.444.0

49.754.459.065.6

44.846.548.449.7

50.752.353.654.4

54.555.757.559.0

60.162.063.865.6

Lifeinsurance

com-panies

5.7

6.06.46.76.76.7

6.67.28.7

10.812.9

16.119.321.323.326.0

29.433.035.237.139.2

41.844.246.950.555.2

60.064.667.569.8

56.357.358.460.0

61.262.563.664.6

65.566.166.667.5

68.068.468.969.8

Other lenders

U.S.agencies 2

5.0

4.94.74.33.63.0

2.42.01 81.92.4

2.73.44 04.44.6

5.26 07.47.8

10.0

11.211.812.211.211.4

12.415.818.421.8

11.611.711 912.4

13.514.415.215.8

16 416.717.518.4

19.620.621. 121.8

Indi-viduals

andothers

11.9

12.012.211.711.511.5

12.113.815 316.517.4

18.419.420 521.823.4

25.427.329.332.535.4

38.041.944.045.947.7

48.750.452.455.3

47.848.248.648.7

48.849.450.050.4

50 851.452.052.4

53.053.854.755.3

1 Includes loans held by nondeposit trust companies, but not bank trust departments.2 Includes former FNMA and new GNMA, as well as FHA, VA, PHA, Farmers' Home Administration and in earlier years

RFC, HOLC and FFMC. Also includes U.S.-sponsored agencies such as new FNMA and Federal land banks. Other U.S.agencies (amounts small or current separate data not readily available) included with "individuals and others."

Sources: Board'of Governors of the Federal Reserve System, based on data from related Government and private organiza-tions, including Federal Home Loan Bank Board, Federal Deposit Insurance Corporation, Institute of Life Insurance, Fed-eral National Mortgage Association, Government National Mortgage Association, and Department of Commerce.

295


TABLE B-59.—Net public and private debt, 1929-68 *


End of year

1929

19301931193219331934

19351936193719381939

19401941194213431944

194519461947..19481949

195019511952 -1953-1954

19551956195719581959

19601961 —196219631964

1965196619671968<>

Total

191.9

192.3182.9175 0168.5171.6

175.0180.6182.2179.9183.3

189 8211.4258.6313.2370.6

405.9396.6415.7431.3445.8

486.1518.9549.7581.1605.2

664.3697.6727.4768.2830.7

872.0929.4997.0

1,071.21,154.0

1,243.81,335.71,424.81,547.4

Public

Fed-eralGov-ern-mentand

agency2

16.5

16.518.521 324.330.4

34.437.739.240.542.6

44 856.3

101.7154.4211.9

252.5229.5221.7215.3217.6

217.4216.9221.5226.8229.1

229.6224.3223.0231.0241.4

239.8246.7253.6257.5264.0

266.4271.8286.5292.5

Fed-eral

finan-cial

agency3

0.7.6.7

.71.31.31.41.3

2.92.42.42.53.7

3.54.05.37.27.5

8.911.29.0

21.6

Stateandlocalgov-ern-ment

13.6

14.716.016 616.315.9

16.116.216.116.116.4

16 416.115.414.513.9

13.413.715.017.019.1

21.724.227.030.735.5

40.244.448.653.258.0

63.070.078.184.792.4

99.9107.1117.9129.5

Private

Total

161.8

161.1148.4137.1127.9125.3

124.5126.7126.9123.3124.3

128.6139.0141.5144.3144.8

140.0153.4178.3198.4208.4

246.3276.5299.9322.2339.3

391.6426.5453.4481.5527.6

565.7608.7660.0721.8790.1

868.6945.6

1,011.41,103.8

Cor-porate

88.9

89.383.580.076.975.5

74.876.175.873.373.5

75.683.491.695.594.1

85.393.5

108.9117.8118.0

142.1162.5171.0179.5182.8

212.1231.7246.7259.5283.3

302.8324.3348.2376.1409.9

452.3498.3534.4586.0

Individual and noncorporate

Total

72.9

71.864.957.151.049.8

49.750.651.150.050.8

53.055.649.948.850.7

54.759.969.480.690.4

104.2114.0128.9142.7156.5

179.5194.8206.7222.0244.3

262.9284.4311.8345.7380.2

416.3447.3477.0517.8

Farm *

12.2

11.811.110.19.18.9

8.98.68.69.08.8

9.19.39.08.27.7

7.37.68.6

10.812.0

12.313.715.216.817.5

18.719.420.223.223.8

25.127.530.233.236.0

39.342.046.050.0

Nonfarm

Total

60.7

60.053.847.041.940.9

40.842.042.541.042.0

43.946.340.940.542.9

47.452.360.769.778.4

92.0100.3113.7126.0139.0

160.9175.4186.5198.8220.5

237.8256.9281.6312.5344.2

377.0405.3431.0467.8

Mort-gage

31.2

32.030.929 026.325.5

24.824.424.324.525.0

26.127.126.826.126.0

27.031.837.242.447.1

54.761.468.476.285.7

98.1108.7117.2127.2140.3

150.9164.1180.2198.5218.5

236.4251.6265.5283.5

Com-mer-cialand

finan-cial*

22.4

21.617.614 011.711.2

10.811.211.310.19.8

9 510.08.19.5

11.8

14.712.111.912.913.9

15.816.217.818.420.8

24.024.424.326.528.7

30.834.837.642.345.4

50.356.263.471.5

Con-sumer

7.1

6.45.34.03.94.2

5.26.46.96.47.2

8.39.26.04.95.1

5.78.4

11.614.417.4

21.522.727.531.432.5

38.842.345.045.151.5

56,158.063 J71.780.3

90.397.5

102.1112.8

1 Net public and private debt is a comprehensive aggregate of the indebtedness of borrowers after eliminating certaintypes of duplicating governmental and corporate debt. For a further explanation of the concept, see "Survey of CurrentBusiness," October 1950.

2 Net Federal Government and agency debt is the outstanding debt held by the public, as defined in the "Budget of theUnited States Government, for the Fiscal Year ending June 30,1970." Figures shown here are subject to revision.

s This comprises the debt of Federally-sponsored agencies, in which there is no longer any Federal proprietary interest.The obligations of the Federal Land Banks are included here beginning in 1947; the debt of the Feieral Home Loan Banksis included beginning in 1951; and the debt of the Federal National Mortgage Association—Secondary Market Operationsis included beginning with 1968.

4 Farm mortgages and farm production loans. Farmers' financial and consumer debt is included in the nonfarm categories.5 Financial debt is debt owed to banks for purchasing or carrying securities, customers' debt to brokers, and debt owed

to life insurance companies by policyholders.6 Estimates.Sources: Department of Commerce (Office of Business Economics), Treasury Department, Department of Agriculture.

Board of Governors of the Federal Reserve System, Federal Home Loan Bank Board, Federal Land Banks, and FederalNational Mortgage Association.

296


GOVERNMENT FINANCETABLE B-60.—Federal budget receipts and outlays, 1929-70

Fiscal year

Administrative budget:19291930..

19311932..1933... . . . . .19341935..

19361937-19381939

Consolidated cash statement:1940

1941194219431944... .1945

1946...1947....19481949—1950

1951 . .19521953 .

Unified budget:19541955...

1956195719581959.-.1960 . . .

1961—19621963...1964...1965

196619671968196911970 i


Receipts

3,8614,058

3,1161,9241,9973,0153,706

3,9974,9565,5884,979

6,879

9,20215,10425,09747,81850,162

43,53743,53145,35741,57640,940

53,39068,01171,495

69,92065,462

74,58179,95879,62179,17992,470

94,37899,657

106,572112,669116,813

130,864149,562153,676186,092198,686

Outlays

3 1273,320

3,5774,6594,5986,6456,497

8,4227,7336,7658,841

9,589

13,98034,50078,90993,95695,184

61,73836,93136,49340,57043,147

45,79767,96276,769

71,13868,503

70,46176,74882,57592,11192,230

97,802106,830111,314118,585118,431

134,654158,352178,862183,701195,272

Surplus ordeficit ( - )

734738

-462-2 ,735-2 ,602-3 ,630-2,791

-4 ,425-2,777-1 ,177-3 ,862

-2 ,710

-4 ,778-19,396-53,812-46,138-45,022

-18,2016,6008,8641,006

-2,207

7,59349

-5 ,274

-1 ,218-3,041

4,1213,210

-2 ,954-12,932

240

-3 ,424-7 ,174-4 ,742-5 ,916-1 ,618

-3 ,790-8 ,790

-25,1872,3913,414

1 Estimate.Note.—Certain interfund transactions are excluded from receipts and outlays starting in 1932. For years prior to 1932 the

amounts of such transactions are not significant.Refunds of receipts are excluded from receipts and outlays starting in 1913; comparable data are not available for prior

years.


297


TABLE B-61.—Federal budget receipts, outlays, financing, and debt, 1959-70

[Millions of dollars; fiscal years]

Description

RECEIPTS, EXPENDITURES, AND NET LEND-ING :

Expenditure account:ReceiptsExpenditures (excludes net lending)...

Expenditure accountdeficit(-)

surplus or

Loan account:Loan disbursements.Loan repayments

Net lending.

Total budget:ReceiptsOutlays (expenditures and net lending).

Budget surplus or deficit (—)

BUDGET FINANCING:Borrowing from the public.Other means of financing...

Total budget financing...

OUTSTANDING DEBT, END OF YEAR:Gross Federal debt

Held by the public

Actual

1959

79,17989,453

-10,274

7,8595,201

2,659

79,17992,111

-12,932

8,6654,267

12,932

287,739234,970

1960

92,47090,348

2,122

8,3106,427

1,882

92,47092,230

240

2,142-2,382

-240

290,799237,112

1961

94,37896,604

-2,226

7,8696,671

1,198

94,37897,802

-3,424

1,4651,959

3,424

292,869238,577

1962

99,657104,480

-4,823

9,6217,271

2,351

99,657106,830

-7,174

9,734-2,560

7,174

303,227248,311

1963

106, 572111,459

-4,887

9,6469,791

-145

106,572111,314

-4,742

6,120-1,378

4,742

310,775254,431

1964

112,669118,041

-5,372

10,2379,693

545

112,669118,585

-5,916

3,0892,827

5,916

316,728257,520

BUDGET RECEIPTS.

Individual income taxesCorporation income taxesEmployment taxes and contributionsUnemployment insurance 2 , „Contributions for other insurance and re-

tirementExcise taxes...Estate and gift taxesCustoms dutiesMiscellaneous receipts3

MEMORANDUM:Federal funds..Trust funds

BUDGET OUTLAYS (EXPENDITURES ANDNET LENDING)

National defenseInternational affairs and financeSpace research and technologyAgriculture and agricultural resourcesNaturaI resourcesCommerce and transportationCommunity development and housingEducation and manpowerHealth and welfareVeterans benefits and servicesInterestGeneral governmentAllowances. T —Undistributed intragovernmental transac-

tions .

79,179

36,71917,3098,8212,131

76910, 5781,333925594

65,67913,500

92,111

46,6173,267145

5,3651,2094,451851

1,08117,6905,4287,0701,173

92,470

40,71521,49411,2482,667

76611,6761,6061,1051,193

75, 56316,907

92,230

45,9083,054401

3,3221,0194,774971

1,28218,7345,4268,2991,334

94,378

41,33820,95412,6802,902

85511,8601,896982910

75,11819,260

97,802

47,3833,357744

3,3401,5685,048191

1,48021,847

5,6888,1081,543

99,657

45,57120,52312,8353,337

87312,5342,0161,142826

79,63520,022

106,830

51,0974,4921,2574,1311,6865,410589

1,70323,3745,6258,3211,703

106,572

83,46323,109

111,314

52,2574,1152,5525,1391,5055,745-8801,706

25,2745,5209,2151,841

MEMORANDUM:Federal fundsTrust fundsIntragovernmental transactions.

-2,238

77,11117,323

-2,322

-2,296

74,86919,986

-2,626

-2,495

79,33921,774

-3,311

- 2 , 558

86,59923,394

-3,163

-2,674

90,13523,898

-2,719

112,669

47,58821,57914,7474,112

94413,1942,1671,2051,036

48,69723,49316,9594,045

1,00613,7312,3941,2521,093

87,11125,558

118,585

53,5914,1174,1705,1861,9726,482-1851,998

26,5985,6819,8102,103

-2,939

95,76125,941

-3,118


298


TABLE B-61.—Federal budget receipts, outlays, financing, and debt, 1959-70—Continued[Millions of dollars; fiscal years]

Description

RECEIPTS, EXPENDITURES, AND NET LEND-ING:

Expenditure account:ReceiptsExpenditures (excludes net lending)

Expenditure accountdeficit ( - )

surplus or

Loan account:Loan disbursements.Loan repayments

Net lending.

Total budget:ReceiptsOutlays (expenditures and net lending).

Budget surplus or deficit ( - )

BUDGET FINANCING;Borrowing from the public.Other means of financing...

Total budget financing.._

OUTSTANDING DEBT, END OF YEAR:Gross Federal debt

Held by the public

BUDGET RECEIPTS..

Individua! income taxes ^..Corporation income taxesEmployment taxes and contributionsUnemployment insurance2

Contributions for other insurance andreti re m e nt

Excise taxesEstate and gift taxesCustoms dutiesMiscellaneous receipts3

MEMORANDUM:Federal funds..Trust funds.. .

BUDGET OUTLAYS (EXPENDITURES ANDNET LENDING)

National defenseInternational affairs and financeSpace research and technologyAgriculture and agricultural resourcesNatural resourcesCommerce and transportationCommunity development and housingEducation and manpowerHealth and welfareVeterans benefits and servicesInterestGeneral governmentAllowancesUndistributed intragovernmental transac-

tions

MEMORANDUM:Federal fundsTrust fundsIntragovernmental transactions.

Actual

1965

116,813117,182

-369

10,9119,662

1,249

116,813118,431

-1,618

4,037-2,419

1,618

323,096261,557

116,813

48,79225,46117,3593,819

1,07914,5702,7161,4421,576

90,86325,950

118,431

49,5784,3405,0914,8072,0637,364288

2,50927,2095,72210,3572,276

-3,174

94,80727,081--3,457

1966 1967

130,864130,822

42

14,62810,796

3,832

130,864134,654

-3,790

3,080710

3,790

329,419264,637

130,864

55,44630,07320,6623,777

1,12713,0623,0661,7671,885

101,34429,520

134,654

56,7854,4905,9333,6792,0357,1352,6444,496

31,3205,920

11,2852,360

-3,431

106,51331,809-3,668

149,562153,299

-3,736

17,67612,623

5,053

149,562158,352

-8,790

2,8545,936

8,790

341,309267,491

149,562

61,52633,97127,8223,659

1,86613,7192,9781,9012,120

111,73237,829

158,352

70,0814,5475,4234,3761,8607,6522,6166,13537,6056,89712, 5882,584

- 4 , 009

126,78036,932-5,360

1968

153,676172,830

-19,153

20,42214,389

6,032

153,676178,862

-25,187

23,0952,092

25,187

369,724290,586

153,676

68,72628,66529,2233,346

2,05014,0793,0512,0382,498

114,62739, 049

178,862

80,5164,6194,7215,9441,7028,0764,0767,012

43,5086,882

13,7442,632

- 4 , 570

143,10541,529

-5,771

Estimate

1969

186,092182,315

3,777

12,47811,092

1,386

186,092183,701

2,391

-3,091700

1-2,391

365,159276,586

186,092

84,40038,10034,8423,300

2,36614,8003,2002,3002,784

141,05045,042

183,701

80,9993,9384,2475,4481,8988,0482,3137,16548,8397,69215,1712,948

100

-5,105

148,16043,037-7,496

1970

198,686194,356

4,330

8,1137,197

916

198,686195,272

3,414

- 4 , 000586

-3,414

371,482272,586

198,686

90,40037,90039,8633,575

2,43115, 7003,4002,3003,117

147,79550,891

195,272

81,5423,7553,9475,1811,8918,9692,7727,88754,9667,72415,9583,2753,150

-5, 745

154,72248,431-7,881

1 Excludes $10,803 million of net credits for conversion of mixed-ownership enterprises to private ownership.2 Includes Federal funds of $321 million in 1959 and $339 million in 1960.3 Includes both Federal funds and trust funds.


299


TABLE B-62.—Relation of the Federal Budget to the Federal sector of the national income andproduct accounts, 1967-70

[Billions of dollars; fiscal years]

Receipts and ExpendituresActual

1967 1968

Estimate

1969 1970

RECEIPTS

Total receipts, budget.

Employer share, employee retirement..Other netting and grossingAdjustment to accrualsOther

Federal sector, national income and product accounts,receipts

EXPENDITURES

Total outlays, budget.

149.6

1.71.2

-4 .7- . 2

147.7

158.4

153.7

1.91.14.6

- . 2

161.1

178.9

Loan accountEmployer share, employee retirementOther netting and grossingDefense timing adjustment..Lending inthe expenditure account _Dollar expenditures to finance agricultural exports.Other

Federal sector, national income and product accounts,expenditures _

186.1

2.11.4

- . ' l

190.0

183.7

-5 .11.71.2

- . 4-1 .6- . 81.1

154.4

-6 .01.91.1

-2 .1-1 .6- . 7

.9

172.4

-1 .42.11.41.8

-1 .1- . 41.1

187.3

198.7

2.21.3.2

- . 1

202.3

195.3

- . 92.21.31.8

-1 .0- . 31.2

199.6

Note.—See Special Analysis A, "Budget of the United States Government for the Fiscal Year Ending June 30, 1970,"for description of these categories.

Sources: Bureau of the Budget and Department of Commerce (Office of Business Economics).

300


TABLE B-63.—Receipts and expenditures of the Federal Government sector of the national incomeand product accounts, 1946-70


Year or quarter

Fiscal year:1946194719481949195019511952195319541955..19561957195819591960196119621963196419651966196719681969119701

Calendar year:19461947..194819491950195119521953195419551956195719581959196019611962196319641965196619671968 v

1966: l ._ . .I I . . .III...IV..

1967: I . . . .

IV. . .1968: I . . . .

I I . . . .I I I . . .IV v_

Receipts

Total

Per-sonaltaxandnon-taxre-

ceipts

Cor-po- |rate

profitstaxac-

cruals

Indi-rect

busi-nesstaxandnon-taxac-cru-als

Con-tribu-tionsfor

socialinsur-ance

Expenditures

Total

Pur-chases

ofgoodsand

serv-ices

Transferpayments

Toper-sons

Tofor-

eign-ers

(net)

Grants-in-aid

to Stateandlocal

govern-ments

Netin-ter-estpaid

Subsi-dieslesscur-rentsur-plusof

gov-ern-mententer-prises

Sur-plusor

defi-cit

na-tion-

alin-

comeand

prod-uctac-

counts

38.442.743.640.042.060.865.169.365.867.275.880.777.985.494.895.3

104.2110.2115.5120.5133.0147.7161.1190.0202.3

39.143.243.338.949.964.067.270.063.872.177.681.678.789.796.598.3

106.4114.5115.0124.7143.0151.2176.9

16.918.820.016.316.523.228.831.430.329.733.636.736.338.242.543.647.349.650.751.357.664.571.688.694.0

17.219.619.016.118.126.131.032.229.031.435.237.436.839.943.644.748.651.548.653.861.7

8.310.611.211.011.921.519.319.717.318.721.120.617.821.522.320.322.923.525.727.731.231.434.539.340.2

8.610.711.89.8

17.021.518.519.517.020,620.620.218.022.521.721.822.724.626.429.332.4

67.3 I 30.979.4 i 38.4

7.47.97.98.08.29.59.7

10.710.410.010.811.711.611.913.213.314.215.015.616.915.716.017.118.119.2

7.87.88.08.08.99.4

10.310.99.7

10.711.211.811.512.513.513.614.615.316.116.515.816.217.6

5.85.54.64.85.56.67.37.57.88.7

10.211.712.213.816.718.119.922.123.524.628.535.837.944.048.9

5.55.14.54.95.97.17.47.48.19.3

10.612.212.414.817.718.220.523.123.825.133.136.841.5

55.529.530.939.642.444.666.075.874.267.369.876.083.190.991.398.0

106.4111.4116.9118.5131.9154.4172.4187.3199.6

35.629.834.941.340.857.871.077.069.768.171.979.688.991.093.0

102.1110.3113.9118.1123.5142.4163.6182.2

40.113.013.219.319.025.146.656.153.243.945.247.750.754.752.755.560.963.465.764.471.784.995.6

101.5105.6

17.212.516.520.118.437.751.857.047.444.145.649.553.653.753.557.463.464.265.266.977.490.6

8.38.78.1

11.38.18.59.3

10.512.112.814.417.819.820.623.625.126.427.328.331.837.342.448.052.8

9.28.87.68.7

10.88.58.89.5

11.512.413.415.719.520.121.524.925.527.027.830.333.440.1

100.0 I 45.7

1.82.65.04.33.12.62.11.72.11.81.91.71.81.82.12.12.12.22.22.32.22.12.12.1

2.21.93.85.13.63.12.12.01.82.01.91.81.81.81.92.12.22.22.22.22.32.22.1

0.91.51.82.12.42.42.52.82.93.03.23.74.76.26.86.97.68.49.8

10.912.714.817.419.623.0

1.11.72.02.22.32.52.62.82.93.13.34.25.66.86.57.28.09.1

10.411.114.415.718.4

3.74.24.24.34.44.64.84.85.04.95.15.55.75.97.06.86.87.58.18.59.09.9

10.812.012.2

4.24.24.34.44.54.74.74.95.04.95.35.75.66.47.16.67.27.78.38.79.5

10.311.9

2.1.7.5.8

1.01.31.1.9

1.01.31.72.82.52.42.33.23.83.63.84.14.55.34.14.13.9

1.6.6.7.8

1.21.31.0.8

1.11.52.42.62.72.12.53.84.03.64.24.35.44.84.2


136.8142.1145.5147.7148.1148.2152.2156.4166.6171.8182.1

-17.113.212.7

.4- . 516.2

-1 .0- 6 . 5-8.5- . 16.04.7

- 5 . 1- 5 . 5

3.5-2 .7- 2 . 1-1 .2-1 .4

2.01.0

-6 .7-11.3

2.72.7

3.513.48.4

-2 .49.16.2

- 3 . 8-7 .0-5.9

4.05.72.1

-10.2-1 .2

3.5-3 .8- 3 . 8

-3.01.2.7

-12.4- 5 . 3

57.661.362.964.966.065.168.269.772.074.983.786.8

32.232.432.832.230.330.530.632.437.038.238.6

15.215.916.016.115.916.116.316.417.017.517.818.1

31.832.533.834.535.936.537.037.940.541.242.042.4

134.8138.4145.8150.5159.3161.5165.1168.6175.1181.9184.9186.8

72.575.679.981.587.490.091.393.597.1

100.0101.2101.6

32.231.633.436.439.339.940.340.843.245.646.647.4

2.72.32.21.92.22.32.61.91.92.12.12.1

13.314.214.915.115.114.615.917.017.718.318.519.2

9.19.39.5

10.010.29.9

10.210.711.311.812.112.2

5.05.35.95.55.14.84.84.63.94.14.44.2

2.03.7

-2.8-11.2-13.3-12.9-12.2-8 .6

-10.2- 2 . 8

i Estimates.Note.—Includes the transactions of the trust accounts and excludes certain financial transactions. Corporate

taxes are included in receipts on an accrual basis; expenditures are timed with the delivery; and CCC guaranteedsupport crop loans are counted as expenditures when the loans are made, not when CCC redeems them.

Sources: Department of Commerce (Office of Business Economics) and Bureau of the Budget.

profitsprice-

3013 2 3 - 1 6 6 0 — 6 9


TABLE B-64.—Public debt securities by kind of obligation, 1929-68[Billions of dollars]


1929 .1930 .1931 .193219331934 . .1935193619371938 . . .193919401941 .1942 .1943194419451946 . .19471948 -194919501951 .195219531954 - -19551956195719581959 _I96019611962 -1963 .1964196519661967 . . .19681967- Jan

FebMar -.-AprMayJuneJulyAugSeptOctNovDec

1968: Jan _FebMarAprMayJune _ _July .AugSeptOctNovDec

Totalpublicdebt

securi-ties i

16 316.017.820.823 628.530.634.437.339.441.945.057.9

108 2165.9230.6278.1259.1256.9252.8257.1256.7259.4267.4275.22/8. 7280.8276.6274.9282.9290.8290.2296.2303.5309.3317.9320.9329.3344.7358.0328.9329.6330.9327.8330.9326.2330.6335.8335.9340.5345.1344.7346.3351.6349.5347.0352.3347.6351.1354.4354.7357.2356.9358.0

Interest-bearing public debt

Marketable publicissues

Short-term

issues2

3.32.92.85.97.5

11.114.212.512.59.87.77.58.0

27.047.169.978.257.147.745.950.258.365.668.777.376.081.379.582.192.2

103.5109.2120.5124.6121.2115.5110.4118.9131.2151.5119.7120.2120.9118.1118.8113.3117.6120.9121.3126.0130.8131.2134.1139.6138 0135.1140.7135.5139.9144.8145.2148.3149.5151.5

Treasurybonds

11.311.313.513.414.715.414.319.520.524.026.928.033.449.367.991.6

120.4119.3117.9111.4104.894.076.979.877.281.881.980.882.183.484.879.875.578.486.497.0

104.299.295 285.399.199.199.099.097.997.497.497.497.397.395.395.295.293.693 693.691.191.191.088 488.388.386.285.3

Nonmarketablepublic issues

UnitedStatessavingsbonds 3

0.2.5

1.01.42.23.26.1

15.027.440.448.249.852.155.156.758.057.657.957.757.757.956.352.551.248.247.247.547.548.849.750.350.851 752.350.850.951.051.151.151.251.351.451 451.651.751.751.751.751 851.851.951.952.052 052.152.252.352.3

Invest-ment

bonds *

1.01.01.01.0

13.013.412.912.712.311.610.39.07.66.25.14.43.73.42.82.72.62.52.72.62.62.62.62.62.62.62.62.62.62.62.62.62 52.52.52.52.52.52.52.52.52.5

Specialissues«

0.6.8.4.44

.6

.62.23.24.25.47.09.0

12.716.320.024.629.031.733.933.735.939.141.242.643.945.645.844.843.544.343.543.443.746.146.352.057.259.151.351.552.151.655.256.256.258.357.757.257.457.255.957.256.757.059.259.558.960.159.758.859.059.1

1 Total includes non-interest-bearing debt, Postal Savings bonds, prewar bonds, adjusted service bonds, depositarybonds, Armed Forces leave bonds, Rural Electrification Administration series bonds, foreign series certificates andnotes, foreign currency certificates, notes and bonds, Treasury certificates, U.S. retirement plan bonds and U.S. savingsnotes not shown separately. Not all of total shown is subject to statutory debt limitation.

2 Bills, certificates of indebtedness, and notes.3 Includes sales of U.S. savings notes beginning May 1967.* Series A bonds through September 1965 and, beginning April 1951, series B convertible bonds.5 Issued to U.S. Government accounts. These accounts also held $17.3 billion of public marketable and nonmarket-

able issues on December 31, 1968.Source: Treasury Department.

302


TABLE B-65.- -Estimated ownership of public debt securities, 1939—68[Par values,* billions of dollars]

End of year ormonth

1939 ._. .1940_19411942 ._ .194319441945. . .194619471948.19491950 _.19511952. .195319541955195619571958 . .1959I960..196119621963196419651966- .19671968 $1967: Jan

FebMar... .AprMayJune . .July...Aug.SeptOctNovDec

1968: JanFeb.. .MarApr .MayJuneJuly..AugSeptOctNovDecs.. .

Total public debt securities 2

Total

41.945.057.9

108.2165.9230.6278.1259.1256.9252.8257.1256.7259.4267.4275.2278.7280.8276.6274.9282.9290.8290.2296 2303.5309.3317.9320.9329.3344.7358.0328.9329.6330.9327.8330.9326.2330.6335.8335.9340.5345.1344.7346.3351.6349 5347.0352.3347.6351.1354.4354.7357.2356.9358.0

Heldby

Govern-mentac-

counts

5.66.78 5

10.514.519.023.927.430.833.735.936.039 342.945.446.749.051.252.852.151.452.852 553.255.358.459.765.973.176.564.866.066.866.670.371.971.873.873.372.973.273.171.973.472.973.275.876.275.676.976.676.276.676.5

Heldby

FederalReservebanks

2.52.22 36.2

11.518.824.323.322.623.318.920.823 824.725.924 924.824.924 226.326.627.428 930.833.637.040.844.349.152.943.544.044.945 546.146.746.846.646.947.448.949.149 149.049 750.550 652.252.453 053.353.353.452.9

Held by private investors

Total

33.836.247.191.5

139.8192.8230.0208.4203.6195.8202.4199.9196.3199.8203.8207.1207.0200.5197.8204.5212.7210.0214.8219.4220.5222.5220.4219.1222.4228.6220.6219.7219.3215.7214.5207.7212.0215.5215.7220.2222.9222.4225.3229.2226.8223.3225.9219.2223.0224.4224.9227.7226.9228.6

Com-mercialbanks3

12.713.717.138.257.376.790.874.568.762.466.861.861.563.463.769.262.059.559.567.560.362.167.267.164.263.960.757.463.865.457.757.358.057.256.455.558.360.261.163.563.463.862.863.762.059.860.859.861.262.163.565.363.965.4

Mutualsavingsbanks

and in-surance

com-panies

8.49.2

11 015.420.828.034.736.735.932.731.529.626.325.525.124.023.121.220.119.819.418.117.417.416.816.515.714.112.611.513.913.713.513.113.012.712.712.812.812.712.712.612.512.512.612.212.412.011.911.911.911.711.611.5

Othercorpo-

rations4

2.02.04.0

10.116.421.422.215.314.114.816.819.720 719.921.519 123.218.717.718.121.418.718 518.618.718.215.814.912.214.614.714.714.112 913.611.111.912.410.711.613.012.213.414.814 113.615 613.014.314.512.914.014.814.6

Stateandlocal

govern-ments 5

0.4.5.7

1.02.14.36.56.37.37.98.18.89.6

11.112.714.415.416.316.616.518.0

18.719 020.121.121.122.924.925.126.924.724 925.025 125 024.924.625.024 824 524.425.125 626.427 126.926 826.626.726.926.726.826.726.9

Indi-viduals6

9.410.013.023.337.253.164.064.165.765.566.366.364.665.264.863.565.065.964.963.769.466.165.966.068.269.872.174.674.075.174.974.674.072.771.970.970.871.472.573.273.974.074.575.275.275.275.474.274.774.975.275.075.075.1

Miscel-laneousinves-tors 7

0.9.8

1.33.56.09.3

11.811.511.912.512.913.713.614.716.016.918.318.919.018.924.226.326.830.231.533.033.233.234.735.134.734.534.734.734.632.633.733.733.834.735.534.736.536.635.835.634.933.634.234.134.734.934.935.1

1 United States savings bonds, series A-F and J, and U.S. savings notes are included at current redemption value.2 Not all of total shown is subject to statutory debt limitation.3 Includes commercial banks, trust companies, and stock savings banks in the United States and Territories and island

possessions; figures exclude securities held in trust departments. Since the estimates in this table are on the basis of parvalues and include holdings of banks in United States Territories and possessions, they do not agree with the estimatesin Table B-51, which are bas id on book values and relate only to banks within the United States.

4 Exclusive of banks and insurance companies.8 Includes trust, sinking, and investment funds of State and local governments and their agencies, and of Territories

and possessions.6 Includes partnerships and personal trust accounts.7 Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, dealers and brokers

Federal oriented agencies not included in Government accounts, and investments of foreign balances and internationalaccounts in this country. Beginning with December 1946, the international accounts include investments by the InternationalBank for Reconstruction and Development, the International Monetary Fund, the International Development Association,the Inter-American Development Bank, and various United Nations' funds, in special non-interest-bearing notes andbonds issued by the U.S. Government.

s Preliminary estimates by Council of Economic Advisers.Source: Treasury Department (except as noted).

3°3


TABLE B-66.—Average length and maturity distribution of marketable interest-bearingpublic debt, 1946-68

End of year or monthAmount

out-standing

Maturity class

Within1 year

1 to 5years

5 to 10years

10 to 20years

20 yearsand over

Average length

Millions of dollars Years

Fiscal year:1946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

1965196619671968

1967: JanFebMarAprMay. . . .June

JulyAugSeptO c t . . . . .NovDec

1968: JanFebMar . . . .AprMay.....June


189,606168,702160,346155,147

155,310137,917140,407147,335150,354

155,206154,953155,705166,675178,027

183,845187,148196,072203, 508206,489

208,695209,127210,672226,592

218,796219,245219,914217,127216,650210,672

214,968218,253218,637223,271226,081226,476

229,285233,273231,651228,718231,761226,592

230,977233,167233,556236,651235,653236,812

61,97451,21148,74248,130

42,33843,90846,36765,27062,734

49,70358,71471,95267,78272,958

70,46781,12088,44285,29481,424

87,63789,13689,648106,407

106,021101,549102,24299,67095, 52489,648

93,95795, 04095,442100,208102,158104,363

107,199116,253114,646111,783109,012106,407

110,824106,121106,534116,040104,938108,611

24,76321,85121,63032,562

51,29246,52647,81436,16129,866

39,10734,40140,66942, 55758,304

72,84458,40057,04158,02665,453

56,19860,93371,42464,470

59,43466,71766,72266, 54170,23871,424

71,43376,24478,19878, 08877,32078,159

78.15767,96767,96967,92267,01764,470

64,46964,99664,99758,60670,75168,260

41,80735,56232,26416,746

7,7928,70713,93315,65127,515

34,25328,90812,32821,47617,052

20,24626,43526,04937,38534,929

39,16933,59624,37830,754

28,00225,65525,65025,64525,64124,378

24,37621,79319,84019,83721,48718,859

18,85924,00524,00624,00630,75230,754

30,75437,14337,14337,14235,13035,130

17,46118, 59716,22922,821

28,03529,97925,70028,66228,634

28,61328, 57826,40727,65221,625

12,63010,2339,3198,3608,355

8,4498,4398,4258,407

8,4328,4318,4308,4288,4268,425

8,4238,4228,4218,4198,4188,417

8,4168,4148,4138,4118,4098,407

8,4068,4028,4018,4008,3988,396

43, 59941,48141,48134,888

25,8538,7976,5941,5921,606

3,5304,3514,3497,208

7,65810,96015,22114,44416,328

17,24117,02316,79716,553

16,90816,89316,87016,84316,81916,797

16,78016,75816,73716,71916,69716,679

16,65416,63516,61716,59616,57116,553

16,52516,50416,48216,46416,43616,415

Months

1529

27846

104937

46

1110

411

72

665567

554

21

0

0012

021010

Note.—All issues classified to final maturity except partially tax-exempt bonds, which were classified to earliest calldate (the last of these bonds were called on August 14,1962, for redemption on December 15, 1962).

Source: Treasury Department.

