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    "title": "1976/06/30 - Economic Policy Board",
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    "ocrText": "The original documents are located in Box 60, folder \"1976/06/30 - 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 Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain.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 60 of the James M. Cannon Files at the Gerald R. Ford Presidential Library\nJune 26, 1976\nECONOMIC POLICY BOARD\nEXECUTIVE COMMITTEE\nProposed Agenda\nMonday, June 28, 1976\nNo EPB Executive Committee meeting\nTuesday, June 29, 1976\n1. Status of Tax Reform Legislation\nTreasury\n2. Report on Puerto Rico International Summit\nSimon\n3. Report on East European Trip\nSimon\nWednesday, June 30, 1976 PRINCIPALS ONLY\n1. New York City Update\nTreasury\n2. Report on H.R. 12323\nSeidman\n3. Economic Analysis of the Public Works Bill\nOMB\nThursday, July 1, 1976\n1. Expropriation Policy\nParsky\n2. Outlook for the CPI\nMacAvoy\nFriday, July 2, 1976\nNo EPB Executive Committee meeting\nECONOMIC POLICY BOARD\nEXECUTIVE COMMITTEE MEETING\nAGENDA\n8:30 a.m.\nRoosevelt Room\nWednesday, June 30, 1976\n1. Economic Analysis of the Public Works Bill\nOMB\n2. Report on H.R. 12323\nSeidman\n3. Outlook for the CPI\nMacAvoy\nsee 5.3192\n94TH CONGRESS\n2D SESSION\nH. R. 12323\nIN THE HOUSE OF REPRESENTATIVES\nMARCH 4, 1976\nMr. RONCALIO introduced the following bill; which was referred to the Com-\nmittee on Interstate and Foreign Commerce\nII\nA\nBILL\n21\nTo reaffirm the intent of Congress with respect to the structure\nof the common carrier telecommunications industry ren-\ndering services in interstate and foreign commerce; to grant\nadditional authority to the Federal Communications Com-\nmission to authorize mergers of carriers when deemed to\nbe in the public interest; to reaffirm the authority of the\nStates to regulate terminal and station equipment used for\ntelephone exchange service; to require the Federal Com-\nmunications Commission to make certain findings in con-\nnection with Commission actions authorizing specialized\ncarriers; and for other purposes.\n1\nBe it enacted by the Senate and House of Representa-\n2 tives of the United States of America in Congress assembled,\n3 That this Act may be cited as the \"Consumer Communica-\n4 tions Reform Act of 1976\".\nLIGHTS GERALD ? FORD\nI\n2\n1\nCONGRESSIONAL FINDINGS AND DECLARATION OF PURPOSE\n2\nSEC. 2. The Congress finds and declares that-\n3\n(a) The revenues from integrated interstate and foreign\n4 common carrier telecommunications services, based on\n5 charges reflecting both costs and value of service, have con-\n6 tributed toward meeting the costs of facilities used in com-\n7 mon for providing such interstate and foreign services and\n8 local telephone exchange service throughout the United\n9 States, and thereby helped maintain a level of charges for\n10 telephone exchange service which is lower than otherwise\n11 would be required.\n12\n(b) The technical integrity of the nationwide telecom-\n13 munications system, its coordinated planning, design, instal-\n14 lation, improvement, management, operation and mainte-\n15 nance are indispensable elements in the interstate telecom-\n16 munications network, necessary both to the reasonableness of\n17 charges and to the high quality and universality of common\n18 carrier telecommunications service, and accordingly Con-\n19 gress hereby reaffirms its policy that the integrated inter-\n20 state telecommunications network shall be structured SO as\n21 to assure widely available, high quality telecommunications\n22 services to all of the Nation's telecommunications users.