Dr. KEYSERLING. I think so, too, very definitely. Second, the same may be said about maximum production. Maximum production under the Employment Act, I think, should include broad quantifications of what part of our production needs to go into investment in plants and equipment, what part needs to go into the public sector, and what part needs to go into private consumption, not only because this is the very nature of meaningful maximum production, but also because this type of analysis, and results accordingly, is vital to the equilibrium or balance essential to sustained maximum production-and to maximum employment also.

Senator JAVITS. Mr. Chairman, would you allow me to interrupt for a question? I notice that you are speaking in terms of the balancing of the national budget, social and economic, et cetera. I was thinking in my bill of a provision which would inspire the people. That is why I suggested a commission, and that is why I beg you to evaluate my suggestion in those terms.

Dr. KEYSERLING. I have said I am in favor of the aim of your suggestion, with some modifications which I will suggest. I am not arguing against your suggestion. Indeed, Senator, I agree with you that the definition of national goals or ultimate purposes, even if one accepted my broader definition of the functions under the Employment Act, would go far beyond this act. Further, because of the interrelationships between economic purposes, even as I broadly define them, and other national goals, which are at times close or even overlapping, I favor your idea that the work on these other goals should in some way be connected with the work of the Council of Economic Advisers under the Employment Act.

Senator JAVITS. Would you yield at that point?
Dr. KEYSERLING. Yes, sir.

Senator JAVITS. We worry about that. Perhaps Senator Clark and I are the principally interested people to think something through on that score. The best we could come up with was to actually, physically integrate the report on national goals with the Economic Report, which the Joint Economic Committee considers regularly, and have it considered by the Joint Economic Conmittee.

Senator CLARK. I am a little dubious about that. I would like to think about it a little.

Dr. KEYSERLING. May I say a word about that after I amplify what I have already said, because I am really saying this: Regardless of the total sweep of our national goals and how they should be determined, the proper implementation and the proper functioning of the Employment Act, and the Economic Report thereunder, is a large enough function in itself to deserve the attention of thoughtful people and of this committee. Therefore, I am generally in favor of Senator Clark's efforts through his bill to improve and redefine that function. Let me now illustrate how, because a word of example is worth a pound of philosophy, let me now illustrate how our recent evolution of economic policies has fallen short just because the Economic Report of the President, and the activities of the Council of Economic Advisers, have not taken sufficiently into account this broader concept of economic and related social matters.

Perhaps the best example is the tax program, and I am not going to repeat here my long and customary critique of that program, except to say this: Under the advice of the Economic Report, and under the

advice of the Economic Advisers, we have during the last few years reduced taxes by an aggregate having a cumulative annual value of about $20 billion.

We have, therefore, allocated annually about $20 billion worth of purchasing power in particular directions, and this means allocation of resources insofar as these tax reductions result in spending.

Now, I know that it is said that this has stimulated the economy some. It would have done this even if the money had been thrown into the streets. But these further questions need to be asked about these huge tax reductions, even from the viewpoint of economic analysis and policy, not to speak of their relationship to those of our social purposes which involve the use of economic resources; and these further questions were not considered adequately by the Economic Reports, by the Council of Economic Advisers, nor by most economists:

First, did the $20 billion annual value tax reduction get allocated to the investment function and to the consumption along lines which would improve our prospects for long-range economic equilibrium, or did they produce a temporary or "nonsustainable" investment boom, about which we may now be worried, at the expense of other components of demand?'

In other words, in taking the so-called aggregative approach that if we pump $20 billion a year into the economy, it does not make much difference where we put it, we have been very lax. I say that this has involved not only an abjuration of vital social goals, but also an abjuration of adequate economic analysis and policy. This would be cured by the kind of economic budget that I am talking about.

Relatedly, these $20 billion annual value tax reductions were allocated in a way which took no account, or woefully inadequate account, of the competing needs and priorities of the private and public sectors of the economy.

Senator CLARK. Or indeed of the social utility of the activities of those who were being helped by the tax cut.

Dr. KEYSERLING. Exactly.

Second, I say that, in dealing with fiscal policy in this matter, but neglecting to pay satisfactory attention to the economic-resource magnitudes of such programs as social security and housing and agriculture, for example, the official economists are over emphasizing one tool of economic policy and not doing enough with the other tools. Third, there is the example of the antipoverty program. The main approach to the antipoverty program is based upon the concept that we attack the poverty problem through what I would call in the main a junior manpower and training program, with heavy stress upon social casework.