304


T A B L E B—67.—Receipts and expenditures of the government sector of the national income and productaccounts, 1929-68


Calendar year or quarter

1929

19301931 . .19321933193419351936193719381939

1940194119421943 .194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966 .19671968*

1966: 1

IIIIV

1967- 1II . . . . . . .IllIV

1968: 1 . . .IIIII

Total government

Re-ceipts

11.3

10.89.58.99.3

10.511.412.915.415.015.4

17.725.032.649.251.253.250.956.858.956.0

68.784.889 894.389.7

100 4109.0115 6114.7128.9

139.8144.6157.0168 8174.1189 1213.2227.4260.9

Ex-pendi-tures

10.3

11.112 410.610 712 913.416 115.016.817.6

18 428.864.093 3

103.092 745.542.450 359.1

60.879.093 7

101 296.797 6

104.1114 9127.2131.0

136.1149.0159.9166 9175.4186 9211.5241.3267.3

Sur-plus ordeficit

nationalincome

andprod-

uct ac-counts

1.0

- . 3- 2 . 9- 1 . 8- 1 4- 2 . 4- 2 . 0- 3 . 1

.3- 1 . 8- 2 . 2

- . 7- 3 . 8

- 3 1 . 4- 4 4 . 1- 5 1 . 8- 3 9 . 5

5.414.48.5

- 3 . 2

7.85.8

- 3 . 8- 6 . 9- 7 . 0

2.74.9

.7- 1 2 . 5- 2 . 1

3.7- 4 . 3- 2 . 9

1.8- 1 . 4

2.21.7

- 1 3 . 8- 6 . 4

Federal Government *

Re-ceipts

3.8

3.02.01.72.73.54.05.07.06.56.7

8.615.422.939.341.042.539.143.243.338.9

49.964.067.270.063.872.177.681.678.789.7

96.598.3

106.4114.5115.0124.7143.0151.2176.9

Ex-pendi-tures

2.6

2.84.23.24.06.46.58.77.48.68.9

10.020.556.185.895.584.635.629.834.941.3

40.857.871.077.069.768.171.979.688.991.0

93.0102.1110.3113.9118.1123.5142.4163.6182.2

Sur-plus ordeficit

nationalincome

andprod-

uct ac-counts

1.2

.3- 2 . 1- 1 . 5- 1 3- 2 . 9- 2 . 6- 3 6

- . 4- 2 . 1- 2 . 2

-̂ •1 3- 5 . 1

- 3 3 . 1- 4 6 6- 5 4 . 5- 4 2 1

3.513.48 4

- 2 . 4

9.16.2

- 3 8- 7 . 0- 5 . 9

4.05.72 1

- 1 0 . 2- 1 . 2

3.5- 3 8- 3 . 8

- 3 . 01 2

7- 1 2 . 4

- 5 . 3

State and localgovernment

Re-ceipts

7.6

7.87.77.37 28.69.18 69.19.39.6

10 010.410.610 911.111 612.915.317 619.3

21.123.325 227.228.831.434.738 241.646.0

49.953.658.663.469.575 584.691.9

102.4

Ex-pendi-tures

7.8

8.48 57.67 28.18.68 18.49.09.6

9.39.18.88.48.59 0

11.014.317 420.0

22.323.725 327.029.932.735.639.544.046.8

49.654.157.662.267.874 583.593.3

103.5

Sur-plus ordeficit

nationalincome

andprod-

uct ac-counts

- 0 . 2

- . 6- 8- . 3

.5

. 65

.7

. 40)

61.31.82.52.72 61.91.0

- . 7

- 1 . 2- . 4

(3).1

- 1 . 3- . 9

- 1 . 4- 2 . 3

- . 8

.2- . 5

.91.21.71 01.1

- 1 . 4- 1 . 1


204.3211.5216.5220.5

222.2223.6229.0234.8

246.6254.2267.2

201.3206 2215.3223.1

235 2239.5243.0247 4

256.9265 5271 3275.4

3.05.31.2

- 2 . 6 -

- 1 2 . 9- 1 5 . 9- 1 4 . 0- 1 2 . 5

- 1 0 . 3- 1 1 . 3

- 4 . 1

136.8142.1145.5147.7

148.1148.2152.2156.4

166.6171.8182.1

134.8138.4145.8150.5

159.3161.5165.1168.6

175.1181.9184.9186.8

2.03 7

- . 3- 2 . 8

- 1 1 . 2- 1 3 . 3- 1 2 . 9- 1 2 . 2

- 8 . 6- 1 0 . 2

- 2 . 8

80.883.686.087.9

89.390.092.795.5

97.8100.8103.6

79.882.084.487.7

91.092.693.895.8

99.5101.9104.9107.8

1.01.61.5.2

- 1 . 7- 2 . 6- 1 . 1

- 4

- 1 . 7- 1 1- 1 . 3

1 See Note, Table B-S3.2 Surplus of $32 million.3 Deficit of $41 million.

Note.—Federal grants-in-aid to State and local governments are reflected in Federal expenditures and State and localreceipts and expenditures. Total government receipts and expenditures have been adjusted to eliminate this duplication.


305


T A B L E B-68.—Receipts and expenditures of the State and local government sector of the nationalincome and product accounts, 1946-68

[Billions of dollars; calendar years]

Year orquarter

Receipts

Total

12.915.317.619.3

21.123.325.227.228.8

31.434.738.241.646.0

49.953.658.663.469.5

75.584.691.9

102.4

Per-sonaltaxand

nontaxreceipts

1.51.82.12.4

2.62.93.13.43.7

4.14.75.25.66.3

7.37.78.79.4

10.8

11.813.615.217.5

Cor-porateprofits

taxaccruals

0.5.6.7.6

.8

.9

.8

.8

.8

1.01.01.01.01.2

1.31.41.41.71.9

2.12.22.62.9

Indirectbusi-nesstaxand

nontaxaccruals

9.310.612.113.3

14.515.817.318.719.7

21.423.625.527.028.9

31.734.136.939.442.3

45.949.553.458.2

Contri-butions

forsocialinsur-ance

0.5.6.7.8

1.01.21.31.51.7

1.82.02.32.52.7

3.03.23.53.84.1

4.54.85.15.3

Fed-eral

grants-in-aid

1.11.72.02.2

2.32.52.62.82.9

3.13.34.25.66.8

6.57.28.09.1

10.4

11.114.415.718.4

Expenditures

Total

11.014.317.420.0

22.323.725.327.029.9

32.735.639.544.046.8

49.654.157.662.267.8

74.583.593.3

103.5

Pur-chases

ofgoods

andserv-ices

9.812.615.017.7

19.521.522.924.627.4

30.133.036.640.643.3

46.150.253.758.263.5

70.178.887.897.1

Trans-fer

pay-ments

toper-sons

1.72.32.92.9

3.53.03.23.33.4

3.73.84.24.64.8

5.15.55.76.06.5

6.97.58.59.6

Netinterest

paid

0.3.3.3.3

.3

.3

.3

.3

.4

.5

.5

.5

.6

.7

.7

.8

.8

.8

.7

.5

.3

.2

.3

Less:Currentsurplusof gov-

ern-mententer-prises

0.7.8.8.9

.91.11.11.21.4

1.61.71.81.82.0

2.22.32.62.82.9

3.03.13.33.4

Surplusor

deficit<-),

nationalincome

andprod-

uct ac-counts

1946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

1965196619671968

1966: I-.--I I . . .I I I . .IV—

1967: l.._-II...III —IV...

1968: I....II —III..IV p.


80.883.686.087.9

89.390.092.795.5

97.8100.8103.6

12.813.413.914.2

14.615.015.415.8

16.317.017.918.9

2.22.22.32.2

2.52.52.52.7

2.82.92.9

47.849.050.051.4

52.152.853.854.7

55.857.358.960.9

4.74.84.95.0

5.05.15.15.1

5.25.35.45.5

13.314.214.915.1

15.114.615.917.0

17.718.318.519.2

79.882.084.487.7

91.092.693.895.8

99.5101.9104.9107.8

75.377.479.782.7

85.887.288.490.0

93.495.698.4

100.8

7.37.47.67.9

8.28.48.69.0

9.29.49.6

10.1

0.4.3.3.3

.3

.2

.2

.2

.2

.3

.3

.4

3.13.13.23.2

3.23.33.33.3

3.43.43.43.5

1.91.0.1

- . 7

- 1 . 2- . 4

- 1 . 1

- 1 . 3- . 9

- 1 . 4- 2 . 3

- . 8

.2- . 5

1.01.61.5

.2

- 1 . 7- 2 . 6- 1 . 1

- 1 . 7- 1 . 1- 1 . 3

i Deficit of $41 million.


306


TABLE B-69.—State and local government revenues and expenditures, selected fiscal years 1927-67[Millions of dollars]

Fiscal year 1

General revenues by source 2

TotalProp-erty

taxes

Salesand

grossre-

ceiptstaxes

Indi-vidualincometaxes

Corpo-ration

netincometaxes

Reve-nue

fromFederalGovern-

ment

Allotherreve-nue 3

General expenditures by function 2

TotalEdu-

cationHigh-ways

Publicwel-fare

AMother<

1927

1932193419361938

19401942194419461948

1950195219531954

1955....1956195719581959

1960196119621963

1962-63 51963-64 51964-65 51965-66 51966-67»

7,271

7,2677,6788,3959,228

9,60910,41810,90812,35617,250

20,91125,18127,30729, 012

31,07334,66738,16441,21945,306

50,50554,03758,25262,890

62,26968,44374,00083,03691,626

4,730

4,4874,0764,0934,440

4,4304,5374,6044,9866,126

7,3498,6529,3759,967

10,73511,74912,86414,04714,983

16,40518,00219,05420,089

19,83321,24122,583

470

7521,0081,4841,794

1,9822,3512,2892,9864,442

5,1546,3576,9277,276

7,6438,6919,4679,829

10,437

11,84912,46313,49414,456

14,44615,76217,118

24,670 19,08526,280 20,554

70

7480153218

224276342422543

788998

1,0651,127

1,2371,5381,7541,7591,994

2,4632,6133,0373,269

3,2673,7914,0904,7605,835

92

7949113165

156272451447592

593846817778

744890984

1,0181,001

1,1801,2661,3081,505

1,5051,6951,9292,0382,227

116

2321,016948800

945858954855

1,861

2,4862,5662,8702,966

3,1313,3353,8434,8656,377

6,9747,1317,8718,722

8,66310,00211,02913,21415,505

1,793

1,6431,4491,6041,811

1,8722,1232,2692,6613,685

4,5415,7636,2526,897

7,5848,4659,2509,699

10,516

11,63412,56313,48914,850

14,55615,95117,25019,26921,227

7,210

7,7657,1817,6448,757

9,2299,1908,86311,02817,684

22,78726,09827,91030,701

33,72436,71140,37544,85148,887

51,87656,20160,20664,816

63,97769,30274, 54682,84393,770

2,235

2,3111,8312,1772,491

2,6382,5862,7933,3565,379

7,1778,3189,39010,557

11,90713,22014,13415,91917,283

18,71920,57422,21623,776

23,72926,28628,56333,28738,233

1,809

1,7411,5091,4251,650

1,5731,4901,2001,6723,036

3,8034,6504,9875,527

6,4526,9537,8168,5679,592

9,4289,844

10,35711,136

11,15011,66412,22112,77013,956

151

444889827

1,069

1,1561,2251,1331,4092,099

2,9402,7882,9143,060

3,1683,1393,4853,8184,136

4,4044,7205,0845,481

5,4205,7666,3156,7578,249

3,015

3,2692,9523,2153,547

3,8623,8893,7374,5917,170

8,86710,34210,61911,557

12,19713,39914,94016,54717,876

19,32521,06322,54924,423

23,67825,58627,44730,02933,332

1 Fiscal years not the same for all governments. See footnote 5.2 Excludes revenues or expenditures of publicly owned utilities and liquor stores, and of insurance-trust activities.

Intergovernmental receipts and payments between State and local governments are also excluded.3 Includes licenses and other taxes and charges and miscellaneous revenues.* Includes expenditures for health, hospitals, police, local fire protection, natural resources, sanitation, housing and

urban renewal, local parks and recreation, general control, financial administration, interest on general debt, and otherunallocable expenditures.

5 Data for fiscal year ending in the 12-month period through June 30. Data for 1963 and earlier years include local govern-ment amounts grouped in terms of fiscal years ended during the particular calendar year.

Note.—Data are not available for intervening years.

See Table B-59 for net debt of State and local governments.


3°7


CORPORATE PROFITS AND FINANCETABLE B-70.—Profits before and after taxes, all private corporations, 1929-68


Year orquarter

Corporate profits (before taxes) andinventory valuation adjustment

All

dus-tries

Manufacturing

Total

Dur-able

goodsin-

dus-tries

Non-dur-able

goodsin-

dus-tries

Trans-porta-tion,com-muni-cation,

andpublic

utilities

Allother

in-dus-tries

Cor-po-rateprof-

itsbe-fore

taxes

Cor-po-ratetaxlia-bil-ity i

Corporate profitsafter taxes

TotalDivi-dendpay-

ments

Un-dis-trib-utedprof-its

Corpo-rate

capitalcon-

sump-tion

allow-ances 2

Profitsplus

capitalcon-

sump-tion

allow-ances 3

1929...

1930___1931...1932...1933.-1934...1935...1936.._1937.-1938...1939...

1940...1941...1942...1943...1944...1945...1946-..1947...1948...1949...

1950...1951...1952...1953.-1954...1955...1956-..1957-..1958...1959...

1960...1961..-1962--1963...1964-..1965...1966...1967...1968 »_.

1966: I...II..III..IV..

1967:II..III.IV..

1968: I —

10.5

7.02.0

-1 .3-1 .2

1.73.45.66.84.96.39.8

15.220.324.423.819.219.325.633.030.8

37.742.739.939.638.046.946.145.641.151.749.950.355.758.966.376.183.980.489.2

5.23.91.3

- . 5

2.13.23.82.33.3

5.59.5

11.813.813.29.79.0

13.617.616.2

20.924.621.622.019.926.024.724.019.326.3

24.423.326.628.832.739.342.839.244.3

2.61.5

- 1 043

.91.71.7.8

1.7

3.16.47.28.17.44.52.45.87.58.1

12.013.211.711.910.514.312.813.39.3

13.6

12.011.414.115.817.822.824.121.224.4

2.62.41.3.5

1.11.52.11.61.7

2.43.14.65.75.95.26.67.8

10.08.1

8.911.49.9

10.19.4

11.811.910.710.012.712.411.912.513.014.916.618.818.019.9

1.8

1.2.5.2

*.. 4.4

!8.5

1.0

1.32.03.44.43.92.71.82.23.03.0

4.04.64.95.04.75.65.95.85.97.0

7.57.98.59.5

10.111.112.011.812.8

3.41.9.2

- . 9- . 8

.3

.91.72.22.12.0

3.03.75.16.26.76.78.59.9

12.511.6

12.713.513.312.613.415.215.615.815.918.4

17.919.120.520.623.525.629.029.432.1

10.03.7

- . 4-2 .3

1.02.33.66.36.84.07.0

10.017.721.525.124.119.724.631.535.228.9

42.643.938.940.638.348.648.847.241.452.1

49.750.355.459.466.877.885.681.692.3

1.4.8.5.4.5.7

1.01.41.51.01.4

2.87.6

11.414.112.910.79.1

11.312.510.4

17.822.319.420.317.721.621.721.219.023.723.023.124.226.328.331.334.633.541.3

8.62.9

- . 9-2 .7

.41.62.64.95.32.95.67.2

10.110.111.111.29.0

15.520.222.718.5

24.921.619.620.420.627.027.226.022.328.526.727.231.233.138.446.551.048.151.0

5.85.54.12.52.02.62.84.54.73.23.8

4.04.44.34.44.64.65.66.37.07.2

8.88.68.68.99.3

10.511.311.711.612.6

13.413.815.216.517.819.821.722.924.6

2.8-2 .6-4 .9-5 .2-1 .6-1 .0- . 2

.4

.6- . 21.8

3.25.75.96.66.54.49.9

13.915.611.3

16.013.011.011.511.316.515.914.210.815.913.213.516.016.620.626.729.325.226.4


IIIIV p..

82.783.484.285.3

79.579.680.282.3

83.889.291.6

4.24.34.34.03.83.63.63.63.63.73.7

3.84.25.05.46.16.44.75.87.07.9

8.810.311.513.215.017.418.920.822.023.5

24.926.230.131.833.936.439.743.447.1

42.942.642.743.3

39.339.138.539.9

41.344.945.3

24.423.823.624.5

21.021.220.621.9

22.325.225.0

18.518.819.018.8

18.317.917.918.0

19.019.720.3

11.812.112.112.0

11.711.812.011.9

12.512.513.0

28.028.729.430.1

28.428.829.730.6

30.031.833.3

85.285.686.785.0

79.980.380.885.4

88.991.892.7

34.534.635.034.4

32.833.033.235.1

39.841.141.5

50.851.051.650.7

47.147.347.650.3

49.150.751.2

21.621.921.921.6

22.523.223.522.5

23.624.425.225.4

29.129.129.729.1

24.624.124.127.9

25.526.326.0

38.439.340.141.0

41.942.944.144.9

45.746.747.648.5

1 Federal and State corporate income and excess profits taxes.2 Includes depreciation and accidental damages.3 Corporate profits after taxes plus corporate capital consumption allowances.

Note.—Beginning 1962 data reflect the new depreciation guidelines issued by the Treasury Department July 11,1962'and the investment tax credit provided in the Revenue Act of 1962.


3o8


T A B L E B—71.—Sales, profits, and stockholders1 equity, all manufacturing corporations (exceptnewspapers), 1947—68


Year orquarter

All manufacturingcorporations

Sales(net)

Profits

Beforetaxes

Aftertaxes

Stock-holders'equityi


Sales(net)

Profits

Beforetaxes

Aftertaxes

Stock-holders'equity l

Nondurable goodsindustries

Sales(net)

Profits

Beforetaxes

Aftertaxes

Stock-holders'equity»

1947..1948..1949-

1950-1951..1952..1953..1954..