\nFORD i LIBRARY GERALD\n23\n(c) The authorization of lines, facilities, or services of\n24 specialized carriers which duplicate the lines, facilities, or\n25 services of other telecommunications common carriers—\n3\n1\n(1) involves higher charges for users of telephone\n2\nexchange service by decreasing the interstate revenues\n3\nthat otherwise would be available for contribution to the\n4\ncommon costs of providing telephone services through-\n5\nout the United States;\n6\n(2) fosters inefficiencies in the utilization of na-\n7\ntional telecommunications resources through the creation\n8\nof unnecessary and wasteful duplication of telecommuni-\n9\ncations lines and facilities and wasteful use of the radio\n10\nspectrum;\n11\n(3) significantly impairs the technical integrity, the\n12\ncoordinated planning, design, installation, improvement,\n13\nmanagement, operation and maintenance of the inte-\n14\ngrated nationwide telecommunications network; and\n15\n(4) has an adverse impact on the national objec-\n16\ntives of maintaining stability of consumer price levels,\n17\nconserving national economic resources, improving pro-\n18\nductivity, and fostering an economy that will maintain\n19\nadequate sources and reasonable costs of capital;\n20 and is, therefore, contrary to the public interest.\n21\n(d) The Congress reaffirms its intent that the com-\n22 plete authority to regulate terminal and station equip-\n23 ment used for telephone exchange service shall rest with\n24 the States even though such terminal and station equipment\n25 also may be used in connection with interstate services.\nFORD is LIBRARY 07V839\n4\n1\n(e) The congressional findings and declarations of\n2 policy set forth herein are necessary to achieve the purposes\n3 of the Communications Act of 1934 as specified in section 1\n4 of that Act; and the Federal Communications Commission\n5 shall take no action inconsistent with the findings and\n-6 declarations in this Act.\n7\nCHARGES FOR SERVICE\n8\nSEC. 3. Section 201 (b) of the Communications Act of\n9 1934, as amended (47 U.S.C. 201) is amended by adding\n10 the following at the end of the first sentence: \"No compen-\n11 satory charges for or in connection with such communica-\n12 tion service may be found to be unjust or unreasonable on\n13 the ground that it is too low. The Commission may not\n14 hold the charge of a carrier up to a particular level to protect\n15 the traffic or revenues from a communication service offered\n16 or provided by another carrier if such charge proposed by\n17 the carrier is compensatory. As used in this subsection, a\n18 charge is compensatory SO long as it equals or exceeds the\n19 incremental cost of providing the communications service.\n20 Such incremental cost is the additional cost caused by the\n21 provision of the service including, where appropriate, the\n22 capital costs of whatever additional facilities are required to\n23 provide the service.\"\nQERALE FORD LIBRARY\n5\n1 ACQUISITIONS BY AND OF CERTAIN COMMON CARRIERS\n2\nSEC. 4. The Communications Act of 1934, as amended;\n3 is further amended by adding the following new section 224:\n4\n\"SEC. 224. Upon application of any common carrier or\n5 other person involved in the transaction, the Commission\n6 shall have jurisdiction (i) to approve the acquisition of\n7 control by a domestic common carrier of any other domestic\n8 common carrier or the acquisition of the whole or any part\n9 of the property of a domestic common carrier by any other\n10 domestic common carrier, or (ii) to approve the acquisition\n11 by a person which is not a common carrier of control of any\n12 domestic common carrier or the acquisition of the whole or\n13 any part of the property of a domestic common carrier,\n14 whenever the Commission determines, after full opportunity\n15 for hearing on an evidentiary record, that such approval is\n16 in the public interest. The Commission shall give reasonable\n17 notice in writing concerning any such proposed action to\n18 the Governor of each of the States in which the physical\n19 property affected, or any part thereof, is situated, and to\n20 each State commission that may also have jurisdiction over\n21 any of the common carriers involved, and to such other per-\n22 sons as it may deem advisable, and shall afford such parties\n23 a reasonable opportunity to participate in any hearings re-\nH.R. 12323-2\nFORD is 01RALD LIBRARY\n6\n1 lated to such action. If the Commission approves the pro-\n2 posed acquisition, it shall certify to that effect; and thereupon\n3 any Act or Acts of Congress making the proposed acquisi-\n4 tion unlawful shall not apply. As used in this section 224,\n5 'domestic common carrier' shall mean a common carrier, the\n6 major portion of whose traffic and revenues is derived from\n7 communications services other than foreign communications.