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The original documents are located in Box 55, folder "1976/01/15 - Economic Policy Board"
of the James M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 55 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE MEETING
AGENDA
8:30 a.m.
Roosevelt Room
January 15, 1976
1.
Review of Omnibus Railroad Bill
Transportation
2.
Review of Regulatory Reform
MacAvoy
Initiatives
3.
Proposed Revision of Seasonal Adjust-
Malkiel
ment Factors for Unemployment
Statistics
EYES ONLY
MINUTES OF THE
ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE MEETING
January 14, 1976
ATTENDEES: Messrs. Seidman, Dunn, Baker, Zarb, Cannon, Collier,
Parsky, Katz, Gorog, Porter, Gerard, Hormats,
Kasputys, Areena, Orlebeke
1. Report of EPB/NSC Task Force on Commodity Policy
The EPB/NSC Task Force on Commodity Policy presented its
report, which is attached at Tab A. There is general agreement
among the departments and agencies represented on the Task
Force that the recently negotiated Cocoa Agreement is unaccept-
able in its current form and that State will inform producing
countries that the United States does not intend to sign the newly
negotiated Cocoa Agreement but is willing to participate in a re-
negotiation of the Agreement if such discussions were aimed at
achieving a more economically acceptable arrangement.
Mr. Parsky reported that the Task Force would present an eco-
nomic analysis of the recently negotiated International Coffee
Agreement in their next report to the EPB Executive Committee
in a fortnight. He also reported that a representative of the
Department of Commerce has been added to the Task Force.
2. New York City Update
The Executive Committee reviewed a memorandum on the New
York City financial situation prepared by the Department of the
Treasury. The discussion focused on a report relating to the
financing requirements under the New York City Seasonal Financ-
ing Act of 1975 prepared by Arthur Anderson and Company for the
Secretary of the Treasury. Briefly, the report suggests that New
York City's cash flow situation will enable them to repay the
seasonal financing loans from the Federal Government but that
their overall financial situation will require them to continue to
take a number of additional measures in order to place the city
on a sound financial footing by 1979.
EYES ONLY
EYES ONLY
2
Mr. Gerard reported that Treasury officials will brief con-
gressional staff members on the New York City financial situ-
ation this afternoon. New York State Congressmen will be
invited to attend the briefing.
Decision
The Executive Committee agreed that a statement from the
Secretary of the Treasury to the President reporting on the New
York City financial situation and the Anderson report should be
prepared and submitted by early afternoon and recommended
that the statement be released to the press.
EYES ONLY
RPB
OF
DEPARTMENT
DEPARTMENTATION
THE SECRETARY OF TRANSPORTATION
UNITED
AMERICA
WASHINGTON, D.C. 20590
STATES
of
January 14, 1976
MEMORANDUM FOR THE ECONOMIC POLICY BOARD
FROM:
William T. Coleman, Jr.
SUBJECT:
Status of Negotiations Over Omnibus Rail Bill
S. 2718, The Railroad Revitalization and Regulatory Reform Act
of 1975, was passed by both Houses of Congress on December 19,
1975, in spite of strong Administration veto threats. A few days
later, the Senate leadership decided not to enroll the bill,
presumably to avoid a veto, and indicated a willingness to pursue
a compromise with the Administration. Consequently, House and
Senate staffs began negotiations with DOT officials on January 2,
1976, contemplating that, if an agreement could be reached,
implementing amendments would be introduced shortly after the
recess.
Subsequently, Jim Lynn and I jointly submitted to the President
the attached memorandum containing recommendations with regard
to the Administration's positions during the negotiations. The
President subsequently approved all of the recommendations made
by DOT, OMB, and the Domestic Council with the exception of
authorizing, in the event it should become necessary, the
expenditure of an additional $200 million in grants for improving
intercity rail passenger service outside the Northeast Corridor.