1955..1956..1957..1958..1959..

I960..1961-1962..1963..1964..

1965..1966.1967.

1966: IIIIII . . . .IV . . . .

1967: IIIIII . . . .IV . . . .

1968: IIIIII . . . .

150.7165.6154.9

181.9245.0250.2265.9248.5

278.4307.3320.0305.3338.0

345.7356.4389.9412.7443.1

492.2554.2575.4

129.9141.0137.8145.5

137.0145.1141.5151.8

148.9158.9155.7

16.618.414.4

23.227.422.924.420.9

28.629.828.222.729.7

27.527.531.934.939.6

46.551.847.8

12.414.012.313.1

11.412.611.012.8

12.514.813.2

10.111.59.0

12.911.910.711.311.2

15.116.215.412.716.3

15.215.317.719.523.2

27.530.929.0

7.28.47.47.9

6.77.66.77.9

7.48.37.6

65.172.277.6

83.398.3

103.7108.2113.1

120.1131.6141.1147.4157.1

165.4172.6181.4189.7199.8

211.7230.3247.6

222.4228.6233.4236.8

240.9245.6249.7254.3

258.6263.4268.4

66.675.370.3

86.8116.8122.0137.9122.8

142.1159.5166.0148.6169.4

173.9175.2195.5209.0226.3

257.0291.7300.6

68.075.471.177.3

71.177.072.680.0

78.886.081.0

7.68.97.5

12.915.412.914.011.4

16.516.515.811.415.8

14.013.616.718.521.2

26.229.225.7

7.08.26.57.5

6.27.25.47.0

6.78.66.8

4.55.44.5

6.76.15.55.85.6

8.18.37.95.88.1

7.06.98.69.5

11.6

14.516.414.6

3.84.63.74.2

3.44.13.14.0

3.74.53.7

31.134.137.0

39.947.249.852.454.9

58.865.270.572.877.9

82.384.989.193.398.5

105.4115.2125.0

110.0114.2117.1119.3

121.6123.7126.0128.6

130.9134.1137.2

84.190.484.6

95.1128.1128.0128.0125.7

136. 3147.8154.1156.7168.5

171.8181-.2194.4203.6216.8

235.2262.4274.8

61.965.666.768.2

65.968.268.971.8

70.172.974.8

9.09.57.0

10.312.110.010.49.6

12.113.212.411.313.9

13.513.915.116.418.3

20.322.622.0

5.45.85.85.6

5.25.45.65.9

5.86.26.4

5.66.24.6

6.15.75.25.55.6

7.07.87.56.98.3

8.28.59.2

10.011.6

13.014.614.4

3.43.73.73.7

3.33.53.63.9

3.73.84.0

34.038.140.6

43.551.153.955.758.2

61.366.470.674.679.2

83.187.792.396.3

101.3

106.3115.1122.6

112.4114.3116.3117.5

119.3121.8123.6125.7

127.7129.4131.2

* Annual data are average equity for the year (using four end-of-quarter figures).

Note.—For explanatory notes concerning compilation of the series, see "Quarterly Financial Report for ManufacturingCorporations," Federal Trade Commission and Securities and Exchange Commission.

Data are not necessarily comparable from one period to another due to changes in accounting procedures, industryclassifications, sampling procedures, etc. Specific information about the effects of the more significant changes and re-visions is contained in the following issues of the "Quarterly Financial Report": third quarter 1953, third quarter 1956,first quarter 1959, and first quarter 1965.

Sources: Federal Trade Commission and Securities and Exchange Commission.

309


T A B L E B—72.—Relation of profits after taxes to stockholders* equity and to sales, all manufac-turing corporations {except newspapers), by industry group, 1947—68

Year orquarter

1947. .19481949

19501951 .1952195319541955 .1956195719581959 . . .

19601961196219631964 . .196519661967

1967: 1IIIIIIV

1968: 1.II111

19471948 ._ .19491950 .19511952 . .195319541955.. . .195619571958195919601961 . -196219631964.1965196619671967: 1

III I I .—IV

1968: 1IIlll..__

Ailman-ufac-tur-mgcor-

pora-tions(ex-cept

news-pap-ers)

15.616.011.615.412.110 310.59.9

12.612.310.98.6

10.49.28.99.8

10.311.613.013.411.711.212.410.812.511.512.611.4

Totaldur-able^

Mo-tor

vehi-clesand

equip-ment

Air-craftandparts

Elec-tricalma-

chin-ery,

equip-ment,andsup-plies

Ma

ery(ex-elec-trical)


Fab-ri-

catedmetalprod-ucts

Pri-maryironandsteelin-

dus-tries

p . :

for

motal

dus-

ines

Stone,clay,and

glassprod-ucts

Ratio of profits after Federal taxes (annual rate) to stockholders

14.415.712.116.913.011 111.110.313.812 811.38.0

10.48.58.19.6

10.111.713.814.211.711.213.29.8

12.511.313.410.7

16.419.922.125.314.313.913.914.121.713 114.28.2

14.513.511.416.316.716.919.515.911.712.516.43.8

14.016.517.97.4

17.713 28.17.39.8

12.711.312.215.214.412.911.712.512.414.713.614.414.3

19.016.113.620 914.013 713.112 412.311 412l510 212 59 58.9

10.010.111.213.514.812.812.212.811.914.111.811.411.5

15.716.311.614 113 011 39.88 6

10 312 610.76 99.77 57.89.19.6

12.514.115.012.912.315.212.212.011.113.612.3

17.617.010.416 013 410 19.87 6

10 010 79.37 38 05 65.97.98.3

10.113.214 712.712.714.211.712.110.012.512.1

12.014.710.014 312 38 5

10.78 1

13.512 711.47 28.07 26.15.47.08.89.8

10.27.77.97.96.09.18.6

10.54.5

12.414.28.1

15 113 811 611.110 415 516 49.36 07.97.17.17.57.69.8

11.914.810.913.712.87.89.58.9

11.59.9

14 015.013.117 714 211 711.812 515 614 912.410 212 79.98.98.98.79.6

10.39.98.23.39.4

10.49.53.9

11.712.0

Fur

- n r i

fjY

equity

18.015.98.1

15 211 38 68.26 09 2

11 68.56 38.96.54.97.98.3

10.113.414.212.110.612.012.413.39.1

12.812.5

Lum-berand

woodprod-ucts(ex-cept

furni-ture)

In-stru-mentsandre-

latedprod-ucts

—percent2

22 919.29.1

17 511 98 57.16 3

11.18 74.75.79.43.64.15.68.29.9

10.110.08.65.58.6

10.59.6

10.916.116.3

14.414.012.116 713 211 611.412 312.512 412.010.613.111.610.612.012.114.417.520.918.015.716.918.720.314.115.518.0

Mis-cella-neousman-ufac-tur-mg(in-

clud-ing

ord-nance)

14.012.27.2

12 39 77 08.27.58.5

11 67.78.29.39.29.99,48.89.5

10.715.413.112.812.513.213.912.69.6

12.2

Profits after taxes per dollar of sales—cents

6 77.05.87.14 84.34.34.55.45.34.84.24.84.44.34.54.75.25.65.65.04.95.24.75.25.05.24.9

6 77.16.47.75 34.54.24 65.75.24.83.94.84.03.94.44.55.15.75.64.84.85.34.35.04.75.24.5

6.06.97.98.34.74.73.95.16.95.25.44.06.35.95.56.96.97.07.26.24.95.36.31.95.46.16.23.4

2.92.41.61.41.82.42.32.63.33.02.72.62.52.62.92.93.23.4

6.35.95.77.25 04.54.14.54.43.84.23.84.43.53.53.73.84.24.84.84.44.24.44.24.84.24.14.1

7.27.36.47.35.54.84.24.45.15.44.83.74.83.94.14.54.75.86.26.45.75.76.35.55.35.15.75.6

7.47.15.16.85.04.03.63.13.84.03.63.13.22.42.53.13.23.74.54.94.54.64.94.24.23.64.44.2

6.67.66.57.95.84.75.35.37.26.76.65.45.45.14.63.94 R5.65.75.84.84.84.83.95.75.15.52.9

8.99.06.9

10.27.86.76.36.68.39.36.64.75.85.45.35.55.36.57.38.26.88.17.75.36.05.46.45.9

7.98.68.6

10.17.16.66.57.48.68.27.56.87.96.65.85.65.35.65.95.64.82.35.45.75.42.66.46.3

6.05.53.35.13.42.72.62.12.93.42.62.02.72.11.62.32.42.93.73.93.53.23.53.63.82.83.63.5

11.49.95.99.45.54.13.53.45.43.92.32.84.21.71.92.53.33.94.03.83.42.43.44.03.74.45.75.8

7.77.87.18.66.14.84.65.56.05.85.75.46.55.95.45.96.07.28.69.58.58.07.98.89.17.47.68.7

6.35.63.65 63.72.72.92.83.13.6?.53.03.53.53.63.43.33.63.84,94.24.24.14.24.14.23.14.0


3 1 0


TABLE B—72.—Relation of profits after taxes to stockholders'' equity and to sales, all manufac-turing corporations {except newspapers), by industry group, 1947—68—Continued

Year orquarter

Nondurable goods industries

Totalnon-dur-

able i

Foodandkin-dredprod-ucts

To-baccoman-ufac-tures

Tex-tilemill

prod-ucts

Ap-pareland

relatedprod-ucts

Paperand

alliedprod-ucts

Print-ingandpub-lish-ing

(ex-cept

news-pa-

pers)

Chem-icalsand

alliedprod-ucts

Petro-leumrefin-ing

Rub-berandmis-

cella-neousplasticprod-ucts

Leatherand

leatherprod-ucts

1947 .19481949195019511952195319541955 . . .1956195719581959196019611962196319641965196619671967: I..

ILIIIIV.

1968: I..ILIII

194719481949195019511952

195319541955195619571 9 5 8 . . . . . . . .195919601961196219631964196519661967

1967: IIL.. .Ill —IV....

1968: I

ML-I

16.616.211.214.111.29.79.99.6

11.411.810.69.2

10.49.89.69.9

10.411.512.212.711.811.211.611.712.511.711.712.1

Ratio of profits after Federal taxes (annual rate) to stockholders

17.612.811.812.38.17.68.18.18.99.38.78.79.38.78.98.89.0

10.010.711.210.89.4

10.311.711.89.9

10.211.4

10.113.612.611.59.58.49.4

10.211.411.712.513.513.413.413.613.113.413.413.514.114.412.114.715.815.013.513.615.9

19.518.77.6

12.78.24.24.61.85.75.84.23.57.55.85.06.26.18.5

10.910.17.65.97.17.89.57.19.19.5

18.912.17.5

10.12.94.45.14.56.18.16.34.98.67.77.29.37.7

11.712.713.312.09.68.6

14.415.112.09.3

15.0

22.016.410.716.213.910.510.19.9

11.511.68.98.19.58.57.98.18.19.39.4

10.69.19.09.58.69.38.5

10.59.2

17.214.711.411.510.39.19.49.2

10.213.011.79.0

11.410.68.5

10.39.2

12.614.215.613.012.113.514.112.210.910.714.8

15.915.813.217.812.210.910.711.614.714.213.311.413.712.211.812.412.914.415.215.113.113.013.712.213.313.413.612.8

' equity—percent2

15.213.313.412.713.413.912.510.09.8

10.110.310.111.311.411.812.412.512.612.312.113.112.911.912.1

12.412.38.7

16.914.811.111.310.613.212.211.19.1

11.09.19.39.69.2

10.611.712.210.39.39.09.2

13.710.813.511.8

Profits after taxes per dollar of sales—cents

6.76.85.46.54.54.14.34.45.15.34.94.44.94.84.74.74.95.45.55.65.35.15.25.25.55.35.25.3

4.23.33.33.42.01.92.02.12.32.42.22.22.42.32.32.32.42.72.72.72.62.32.52.82.82.52.52.7

4.15.25.14.93.83.23.74.24.85.05.25.45.4

5.55.75.75.95.95.95.95.95.15.86.46.25.75.56.0

8.28.34.15.83.41.92.21.02.62.61.91.63.02.52.12.42.33.13.83.62.92.42.72.93.42.73.23.4

4.63.12.12.8.6

1.01.21.11.31.61.31.01.51.41.31.61.42.12.32.42.31.81.72.82.92.51.92.7

10.78.56.58.86.65.75.45.66.16.15.04.75.25.04.74.64.55.14.95.44.74.84.94.54.74.45.14.5

6.15.24.54.53.73.33.43.43.64.23.73.14.03.62.83.43.24.34.85.14.44.34.64.93.93.83.64.8

8.88.88.2

10.36.56.16.16.88.38.07.67.07.97.57.37.47.57.97.97.86.96.97.06.57.07.06.96.6

11.110.110.410.611.111.610.69.59.59.9

10.39.7

10.810.911.111.211.011.210.910.711.211.210.610.7

4.44.73.85.84.53.63.84.04.44.44.23.54.03.63.83.73.64.14.34.43.93.73.43.65.14.24.84.5

14.010.46.2

10.92.15.86.05.98.57.27.05.78.56.34.46.96.9

10.511.612.911.912.87.9

12.114.613.312.012.4

4.33.32.23.7.6

1.81.81.92.52.12.01.72.21.61.11.81.82.62.83.G3.03.22.13.03.43.33.13.3

1 Includes certain industries not shown separately.2 Annual ratios based on average equity for the year (using four end-of-quarter figures). Quarterly ratios based on equity

at end of quarter only.

Note.—Ratios based on data in millions of dollars.For explanatory notes concerning compilation of the series, see "Quarterly Financial Report for Manufacturing Cor-

porations," Federal Trade Commission and Securities and Exchange Commission. See also Note, Table B-71.

Sources: Federal Trade Commission and Securities and Exchange Commission.

3 1 1


T A B L E B—73.—Sources and uses of funds, nonfarm nonfinancial corporate business, 1957—68


Source or use of funds

Sources, total

Internal sources1.

Undistributed profits1 . .Corporate inventory

valuation adjustment.Capital consumption

allowances1...

External sources

Stocks..BondsMortgagesBank loans, n.e.c...Other loansTrade debtProfits tax liability.Other liabilities... .

Uses, total.

Purchases of physical assets.

Nonresidential fixedinvestment

Residential structures...Change in business

inventories

Increase in financial assets2..

Liquid assetsDemand deposits and

currencyTime depositsU.S. Government

securitiesOpen-market paper

Consumer creditTrade creditOther financial assets

Discrepancy (uses lesssources).

1957

42.0

30.6

11.8

-1.5

20.3

11.4

2.46.3.41.1.7.5

-2.12.2

40.0

34.7

33.4.7

.6

5.3

-.1

**

-.4.3

.22.62.5

-1.9

1958

42.2

29.5

8.3

-.3

21.4

12.7

2.15.71.2-.6.24.3

-2.62.4

42.1

27.3

28.41.4

-2.5

14.8

2.5

1.5.9

*.1

7^93.4

- i

1959

55.5

35.0

12.6

-.5

22.9

20.5

2.23.01.23.0.34.92.43.6

54.4

36.9

31.11.7

4.1

17.4

5.6

-1.0

6.6

.87.23.3

-1.1

1960

47.3

34.4

10.0

.2

24.2

12.9

1.63.5

.71.31.03.1

- 2 . 2

4.0

45.2

39.2

34.91.3

3.0

6.1

- 3 . 9

- . 51.3

- 5 . 4.7

.26.33.7

- 2 . 0

1961

54.7

35.6

10.2

-.1

25.4

19.1

2.54.61.8.1.36.61.21.9

55.0

37.0

33.22.2

1.5

18.0

3.5

1.71.9

-.2.1

.110.04.6

.3

1962

63.3

41.8

12.4

.3

29.2

21.5

.64.62.92.5.74.41.14.7

61.7

44.7

37.03.0

4.7

16.9

4.1

-.93.7

.5

.9

.98.24.1

-1.6

1963

65.9

43.9

13.6

-.5

30.8

22.0

-.33.93.52.9.5

6.01.54.0

65.8

46.7

38.63.7

4.3

19.1

4.3

-.83.9

.5

.7

8] 54.8

- i

1964

70.2

50.5

18.3

5

32.8

19.7

1.44.03.33.61.33.4.91.8

66.9

53.5

44.03.6

5.9

13.4

.6

-2.53.2

-1.41.4

1.09.12.5

-3.3

1965

89.3

56.6

23.1

-1.7

35.2

32.7

5.43.19.21.37.41.94.3

88.2

64.9

53.23.8

7.9

23.3

.8

-1.83.9

-2.1.8

1.212.87.9

-1.1

1966

99.1

61.1

24.4

-1.7

38.4

38.0

1.210.22.76.92.57.8.26.6

96.7

79.8

63.02.8

14.1

16.9

1.0

.7-.7

-1.22.3

1.110.83.3

-2.3

1967

94.0

61.5

20.7

-1.2

42.0

32.5

2.315.13.85.21.73.1

-3.85.1

90.6

74.1

64.93.7

5.5

16.5

.9

-1.74.1

-3.01.4

1.08.75.3

-3.4

1968

109.1

63 .8

21.3

- 3 . 1

45.6

45.3

.213.42.95.54.3

11.12.15.8

105.2

81.3

70.13.9

7.4

24.9

7.4

.32.0

.83.6

1.613.82.2

- 2 . 9

1 The figures shown here for "internal sources," "undistributed profits," and "capital consumption allowances"differ from those shown for "cash flow, net of dividends," "undistributed profits" and "capital consumption allowances"in the gross corporate product table in the national income and product accounts of the Department of Commerce forthe following reasons: (1) these figures include, and the statistics in the gross corporate product table exclude, branchprofits remitted from foreigners net of corresponding U.S. remittances to foreigners; and (2) these figures exclude, andthe gross corporate product figures include, the internal funds of corporations whose major activity is farming.3 Includes some categories not shown separately.