\n8 This section 224 shall not apply where either section 221 (a)\n9 or 222 of this Act is applicable or to the acquisition by any\n10 person of a telephone common carrier as defined in section\n11 225 (a) (1)\n12\nSEC. 5. Section 2 (b) of the Communications Act of\n13 1934, as amended, (47 U.S.C. 152 (b)) is further amended\n14 by striking the clause beginning with the words \"except\n15 that\" following the semicolon and inserting the following\n16 \"except that sections 201 through 205 of this Act, both in-\n17 clusive, and section 224 of this Act shall, except as other-\n18 wise provided therein, apply to carriers described in clauses\n19 (2), (3), and (4)\n20 REAFFIRMATION OF STATE JURISDICTION OVER LOCAL\n21\nTERMINAL AND STATION EQUIPMENT\n22\nSEC. 6. Section 2 (b) of the Communications Act of\n23 1934, as amended (47 U.S.C. 152 (b)) is further amended\nFORD is LIBRARY 03RALD\n24 by striking \"or\" at the end of the phrase following \"(1)\"\n25 and substituting therefor the following: \"including but not\n26 limited to, the charges, classifications, practices, services,\n7\n1 facilities, or regulations for or in connection with the use or\n2 connection of any station equipment, terminating facilities,\n3 exchange plant, and other like instrumentalities and appara-\n4 tus used in common for both intrastate communication service\n5 and interstate or foreign communication service, whether\n6 provided by a common carrier or any other person, or\".\n7\nSEC. 7. Section 3 of the Communications Act of 1934,\n8 as amended (47 U.S.C. 153), is further amended by adding\n9 the following new subsection:\n10\n\"(gg) 'Intrastate communication' means communica-\n11 tion or transmission between points in the same State, ter-\n12 ritory, or possession of the United States, or in the District\n13 of Columbia, including among other things, all station equip-\n14 ment, terminating facilities, exchange plant, and other like\n15 instrumentalities and apparatus used. for or in connection\n16 with telephone exchange service or interexchange service,\n17 even though such equipment, facilities, plant, instrumentali-\n18 ties or apparatus are or may be used in connection with-\n19 interstate or foreign communications service. Intrastate com-\n4\n20 munication service' means any service which provides\n21 intrastate communication.\".\n22\nFINDINGS TO BE INCLUDED IN COMMISSION\n23\nAUTHORIZATIONS OF SPECIALIZED CARRIERS\n24\nSEC. 8. The following new section is added in title II\n25 of the Communications Act of 1934, as amended:\nFORD is OFRALD LIBRARY\n8\n1\n\"SEC. 225. (a) As used in this section-\n2\n(1) The term 'telephone common carrier' means any\n3 common carrier, the major portion of whose traffic and\n4 revenues, in interstate and foreign communication and in\n5 intrastate communication, is derived from message telephone\n6 services, telephone exchange services, radio-telephone ex-\n7 change services, or a combination thereof.\n8\n(2) The term 'telegraph common carrier' means any\n9 common carrier which provides a public message telegram\n10 service in interstate communications.\n11\n(3) The term 'specialized carrier' means any com-\n12 mon carrier other than a telephone or telegraph common\n13 carrier.\nSI\n14\n(4) The term 'message telephone service' means tele-\n15 phone service between stations in different exchange areas\n16 on a message-by-message basis, contemplating a separate\n17 connection for each occasion of use.\n18\n(5) The term 'public message telegram service' means\n19 a substantially nationwide telegraph service for the trans-\n20 mission and reception of record matter where the transmis-\n21 sion is not directly controlled by the sender and for which\n22 a charge is collected on the basis of number of words trans-\n23 mitted and which is available to the public.