To date, the negotiations have gone well. While the negotiations
have been with the staff, with neither side bound until full agreement
is reached and principals concur, we have reason to believe the
staff is acting within its authority. All tentative agreements
reached with the staff fall within the guidelines of the decisions
made by the President as a result of the attached memorandum,
although the tentative agreements reached relating to rail passenger
2.
service apply the dollars differently. In this regard, the President
approved a program of between $1. 4 and $1.7 billion for the
Northeast Corridor plus another $200 million in grants for
improving passenger service outside the Corridor, for a potential
total of $1.9 billion. In the negotiations, the Department has
tentatively agreed to a $1.6 billion program for the Corridor,
plus another $150 million in Federal assistance for stations and
fencing on a 50-50 match basis with State and local authorities
(with the Secretary retaining discretion, within the $150 million
limit, to fund without a match any station or fencing improvements
required by safety considerations), and, in addition, $115 million
for acquisition and start-up costs related to the project. However,
pursuant to the negotiations, the bill will not contain any
authorization of another $200 million in grants for rail passenger
service outside the Corridor, making the total of separate
authorizations in the bill for rail passenger service $1.865
billion. All such funds will require an appropriation.
In addition, substantial improvements to the regulatory provisions
of the bill have tentatively been agreed upon.
The prospects for reaching a complete agreement prior to Congress
reconvening on January 19 are good, and we are negotiating now
with respect to the parliamentary procedure that will be followed.
William I
William T. Coleman, Jr.
Attachment
EXECUTIVE OFFICE OF THE PRESIDENT.
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
ACTION
MEMORANDUM FOR:
THE PRESIDENT
FROM:
JAMES T. LYNN and WILLIAM T. COLEMAN
SUBJECT:
Proposed Changes tu Administration
Position on Omnibus Rail Bill
Financial Provisions
Background
S. 2718 was passed by both houses of Congress on December 19, in spite
of strong Administration veto threats. A few days later, Senate
leadership decided not to enroll the bill, presumably to avoid a veto,
and indicated a willingness to pursue a compromise with the Admin-
istration. Consequently, House and Senate members and staff are
scheduled to begin negotiations with DOT officials on January 2. If
an agreement can be reached, implementing amendments would be intro-
duced for joint resolution shortly after recess.
There are two areas of major disagreement which must be resolved, if
a veto threat is to be averted. The first concerns our ability to
control and protect the massive Federal investments being contemplated.
S. 2718 would place control of funding for both ConRail and the North-
east Corridor project in the U.S. Railway Association, which is not
part of the executive branch. Secondly, the level and mix of funding
is presently unacceptable. This matter is discussed in the following
section. Failure to reach a workable compromise in either of these
areas would be clear grounds for veto.
In addition, your advisors are currently discussing whether to explore
certain changes in the regulatory provisions of S. 2718 with the
committees. While the legislation does contain major regulatory
reform, shortfalls in some areas (railroad rate bureau price fixing
activities) may warrant further attention.
Overall Funding Level Issue
As shown in the attached table, S. 2718 contains $7.6 billion in new
authorizations, compared with the Administration's original proposal
of $5.6 billion. The current over-run of $2.0 billion is clearly
2
excessive, and we have publicly identified this as a major basis for
veto. However, in the interest of reaching a quick accord on this
urgent legislation, we recommend compromising in the range of $6.0-
6.5 billion. Assuming full funding at the higher figure, this could
lead to an increase above 1977 outlay estimates, somewhere in the
range of $0-160 million. Fortunately the potential add-ons are
relatively controllable by the executive branch, and are longer-range
efforts which can be stretched through the appropriation process and
management controls.
Individual Funding Issues to be Negotiated
Specific changes from our current base are proposed in the funding
programs described below. Note that the excessive level of overall
funding obscures the fact that some areas are too low (e.g., nation-
wide rail freight rehabilitation), while others are too high (e.g.,
Northeast Corridor passenger improvements).
On the following issues there is complete agreement among DOT, OMB
and the Domestic Council on the proposed recommendation.
ConRail
The Administration's bill set aside $250 million to be used for
purchase of ConRail securities only under special adverse con-
ditions. S. 2718 eliminates this contingency reserve, and simply
merges it with other ConRail funding. While we would prefer to
keep it separate, we would be willing to concede this point if
control over all ConRail funding were given to the executive branch.
Decision
Approve elimination of contingency fund, provided
we get control
Disapprove, and keep separate
S. 2718 provides $200 million in loan guarantees for electrification
of ConRail mainlines. We recommend that this be deleted as a separate
funding category, since this type of project is eligible under the
rail freight assistance described later.
Decision
Approve deletion of this provision
Disapprove, and include provision
3
$400 million in loan guarantees is provided for certain preconveyance
expenses accruing to ConRail (such as labor and shipper claims).