Source: Board of Governors of the Federal Reserve System

312


TABLE B—74.—Current assets and liabilities of United States corporations^ 1939-68[Billions of dollars]

End of yearor quarter

1939 . . .

19401941194219431944

1945.-.1946

194719481949

195019511952 .19531954

19551956195719581959

19601961

New series 319611962196319641965

19661967

1966: 1 . . .

IllIV

1967: 1IIIllIV

1968: 1II —III

Total

54.5

60.372.983.693.897.2

97.4108.1

123.6133.0133.1

161.5179.1186.2190.6194.6

224.0237.9244.7255.3277.3

289.0306.8

304.6326.5351.7372.2410.2

443.4464.0

415.7425.7433.4443.4

443.9444.9452.7464.0

471.4481.9492.2

Cashon

handandin

banks

10.8

13.113.917.621.621.6

21.722.8

25.025.326.5

28.130.030.831.133.4

34.634.834.937.436.3

37.241.1

40.743.746.547.349.9

50.152.3

47.548.447.650.1

47.347.749.152.3

50.151.452.8

Current assets

U.S.Gov-ern-ment

securi-ties

2.2

2.04.0

10.116.420.9

21.115.3

14.114.816.8

19.720.719.921.519.2

23.519.118.618.822.8

20.120.0

19.219.620.218.617.0

15.712.4

17.215.514.815.7

14.411.510.812.4

14.613.312.9

Re-ceiv-ablesfromU.S.Gov-ern-

ment1

0.1.6

4.05.04.7

2.7.7

Notesandac-

countsreceiv-able

22.1

23.927.423.321.921.8

23.230.0

38.3424C

1 .12 . 72.82.62.4

2.32.62.82.82.9

3.13.4

3.43.73.63.43.9

4.55.1

3.94.04.24.5

4.44.64.75.1

4.84.74.8

.4

.0

55.758.864.665.971.2

86.695.199.4

106.9117.7

126.1135.8

133.3144.2156.8169.9190.2

205.1214.5

193.2199.2203.5205.1

205.1207.5211.5214.5

216.6223.6229.5

In-ven-

tories

18.0

19.825.627.327.626.8

26.337.6

44.648.945.3

55.164.965.867.265.3

72.880.482.281.988.4

91.895.2

95.2100.7107.0113.5126.9

144.5153.8

130.4134.6139.5144.5

148.1149.2151.2153.8

156.6159.9163.7

Othercur-rentas-

sets 2

1.4

1.51.41.31.31.4

2.41.7

1.61.61.4

1.72.12.42.43.1

4.25.96.77.59.1

10.611.4

12.914.717.819.622.3

23.625.9

23.624.023.823.6

24.824.325.425.9

28.729.128.6

Total

30.0

32.840.747.351.651.7

45.851.9

61.564.460.7

79.892.696.198.999.7

121.0130.5133.1136.6153.1

160.4171.2

155.8170.9188.2202.2229.6

253.2262.9

232.2237.5244.4253.2

251.4251.1255.4262.9

265.4272.1281.3

Current liabilities

Ad-vances

andpre-pay-

ments,U.S.Gov-ern-

ment1

0.6.8

2.02.21.8

.9

213931

. 41.32.32.22.4

2.32.42.31.71.7

1.81.8

1.82.02.52.73.1

4.45.8

3.33.54.04.4

4.95.45.75.8

6.16.26.3

Notesandac-

countsPay-able

21.9

22.625.624.024.125.0

24.831.5

.6

. 3

.5

47.953.657.057.359.3

73.881.584.388.799.3

105.0112.8

110.0119.1130.4140.3160.4

176.2183.6

160.6166.4170.2176.2

173.5177.0178.6183.6

181.9188.0193.8

Fed-eralin-

cometax

liabili-ties

1.2

2.57.1

12.616.615.5

10.48.5

10.711.59.3

16.721.318.118.715.5

19.317.615.412.915.0

13.514.1

14.215.216.517.019.1

19.115.2

19.116.718.019.1

18.612.713.515.2

17.315.415.6

Othercur-rentlia-

bili-ties

6.9

7.17.28.78.79.4

9.711.8

13.213.514.0

14.916.518.720.722.5

25.729.031.133.337.0

40.142.5

29.834.538.742.246.9

53.658.3

49.151.052.353.6

54.355.957.658.3

60.262.565.5

Network-

ingcapi-tal

24.5

27.532.336.342.145.6

51.656.2

62.168.672.4

81.686.590.191.894.9

103.0107.4111.6118.7124.2

128.6135.6

148.8155.6163.5170.0180.7

190.2201.1

183.6188.2189.0190.2

192.6193.8197.2201.1

206.0209.8210.9

1 Receivables from and payables to U.S. Government do not include amounts offset against each other on corporations'books or amounts arising from subcontracting which are not directly due from or to the U.S. Government. Wherever possible,adjustments have been made to include U.S. Government advances offset against inventories on corporations' books.

2 Includes marketable securities other than U.S. Government.3 Generally reflects definitions and classifications used in "Statistics of Income" for 1961.Note.—Data relate to all United States corporations, excluding banks, savings and loan associations, insurance com-

panies, and beginning with the new series for 1961, investment companies. Year-end data through 1965 are based on"Statistics of Income" (Treasury Department), covering virtually all corporations in the United States. "Statistics ofIncome" data may not be strictly comparable from year to year because of changes in the tax laws, basis for filing returns,and processing of data for compilation purposes. All other figures shown are estimates based on data compiled from manydifferent sources, Including data on corporations registered with the Securities and Exchange Commission.

Source: Securities and Exchange Commission.

313


TABLE B-75.—State and municipal and corporate securities offered, 1934-68 l


Year or quarter

1934..

1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944..

1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..

1955.1956.1957.1958.1959.

1960.1961.1962.1963.1964.

1965...1966...1967.-.1968 P..

1966:I I -III.IV..

1967:I I -III.IV..

1968: I .

I I I . . .IV p . .

Stateand

munici-pal se-

curitiesofferedfor cash(prin-cipal

amounts)

939

1,2321,121908

1,1081,128

1,238956524435661

7951,1572,3242,6902,907

3,5323,1894,4015,5586,969

5,9775,4466,9587,4497,681

7,2308,3608,55810,10710,544

11,14811,08914,28816,295

2,8703,1772,4342,609

4.0463,7993,0383,404

3,6583,7714,5744,295

Corporate securities offered for cash 2

Gross proceeds 3

Total

397

2,3324,5722,3102,1552,164

2,6772,6671,0621,1703,202

6,0116,9006,5777,0786,052

6,3617,7419,5348,8989,516

10,24010,93912,88411,5589,748

10,15413,16510,70512,21113,957

15,99218, 07424,79822,400

5,0945,1154,1973,669

5,4646,2086,8326,294

Com-monstock

222722852587

1081103456

163

397891779614736

8111,212,369,326

1,213

2,1852,3012,5161,3342,027

1,6643,2941,3141,0122,679

1,5471,9391,9593,860

519975171274

298518447696

5,178 7405,705 8325,280 9806,235 1,305

Pre-ferredstock

862714068698

183167112124369

758127762492425

631838564489816

635636411571531

409450422343412

725574885640

215115143101

92208231354

24912418085

Bondsandnotes

371

2,2254,0291,6182,0441,980

2,3862,390917990

2,669

4,8554,8825,0365,9734,890

4,9205,6917,6017,0837,488

7,4208,0029,9579,6537,190

8,0819,4208,96910,85610,865

13,72015,56121,95417,900

4,3594,0253,8833,294

5,0745,4826,1545,244

4,1894,7494,1204,845

Proposed uses of net proceeds *

New money

Total

384

2,2664,4312,2392,1102,115

2,6152,6231,0431,1473,142

5,9026,7576,4666,9595,959

6,2617,6079,3808,7559,365

10, 04910,74912,66111,3729,527

9,92412,88510,50112,04913,792

15,80117,84124,409

Total

208858991681325

569868474308657

1,0803,2794,5915,9294,606

4,0066,5318,1807,9606,780

7,9579,66311,7849,9078,578

8,75810,7158,2408,898

11,233

13,06315,80622,230

5,0365,0464,1433,617

5,4036,1096,7166,181

5,0815,5945,170

4,3204,6443,6633,179

5,0765,6725,9435,538

4,6274,8024,610

Plantand

equip-ment

32

111380574504170

424661287141252

6382,1153,4094,2213,724

2,9665,1106,3125,6475,110

5,3336,7099,0407,7926,084

5,6627,4135,6525,3407,003

7,71212,43016,154

Work-ing

capi-tal

26

96478417177155

145207187167405

4421,1641,1821,708882

1,0411,4211,8682,3131,670

2,6242,9542,7442,1152,494

3,0973,3032,5883,5584,230

5,3523,3766,076

3,2583,6682,9072,597

3,8084,2654,3293,752

3,5913,2622,880

1,

1,1,1,1,

1,1,1,

062976756582

268407614787

036540730

Retire-mentof se-

curities

231

1,8653,3681,1001,2061,695

1,8541,583396739

2,389

4,5552,8681,352307401

1,271486664260

1,875

1,227364214549135

271868754

1,526754

996241312

51725267

395113389

675030

Otherpur-poses

95

19320414822295

19217217310096

267610524722952

984589537535709

864721663915814

8951,3021,5071,6251,805

1,7411,7951,867

665331428371

287386640554

387742530

1 These data cover substantially all new issues of State, municipal, and corporate securities offered for cash sale in theUnited States in amounts over $100,000 and with terms to maturity of more than 1 year.

2 Excludes notes issued exclusively to commercial banks, intercorporate transactions, sales of investment company issues,and issues to be sold over an extended period, such as offerings under employee-purchase plans.

3 Number of units multiplied by offering price.* Net proceeds represents the amount received by the issuer after payment of compensation to distributors and other

costs of flotation.

Sources: Securities and Exchange Commission, "The Commercial and Financial Chronicle," and "The Bond Buyer."


TABLE B-76.—Common stock prices, earnings, and yields, and stock market credit, 1939-68

Year or month

Standard & Poor's common stock data

Price index1

Totai(500

stocks)

Indus-trials(425

stocks)

Publicutilities

(50stocks)

Rail-roads(25

stocks)

Divi-dendyield >(per-cent)

Price/earn-ings

ratio 3

Stock market credit

Customer credit (excludingU.S. Government

securities)

TotalNet

debitbal-

ances*

Bankloans

to'others"*

Bankloans tobrokers

anddealers0

1939194019411942194319441945194619471948194919501951195219531954195519561957195819591960196119621963196419651966196719681967 Jan...

Feb...Mar...Apr...May...June..July...Aug...Sept..Oct...Nov...Dec...

1968: Jan...Feb...Mar...Apr...May...June..July...Aug...Sept..Oct...Nov...Dec p..

1941-43=10 Millions of dollars

12.0611.029.828.67

11.5012.4715.1617.0815.1715.5315.2318.4022.3424.5024.7329.6940.49,46.6244.3846.2457.3855.8566.2762.3869.8781.3788.1785.2691.9398.7084.4587.3689.4290.9692.5991.4393.0194.4995.8195.6692.6695.3095.0490.7589.0995.6797.87

100.53100.3098.11

101.34103.76105.40106.48

11.7710.699.728.78

11.4912.3414.7216.4814.8515.3415.0018.3322.6824.7824.8430.2542.4049.8047.6349.3661.4559.4369.9965.5473.3986.1993.4891.0999.18

107.4989.8893.3595.8697.5499.5998.61

100.38102.11103.84104.16100.90103.91103.1198.3396.77

104.42107.02109.73109.16106.77110.53113.29114.77116.01

16.3415.0510.937.74

11.3412.8116.8420.7618.0116.7717.8719.9620.5922.8624.0327.5731.3732.2532.1937.2244.1546.8660.2059.1664.9969.9176.0868.2168.1066.4270.6370.4570.0371.7070.7067.3967.7768.0367.4564.9363.4864.6168.0265.6162.6263.6662.9265.2167.5566.6066.7766.9370.5970.54

9.829.419.398.81

11.8113.4718.2119.0914.0215.2712.8315.5319.9122.4922.6023.9632.9433.6528.1127.0535.0930.3132.8330.5637.5845.4645.7846.3446.7248.8444.4846.1346.7845.8047.0048.1949.9150.4349.2746.2842.9543.4643.3842.3541.6844.7948.0051.7251.0148.8051.1154.2653.7455.19

4.055.596.827.244.934.864.173.854.935.546.596.576.135.805.804.954.084.094.353.973.233.472.983.373.173.013.003.403.203.073.513.363.293.243.193.193.153.113.073.073.183.093.133.283.343.123.073.003.003.093.012.942.922.93

13.8010.248.268.80

12.8413.6616.3317.699.366.906.646.639.27

10.479.69

11.2511.5014.0512.8916.6417.0517.0921.0616.6817.6218.0817.0814.9217.52

1,374976

1,032968

1,2491,7981,8261,9802,4453,4364,0303,9843,5764,5374,4614,4155,6025,4947,2427,0537,7057,443

10,347

17.86

17.01

17.81

17.41

16.40

"17.'23'

7,3457,4157,8087,9698,0858,3338,8008,8699,1629,4339,495

10,34710,2299,8409,622

10,04710,62511,13811,27710,97611,23811,33611,575

942473517499821

1,2371,2531,3321,6652,3882,7912,8232,4823,2853,2803,2224,2594,1255,5155,0795,5215,3297,883

5,2905,3495,7185,8195,9266,1666,6036,6076,8257,0107,0537,8837,7977,4197,2487,7018,2688,7288,8618,4898,7248,8598,994

353432503515469428561573648780

1,0481,2391,1611,0941,2521,1811,1931,3431,3691,7271,974

«2,1842,1152,4642,6742,0552,0662,0902,1502,1592,1672,1972,2622,3372,4232,4422,4642,4322,4212,3742,3462,3572,4102,4162,4872,5152,5572,6312,674

715584535850

1,3282,1372,7821,471

7841,3311,6081,7421,4192,0022,2482,6882,8522,2142,1902,5692,5842,6143,3984,3524,7544,631

M,2774,5015,0825,7984,6724,0454,4844,3854,0753,8134,1954,6854,8144,6704,2965,0825,8235,0524,3054,3764,2824,5856,3276,1566,4525,6504,9605,798

* Annual data are averages of monthly figures and monthly data are averages of daily figures.2 Aggregate cash dividends (based on latest known annual rate) divided by the aggregate monthly market value of the

stocks in the group. Annual yields are averages of monthly data.3 Ratio of quarterly earnings (seasonally adjusted annual rate) to price index for last day in quarter. Annual ratios are

averages of quarterly data.* As reported by member firms of the New York Stock Exchange carrying margin accounts. Includes net debit balances

of all customers (other than general partners in the reporting firm and member firms of national exchanges) whose com-bined accounts net to a debit. Balances secured by U.S. Government obligations are excluded through 1967 and includedthereafter. Data are for end of period.

s Loans by weekly reporting member banks (weekly reporting large commercial banks beginning 1965) to others thanbrokers and dealers for purchasing or carrying securities except U.S. Government obligations. Data are for last Wednesday

'Loans'by weekly reporting member banks (weekly reporting large commercial banks beginning 1965) for purchasingor carrying securities, including U.S. Government obligations. Data are for last Wednesday of period.

toUIWV. BowA O\ fcOMttWt* Ot VE» f *tett\ tasww System, Standard & Poor's Corporation, and New York StockExchange.

3*5


TABLE B—77.—Business formation and business failures, 1929-68

Year or month

1929 . . .1930193119321933 3

19341935 . _1936193719381939 3_ . . .19401941194219431944194519461947 .1948194919501951.1952 .19531954195519561957195819591960 1 . . .19611962 .1963 .19641965196619671968

1967: Jan... .FebMarAprMayJuneJulyAugSeptOctNovDec

1968: JanFebMarAprMayJune..,JulyAugSeptoct.:.:NovDec

indexof net

businessformation

(1957-59 =100)

123.196.7

102.3102.8108.0103.599.8

107.6103.298.397.1

104.699.895.498.0

100.6104.5106.0105.5107.7

Newbusinessincorpo-rations(num-ber)

132,916112,63896,10185,49192,92583,64992,819

102,545117,164139,915141,163137,112150,781193,067182,713181,535182,057186,404197,724203,797200,010206,569

Business failures *

Busi-ness

failurerate 2

103.9121.6133.4154.1100.361.161.747.845.961.169.663.054.544.616.46.54.25.2

14.320.434.434.330.728.733.242.041.648.051.755.951.857.064.460.856.353.253.351.649.038.6

Seasonally adjusted

102.2103.2103.3103.7105.0108.1108.4110.7110.3110.6112.7113.8113.5114.5113.6113.9115.1116.2119.1119.7122.1125.2124.6

16,70315,98716,24416,76017,62717,79916,30017,67418,11818,00018,40318,16817,22318,01417,97418,65918,79619,19719,53020,05321,23721,72120,850

54.957.149.752.148.648.643.249.349.147.442.243.238.237.544.343.540.936.941.036.540.337.535.729.9

Number of failures

Total

22,90926,35528,28531,82219,85912,09112,2449,6079,490

12,83614,76813,61911,8489,4053,2211,222

8091,1293,4745,2509,2469,1628,0587,6118,862

11,08610,96912,68613,73914,96414,05315,44517,07515,78214,37413,50113,51413,06112,3649,636

1,1911,2161,2161,1601,1001,047

8431,017

913949881831844832

1,0211,003

909751810734705768696563

Liability sizeclass

Under$100,000

22,16525,40827,23030,19718,88011,42111,6919,2859,203

12,55314,54113,40011,6859,2823,1551,176

7591,0023,1034,8538,7088,7467,6267,0818,075

10,22610,11311,61512,54713,49912,70713,65015,00613,77212,19211,34611,34010,83310,1447,829

1,003995981966917850708793758782718673651682839833707616646607598614569467

$100,000andover

744947

1,0551 625

979670553322287283227219163123664650

127371337538416432530787860856

1,0711,1921,4651,3461,7952,0692,0102,1822 1552,1742,2282,2201,807

18822123519418319713522415516716315819315018217020213516412710715412796

Amount of currentliabilities (millions

of dollars)

Total

483.3668.3736.3928.3457.5334.0310.6203.2183.3246.5182.5166.7136.1100.845.331.730.267.3

204.6234.6308.1248.3259.5283.3394.2462.6449.4562.7615.3728.3692.8938.6

1,090.11,213.61,352.61,329.21,321.71,385.71,265.2

941.0

108.2113.5119.3103,893.4

104.672.6

108.993.981.670.0

195.4104.579.688.680.191.474.790.365.858.765.458.783.4

Liability sizeclass

Under$100,000

261.5303.5354.2432.6215.5138.5135.5102.8101.9140.1132.9119.9100.780.330.214.511.415.763.793.9

161.4151.2131.6131.9167.5211.4206.4239.8267.1297.6278.9327.2370.1346.5321.0313.6321.7321.5297.9241.1

30.229.328.727.827.124.720.823.722.222.521.319.620.421.426.124.821.918.619.218.319.118.617.914.8

$100,000andover

221.8364.8382.2495.7242.0195.4175.1100.481.4

106.449.746.835.420.515.117.118.851.6

140.9140.7146.797.1

128.0151.4226.6251.2243.0322.9348.2430.7413.9611.4720.0867.1

1,031.61,015.61,000.01,064.1

967.3699.9

77.984.190.676.166.380.051.785.271.859.148.7

175.884.158.262.555,369.556. C71.147.539.546.840.868.6

1 Commercial and industrial failures only. Excludes failures of banks and railroads and, beginning 1933, of real estate,insurance, holding, and financial companies, steamship lines, travel agencies, etc.

2 Failure rate per 10,000 listed enterprises.3Series revised; not strictly comparable with earlier data.

Sources: Department of Commerce (Bureau of the Census) and Dun & Bradstreet, Inc.

3l6Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

AGRICULTURE

Year orquarter

1929 __

1930 .1931193219331934 . . . .19351936193719381939

19401941194219431944.

194619471948.1949

19501951.1952.19531954.195519561957.19581959.

19601961196219631964.19651966.19671968 » _.__

1967: 1 ________IIIIIIV

1968: 1IIIIIIV v

T A B L E B—78.—Income from

Personal incomereceived by totalfarm population

Fromall

sources

5.47.77.29.07.27.4

7.610.114.116.516.617.220.021.123.819.5

20.422.722.119.818.417.617.817.719.518.1

18.719.720.420.620.623.624.823.724.4

Fromfarm

sources1

Fromnon-farm

sources2

3.25.44.66.24.74.8

4.86.8

10.112.112.212.815.515.818.013.3

14.116.215.4.13.412.511.411.211.012.811.0

11.512.212.312.111.313.514.313.013.5

2.22.32.62.72.52.6

2.83.33.94.44.44.44.65.35.86.2

6.36.56.76.45.96.26.66.66.77.0

7.27.58.28.59.3

10.010.510.710.9

agriculture, 1929-68

Income received from farming

Realized gross

Totals

Cashreceipts

frommarket-

ings

Billions of dollars

13.9

11.58.46.47.18.69.7

10.811.410.110.6

11.113.918.823.424.425.829.534.134.731.6

32.337.136.835.033.633.134.334.037.937.5

38.139.841.342.342.644.949.649.150.8

11.3

9.16.44.75.36.47.18.48.97.77.9

8.411.115.619.620.521.724.829.630.227.8

28.532.932.531.029.829.530.429.733.533.5

34.235.136.437.437.239.343.242.844.1

Produc-tion ex-penses

7.7

6.95.54.54.44.75.15.66.25.96.3

6.97.8

10.011.612.313.114.517.018.818.0

19.422.322.621.321.621.922.423.325.226.1

26.427.128.629.729.530.933.434.835.9

Net to farmoperators

Exclud-ing netinven-tory

change

6.3

4.52.91.92.73.94.65.15.24.24.3

4.26.18.8

11.812.112.815.017.115.913.6

12.914.814.113.712.011.211.910.712.711.4

11.712.612.612.613.114.016.214.214.9

Includ-ing netinven-tory

change4

6.2

4.33.32.02.62.95.34.36.04.44.4

4.56.59.9

11.711.712.315.115.417.712.8

13.716.015.113.112.511.511.411.313.511.5

12.113.013.213.212.315.016.114.615.4

Net income perfarm, includingnet inventory

cha

Currentprices

nge

1968prices8

Dollars

945

651506304379431775639905668685

7061,0311,5881,9271,9502,0632,5432,6153,0442,233

2,4212,9462,8962,6262,6062,4632,5352,5903,1892,795

3,0493,3993,5863,7083,5644 4874,9674,6545,035

2,054

1,5141,368

9501,1841,1972,0951,7272,3821,8561,903

1,9612,6443,6093,8543,7503,8204,2383,6834,0593,059

3,3163,6823,5753,2823,2173,0413,0913,0833,7083,250

3,5053,9074,0754,1663,9604,9315,2844,8485,035


48.949.349.248.9

49.850.751.651.1

42.543.043.042.7

43.244.044.944.3

34.434.935.035.0

35.435.936.236.3

14.514.414.213.9

14 414.815.414.8

14.614.714.814.5

14.815.115.715.8

4,6404,6704,7004,610

4,8404,9405,1305,170

4,8804,8604,9004,750

4,9404,9405,0805,120

1 Net income to farm operators including net inventory change, less net income of nonresident operators, plus wagesand salaries and other labor income of farm resident workers, less contributions of farm resident operators and workersto social insurance.

2 Consists of income received by farm residents from nonfarm sources, such as wages and salaries from nonfarm em-ployment, nonfarm business and professional income, rents from nonfarm real estate, dividends, interest, royalties,unemployment compensation, and social security payments.

3 Cash receipts from marketings, Government payments, and nonmoney income furnished by farms.4 Includes net change in inventory of crops and livestock valued at the average price for the year.5 Income in current prices divided by the index of prices paid by farmers for family living Items on a 1968 base.Source: Department of Agriculture.

3 2 3 - 1 6 6 O — 6 9 - 2 1317


TABLE B-79.—Farm production indexes, 1929-68

[1957-59=1001

Year

1929...

1930..,1931193219331934...

19351936 .1937...1938...1939...

1940...1941...1942...1943...1944...

1945...1946...1947...1948..1949..

1950..1951..1952..1953..1954..

1955..1956..1957..1958..1959..

I960..1961-1962..1963..1964..

1965..1966..1967..1968 v.

Farmout-put^

62

6166645951

6155696768

7073828083

8184818887

8689929393

969795102103

106107108112111

114113118120

Total 2

73

6977736554

7059817675

7879898388

8589859792

8991959493

969593104103108106107111108

115111117119

Feedgrains

62

5663735633

6038676565

6671817478

7582639i80

8175797781

868593101106

1099910010895

111110124118

Hayandorage

79

6672746964

8266758175

8686939190

9387848483

8992909292

989410110297

103102106106107

112110115114

Foodrains

68

7479634745

5554747763

6979837288

929511110792

868510910088

8387821219711510698102114

117118134141

Crops

Vege-tables

73

7475767380

8175828181

8384899792

94105919794

9689909593

9610298102100102108106106101

108109110113

Fruitsandnuts

75

7392757671

9070938496

9399988498

891061019298

98100979899

991039410210498102103100101

106108116109

Cot-ton

120

11313810510578

861011549796

1028810593100

747197122131

82124124134111

1201088993118

116116121125124

121786188

To-bacco

88

9589588063

76689180110

84738181113

114134122115114

117135130119130

12712696100104

112119134135129

10710911499

Oilcrops

13

1414131113

2116182229

3437566050

5452556761

7165636371

78929111198

104121122128128

153164171188

Livestock and

Total 3

63

6465666761

5963626570

7175849186

8683828085

8892929396

99999799104

102107108111114

111114117118

Meatani-mals

62

6366677059

5360586371

7276879788

8482817983

8995959498

1031009698106

103107109114117

111116120123

products

Dairyprod-ucts

75

7678797978

7879798182

8489929192

9594939093

9392929798

9910110110099

101103104103105

10310010099

Poul-tsandeggs

44

45444444414144444548

4954627171

7469686774

7881828487

869495101104

104112112115119

124132138134

» Farm output measures the annual volume of farm production available for eventual human use through sales fromfarms or consumption in farm households. Total excludes production of seeds and of feed for horses and mules.

2 Includes production of seeds and of feed for horses and mules and certain items not shown separately.3 Includes certain items not shown separately.Source: Department of Agriculture.

318


TABLE B-80.—Farm population, employment, and productivity, 1929-68

Year

1929..

1930..1931..1932..1933..1934..

1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944..

1945..1946..1947..1948..1949..

1950.1951..1952.1953.1954..

1955.1956.1957.1958..1959.

I960..1961.1962.1963.1964.

1 9 6 5 . . . .1 9 6 6 . . . .19671968 P.

Farm population(April l )^

Num-ber

(thou-sands)

30,580

30,52930,84531,38832,39332,305

32,16131,73731,26630,98030,840

30,54730,11828,91426,18624,815

24,42025,40325,82924,38324,194

23,04821,89021,74819,87419,019

19,07818,71217,65617,12816,592

15,63514,80314,31313,36712,954

12,36311,59510,81710,500

As per-cent of

totalpopu-lations

25.1

24.824.825.125.825.5

25.324.824.223.823.5

23.122.621.419.217.9

17.518.017.916.616.2

15.214.213.912.511.7

11.511.110.39.89.4

8.78.17.77.16.7

6.45.95.45.2

Farm employment(thousands)*

Total

12,763

12,49712,74512,81612,73912,627

12,73312,33111,97811,62211,338

10,97910,66910,50410,44610,219

10,00010,29510,38210,3639,964

9,9269,5469,1498,8648,651

8,3817,8537,6007,5037,342

7,0576,9196,7006,5186,110

5,6105,2144,9034,745

Familyworkers

9,360

9,3079,6429,9229,8749,765

9,8559,3509,0548,8158,611

8,3008,0177,9498,0107,988

7,8818,1068,1158,0267,712

7,5977,3107,0056,7756,570

6,3455,9005,6605 5215,390

5,1725,0294,8734,7384,506

4,1283,8543,6503,550

Hiredworkers

3,403

3,1903,1032,8942,8652,862

2,8782,9812,9242,8072,727

2,6792,6522,5552,4362,231

2,1192,1892,2672,3372,252

2,3292,2362,1442,0892,081

2,0361,9531,9401,9821,952

1,8851,8901,8271,7801,604

1,4821,3601,2531,195

Farm output

Perunit oftotalinput

Per man-hour

Total CropsLive-stockand

products

Cropproduc-

tionper

acre4

Index, 1957-59=100

Live-stockpro-

ductionper

breed-

unit

63

6369696559

6962737472

1Z75827982

8285828886

8586899091

949696103101

105106107108107

no106108107

28

2830302827

3129333535

3639424244

4649505657

61f2687174

808691103106

115120127137142

154159169176

28

2730302727

3128333534

3739434144

4650505757

6361676973

778390105105

114116122129132

146150155165

48

4747474643

4446464850

5051565856

5859616266

6872747680

858992100108

113123130140152

159170183187

69

6472686151

6656767374

7677867883

8286829285

8485908988

919293105102

109112115118115

122119122127

68

7070696862

6970717575

7580817875

797879

8689899392

939596100104

105109108110113

111118119

1 Farm population as defined by Department of Agriculture and Department of Commerce, i.e., civilian populationliving on farms, regardless of occupation.

2 Total population of United States as of July 1 including Armed Forces abroad.3 Includes persons doing farmwork on all farms. These data, published by the Department of Agriculture, Statistical

Reporting Service, differ from those on agricultural employment by the Department of Labor (see Table B-22) because ofdifferences in the method of approach, in concepts of employment, and in time of month for which the data are collected.See monthly report on "Farm Labor."

* Computed from variable weights for individual crops produced each year.

Sources: Department of Agriculture and Department of Commerce (Bureau of the Census).

319


T A B L E B—81.—Indexes of prices received and prices paid by farmers, and parity ratio, 1929—68[1957-59=1001

Year or month

Prices received by farmers

Allfarmprod-ucts^ All

crops

Crops

Foodgrains

Feed grainsand hay

Total Feedgrains

Cot-ton

To-bacco

Oil-bear-

ingcrops

Livestock and products

Alllive-stockand

prod-ucts^

Meatani-mals

Dairyprod-ucts

Poul-tryandeggs

1929..

1930..1931..1932..1933..1934_.1935..1936..1937..1938..1939..

1940..1941..1942..1943-1944..1945..1946..1947..1948..1949..

1950..1951..1952..1953.1954..1955.1956.1957..1958..1959.

1960.1961.1962..1963..1964.1965.1966.1967.1968.

1967: Jan 15Feb l5 .Mar 15Apr 15May 15June 15

July 15Augl5Sept 15Octl5.Novl5Dec 15

1968: Jan 15. .Feb 15..Mar 15..Apr 15.May 15.June 15

July 15. .Aug 15_.Sept 15.Oct 15 . .Nov 15..Dec 15_.

52362729374547514039

425166

«80«826 866 98114119103

10712511910510296959710499

999910110098103110104107

106104103102104105

106105105104104105

105106107107108107

108108110108108108

61

52342632444649533637

414865848991102118114100

10411912010810810410510110099

100102104107107104106100102

1009910010099102

999998101102103

103102103104105103

9910110310210299

55

44272131434651573534

40465770788195128118103

1061151161111101071061069896

96991071069077878476

74

67463136606865794546

54587296108106127161162112

12214314713012811611510597

969598104105110114110100

117116117115115116

11310510410197101

102104104103104103

9993959398100

77

68442836607068844544

54587397109104131171170109

1231471501321301161161059798

94949610210310811210897

115114115114114115

112104103979497

99101101101102101

979092909697

57

40241926393838362728

3243606466699110510494

10812911910210510410310197102

9710010410410094827372

646566666466

687169889889

726463646967

658485867870

35

29201822323533413631

28325166727478777882

8390898991909396100104

103109109102101106114114117

115116116115115115

115114112111115114

115116116116116116

116119119118118120

97100114158153106

1201481291221331091111069896

93112108113112116128121115

128125126125124125

122117116113114115

117119118118118118

117117111109111112

62

52382827324446494341

42536677768294111122106

10813011910497908894106100

9898999591101113107112

109107106103108108

110110110107105105

107109109109109111

114113116113113115

50

43302019223838423736

3546606662

«67« 81107117101

1101331159492807689109102

96971019488104116109112

108107105104114115

116115111108103103

105111112113113115

118115114110109111

65

55433334404549514543

475563

•776 86«896 104106117

9711211810496969910199100

1011019999100102115119124

122120117114113111

114117122125125124

124122120119119117

120123128131132131

102

81625147567473706961

627796121112126127141153140

11814413014011312111210210890

10192929290921028489

979091828078

848184777882

848384807885

90911049497103


320


TABLE B-81.—Indexes of prices received and prices paid by farmers, and par itContinued[1957-59=100]

> ratio, 1929-68—

Year or month

Prices paid by farmers

Allitems,

in-terest,taxes,and

wagerates

(parityindex)

Commodities and services

Allitems

Fam-

livingitems

Production items

Allproduc-

tionitems i

FeedMotor

ve-hicles

Farmma-

chin-ery

Fer-til-izer

Inter-est 2 Taxes 3 Wage

rates*

Parityratio s

19291930193119321933193419351936193719381939194019411942194319441945194619471948194919501951195219531954195519561957195819591960196119621963—.196419651966—196719681967: Jan 15...

Febl5...Mar 15. .Apr 15...May 15..June 15..July 15...Aug 15...Septl5_.Octl5__.Novl5...Dec 15...

1968: Jan 15...Feb 15...Mar 15...Apr 15...May 15..June 15..July 15..Aug 15..Sept 15..Octl5...Nov 15...Dec 15...