Now, I in no way challenge the validity of this attack, insofar as as it can go. But the poverty of 34 million people, and the deprivation of another 34 million people in the American economy, coming to a total of 68 million, is a profound matter of how we use our total economic resources and how we deploy our total national economic policies. Indeed, the creation of a larger economic take by the 68 million poor or deprived people in the United States is at the very heart of our whole economic problem, much more so than the balanceof-payments problem or gold problem with which the Council of Economic Advisers deals so fully because it happens to be a more traditional aspect of classical economic policy.

What has happened in consequence? When the President decided that he wanted a poverty program, the Council suddenly batted up a poverty analysis, and put it in the reports for 1964. But I notice that, in the 1965 reports, the poverty problem has been reduced to a few pages of treatment. Instead, for the reasons I have given, the poverty problem is our central economic problem, in terms of analysis, objectives, programs, and policies, and thus it should be the center, or close to the center, of these reports.

Let us take the manpower problem as another example, and here I beg respectfully to disagree with the idea that that be assigned to the Department of Labor. The Department of Labor did a creditable job, but I think not really a very good job, and furthermore a job not integrated with and in some respects inconsistent with the Economic Report.

Why do I say this? The problem of manpower and technology raises the sorts of prime questions: Taking into account the relative rates of technological change in various sectors of the American economy, where will the employment opportunities occur in the future? In other words, even if we wanted to increase employment opportunity greatly in the automobile industry by giving people more money by tax reduction to buy cars, we cannot do this because the technology in that industry is going to increase faster than any feasible increase in the demand for cars.

Senator CLARK. We have been after them on that in this subcommittee and I think you will find a different approach next year. I certainly hope so.

Dr. KEYSERLING. What I am trying to say even more importantly, Senator, is that a long-range projection of where the real employment opportunities should be in the American economy in the next 10 years is an essential part of what should be the projection of employment goals under the Employment Act.

Senator CLARK. I completely agree.

Dr. KEYSERLING. I cannot imagine anything closer to the purposes of the act, and the Council of Economic Advisers should by now have developed a completely worked out long-range projection of a viable pattern of employment opportunity in the U.S. economy, looking a decade ahead. This task is "economic," but obviously it would also involve values or "social" aspects.

Senator CLARK. Ewan Clague did not do such a bad job.

Dr. KEYSERLING. This manpower problem is an excellent example of the relationship between so-called economics and social values, because how could we possibly project worthy manpower goals without considering "manpower for what?"

I believe that the Economic Reports and the Council of Economic Advisers should develop the kind of long-range budget you define in your proposed legislation-I call it an American economic performance budget, but the name dosen't matter. This should project long-range goals for employment, and it does not mean much to say that we need 22 to 25 million additional jobs within the next 10 years unless we break this down into meaningful components. These components inherently involve both analyses and policy.

It does not mean very much, economically speaking, to say we need a gross national product of $750 billion by x years from now, unless this goal in turn is broken down into components, because the

relationships among these components will determine whether the goal is reached on time, and these components are affected by tax policy, social security policy, money policy, and all other major economic and financial policies. And it does not mean very much to say that we need aggregate purchasing power of $750 billion to get a $750 billion product unless we break this overall goal down into a distributive pattern-and I am not talking about socialism or full-scale national planning-which is conducive to both economic equilibrium and the meeting of the priorities of our needs, and consistent with our nationwide concepts of justice.

Senator CLARK. You get at this in your June article in the New Republic in which you set up a model to distribute income.

Dr. KEYSERLING. Exactly, and I have done this repeatedly in my various studies, so I heartedly commend the objectives and purposes of your legislation.

Senator CLARK. I would like to have the article entitled "The Great Society, New Kind of Balance Sheet Needed," by Dr. Keyserling printed in the record at this point.

(The article referred to appears on p. 51.)

Senator JAVITS. Mr. Chairman, may I make one suggestion? I was just talking to Professor Gross and I am sure Professor Keyserling will be willing to do the same thing.

Professor Gross is about to write us a letter telling us what changes he thinks should be made in an optimum piece of legislation and I would like to ask unanimous consent to include that in the record. Would you, Dr. Keyserling, like so do the same?

Dr. KEYSERLING. I have here now a document which I have been working on for about 10 years, which embodies my ideas as to desirable changes in the Employment Act. I would be glad to submit that, not by any way of presumption nor by way of implying that parts of it are more desirable than parts of the legislation thus far proposed, nor implying that it would appeal to you gentlemen in full or large measure. But my draft does provide an adequate guideline to my thinking, which could be contrasted, I think helpfully, with the provisions of the currently proposed lesiglation.

Senator CLARK. We would like to have that.

Dr. KEYSERLING. The only thing it does not take account of is Senator Javits' proposal, but I will write a letter including that.

