SUMMARY OF GENERAL REPORT ON ECONOMIC PROB

LEMS OF THE RECONVERSION PERIOD

This general report of the committee is to be distinguished from the three previous reports which it has issued, on the cancelation of war contracts, the disposal of surplus Government property and plants, and on the demobilization-reemplovment problem. The purpose of this general statement is to provide a background for meeting the problems involved in reestablishing our economy on a successful peacetime basis.

GENERAL PRINCIPLES

The goal of post-war economic policy is the creation of conditions favorable to the expansion of our peacetime production, so that the national labor force will be gainfully employed and the national income will be adequate to sustain an active market for goods and services, with improved living standards.

For the attainment of post-war prosperity we must look primarily to the efforts of private enterprise, its management and its labor force. The role of the Government is essentially to provide the setting in which these efforts will have the best prospects of success. At the same time it is the obligation of the Government to take direct public measures for the protection of its citizens against the economic hazards which are unavoidable in a progressing economy that preserves freedom of private enterprise and individual opportunityespecially during the difficult period of transition from production for war to production for peace.

A large part of American industry has had to be commandeered for war production. Both labor and capital have been diverted from their normal channels. In relaxing the wartime Government controls to release war-restricted resources for civilian production, public policy must follow a course that will avoid either a hampering rigidity or a chaotic looseness during the transfer of our economic resources to peacetime pursuits.

Private business and labor cannot reasonably be expected to make their full contribution to a rapid and effective reconversion of the economy unless the Congress and the appropriate executive agencies are prepared to back up the economy with measures designed to stimulate productive investment and generate useful employment.

I. INTEGRATION OF THE POST-WAR ECONOMIC PROGRAM

The realm of post-war economic policy covers a wide range of subjects. They must be fitted into a consistent and harmonious body of post-war legislation. Whether the Congress is dealing with war contracts, surplus property, taxation, money and credit, public

works, or price and wage stabilization, the consideration of any of these subjects must contribute to the common goal of stimulating and maintaining a high post-war level of production and employment. From its studies of administrative agencies and the testimony of administration executives, the committee is convinced of the need for bringing all aspects of the post-war economic program under central policy guidance. There must be a point of authoritative decision within the administration to coordinate the operations of the agencies engaged in the settlement of war contracts, the disposal of surplus property, the facilitating of reemployment, and the orderly relaxation of wartime controls.

To this end the committee has supported the expansion of the functions of the present Office of War Mobilization to make it the Office of War Mobilization and Reconversion. The Director of this Office would be charged with the formulation of the over-all policies necessary to effect economic transition from war to peace, and with the responsibility for having those policies followed by the designated administrative agencies.

The committee felt that it would be helpful to the Director in the exercise of his duties if he had an advisory board to which he could look for advice and suggestions on policies and procedures. It was, therefore, proposed that an advisory board of 12 members be appointed by the President with the consent of the Senate. All of the members would represent the general public and the public interest, but 3 of the members would be persons with business experience, 3 with labor experience, and 3 with agricultural experience.

The administrators of the major areas of the economic transition program should likewise make systematic use of industry advisory boards to aid the public agencies in specific problems arising in connection with surplus property disposal, release of war controls, financing of the reconversion and reemployment measures, etc.

To meet changing requirements and to correct deficiencies, progress reports should be periodically submitted by the Director of the Office of War Mobilization and Reconversion for study by the Congress, on the conduct of the demobilization and readjustment program.

II. CONTRACT TERMINATION AND SETTLEMENT

It is believed that the new contract settlement law, enacted on July 1, 1944, will expedite conclusive settlements for both prime and subcontractors; and that it will protect the Government in the avoidance of overpayments to the fullest extent consistent with the primary objective of clearing the way for speedy resumption of civilian production.

From this point on the committee will keep in close touch with the administration of the law and make any recommendations for modification which the results of experience with the operation of the law may suggest.

III. DISPOSAL OF SURPLUS GOVERNMENT PROPERTY AND PLANTS

The committee has recommended the immediate enactment of legislation for the disposal of surplus Government property, granting to the Surplus Property Administrator the necessary powers and legal sanctions for expediting the full utilization of Government supplies and industrial plant in the public interest.

The committee, recognizing the diverse and complex problems that will be faced by the Surplus Property Administrator, recommended a number of definite policies to assist and guide him in the conduct of disposal activities.

1. The transfer of surplus property from one Government agency to another, at fair value, should be facilitated, to avoid unnecessary commercial purchases. Present and future needs of the armed forces should be given careful consideration in this connection.

2. Other public agencies, educational and charitable institutions should be given an opportunity to buy surplus property, but the committee does not believe it is in the public interest to donate such property to them, except where it is of negligible commercial value.

3. Every effort should be made to afford returning veterans opportunity to acquire property in order to establish themselves in farming, business, or the professions.

4. Smaller businesses should be afforded opportunities to acquire property, through offerings in small lots, through wide publication of sales notices, through protection against large-scale speculative buying, and by similar provisions. Full access to records should be given with respect to all transactions.

5. Former owners of surplus real property should be given an opportunity to reacquire the property at a fair value.

6. Efforts should be made to dispose of surplus property abroad in such manner that it would improve trade relations with foreign nations and tend to develop foreign markets. Care should be taken to avoid the dumping into this country of such property sold abroad. 7. The committee feels that the Administrator should aim to dispose of surplus property as promptly as feasible and to facilitate prompt redistribution to consumers. At the same time care must be taken that monopoly is not fostered or that the economy and employment is not unduly disturbed.