5552443837414242454242424552586265718289868796989595949598100102102103105107107110114116121116115116116116117117117117117117117118119120121121121121121121122123123

555144383843454548454445485561646672859288901001009696959698101101101101103104104106109111114110110110110HI111111111111111111111112113113114114114114114114115115116

5450433738434343454342424552586164718388858694959494959699100101102102103104105107110113117112112112111112112113113113114114114115115116117117117118118118119119119

565243383844464650474647505763666773859591941041049797969598100102101101103104103105108109111109109109109109110110109109109109109110111111111112112112111111111112113

68614332375253556247475054667887861001181251031051181261141131061031019910098981001041031041091061021101091091081071071061041041031021031041041031031031021019910099101101

3635353434363738394240404245475153556371787883878686878996100104102102105109111113117121128

4343424039404142434443434346484949515867767883868787879296100104107110111113116119124129136

119

121121

122124124124

126

129129

128

130

127

130

132

132

133

136

138

858375666169686467676664647176777979889698941001021031021011001001001001001001001009910010010098

1001001001011011011011011001001001001001001009898498*989896969696

11611310810190807468646058565451464341404243454954596368748391

100109120131145162182206231253273253253253253253253253253253253253253273273273273273273273273273273273273

5657565144383636363837383838373739434856606568717477818793

100107117125132139147156170181193181181181181181181181181181181181181193193193193193193193193193193193193

929699

105109110114116119125135146158137137137146146146148148148152152152150150150157157157159159159166166166

9283675864 (66)75 (80)88 (95)92 (95)93 (97)78 (83)77 (85)81 (88)93 (98)

105 (109)113 (116)108 (110)109 (111)113 (115)115 (116)110 (111)100 (100)101 (102)107 (108)100 (101)92 (93)

80 86)74 (79)74 (79)76 (81)75 (80)74 (79)72 (77)74 (79)75 (80)74 (80)75 (80)74 (79)73 (78)73 (78)74 (79)

(79)(80)79)79)79)79)

(79)(79)

-- (81)73 (79)73 (79)73 (78)

1 Includes items not shown separately.2 Interest payable per acre on farm real estate debt.3 Farm real estate taxes payable per acre (levied in preceding year).4 Monthly data are seasonally adjusted.s Percentage ratio of prices received for all farm products to parity index, on a 1910-14=100 base. The adjusted parity

ratio (shown in parentheses in the table) reflects Government payments made directly to farmers.6 Includes wartime subsidy payments.Source: Department of Agriculture.

321


TABLE B-82.—Selected measures of farm resources and inputs, 1929-68

Year

1929..

1930..1931. .1932..1933..1934..

1935..1936..1937..1938..1939..

1940..1941. .1942..1943..1944..

1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..

1955..1956.1957..1958..1959.

1960.1961.1962.1963.1964.

19651 9 6 6 . . . .19671968 v

Cropsharvested(millions

of acres) i

Total

365

369365371340304

345323347349331

341344348357362

354352355356360

345344349348346

340324324324324

324303295300301

298295308301

Exclu-sive ofuse forfeed forhorses

andmules

298

304303311281247

289269295301286

298304309320326

322323329332338

326326334335335

330315316317318

319299291296297

294291304

Live-stock

breed-ing

units(1957-

59 =100)2

92

9293959898

8690878793

9594104117114

1091071049899

102103103100104

10610410199100

9798100101101

1009798

Man-hoursof

farmwork(bil-lions)

23.2

22.923.422.622.620.2

21.120.422.120.620.7

20.520.020.620.320.2

18.818.117.216.816.2

15.115.214.514.013.3

12.812.011.110.510.3

9.89.49.18.88.3

7.97.57.47.2

Index numbers of inputs (1957-59 = 100)

Total

89949194

9797100101101

999999100101

101104103103102

1021019999102

101101101104104

104107109112

_harmlabor

218

216220213212190

198192208193194

192188194191190

177170162158152

142143136131125

1201131049997

9289858278

74717068

Farmreal

estate 3

92

9189868786

8889909192

9292918988

8891929595

97989999100

10099100100100

101101103104106

106107106106

Me-chani-cal

powerandma-

chinery

38

4038353232

3335384040"

4244485051

5458647280

8692969798

999910099101

104101100104102

105110112116

Ferti-lizerand

limingmaterials

21

2116111214

1720242324

2830343843

4553565761

6873808388

90919497109

111117125141155

162182205221

Feed,seed,andlive-stockpur-

chases 4

27

2623242424

2331293037

4546576364

7269737269

7280818082

869193101106

109111117123126

127136140149

Miscel-laneous

76

7678797669

6668687072

7374757676

7677787482

85

9191

949895100105

106109113117120

120123120130

1 Acreage harvested (excluding duplication) plus acreages in fruits, tree nuts, and farm gardens.3 Animal units of breeding livestock, excluding horses and mules.' Includes service buildings and improvements on land.< Nonfarm inputs associated with farmers' purchases.Source: Department of Agriculture.

322


TABLE B-83.—Comparative balance sheet of agriculture, 1929-69


Beginning ofyear

1929 . . . .

19301931193219331934

19351936193719381939

1940194119421943 . . .1944

19451946 . _19471948..1949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969 v

Assets

Total

68.5

52.955.062.973.784.6

94.2103.5116.4127.9134.9

132.5151.5167.0164.3161.2

165.1169.6178.0185.8202.2

203.1204.0212.9221.0229.8

238.5256.0269.8283.5297.9

Realestate

48.0

47.943.737.230.832.2

33.334.335.235.234.1

33.634.437.541.648.2

53.961.068.573.776.6

75.386.695.196.595.0

98.2102.9110.4115.9124.4

130.2131.7138.0143.8152.1

160.9172.5182.5193.7202.7

Other physical assets

Live-stock i

6.6

6.54.93.63.03.2

3.55.25.15.05.1

5.15.37.19.69.7

9.09.7

11.913.314.4

12.917.119.514.811.7

11.210.611.013.917.7

15.215.616.417.315.8

14.517.518.918.7

Ma-chin-eryand

motorvehi-cles

3.2

3.43.33.02.52.2

2.22.42.63.03.2

3.13.34.04.95.4

6.55.45.37.4

10.1

12.214.116.717.418.4

18.619.320.320.221.8

22.221.822.322.724.1

25.527.128.931.0

Crops2

2.5

2.73.03.85.16.1

6.76.37.19.08.6

7.67.98,89.09.2

9.68.38.37.69.3

7.78.08.89.39.8

9.29.7

10.09.5

House-hold

equip-mentand

furnish-ings

4.0

4 24.24.95.05.3

5.66.17.78.59.1

8.69.7

10.39.99.9

10.010.510.09.99.8

9.68.99.19.08.9

8.68.68.48.5

72.4

Financial assets

De-positsandcur-rency

3.6

3.23.54.25.46.6

7.99.4

10.29.99.6

9.19.19.49.49.4

9.49.59.49.5

10.0

9.28.78.89.29.2

9.610.010.310.9

U.S.savingsbonds

0.2.4.5

1.12.2

3.44.24.24.44.6

4.74.74.74.64.7

5.05.25.15.15.2

4.74.64.54.44.2

4.24.13,93.8

Invest-mentin co-opera-tives

0.6

.8

.9

.91.01.1

1.21.41.51.71.9

2.12.32.52.72.9

3.13.33.53.74.0

4.34.75.05.35.7

6.06.56.97.4

22.8

Claims

Total

68 5

52.955.062.973.784.6

94.2103.5116.4127.9134.9

132.5151.5167.0164.3161.2

165.1169.6178.0185.8202.2

203.1204.0212.9221.0229.8

238.5256.0269.8283.5297.9

Realestatedebt

9.8

9.69.49.18.57.7

7.67.47.27.06 8

6.66.56.46.05.4

4.94.84.95.15.3

5.66.16.77.27.7

8.29.09.8

10.411.1

12.112.813.915.216.8

18.921.223.325.527.8

Otherdebt

5.0

3 43.94.14.03.5

3.43.23.64.26.1

6.87.08.08.99.2

9.49.89.6

10 012.5

12.713.414.816.518.1

18.720 422.424.927.6

Pro-prie;torsequi-ties

53.9

42 944.652.463.775.7

85.995.5

107.9118.6123.5

120.1138.4152.3148.2144.3

147.5150.8158.6165.4178.6

178.3177.8184.2189.3194.9

200.9214 4224.1233.1242.5

1 Beginning with 1961, horses and mules are excluded.2 Includes all crops held on farms and crops held off farms by farmers as security for Commodity Credit Corporation

loans. The latter on January 1,1968, totaled $487 million.

Source: Department of Agriculture.

323


Year orquarter

INTERNATIONAL STATISTICSTABLE B-84.—United States balance of payments, 1946-68


Exports of goods and services

TotalMer-

chan'dise i

Mil i-tarysales

Income oninvestments

Pri-vate

Gov-ern-ment

Otherserv-ices

Imports of goods and services

TotalMer-chan-dise1

Mili-taryex-

pend-itures

Otherserv-ices

Bal-ance

ongoods

andserv-ices

Remit-tances

andpen-sions

1946194719481949

19501951195219531954

1955195619571958- _1959

19601961196219631964

19651966196719681°

14,73519,73716,78915,770

13,80718,74417,99216,94717,759

19,80423,59526,48123,06723,489

27,32528,60930,34332,43237,098

39,19643,14245,75650,219

11,70716,01513,19312,149

10,11714,12313,31912,28112,799

14,28017,37919,39016,26416,295

19,48719,94420,60622,07125,297

26,24429,17630,46833,452

2182

200161375300302

335402656657747

830829

1,2401,431

7511,0361,2381,297

1,4841,6841,6241,6581,955

2,1702,4682,6122,5382,694

3,0013,5613,9484,1514,930

5,3845,6596,2356,819

2166102

109198204252272

274194205307349

348381471498456

2,2562,6202,2562,226

2,0972,7392,8452,5642,551

2,8803,3933,8993,6583,849

4,1554,3204,6615,0555,668

6,229509593 6; 885624 7,189

7,683835

-6,991-8,208-10,349-9,621

-12,028-15,073-15,766-16,561-15,931

-17,795-19,628-20,752-20,861-23,342

-23,355-23,151-25,358-26,620-28,688

-32,295-38,063-40,989-47,824

-5,073-5,979-7,563-6,879

-9,108-11,202-10,838-10,990-10,354

-11,527-12,804-13,291-12,952-15,310

-14,744-14,522-16,219-17,014-18,648

-21,516-25,541-26,991-33,020

-493-455-799-621

-576-1,270-2,054-2,615-2,642

-2,901-2,949-3,216-3,435-3,107

-3,087-2,998-3,105-2,961-2,876

-2,945-3,735-4,340-4,511

-1,425-1,774-1,987-2,121

-2,344-2,601-2,874-2,956-2,935

-3,367-3,875-4,245-4,474-4,925

-5,523-5,631-6,035-6,645-7,164

-7,834-8,787-9,658

-10,293


1966: I 42,112II 42,580III 43,648IV... 44,236

1967: I 45,484II 145,508III :46,052IV.... 45,984

1968: IIIIII *__

47,44050,22852,988

28,75228,71629,47629,760

30,64430,81230,50429,912

31,69633,30035,360

800876820820

1,3401,344980

1,292

1,2241,4481,620

5,3165,5525,7685,996

5,7725,5646,6846,916

6,1766,9167,364

596 6,648596 6,840588 6,996596 7,064

604660624612

792884828

7,1247,1287,2607,252

7,5527,6807,816

-36,080-37,344-39,112-39,716

-40,312-40,432-40,616-42, 592

-46,136-47,860—49,476

-24,144-25,052-26,268-26,700

-26,744-26,420-26,164-28,636

-31,468-33,280-34,312

-3,488-3,692-3,848-3,916

-4,288-4,260-4,392-4,416

-4,440-4,492-4,600

-8,448-8,600-8,996-9,100

-9,280-9,752-10,060-9,540

-10,228-10,088-10,564

7,74411,5296,4406,149

1,7793,6712,226386

1,828

2,0093,9675,7292,206

147

3,9705,4584,9855,8128,409

6,9015,0804,7682,395

-648-728-631-641

-533-480-571-644-633

-597-690-729-745-815

-697-724-779-891-896

-1,027-1,015-1,276-1,136

1,0481,5681,4321,052

1,0641,1441,200


324


TABLE B-84.—United States balance of payments, 1946-68— Continued


Year orquarter

U.S.Gov-ern-ment

grantsand

capi-tal,net 2

U.S. private capital,net

Directinvest-ment

Otherlong-term

Short-term

For-eigncapi-tal,net 2

Errorsand

unre-cordedtrans-actions

lqu'ditybasis 3

Balance

Offi-cial

reservetrans-actionsbasis *

Changes in selected lia-bilities (decrease ( - ) ) «

To foreignofficial holders

Liquid Non-liquid

Toother

foreignhold-ers 7

Changesin gold,convert-ible cur-rencies,

andIMFgold

trancheposition

(increase( ) )

1946. . . .1947.. . .1948.. . .1949. . . .

1950.. . .1951. . . .1952.. . .1953. . . .1954.. . .

1955.. . .1956.. . .1957... .1958.. . .1959-...

1960196119621963.. . .1964—.

1965... .1966....1967- . .196810..

1966: I —II..III..IV.

1967: I..II . . .ML.IV..

1968: I . . .II...

-5,293-6,121-4,918-5,649

-3,640-3,191-2,380-2,055-1,554

-2,211-2,362-2,574-2, 587-1,986

-2,768-2,779-3,013-3,578-3,564

-3,370-3,444-4,211-4,252

-230-749-721-660

-621-508-852-735-667

-823-1,951-2,442-1,181-1,372

-1,674-1,598-1,654-1,976-2,328

-3,468-3,623-3,020-3,348

127- 4 9- 6 9

-495-437-214

185-320

-241-603-859

-1,444-926

-855-1,025-1,227-1,698-2,103

-1,079-256

-1,270-603

-310-189-116

187

-149-103- 9 4167

-635

-191-517-276-311

- 7 7

-1,349-1,556

-546-785

-2,147

753- 4 1 8

-1,214-1,280

- 6 1 5-432-361

44

18154052

146249

297615545186736

364702

1,026690689

2702,5313,1857,448

218949

1,193786

- 1 1500627366191

515568

1,184511423

-892-847-997-244-860

-315-210-532-304

9934,210

817136

-3 ,489

- l , 206L- 2 , 1 8 4 .-1 ,541

-1 ,242-973

578-3 ,365-3 ,870

-3,901 -3 ,403-2,371 j-1,347-2 ,204-2 ,702-2,670 -2 ,011-2 ,800 -1 ,564

-1,335-1,357-3,571-1,080

-1 ,289266

-3 ,4051,888

9 1,4489 6819 457

1,6731,075

- 1 8-1 ,595

2,062

250- 3 9318

85761

1,291

3081,084

214620

1,554

1312,3841,457

- 6 2 3-3,315-1,736

-266

1,758- 3 3

-4151,256

480

182-869

-1,1652,2921,035

2,145606

1,533377171

1,222568

52

Seasonally adjusted annual rates Quarterly totals unadjusted

-3,864' -2,780-3,936-4,008-2,992 -3,488-2,988-4,216

-4,704 -2,612-4,156-2,604—3,952—3,608-4,032-3,260

-4,656-1,496-4,288 -4,140-3,812 -4,408

-988-256-28244

-696-724

-2,024-1,636

- 8 0 0- 2 2 8- 7 8 0

-276-192-524-680

-592-1,088!-1,520-1,656

-532-1,424-1,884|

1,1124,3401,5003,184

3,4604,r"3,0641,412

5,4689,9166,960

-792 1 --580

924 -- 4 0 8 -

-1 ,000--1,832 -

828 -jj—972

-1,7161,776

-2 ,520--372

-1,204-1,332

-2,020-2,088-3,208!-6 ,968-

-2,748'--656

164

-1,636-4642,768

396

-7,056-3,224

988-4,328

-2,2246,1121,776

-85254

-598-199

-80544281

1,317

1,3632,198-44

3424790390

332580119260

369772524

47527

1,211671

-70995

1,306765

7182,2631,065

4246882

- 6

1,027-419- 3 7 5-181

904-137-571

s, and changes in official reserve assets

* Adjusted from customs data for differences in timing and coverage.2 Includes certain special Government transactions.3 Equals changes in liquid liabilities to foreign official holders, other foreign holders, and <

consisting of gold, convertible currencies, and the U.S. gold tranche position in the IMF.* Equals changes in liquid and nonliquid liabilities to foreign official holders and changes in official reserve assets con-

sisting of gold, convertible currencies, and the U.S. gold tranche position in the IMF.* Includes short-term official and banking liabilities, foreign holdings of U.S. Government bonds and notes, and certain

nonliquid liabilities to foreign official holders.* Central banks, governments, and U.S. liabilities to the IMF arising from reversible gold sales to, and gold deposits with

the United States.* Private holders; includes banks and international and regional organizations, excludes IMF.8 Not reported separately.9 Includes change in Treasury liabilities to certain foreign military agencies; excluding these changes, data ($ millions)

are 1,258 (1960), 741 (1961), 918 (1962).10 Average for the first 3 quarters on a seasonally adjusted annual rates basis.

Note.—Data exclude military grant-aid and U.S. subscriptions to International Monetary Fund.