Senator CLARK. In that connection, give some thought to the categories from which he wants his commission member to be drawn. Are they as good as we can get?

(The material referred to follows:)

Hon. JOSEPH S. CLARK,

WASHINGTON, D.C., October 27, 1965.

Chairman, Subcommittee on Employment and Manpower, Senate Committee on Labor and Public Welfare, Washington, D.C.

DEAR SENATOR CLARK: This letter is responsive to your request, when I testified before the subcommittee on October 19, that I comment upon your proposed bill, S. 1630, and Senator Javits' proposed bill, S. 2632.

With respect to your proposed bill, S. 1630, my testimony indicated my hearty approval of its purposes, and my general approval of its content. I think there could be some further improvement of and expansion of the detailed contents of the bill, and toward this end I have submitted for incorporation in my testimony, and for purposes of discussion only, a separate draft of a bill upon which I have been working for some years. I believe that the Senators and their staffs interested in this whole problem will be able to relate the suggestions contained in my draft

to your proposed bill. My edited testimony, in accord with your request, also contains some specific suggestions with respect to your bill, S. 1630. If any further discussion of my proposals seems in order sometime in future, I shall be most happy to advance in any way that I can the efforts which you are making which seem to me of such vital importance.

With respect to the bill introduced by Senator Javits, S. 2362, I am in accord also with its basic purposes. But I find its details vulnerable in important respects. I believe that the Economic Reports of the President under the Employment Act, particularly as brought into line with the purposes of your bill, should and would contain an adequate and definitive statement of our national economic goals, going far beyond recent and current practices under the Employment Act. Therefore I do not believe that the Congress should establish or that the President should appoint another public body to formulate such economic goals. We have far too much diffusion of this responsibility at the national public level already, and one of the prime benefits of your bill, if enacted, would be to achieve a more efficient and effective concentration of the public responsibility for defining and implementing national economic goals, within the structure of the Employment Act. This is entirely consistent with my view that it is all to the good that a wide range of private and non-Federal organizations define our national economic goals-for example, the National Planning Association, and the Conference on Economic Progress, under my direction. Further, it would seem to me particularly undesirable, and perhaps confusing, that the Economic Reports of the President should contain the findings and recommendations of a separate and to a degree duplicative body with respect to economic goals and policies. The Economic Report of the President is in my view a major message of the President to the Congress, and it does not seem that such a message should contain, even by way of an appendix, the separate and perhaps competing or conflicting views of another body no matter how august. For such views to appear in the President's Economic Report would in my view be tantamount to such competing or conflicting views appearing in the President's state of the Union message or budget message, and that would seem to me unthinkable. Nor could this objection be met, in my view, by making the Council of Economic Advisers an integral part of a Commission on National Goals. This in effect would substitute the Commission for the Council of Economic Advisers, which I think undesirable because the job of the Council of Economic Advisers, as you and I would redefine it, is plenty big enough and should not in my view be comingled with the setting forth of noneconomic national goals, the nature of which I alluded to by way of illustration in my recent testimony. Besides, I submit that the views and activities of the President's Economic Advisers should not be comingled with those of others. The same comments apply to the proposal that the work of the proposed Commission be transmitted to the congressional Joint Economic Committee and be made a subject of its hearings. Yet I do favor what I take to be the main thrust of Senator Javits' proposal, which is really concerned with the lack of any appropriate agency of a public nature to whom the President can turn for advice and help with respect to noneconomic goals of national significance. Even here, there may be some lack of precision in thought or communication, because I would assume that we are talking about something as broad as the function of the President and of our National Government. The President, with the aid of the whole governmental structure, sets forth all kinds of national goals, and if this is not done adequately the cure may not be in the establishment of still another public body set up by the Congress and appointed by the President. If the President feels that he now has no effective means for reconciling all of the different goals which he is called upon to expound as the sole representative of all the people, then perhaps he may be able to organize some additional intragovernmental relationships (of which there are already a number) which will facilitate this purpose. Here again, I am entirely in accord with the setting forth of noneconomic, as well as economic, national goals and aspirations, by private and non-Federal agencies such as the Rockefeller reports.

Without debating the merits of President Eisenhower's Commission on National Goals, I felt when it was established that this Commission should be temporary (as it was) rather than permanent and that it represented some unclear thinking as to what should be done by the President and the Government as against what should be done by others; and maybe these intrinsic difficulties explain in part why neither President Eisenhower nor President Kennedy moved from the base of what the Eisenhower Commission found. This really boils down to my view that the Presidential and governmental function cannot very much be delegated to others.