Estimates indicate that $235 million would be sufficient for this
purpose, and we therefore recommend this level. Since ConRail will
in turn, have a legal claim against the bankrupt estates for this
amount, no outlay impact is expected.
Decision
Approve authorization at $235 million
Disapprove, and provide no authorization for
this purpose
Rail Passenger
Northeast Corridor - Senators Hartke, Pastore and Weicker are strong
advocates of a very high-speed system in the Boston-Washington
corridor. S. 2718 provides $2.6 billion for upgrading, acquiring
and managing this corridor, as opposed to the Administration's $1.2
billion proposal. The difference is mainly one of trip time targets.
The conference report set initial trip time goals of 2 hours, 45
minutes Washington-New York, and 3 hours, 30 minutes New York-Boston,
a reduction of 15 minutes and 20 minutes, respectively, from the
Administration's program. The bill cites as an eventual goal even
further trip time reductions which would require amounts far in
excess of the $2.6 billion provided. By compromising at a level of
between $1.4 and $1.7 billion and concentrating on speed-related
improvements only, a program could be developed which compares
favorably to the speeds cited in the initial target cited in the
conference report. In exchange, the Administration would gain
control over these funds and reduce the authorization by $700-1
billion.
Decision
Approve compromise of between $1.4-1.7 billion
Disapprove, and remain at $1.2 billion
Passenger improvements nationwide - $200 million is provided for
the vague purpose of improving intercity rail passenger service
outside the Northeast Corridor. This directly conflicts with our
AMTRAK policy, and should be deleted. Nevertheless, Senator
Pearson and Congressman Skubitz, who are valuable allies on other
issues, strongly support this provision.
Decision
Approve deletion of this item
Disapprove, and include $200 million
4
Acquisition of passenger lines - Congressmen Rooney and Tip O'Neill
insisted that $20 million be provided for AMTRAK to acquire and
improve line segments such as Philadelphia-Harrisburg and New Haven-
Springfield-Boston. lle--recommend that, to attain negotiating
leverage, this $20 million be accepted.
Decision
Approve add-on of $20 million
Disapprove, and delete provision
Nationwide Rail Freight
The Administration's proposal included $2 billion in loan guarantees
to assist railroads nationwide, in making improvements to track,
equipment and other facilities. S. 2718 reduces this to $800 million.
In view of the estimated level of need for such assistance, and the
minimal expected outlay impact, we recommend raising the loan guarantee
total to $1.3-1.4 billion.
Decision
Approve increase to $1.3-1.4 billion
Disapprove, and stay at $800 million
S. 2718 introduces $600 million in complex, low-interest baloon-type
securities called "redeemable preference shares" as a supplement to
the loan guarantees described above. We recommend deleting this
provision, and substituting a more conventional and flexible package
of direct loans and grants, in the range of $500-600 million. Our
figures already include $400 million in grants to facilitate
Controlled Transfer of ConRail assets, but S. 2718 does not include
such funds. Thus, by expanding the scope of -our Controlled Transfer
funds to cover other rail freight purposes, we can propose to achieve
the same purposes as S. 2718 with a relatively small increase in
authorizations.
Decision
Approve use of Controlled Transfer funds
for a wider range of purposes, and
raise level to $500-600 million
Disapprove, and limit funding to loan
guarantees
Continuation Subsidies
A new $400 million funding program is included in S. 2718, to assist
5
state and local interests throughout the country to subsidize,
acquire, and modernize branchlines which would otherwise be
abandoned. We believe that this would help to remove the burden
of uneconomic lines from the rail industry. Although the autho-
rization level is somewhat inflated, these funds are relatively
controllable and slow-spending. As a bargaining tool, we would
propose agreement to the $400 million level, in return for
concessions elsewhere.
Decision
Approve branchline subsidies at $400 million
Disapprove, and delete this provision
Special grants of $81 million are provided for turning abandoned
rail rights-of-way into recreation facilities, and for preserving
rail lines to coal fields. We recommend deletion of these special
categories, in return for making these functions eligible under
the $400 million branchline subsidy program.