325


TABLE B—85.—United States merchandise exports and imports, by commodity groups, 1958—68


Year or quarter

19581959

19601961196219631964

1965196619671968 s

1966* 1IIIIIIV

1967- 1IIIIIIV

1968- 1IIIIIIV8

Merchandise exports *

Total, includ-ing reexports 2

Sea-sonally

ad-justed

;;E

7,1947,2577,4397,500

7,7707,7777,7727,688

8,0128,3688,9658,600

Unad-justed

16,37316,418

19,63520,19020,97322,42725,690

26,69929,37930,93434,000

7,0787,4357,0257,841

7,6807,9677,2738,014

7,9808,5708,3699,100

Domestic exports

Total 2 4

16,20816,234

19,43419,94420,70322,14325,338

26,35628,94430,55033,600

6,9787,3056,9197,742

7,5847,8677,1767,923

7,8828,4638,2629,000

Food,bever-ages,

and to-bacco

2,6882,852

3,1673,4663,7434,1884,637

4,5205,1864,7104,600

1,2521,2571,3101,367

1,1271,1571,1311,295

1,1961,0911,1221,200

Crudemate-rialsand

fuels s

3,0512,996

3,9423,8633,3553,7744,336

4,2744,4034,7224,800

1,0241,0861,0271,266

1,1581,2081,1231,233

1,1761,2041,1661,300

Man-ufac-tured

goods6

11,54611,171

12,55912,74813,65514,25916,388

17,38819,10820,75223,800

4,6444,8884,5305,046

5,1965,4314,8295,296

5,4286,0615,9006,400

Merchandise imports

General imports s

Total*

Sea-sonally

ad-justed

6,0216,3356,59?6,661

6,6846,5906,5427,105

7,8238,2328,4558,300

Unad-justed

13,26215,629

15,01914,71616,39217,14018,684

21,36625,54226,81233,000

5,8946,3346,5 56,769

6,6166,5796,4057,212

7,7358,2198,4208,600

Food,bever-ages,

and to-bacco

3,5503,580

3,3923,4553,6743,8634,022

4,0134,5894,7015,400

1,1121,1651,1121,200

1,2121,1251,1001,264

1,2571,3081,4311,400

Crudemate-rialsand

fuels s

4,0624,580

4,3804,3034,6404,6924,976

5,3855,6745,3346,000

1,4101,4381,4561,370

1,3851,3361,2541,359

1,4371,4521,5541,600

Man-ufac-tured

goods e

5,2837,090

6,8476,5237,6268,0669,096

11,23814,41315,71220,400

3,1843,5173,7653,947

3,8063,8443,7794,283

4,7865,1555,1235,300

Grossmer-chan-dise

tradesur-plus,sea-

sonallyad-

justed ^

3,111789

4,6165,4744,5815,2877,006

5,3333,8374,1221,000

1,173921847839

1,0861,1871,230

583

189136510300

1 Beginning 1960, data have been adjusted for comparability with the revised commodity classifications effective in 19652Totals exclude Department of Defense shipments of grant-aid military supplies and equipment under the Military

Assistance Program.3 Total arrivals of imported goods other than intransit shipments.4Total includes commodities and transactions not classified according to kind.6 Includes fats and oils.6 Includes machinery, transportation equipment, chemicals, metals, and other manufactures. Export data for these items

include military grant-aid shipments.7 Exports, excluding military grant-aid, less general imports; quarterly data seasonally adjusted.8Totals based on data for October, November, and estimates for December.

Note.—Data are as reported by the Bureau of the Census. Export statistics cover all merchandise shipped from the U.S.customs area, except supplies for U.S. Armed Forces. Export values are f.a.s. port of export and include shipments underAgency for International Development and Food for Peace programs as well as other private relief shipments. Importvalues are defined generally as the market value in the foreign country, excluding the U.S. import duty and transportationcosts such as ocean freight and marine insurance.

Source: Department of Commerce, Bureau of International Commerce.

326


TABLE B-86.—United States merchandise exports and imports, by area, 1962-68


Area 1962 1963 1964 1965 1966 1967January-November

1967 1968

Exports (including reexportsand special category ship-ments): Total

Developed countriesDeveloping countries

CanadaOther Western Hemisphere-Western Europe iEastern Europe.AsiaAustralia and OceaniaAfrica ..

General imports: Total

Developed countriesDeveloping countries

CanadaOther Western Hemisphere..Western Europe1

Eastern EuropeAsiaAustralia and OceaniaAfricaUnidentified countries2

21,700

13,9857,589

4,0453,6797,633

1254,676

5191,023

16,392

10,2506,035

3,6603,9314,544

792,96044075424

23,347

15,1248,056

4,2513,6928,171

1675,448565

1,053

17,140

10,8076,242

3,8294,0214,731

813,192

5027777

26,508

17,2028,966

4,9154,2929,096340

5,802804

1,259

18,684

11,8946,676

4,2394,1515,208

993,62044091710

27,478

18,3159,023

5,6434,2749,224

1406,012956

1,229

21,366

14,0677,145

4,8324,3716,155

1374,52845387812

30,320

20,01010,112

6,6614,7699,805

1986,733805

1,349

25, 542

17, 5907,762

6,1254,7047,678

1795,2765949797

31,526

21,3719,960

7,1654,71810,103

1957,1461,0171,182

26,812

18,9437,681

7,1074,6358,050177

5,3485819068

28,655

19,3909,084

6,5474,3029,174

1816,504853

1,094

24,381

17,2106,999

6,4384,2297,287

1624,9105228258

31,282

21,2729,820

7,2964,8289,967

1906,877949

1,175

30,093

21,8438,056

8,0424,6379,240

1826,298

6581,027

9

1 Includes Finland, Yugoslavia, Greece, and Turkey.2 Consists of certain low-valued shipments and some uranium imports, not identified by country.

Note.—Developed countries include Canada, Western Europe, Japan, Australia, New Zealand, and the Republic ofSouth Africa. Developing countries include rest of the world except Communist areas in Eastern Europe and Asia andunidentified countries.

Source: Department of Commerce, Bureau of International Commerce.

327


TABLE B-87.—United States overseas loans and grants, by type and area, fiscal years 1962-68[Millions of dollars]

Type of program and fiscalperiod

Total economic loans and grants(net obligations and loanauthorizations): 1

1962-67 averageLoansGrants

1968LoansGrants _

Economic loans and grants toless developed countries, byprogram: 2

Net obligations and loanauthorizations:

1962-67 average1968

Repayments and interest:1962-67 average..1968

Agency for InternationalDevelopment:

Net obligations and loanauthorizations:

1962-67 average1968

Repayments and interest:1962-67 average1968

Export-Import Bank long-termloans:

Loan authorizations:1962-67 average...1968 ----

Repayments and interest:1962-67 average1968

Food for Freedom:Obligations:

1962-67 average1968

Repayments and interest:1962—67 average1968

Contributions and Subscriptionsto International Lending Or-ganizations: 3

Obligations:1962-67 average1968

Peace Corps and other:4

Obligations:1962-67 average1968

Repayments and interest:1962—67 average1968

Total

4,7302,5352,195

4,7492,6042,145

4,5384,445

678976

2,2971,891

196270

376570

365490

1,3881,398

95178

241424

236162

2239

NearEastand

SouthAsia

1,5761,167

409

1,2791,066

212

1,5761,279

245348

764440

108148

80174

7189

720652

62103

1213

58

LatinAmerica

1,163754409

1,362874488

1,1631,362

273393

557496

2050

178301

235307

151228

1015

162300

11536

921

Vietnam

347*

347444

*444

347444

114

278304

113

69140

1

EastAsia

516189327

562248313

446468

5364

226230

2126

2628

2526

157185

49

3725

33

Africa

397168229

337200137

397337

2748

209116

1625

2749

818

139148

23

2224

11

Europe

274228

46

162145

17

16721

60113

2*

1718

6518

2649

1013

1846

Otherand

non-regional

45929

430

60470

534

442534

87

261304

31

5142

79124

5064

66

*Some data are preliminary.Countries have been classified "less developed" on the basis of the standard list of less developed countries used

by the Development Assistance Committee of the Organization for Economic Cooperation and Development. On thisbasis, "less developed" countries include all countries receiving U.S. loans or grants except the following which areconsidered "developed": Japan, Australia, New Zealand, Republic of South Africa, Canada, and all of Europe exceptMalta, Spain and Yugoslavia.

3 Includes capital subscriptions and contributions to the Inter-American Development Bank, the International Develop-ment Association and the Asian Development Bank.

4 Data for certain programs from Department of Commerce (Office of Business Economics).Source: Agency for International Development (except as noted).

328


TABLE B-88.—International reserves, 1949, 1953, and 1963-68

[Millions of dollars; end of period]

Area and country 1949 1953 1963 1964 1965 1966 1967

1968

Sep-tember

De-cember

All countries.

Developed areas . . .

United States-

United Kingdom

Other Western EuropeAustriaBelg ium. .France. . .GermanyItalyNetherlandsScandinavian coun-

tries (Denmark,Finland, Norway,and Sweden)

SpainSwitzerland.. .Othera.

Canada-

Japan. . .

Australia, New Zealand,and South Africa

Less developed areas *

Latin America.Middle E a s t . . .Other AsiaOther Af r ica . . .

45,635

37,245

26,024

1,752

6,45792978580196

(

537

&

1,222

1,197

(0

1,582

8,390

2,7751,4753,395<290

51,890

41,390

23,458

2,670

10,515325

1,144829

1,773768

1,232

1,026150

1,7681,500

1,902

892

1,952

10,500

3,4001,2003,8401,800

66,370

56,820

16,843

3,147

29,4131,2291,9704,9087,6503,6192,102

1,8751,1473,0741,839

2,603

2,058

2,756

9,550

2,7252,2553,0851,405

68,670

58,945

16,672

2,316

32,2791,3172,2225,7247,8823,8242,349

2,3801,5133,1201,948

2,881

2,019

2,777

9,725

2,8552,3203,0701,415

70,430

59,445

15,450

3,004

33,5831,3112,3346,3437,4294,8002,416

2,3241,4093,2441,973

3,027

2,152

2,228

10,985

3,2802,6753,3951; 575

71,895

60,235

14,882

3,100

34,9501,3332,3506,7338,0284,9102,448

2,3401,2053,3242,278

2,693

2,119

2,494

11,660

3,1802,8453,8451,730

73,510

61,055

14,830

2,695

36,4481 4842,5906,9948,1525,4632,619

2,2361,0493,5552,306

2,709

2,030

2,341

12,455

3,4603,1953,9751,750

73,440

59,850

14,634

2,717

34,4691,5382,4164,3749,1895,5842,471

2,4511,1202,9322,394

2,727

2,380

2,921

13,590

3,6603,3454,2402,145

15,710

2,422

1,5102,1874,201

2,463

2,320

3,932

2,906

i Not available separately.3 In addition to other Western European countries, includes unpublished gold reserves of Greece and an estimate of

gold to be distributed by the Tripartite Commission for the Restitution of Monetary Gold.3 Includes unpublished gold holdings not allocable by area.< Estimate.

Note.—Includes gold holdings, reserve positions in the International Monetary Fund, and foreign exchange of all countriesexcept U.S.S.R., other Eastern European countries, Communist China and Cuba (after 1960).

Beginning 1959, when most of the major currencies of the world became convertible, data exclude known holdings ofinconvertible currencies, balances under payments agreements, and the bilateral claims arising from liquidation of theEuropean Payments Union.

Source: International Monetary Fund, "International Financial Statistics."

329


TABLE B-89.—United States reserve assets: Gold stock, holdings of convertible foreign currencies,and reserve position in the International Monetary Fund, 1946-68



1946194719481949

19501951 _195219531954

195519561957 . . . .19581959

19601961196219631964

196519661967 . . . . .1968

1967: Jan.. .FebMarApr _MayJune

JulyAugSeptOct .NovDec

1968: Jan. . . .FebMar.AprMayJune

JulyAug. .SeptOctNovDec

Total reserveassets

20,70624,02125,75826,024

24,26524,29924.71423,45822 978

22,79723,66624,83222,54021,504

19,35918,75317,22016,84316,672

15,45014,88214,83015,710

14,19613,99813,85513,90613,94314,274

14,22414,60514,64914,92715,43814,830

14,62014,79013,92613,84014,34814,063

14,36614,42714,63414,42715,66015,710

Gold stock i

Total*

20,70622,86824,39924,563

22,82022,87323,25222,09121 793

21,75322 05822,85720,58219,507

17,80416,94716,05715,59615,471

s 13,80613 23512,06510,892

13,20213,16113,18413,23413;21413,169

13,13613,07513,07713,03912,96512,065

12,00311,90010,70310,54710,46810,681

10,67610,68110,75510,78810,89710,892

Treasury

20,52922,75424,24424,427

22,70622,69523,18722,03021 713

21,69021,94922,78120,53419,456

17,76716,88915,97815,51315,388

13,73313,15911,98210,367

13,15713,10713,10713,10913,10913,110

13,10813,00813,00612,90512,90811,982

11,98411,88210,48410,48410,38410,367

10,36710,36710,36710,36710,36710,367

Convertibleforeign

currencies3

11699

212432

7811 3212,3453,528

645480314315363738

7191,1621,2001,5092,0922,345

2,1762,2352,7462,8043,3862,479

2,7732,8172,9532,7033,6553,528

Reserveposition in

InternationalMonetary Fund4

1,1531,3591,461

1,4451,4261,4621,3671 185

1,0441,6081,9751,9581,997

1,5551,6901,0641,035

769

5 863326420

1,290

349357357357366367

369368372379381420

441655477489494903

917929926936

1,1081,290

1 Includes gold sold to the United States by the International Monetary Fund with the right of repurchase whichamounted to $800 million on December 31, 1968. Beginning September 1965 also includes gold deposited by the IMF tomitigate the impact on the U.S. gold stock of purchases by foreign countries for gold subscriptions on increased IMFquotas. Amount outstanding was $230 million on December 31,1968. The United States has a corresponding gold liabilityto the IMF.

2 Includes gold in Exchange Stabilization Fund.3 Includes holdings of Treasury and Federal Reserve System.4 In accordance with Fund policies the United States has the right to draw foreign currencies equivalent to its reserve

position in the Fund virtually automatically if needed. Under appropriate conditions the United States could draw addi-tional amounts equal to the United States quota.

5 Reserve position includes, and gold stock excludes, $259 million gold subscription to the Fund in June 1965 for a U.S.quota increase which became effective on February 23, 1966. In figures published by the Fund from June 1965 throughJanuary 1966, this gold subscription was included in the U.S. gold stock and excluded from the reserve position.

Mote.—Gold held under earmark at Federal Reserve Banks for foreign and international accounts is not included inthe gold stock of the United States.

Sources: Treasury Department and Board of Governors of the Federal Reserve System.

330


TABLE B-90.—Price changes in international trade, 1960-68

11958=100]

Area or commodity class 1960 1961 1962 1963 1964 1965 1966 1967

1968

Thirdquarter

Developed areas

Total:

ExportsTerms of trade i .

United States »

Exports

Terms of trade 1.

Developing areas

Total:ExportsTerms of trade 1.

Latin America

ExportsTerms of trade 1.

Southern and Eastern Asia <

ExportsTerms of traded

Primary commodities: Total.

Foodstuffs

Coffee, tea, and cocoa-Cereals

Other agricultural commodities *

Fats, oils, and oilseeds..Textile fibers

WoolRubber

MineralsMetal ores..

Manufactured goods: Total8...

Nonferrous base metals 8_.

100103

101101

99

111109

97

91

7796

107

94104108141

93

101

114

Unit value indexes by area

101104

103105

9597

9395

104104

101105

102107

9395

9193

101102

102104

102105

9597

9497

102102

103104

103104

9797

101103

103100

104104

106106

9797

101102

104100

106104

107105

9997

103103

106103

106105

112108

9897

101100

9999

World export price indexes «

95

90

7298

103

97105107107

92100102

110

94

90

70103

99

89101106102

9299

102

109

100

103

73102103

9511212795

9296

103

110

103

106

87105

105

9811613191

94104104

135

100

99

80101

104

10810511093

96110

106

155

101

100

84107

105

10510611599

97110

108

178

98

99

81109

98

971019871

95104

109

163

105105

113108

9897

3 1023 99

3 993 100

97

96

81106

97

911019371

95104

109

162

1 Terms of trade indexes are unit value indexes of exports divided by unit value indexes of imports.2 Includes foreign trade of Alaska, Hawaii, and Puerto Rico.3 Data are for second quarter 1968.* Excludes Japan.« Data for manufactured goods are unit value indexes,e Includes nonfood fish and forest products.

Note.—Data exclude trade of Communist areas in Eastern Europe (except Yugoslavia) and Asia.

Sources: United Nations and Department of Commerce (Bureau of International Commerce).

331


TABLE B-91.—Consumer price indexes in the United States and other major industrial countries1957-68

Period

19571958..1959

1960 .196119621963-_1964

196519661967 . . .1968 !

1965: 1.II. _III . .IV

1966: LII ._IllIV _

1967: 1IIIIIIV

1968: 1IIIllIV 2

UnitedStates

91.894.495.1

96.697.798.8

100.0101.3

103.0106.0109.0113.3

102 1102.8103.2103.7

104 5105.6106.6107.4

107.6108.4109.5110.4

111.6112.8114.2115.5

Canada

91.794.195.1

96.297.198.3

100.0101.8

104.3108.2112.0116.3

103 1103.9104.8105.3

106 7107.9108.9109.5

109.9111.5113.2113.6

114.9116.0117.3117.9

11963=

Japan

79.378.979.8

82.687.093.0

100.0103.9

110.7116.4121.0127.0

108.6110.8110.8112.9

114 9116.4116.5117.6

119.8119.7120.2124.1

126.2126.4127.4129.8

=100]

France

69.680.185.0

88.191.095.4

100.0103.4

106.0108.9111.8116.4

105.0106.1106.3106.9

107 7108.5109.2109.8

110.8111.2111.9113.5

115.1115.8117.2119.2

Germany

88.190.090.9

92.194.397.1

100.0102.3

105.8109.5111.1112.5

104.1105.4106.5107.1

108.5109.8109.6110.1

110.9111.5111.2110.8

112.3112.5112.5112.9

Italy

83.285.585.1

87.188.993.1

100.0105.9

110.7113.3116.9118.4

109.5110.1111.2111.9

112.7113.0113.3114.2

115.9116.6117.5117.9

118.2118.5118.3118.5

Nether-lands

889091

949597

100106

111118121125

108113112112

116120118118

119123122122

124125126

UnitedKingdom

86.989 590.0

90.994.098.0

100.0103.3

108 2112.4115.2120.1

105 8108.5108.9109.6

110-4112.5112.9113.8

114.4115.4114.8116.2

117.8120.6121.3122.0

1 Averages for January-November for the United States; January-September for the Netherlands; and January-Octoberfor all other countries.

2 October-November average for the United States and October data for ail other countries.

Sources: Department of Labor and Organization for Economic Cooperation and Development.

332U.S. GOVERNMENT PRINTING OFFICE: 1969 O — 3 2 3 - 1 6 6