8. As far as it is consistent with the policies and objectives which are stated in the act, the Administrator should endeavor to realize the highest obtainable return for the Government from the disposal of the surplus property.

The committee recognizes, however, that considerable quantities of surplus war matériel will have low, even negligible, commercial value.

IV. TRANSITIONAL UNEMPLOYMENT AND REEMPLOYMENT

A satisfactory approach to maximum employment after the war will require jobs to exceed previous employment peaks by nearly 20 percent, providing from eight to ten million more jobs than in the high peacetime year of 1940. That the basic first step in the solution of the problem of post-war employment is to offer maximum encouragement to the expansion of business and the consequent development of job opportunities.

It is this emphasis upon the providing of more jobs that underlies the approach the committee has taken to the other matters discussed in this report. The problem of employment is the most pressing reason for such proposals as the providing of investment incentives through reform of the tax system; the expansion of credit facilities for equity capital; the opening and widening of foreign markets;

the stimulation of private and public construction; and the preparation of a backlog of needed public works.

Beyond these general measures which are designed to increase national production and hence the number of jobs, the committee recommends that measures be taken to assist those veterans and war workers who are seeking jobs, to enable them to find work with the least possible delay and with the fewest possible cases of loss of skill or rating. The committee therefore recommends that an adequate and coordinated service should be provided for this purpose, both under the Servicemen's Readjustment Act of 1944, for veterans, and under the United States Employment Service.

Our soldiers and sailors should not be retained in military service any longer than military needs require. Moreover, war production should not be continued beyond the point where definite war needs have been met, merely to cushion the shock of reconversion and provide employment. The committee feels that such proposals are unwise.

Unemployment compensation.-The large savings in the hands of millions of individuals throughout the country in the form of Government bonds, cash, and bank deposits will form the principal backlog of protection for the individual against decline in income or unemployment during the transitional period.

The committee believes that unemployment compensation is the principal means of protection which the Government can provide for the unemployed worker. The great majority of war workers are covered by the State unemployment compensation systems which are well established. It is estimated that the reserves in these State funds will amount to over $6,000,000,000 by the end of this year.

The committee strongly urges the State authorities to give immediate consideration to improving the State laws, particularly with respect to increasing the duration and level of benefits.

The committee feels that prompt action should be taken by the Federal Government to protect the State funds against threat of depletion; with such protection the States would be in a better position to increase their benefits.

The committee also feels that the unemployment compensation law should be extended to cover groups which are not now included, such as Federal Government employees, maritime workers, and employees of concerns hiring less than eight workers.

The committee does not recommend any change during the immediate post-war period in Federal old-age and survivors insurance, but it does believe that many groups of workers should be added to those covered under this program.

Moreover, the committee recommends that the House Ways and Means Committee and the Senate Finance Committee appoint an advisory council of qualified experts to study the tax features and other financial problems of the Federal old age and survivors insurance plan and submit recommendations.

It is also recommended that legislation be passed to give credit on the basis of a stated monthly wage for each month spent in the service by members of the armed forces and that payments be made into the insurance fund by the Federal Treasury to cover the cost.

V. PUBLIC WORKS AND PRIVATE CONSTRUCTION

The construction field is recognized as one in which deferred demand makes possible a broad expansion of employment. Both private and public construction in large volume has been held back by wartime shortages of materials and manpower.

The release of those bottlenecks which will retard the rapid expanding of construction presents an urgent problem. The Director of War Mobilization and Reconversion will have to turn his attention early to the problems confronting the construction industry if its important potential contributions to reemployment are to materialize fully.

The committee recommends that the hastening of plans for State and local public works should be stimulated by a system of grants-inaid, provided on a matching basis, to help governmental units to have their projects ready for initiation at the earliest possible moment. Since the State and local governments are in a strong financial position, the committee does not feel that the immediate situation is one which requires a federally financed emergency works program at this time.

However, in view of the critical importance of stabilizing employment in the long run, the committee recognizes that it is essential to prepare a reserve shelf of useful public works to be put in operation in case serious unemployment should develop as the post-war period progresses. To this end the committee advocates that the grants-inaid program for plans and specifications recommended above should be extended into a more permanent one, looking toward later possible emergencies.

The committee intends to make further studies of the appropriate steps necessary to accomplish a stabilizing of the construction industry at a high employment level, and of the part which federally financed public works should play in such a program.

The committee recognizes that public works represent a spending of the people's money and that a commensurate public service resulting from these outlays is the least that can be expected. This public service must be recognized as consisting not only of the utilities realized from the physical facilities provided but also of the measure of stability which their execution and timing provides for employment and industrial activity.

The committee believes that large Government spending in itself is not a satisfactory stimulus to sustained production. The Work Projects Administration at its peak employed not more than 4,000,000 people, only at subsistence wages. The national debt at that time. was less than $35,000,000,000 in contrast with possible $300,000,000,000 incurred by the war's end. The stability of our national credit may be threatened if large-scale deficit spending continues into the peacetime period.

VI. TAXES

It is not unlikely that during the first years after the war the total of Federal expenditures will approach $20,000,000,000 per annum. It is imperative that expenditures be matched by tax revenues, at least over a period of years, and that further continued growth of the national debt be checked. This means that production and employ