Decision
Approve deletion, and merger with branchline
subsidies
Disapprove, and include $81 million
$125 million is authorized for special commuter rail subsidies,
following the startup of ConRail. We argue that this function
should be included under the $11.8 billion already authorized in
the Mass Transit Act, but the transit industry is fighting hard
for an increase. Only two states would benefit (Pennsylvania
and New Jersey).
Decision
Approve inclusion of $125 million within
authorized UMTA funds
Disapprove, and add $125 million in new funds
Other Funding Issues
Controlled Transfer funds of $400 million, supported by the Admin-
istration, are not included in S. 2718. See "Nationwide Freight"
discussion for recommendation.
$29 million in multi-year funds is included for administrative
expenses, associated with the above programs. We have no
objection to these authorizations; since they are controllable
through the normal appropriations process.
6
Decision
Approve authorization of $29 million
Disapprove, and delete funding
Attachment
COMPARISON OF NEW AUTHORIZATIONS FOR RAIL FUNDING
(Dollars in Millions)
Administration Position
Base
Revised
S. 2718
I. ConRail
Purchase of Securities
$1,850
$2,100
$2,100
Contingency
250
---
---
Electrification (loan
guarantees)
---
---
(200)
Pre-conveyance claims
(loan guarantees)
---
(235)
(400)
II. Rail Passenger
Northeast Corridor Project
1,080
1,400-1,680
2,400
Passenger improvements
nationwide
---
---
200
Acquisition of passenger
corridors by AMTRAK
---
20
20
III. Nationwide Rail Freight
(Loan guarantees)
(2,000)
(1,300)-(1,400)
(800)
Loans/grants/redeemable
preference shares
---
500-600
600
IV. Continuation Subsidies
Branchline
---
400
400
Right-of-way for recreation,
and for coal field access
---
----
81
Commuter
----
---
125
V. Other
Controlled Transfer Assistance
400
(merged with III)
---
Administrative expenses
---
29
29
TOTAL NEW AUTHORIZATIONS
$5,580
$5,984-5,464
$7,591
TOTAL INCREASE IN 1977 OUTLAYS
OVER PREVIOUS ESTIMATE
$0-160
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON
ALAN GREENSPAN, CHAIRMAN
PAUL W. MACAVOY
January 14, 1976
BURTON G. MALKIEL
MEMORANDUM FOR THE ECONOMIC POLICY BOARD
Subject: Proposed Revision of Seasonal Adjustment
Factors for Unemployment Statistics.
The attached table, indicating proposed revisions of
our unemployment rate statistics, will be discussed at the
January 15th meeting of the Economic Policy Board.
Burton Malkiel
Burton G. Malkiel
AMERICANA REVOLUTION
1776-1976
©
CONFIDENTIAL
Impact of proposed procedure on 1975 unemployment rotes, published and revised
Current method
Proposed method
Difference
Difference
between 1975
between 1975
Month
Initial
Routine
Initial
Routine
published
published
computation
revision
computation
revision
and proposed
and proposed
(1)
(2)
method (routine
(4)
(5)
method (initial
revision)
computation)
(5) - (1)
(4) - (1)
January
8.2
8.0
8.1
7.9
-.3
-.1
February
8.2
8.1
8.1
8.0
-.2
-.1
March
8.7
8.5
8.7
8.5
-.2
-
April
8.9
8.7
8.8
8.6
-.3
-.1
May
9.2
9.0
9.0
8.9
-.3
-.2
June
8.6
8.6
8.7
8.7
+.1
+.1
July
8.4
8.6
8.6
8.7
+:3
+.2
August
8.4
8.5
8.3
8.5
+.1
-.1
September
8.3
8.6
8.3
8.6
+.3
-
October
8.6
8.7
8.5
8.6
-
-.1
November
8.3
8.5
8.3
8.5
+.2
-.1
December
8.3
/
8.4
8.2
8.3
-
-.1
Explanation of Columns
(1) Employment and unemployment for, major age/sex groups adjusted multiplicatively applying 1974
factors to 1975 data. These data were published monthly during 1975.
(2) Seasonality revised to incorporate 1975 experience.
(4) Employment and adult unemployment adjusted multiplicatively; teenage unemployment adjusted by
additive procedure. Calculated by applying 1974 factors to 1975 data. Would have been published in 1975
if the new procedure were in effect.
(5) Seasonally adjusted to incorporate 1975 experience.
SOURCE: Bureau of Labor Statistics, January 1976