September 16, 1975
Page 28883
BUDGET COMMITTEE HEARINGS SCHEDULED
Mr. MUSKIE. Mr. President, I have today received the Congressional Budget Office's new study entitled "Recovery: How Fast and How Far?" The report evaluates the success of congressional fiscal policy, identifies potential dangers and indicates the options and resulting tradeoffs which Congress faces in dealing with energy, inflation, and unemployment.
While the CBO report confirms that congressional action to cut taxes and increase social security benefits has provided a "rapid rate of recovery" which seems assured through early 1976, times are still grim and the outlook pessimistic for 8 million unemployed and for every American who struggles under the burden of inflation rates rising again.
The report warns that current monetary policy and higher prices result from food and energy developments, not as a "result of current pressures on capacity or labor," and could retard or "even abort the recovery."
According to the CBO, there is likely to be little improvement in unemployment in 1977 and inflation will continue at a rate of 6 to 7.5 percent.
Even this pessimistic outlook is predicated on optimistic assumptions about energy policy; namely, no decontrol of oil prices and removal of the oil tariff.
In this framework, where are administration priorities?
Immediate decontrol, the latest administration position, means 1.8 percent more inflation, and 600,000 more unemployed, and higher oil company profits over the next 2 years.
This is the policy the administration finds acceptable and offers the Congress and the country.
But the CEO report makes it clear that there is an alternative fiscal and monetary policy which could put 1,500,000 more people to work, add $90 billion output to an anemic GNP while increasing inflation by less than one-half percent.
The administration rejects this option out of hand.
The Budget Committee will conduct hearings beginning on September 23 to examine again the difficult trade-offs between energy, inflation, and unemployment in an attempt to arrive at a fiscal policy which will keep the country on the road to recovery on which it has embarked.
Our hearings will focus on three primary issues:
First. Should fiscal policy be changed? Should we have less spending, more spending, an additional tax cut or is the economic policy mix that we decided on last spring still the proper one to rapidly move the country toward recovery?
Second. What new budget requests will the President make requiring additional outlays beyond the Congress total $367 billion? In what ways will the President demand that we bust the deficit either through revised, allegedly more accurate program costs or through spending the President thinks is of a high priority now?
Third. What mix of job-creating programs is most appropriate in light of what we know about their effectiveness and the halting, sluggish character of recovery from recession.
On September 23, the Director of the Congressional Budget Office, Alice Rivlin, the Director of the Office of Management and Budget, James Lynn, and the Chairman of the Council of Economic Advisors, Alan Greenspan, will present a factual background on the state of the budget and the economy.
On September 24, George Meany will appear.
On September 25 we will again explore the relationship between monetary and fiscal policy through a meeting with the Chairman of the Federal Reserve, Arthur Burns. My own objective at that session will be to see if we cannot gain some better control over the impact of discretionary changes in interest rates on other factors affecting the economy and the budget.
The intent of the Budget Act was to enable Congress in time of economic difficulty to set the country firmly back on the track to economic stability. A reasonable argument can be made that monetary policy thus far this year has retarded the speed of economic recovery and unnecessarily prolonged unemployment while not restraining inflation.
On September 30, Secretary of the Treasury Simon and Secretary of Labor Dunlop will discuss potential remedies to deal with unemployment and inflation over the coming months.
On October 1, Mr. Arthur Okun, former Chairman of the President's Council of Economic Advisors, Mr. Murray Weidenbaum, former Assistant Secretary of the Treasury, and Mr. Arthur Brimmer, former Governor of the Federal Reserve, will present the always valuable perspective of informed experts outside the Government.
On October 2, representatives of the business community will present their analysis of our current problems and remedies as they see them.