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Later Amendments to the 1946 Act

When Senator Hubert H. Humphrey was Chairman of the JEC, he noted in a 1976 hearing, “It is my judgment that [the 1946 Act] has, from time to time, been conveniently ignored.” He believed Congress should enact legislation to set more explicit employment objectives, and wanted the government to provide jobs should these employment goals not be achieved. In the following Congress, the Full Employment and Balanced Growth Act of 1978 was enacted, known as “Humphrey-Hawkins.” Although Senator Humphrey passed away before President Jimmy Carter signed the bill into law, his widow, Muriel Humphrey, succeeded him in the Senate and attended the signing ceremony.

Humphrey-Hawkins made several amendments to the Employment Act of 1946, which—like the 1946 Act—reflected a number of compromises between those in Congress who were interventionist and those who were concerned about fiscal responsibility and maintaining the primary role of the private sector in maximizing employment.

The Declaration of Policy in the 1946 Act was amended to change “maximum” to “full” employment and include additional economic and policy goals beyond employment and production, including price stability (given the high level of inflation in 1978) and increased real income. Other goals included “balanced growth, a balanced Federal budget, adequate productivity growth, proper attention to national priorities, [and] achievement of an improved trade balance through increased exports.”

While stopping short of having Congress establish full employment as a statutory right to be enforced by the Federal Government, the 1978 Act referred to full employment as if it were an inherent right that already existed. Rather than establishing a national right, the Statement of Policy established a national “goal” of fulfilling a nebulous “right to full employment” it assumed already existed beyond statute.

In a nod to fiscal responsibility and the role of the private sector, the 1978 Act amended the 1946 Act to clarify that its purpose is “to rely principally on the private sector for expansion of economic activity and creation of new jobs for a growing labor force.” To promote private-sector reliance, the amendment clarified that the law’s purpose was to encourage “the adoption of fiscal policies that would establish the share of the gross national product accounted for by Federal outlays at the lowest level consistent with national needs and priorities.”

Significantly, as detailed in Chapter 2, CBO recently determined that outlays as a share of GDP are above their historical average and on a decidedly upward trend over the next decade, seemingly contrary to the purpose enumerated in the amended 1946 Act.

Role of the Joint Economic Committee

As the economic and fiscal policy goals outlined in the 1946 Act expanded in 1978, so did the breadth of the JEC’s mandate to study economic policy and programs that would achieve those goals. Through the 1978 amendments, the JEC’s authority grew to issuing a monthly economic indicators report and analyzing the short- and medium-term goals of the Economic Report of the President for the House and Senate Budget Committees.

Regarding economic indicators, Colleen Healy—long-time staffer for the Joint Economic Committee—recalls the days before economic data was widely available electronically. In that era, the JEC was considered the preeminent source of the most recent and comprehensive information on economic indicators. Members of Congress, congressional staff, members of the media, and many others frequently visited the Committee’s office in order to procure paper copies of the latest data. Today, the JEC still distributes and analyzes economic data, but does so chiefly through electronic means.

Under its current structure, the JEC is composed of 10 Members of the House of Representatives and 10 Members of the Senate, in proportions reflecting the party composition of Congress. The chairmanship of the JEC alternates between the House and Senate each Congress. Due to the changing leadership and composition of the Committee, the JEC over the years has chosen to emphasize different goals within the 1946 Act, as well as different means of achieving them. One constant has been the JEC’s role as the economic think tank and incubator of ideas for Congress.

Prestige of the Joint Economic Committee

Taking stock of the JEC’s growing contributions to public discourse, President Eisenhower wrote, “The JEC and the Congress through special studies and public hearings have become a major instrument in promoting better economic understanding.”

As noted by former Senate Historian Richard Baker, a 1952 Nation’s Business article stated the following:

[The Joint Economic Committee] has been called the country's 'most important economic policy group.’ … The committee… has been a major force in shaping American economic policy not only in Congress but in the [Eisenhower] Administration and business world as well. Its studies and publications are must reading among economists. The accomplishments of the Joint Economic Committee, in the decade following its creation, confirmed the goals of congressional reformers who had long sought to strengthen the quality and independence of expertise available to members of Congress.

The Committee has also drawn a number of renowned economists in its 70-year history. In fact, economist Paul Douglas chaired the Committee in its infancy. It was Douglas who, in part, constructed the Cobb-Douglas utility function, one of the foundations of modern microeconomic theory.

In 1957, Business Week featured the talented team of staff economists on the Joint Economic Committee:

They perform many of the tasks that economists perform for private business, and that the Council of Economic Advisers performs for the President. But there’s this difference: Instead of working in the quiet retreat preferred by economists, [they] perform always in the glare of political controversy. They deal with such explosive matters as taxation, tight money, and rising prices—and do it with powerful [Members] of both parties looking over their shoulders.

As the Committee’s reputation grew, it attracted some of the most well-known economists of the modern era who would help foster debate on what would become the two main competing theories in public economics—Keynesian and supply-side theory and practice.

Norman Ture, one of the foremost advocates of supply-side economics and one of the architects of the 1964 and 1981 tax cuts, began his career as a JEC staffer. His primary duty was to organize tax policy hearings, information from which he would later use when crafting policies for Presidents Kennedy, Johnson, and Reagan. His focus on creating a simpler and less burdensome tax code culminated in the first hearing to be held on the notion of a flat tax—a concept that permeates almost any contemporary discussion of tax reform to this day.

Other important milestones in the history of the JEC include its role in moving away from the gold standard, recommending tax cuts in the 1960s, and providing leadership during the vast tax reforms of the 1980s.

In the 1960s, the JEC recommended broad-based tax cuts to promote economic growth and reach full employment. In its Joint Economic Report of 1961, Members recommended a “review [of] the tax structure with a view to recommending a downward revision of taxes—not a temporary ‘tax cut’—and that it make further periodic reviews for the same purpose, say, every five years.” This forced the CEA to concur in its Economic Report of the President and ultimately paved the way for the 1964 tax cuts.

The Committee once again called for tax cuts and simplification of the tax code during the Reagan administration. In the 1980 Joint Economic Report, the Committee outlined why cutting taxes had become so difficult: Policymakers have not viewed tax reductions as an important device to improve the structure of the economy because of the absence of economic models capable of adequately assessing the effects of supply side tax policies.

Not long thereafter, the Committee worked to create such a model and remove one of the barriers to progress. The model showed that “tax policies, such as depreciation schedule adjustment, can lower the inflation rate substantially over the decade.” Senator Lloyd Bentsen, Chairman of the JEC in 1980, wrote, “This new model is an important tool which will help policymakers implement the supply side policies which are being advocated by the JEC.” The model would prove instrumental in gaining support for the 1981 and 1986 tax rate reductions.

Additionally, the Committee has followed a tradition of hearing annual testimony from the Chair of the Federal Reserve Board of Governors, dating back to Chairman Marriner Eccles in 1947. In December 2015, Chair Janet Yellen testified before the JEC shortly before the Fed announced its much-anticipated increase in interest rates.

The Joint Economic Committee also boasts an extraordinarily distinguished group of alumni. In alphabetical order, some notable names include: