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    "title": "1976/01/15 - Economic Policy Board",
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        "James M. Cannon Files (Ford Administration)",
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    "ocrText": "The original documents are located in Box 55, folder \"1976/01/15 - Economic Policy Board\"\nof the James M. Cannon Files at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nDigitized from Box 55 of the James M. Cannon Files at the Gerald R. Ford Presidential Library\nECONOMIC POLICY BOARD\nEXECUTIVE COMMITTEE MEETING\nAGENDA\n8:30 a.m.\nRoosevelt Room\nJanuary 15, 1976\n1.\nReview of Omnibus Railroad Bill\nTransportation\n2.\nReview of Regulatory Reform\nMacAvoy\nInitiatives\n3.\nProposed Revision of Seasonal Adjust-\nMalkiel\nment Factors for Unemployment\nStatistics\nEYES ONLY\nMINUTES OF THE\nECONOMIC POLICY BOARD\nEXECUTIVE COMMITTEE MEETING\nJanuary 14, 1976\nATTENDEES: Messrs. Seidman, Dunn, Baker, Zarb, Cannon, Collier,\nParsky, Katz, Gorog, Porter, Gerard, Hormats,\nKasputys, Areena, Orlebeke\n1. Report of EPB/NSC Task Force on Commodity Policy\nThe EPB/NSC Task Force on Commodity Policy presented its\nreport, which is attached at Tab A. There is general agreement\namong the departments and agencies represented on the Task\nForce that the recently negotiated Cocoa Agreement is unaccept-\nable in its current form and that State will inform producing\ncountries that the United States does not intend to sign the newly\nnegotiated Cocoa Agreement but is willing to participate in a re-\nnegotiation of the Agreement if such discussions were aimed at\nachieving a more economically acceptable arrangement.\nMr. Parsky reported that the Task Force would present an eco-\nnomic analysis of the recently negotiated International Coffee\nAgreement in their next report to the EPB Executive Committee\nin a fortnight. He also reported that a representative of the\nDepartment of Commerce has been added to the Task Force.\n2. New York City Update\nThe Executive Committee reviewed a memorandum on the New\nYork City financial situation prepared by the Department of the\nTreasury. The discussion focused on a report relating to the\nfinancing requirements under the New York City Seasonal Financ-\ning Act of 1975 prepared by Arthur Anderson and Company for the\nSecretary of the Treasury. Briefly, the report suggests that New\nYork City's cash flow situation will enable them to repay the\nseasonal financing loans from the Federal Government but that\ntheir overall financial situation will require them to continue to\ntake a number of additional measures in order to place the city\non a sound financial footing by 1979.\nEYES ONLY\nEYES ONLY\n2\nMr. Gerard reported that Treasury officials will brief con-\ngressional staff members on the New York City financial situ-\nation this afternoon. New York State Congressmen will be\ninvited to attend the briefing.\nDecision\nThe Executive Committee agreed that a statement from the\nSecretary of the Treasury to the President reporting on the New\nYork City financial situation and the Anderson report should be\nprepared and submitted by early afternoon and recommended\nthat the statement be released to the press.\nEYES ONLY\nRPB\nOF\nDEPARTMENT\nDEPARTMENTATION\nTHE SECRETARY OF TRANSPORTATION\nUNITED\nAMERICA\nWASHINGTON, D.C. 20590\nSTATES\nof\nJanuary 14, 1976\nMEMORANDUM FOR THE ECONOMIC POLICY BOARD\nFROM:\nWilliam T. Coleman, Jr.\nSUBJECT:\nStatus of Negotiations Over Omnibus Rail Bill\nS. 2718, The Railroad Revitalization and Regulatory Reform Act\nof 1975, was passed by both Houses of Congress on December 19,\n1975, in spite of strong Administration veto threats. A few days\nlater, the Senate leadership decided not to enroll the bill,\npresumably to avoid a veto, and indicated a willingness to pursue\na compromise with the Administration. Consequently, House and\nSenate staffs began negotiations with DOT officials on January 2,\n1976, contemplating that, if an agreement could be reached,\nimplementing amendments would be introduced shortly after the\nrecess.\nSubsequently, Jim Lynn and I jointly submitted to the President\nthe attached memorandum containing recommendations with regard\nto the Administration's positions during the negotiations. The\nPresident subsequently approved all of the recommendations made\nby DOT, OMB, and the Domestic Council with the exception of\nauthorizing, in the event it should become necessary, the\nexpenditure of an additional $200 million in grants for improving\nintercity rail passenger service outside the Northeast Corridor.\nTo date, the negotiations have gone well. While the negotiations\nhave been with the staff, with neither side bound until full agreement\nis reached and principals concur, we have reason to believe the\nstaff is acting within its authority. All tentative agreements\nreached with the staff fall within the guidelines of the decisions\nmade by the President as a result of the attached memorandum,\nalthough the tentative agreements reached relating to rail passenger\n2.\nservice apply the dollars differently. In this regard, the President\napproved a program of between $1. 4 and $1.7 billion for the\nNortheast Corridor plus another $200 million in grants for\nimproving passenger service outside the Corridor, for a potential\ntotal of $1.9 billion. In the negotiations, the Department has\ntentatively agreed to a $1.6 billion program for the Corridor,\nplus another $150 million in Federal assistance for stations and\nfencing on a 50-50 match basis with State and local authorities\n(with the Secretary retaining discretion, within the $150 million\nlimit, to fund without a match any station or fencing improvements\nrequired by safety considerations), and, in addition, $115 million\nfor acquisition and start-up costs related to the project. However,\npursuant to the negotiations, the bill will not contain any\nauthorization of another $200 million in grants for rail passenger\nservice outside the Corridor, making the total of separate\nauthorizations in the bill for rail passenger service $1.865\nbillion. All such funds will require an appropriation.\nIn addition, substantial improvements to the regulatory provisions\nof the bill have tentatively been agreed upon.\nThe prospects for reaching a complete agreement prior to Congress\nreconvening on January 19 are good, and we are negotiating now\nwith respect to the parliamentary procedure that will be followed.\nWilliam I\nWilliam T. Coleman, Jr.\nAttachment\nEXECUTIVE OFFICE OF THE PRESIDENT.\nOFFICE OF MANAGEMENT AND BUDGET\nWASHINGTON, D.C. 20503\nACTION\nMEMORANDUM FOR:\nTHE PRESIDENT\nFROM:\nJAMES T. LYNN and WILLIAM T. COLEMAN\nSUBJECT:\nProposed Changes tu Administration\nPosition on Omnibus Rail Bill\nFinancial Provisions\nBackground\nS. 2718 was passed by both houses of Congress on December 19, in spite\nof strong Administration veto threats. A few days later, Senate\nleadership decided not to enroll the bill, presumably to avoid a veto,\nand indicated a willingness to pursue a compromise with the Admin-\nistration. Consequently, House and Senate members and staff are\nscheduled to begin negotiations with DOT officials on January 2. If\nan agreement can be reached, implementing amendments would be intro-\nduced for joint resolution shortly after recess.\nThere are two areas of major disagreement which must be resolved, if\na veto threat is to be averted. The first concerns our ability to\ncontrol and protect the massive Federal investments being contemplated.\nS. 2718 would place control of funding for both ConRail and the North-\neast Corridor project in the U.S. Railway Association, which is not\npart of the executive branch. Secondly, the level and mix of funding\nis presently unacceptable. This matter is discussed in the following\nsection. Failure to reach a workable compromise in either of these\nareas would be clear grounds for veto.\nIn addition, your advisors are currently discussing whether to explore\ncertain changes in the regulatory provisions of S. 2718 with the\ncommittees. While the legislation does contain major regulatory\nreform, shortfalls in some areas (railroad rate bureau price fixing\nactivities) may warrant further attention.\nOverall Funding Level Issue\nAs shown in the attached table, S. 2718 contains $7.6 billion in new\nauthorizations, compared with the Administration's original proposal\nof $5.6 billion. The current over-run of $2.0 billion is clearly\n2\nexcessive, and we have publicly identified this as a major basis for\nveto. However, in the interest of reaching a quick accord on this\nurgent legislation, we recommend compromising in the range of $6.0-\n6.5 billion. Assuming full funding at the higher figure, this could\nlead to an increase above 1977 outlay estimates, somewhere in the\nrange of $0-160 million. Fortunately the potential add-ons are\nrelatively controllable by the executive branch, and are longer-range\nefforts which can be stretched through the appropriation process and\nmanagement controls.\nIndividual Funding Issues to be Negotiated\nSpecific changes from our current base are proposed in the funding\nprograms described below. Note that the excessive level of overall\nfunding obscures the fact that some areas are too low (e.g., nation-\nwide rail freight rehabilitation), while others are too high (e.g.,\nNortheast Corridor passenger improvements).\nOn the following issues there is complete agreement among DOT, OMB\nand the Domestic Council on the proposed recommendation.\nConRail\nThe Administration's bill set aside $250 million to be used for\npurchase of ConRail securities only under special adverse con-\nditions. S. 2718 eliminates this contingency reserve, and simply\nmerges it with other ConRail funding. While we would prefer to\nkeep it separate, we would be willing to concede this point if\ncontrol over all ConRail funding were given to the executive branch.\nDecision\nApprove elimination of contingency fund, provided\nwe get control\nDisapprove, and keep separate\nS. 2718 provides $200 million in loan guarantees for electrification\nof ConRail mainlines. We recommend that this be deleted as a separate\nfunding category, since this type of project is eligible under the\nrail freight assistance described later.\nDecision\nApprove deletion of this provision\nDisapprove, and include provision\n3\n$400 million in loan guarantees is provided for certain preconveyance\nexpenses accruing to ConRail (such as labor and shipper claims).\nEstimates indicate that $235 million would be sufficient for this\npurpose, and we therefore recommend this level. Since ConRail will\nin turn, have a legal claim against the bankrupt estates for this\namount, no outlay impact is expected.\nDecision\nApprove authorization at $235 million\nDisapprove, and provide no authorization for\nthis purpose\nRail Passenger\nNortheast Corridor - Senators Hartke, Pastore and Weicker are strong\nadvocates of a very high-speed system in the Boston-Washington\ncorridor. S. 2718 provides $2.6 billion for upgrading, acquiring\nand managing this corridor, as opposed to the Administration's $1.2\nbillion proposal. The difference is mainly one of trip time targets.\nThe conference report set initial trip time goals of 2 hours, 45\nminutes Washington-New York, and 3 hours, 30 minutes New York-Boston,\na reduction of 15 minutes and 20 minutes, respectively, from the\nAdministration's program. The bill cites as an eventual goal even\nfurther trip time reductions which would require amounts far in\nexcess of the $2.6 billion provided. By compromising at a level of\nbetween $1.4 and $1.7 billion and concentrating on speed-related\nimprovements only, a program could be developed which compares\nfavorably to the speeds cited in the initial target cited in the\nconference report. In exchange, the Administration would gain\ncontrol over these funds and reduce the authorization by $700-1\nbillion.\nDecision\nApprove compromise of between $1.4-1.7 billion\nDisapprove, and remain at $1.2 billion\nPassenger improvements nationwide - $200 million is provided for\nthe vague purpose of improving intercity rail passenger service\noutside the Northeast Corridor. This directly conflicts with our\nAMTRAK policy, and should be deleted. Nevertheless, Senator\nPearson and Congressman Skubitz, who are valuable allies on other\nissues, strongly support this provision.\nDecision\nApprove deletion of this item\nDisapprove, and include $200 million\n4\nAcquisition of passenger lines - Congressmen Rooney and Tip O'Neill\ninsisted that $20 million be provided for AMTRAK to acquire and\nimprove line segments such as Philadelphia-Harrisburg and New Haven-\nSpringfield-Boston. lle--recommend that, to attain negotiating\nleverage, this $20 million be accepted.\nDecision\nApprove add-on of $20 million\nDisapprove, and delete provision\nNationwide Rail Freight\nThe Administration's proposal included $2 billion in loan guarantees\nto assist railroads nationwide, in making improvements to track,\nequipment and other facilities. S. 2718 reduces this to $800 million.\nIn view of the estimated level of need for such assistance, and the\nminimal expected outlay impact, we recommend raising the loan guarantee\ntotal to $1.3-1.4 billion.\nDecision\nApprove increase to $1.3-1.4 billion\nDisapprove, and stay at $800 million\nS. 2718 introduces $600 million in complex, low-interest baloon-type\nsecurities called \"redeemable preference shares\" as a supplement to\nthe loan guarantees described above. We recommend deleting this\nprovision, and substituting a more conventional and flexible package\nof direct loans and grants, in the range of $500-600 million. Our\nfigures already include $400 million in grants to facilitate\nControlled Transfer of ConRail assets, but S. 2718 does not include\nsuch funds. Thus, by expanding the scope of -our Controlled Transfer\nfunds to cover other rail freight purposes, we can propose to achieve\nthe same purposes as S. 2718 with a relatively small increase in\nauthorizations.\nDecision\nApprove use of Controlled Transfer funds\nfor a wider range of purposes, and\nraise level to $500-600 million\nDisapprove, and limit funding to loan\nguarantees\nContinuation Subsidies\nA new $400 million funding program is included in S. 2718, to assist\n5\nstate and local interests throughout the country to subsidize,\nacquire, and modernize branchlines which would otherwise be\nabandoned. We believe that this would help to remove the burden\nof uneconomic lines from the rail industry. Although the autho-\nrization level is somewhat inflated, these funds are relatively\ncontrollable and slow-spending. As a bargaining tool, we would\npropose agreement to the $400 million level, in return for\nconcessions elsewhere.\nDecision\nApprove branchline subsidies at $400 million\nDisapprove, and delete this provision\nSpecial grants of $81 million are provided for turning abandoned\nrail rights-of-way into recreation facilities, and for preserving\nrail lines to coal fields. We recommend deletion of these special\ncategories, in return for making these functions eligible under\nthe $400 million branchline subsidy program.\nDecision\nApprove deletion, and merger with branchline\nsubsidies\nDisapprove, and include $81 million\n$125 million is authorized for special commuter rail subsidies,\nfollowing the startup of ConRail. We argue that this function\nshould be included under the $11.8 billion already authorized in\nthe Mass Transit Act, but the transit industry is fighting hard\nfor an increase. Only two states would benefit (Pennsylvania\nand New Jersey).\nDecision\nApprove inclusion of $125 million within\nauthorized UMTA funds\nDisapprove, and add $125 million in new funds\nOther Funding Issues\nControlled Transfer funds of $400 million, supported by the Admin-\nistration, are not included in S. 2718. See \"Nationwide Freight\"\ndiscussion for recommendation.\n$29 million in multi-year funds is included for administrative\nexpenses, associated with the above programs. We have no\nobjection to these authorizations; since they are controllable\nthrough the normal appropriations process.\n6\nDecision\nApprove authorization of $29 million\nDisapprove, and delete funding\nAttachment\nCOMPARISON OF NEW AUTHORIZATIONS FOR RAIL FUNDING\n(Dollars in Millions)\nAdministration Position\nBase\nRevised\nS. 2718\nI. ConRail\nPurchase of Securities\n$1,850\n$2,100\n$2,100\nContingency\n250\n---\n---\nElectrification (loan\nguarantees)\n---\n---\n(200)\nPre-conveyance claims\n(loan guarantees)\n---\n(235)\n(400)\nII. Rail Passenger\nNortheast Corridor Project\n1,080\n1,400-1,680\n2,400\nPassenger improvements\nnationwide\n---\n---\n200\nAcquisition of passenger\ncorridors by AMTRAK\n---\n20\n20\nIII. Nationwide Rail Freight\n(Loan guarantees)\n(2,000)\n(1,300)-(1,400)\n(800)\nLoans/grants/redeemable\npreference shares\n---\n500-600\n600\nIV. Continuation Subsidies\nBranchline\n---\n400\n400\nRight-of-way for recreation,\nand for coal field access\n---\n----\n81\nCommuter\n----\n---\n125\nV. Other\nControlled Transfer Assistance\n400\n(merged with III)\n---\nAdministrative expenses\n---\n29\n29\nTOTAL NEW AUTHORIZATIONS\n$5,580\n$5,984-5,464\n$7,591\nTOTAL INCREASE IN 1977 OUTLAYS\nOVER PREVIOUS ESTIMATE\n$0-160\nCOUNCIL OF ECONOMIC ADVISERS\nWASHINGTON\nALAN GREENSPAN, CHAIRMAN\nPAUL W. MACAVOY\nJanuary 14, 1976\nBURTON G. MALKIEL\nMEMORANDUM FOR THE ECONOMIC POLICY BOARD\nSubject: Proposed Revision of Seasonal Adjustment\nFactors for Unemployment Statistics.\nThe attached table, indicating proposed revisions of\nour unemployment rate statistics, will be discussed at the\nJanuary 15th meeting of the Economic Policy Board.\nBurton Malkiel\nBurton G. Malkiel\nAMERICANA REVOLUTION\n1776-1976\n©\nCONFIDENTIAL\nImpact of proposed procedure on 1975 unemployment rotes, published and revised\nCurrent method\nProposed method\nDifference\nDifference\nbetween 1975\nbetween 1975\nMonth\nInitial\nRoutine\nInitial\nRoutine\npublished\npublished\ncomputation\nrevision\ncomputation\nrevision\nand proposed\nand proposed\n(1)\n(2)\nmethod (routine\n(4)\n(5)\nmethod (initial\nrevision)\ncomputation)\n(5) - (1)\n(4) - (1)\nJanuary\n8.2\n8.0\n8.1\n7.9\n-.3\n-.1\nFebruary\n8.2\n8.1\n8.1\n8.0\n-.2\n-.1\nMarch\n8.7\n8.5\n8.7\n8.5\n-.2\n-\nApril\n8.9\n8.7\n8.8\n8.6\n-.3\n-.1\nMay\n9.2\n9.0\n9.0\n8.9\n-.3\n-.2\nJune\n8.6\n8.6\n8.7\n8.7\n+.1\n+.1\nJuly\n8.4\n8.6\n8.6\n8.7\n+:3\n+.2\nAugust\n8.4\n8.5\n8.3\n8.5\n+.1\n-.1\nSeptember\n8.3\n8.6\n8.3\n8.6\n+.3\n-\nOctober\n8.6\n8.7\n8.5\n8.6\n-\n-.1\nNovember\n8.3\n8.5\n8.3\n8.5\n+.2\n-.1\nDecember\n8.3\n/\n8.4\n8.2\n8.3\n-\n-.1\nExplanation of Columns\n(1) Employment and unemployment for, major age/sex groups adjusted multiplicatively applying 1974\nfactors to 1975 data. These data were published monthly during 1975.\n(2) Seasonality revised to incorporate 1975 experience.\n(4) Employment and adult unemployment adjusted multiplicatively; teenage unemployment adjusted by\nadditive procedure. Calculated by applying 1974 factors to 1975 data. Would have been published in 1975\nif the new procedure were in effect.\n(5) Seasonally adjusted to incorporate 1975 experience.\nSOURCE: Bureau of Labor Statistics, January 1976"
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