\nGERALD TORD\n9\n1\n(b) The Commission shall not grant or authorize any\n2 construction permit, station license, or certificate, for the\n3. .construction, acquisition, or operation of any communica-\n4 tion or transmission line or facility, or extension thereof, or\n5 any modification or renewal thereof, that otherwise might\n6. be granted or authorized pursuant to any provision of this\n7 Act, to any specialized carrier that furnishes or proposes\n8 to furnish interstate communication service unless the Com-\n9 mission shall find, after full opportunity for evidentiary hear-\n10 ing on the record, that such permit, license, or certificate,\n11 will not result in increased charges for telephone exchange\n12 service or in wasteful or unnecessary duplication of com-\n13 munication lines, facilities, equipment and instrumentalities\n14 of any telephone or telegraph common carrier, and will not\n15 significantly impair the technical integrity and capacity for\n16 unified and coordinated planning, management, design, and\n17 operation of the nationwide telephone network. In finding\n18 that such grant or authorization will not result in wasteful\n19 or unnecessary duplication, the Commission shall deter-\n20 mine, among other things, that the proposed service or serv-\n21 ices of the specialized carrier, which are the subject of the\n22 requested grant or authorization, (i) are not like or similar\n23 to any service or services provided by a telephone or tele-\nFORD is LIBRARY 078470\n10\n1 graph common carrier and (ii) cannot be provided by avail-\n2 able communications lines, facilities, equipment, or instru-\n3 mentalities of a telephone or telegraph common carrier. At\n4 any hearing involving a matter under this subsection, the\n5 burden of proof to support the requisite findings by the\n6 Commission shall be on the applicant for such permit, license,\n7 or certificate.\"\n94TH CONGRESS\n2D SESSION\nH. R. 12323\nor\nLIBRARY\nA BILL\nFORD\nTo reaflirm the intent of Congress with respect\nis\nto the structure of the common carrier tele-\n917870\ncommunications industry rendering services\nin interstate and foreign commerce; to grant\nadditional authority to the Federal Com-\nmunications Commission to authorize mer-\ngers of carriers when deemed to be in the\npublic interest; to reaffirm the authority of\nthe States to regulate terminal and station\nequipment used for telephone exchange\nservice; to require the Federal Communica-\ntions Commission to make certain findings in\nconnection with Commission actions author-\nizing specialized carriers; and for other pur-\nposes.\nBy Mr. RONCALIO\nMARCH 4, 1976\nReferred to the Committee on Interstate and Foreign\nCommerce\nEYES ONLY\nMINUTES OF THE\nECONOMIC POLICY BOARD\nEXECUTIVE COMMITTEE MEETING\nJune 29, 1976\nATTENDEES:\nMessrs. Seidman, Greenspan, Lynn, Richardson,\nDixon, Cannon, MacAvoy, Gorog, Katz, Malkiel,\nDarman, Porter, Penner, Jones, Goldstein,\nSegall, Duval\n1. Tax Reform Legislation\nThe Executive Committee reviewed a memorandum, prepared\nby the Treasury, on tax reform legislation and the 45-\nday extension of withholding rates which the Congress\nis anticipated to transmit to the President tomorrow.\nThe discussion focused on whether the extension would\nterminate on August 15, 1976 or September 1, 1976, the\ncurrent prospects of tax reform legislation during this\nsession of Congress, the proliferation of amendments to\nthe tax reform bill, what the Administration position\nshould be on provisions for Employee Stock Ownership\nPlans (ESOPS) in the absence of provisions for Broadened\nStock Ownership Plans (BSOPS), and whether a statement\nshould be issued regarding congressional action on tax\nreform legislation. The Committee also discussed\nbriefly a proposed draft statement.\nDecision\nThe Executive Committee requested Treasury to prepare a\nproposed position on provisions in the tax bill relating\nto ESOPS in the absence of provisions providing for\nBSOPS for review by the Executive Committee and consid-\neration by the President.\nExecutive Committee members were requested to provide\ntheir comments on tax legislation to Mr. Gorog no later\nthan noon today.\n2. Report on International Puerto Rican Summit\nMr. Greenspan reported on the recently concluded Inter-\nnational Summit Conference in Puerto Rico, noting that\nthe participants were pleased at how well the meetings\nEYES ONLY\nEYES ONLY\n2\nwent and that the level of discussion was very much like\na seminar with regard to discussion of differences on\ntactics and strategy in dealing with the problems con-\nfronting the industrialized nations.\nEYES ONLY\nRBP\nECONOMIC POLICY BOARD\nEXECUTIVE COMMITTEE MEETING\nAGENDA\n8:30 a.m.\nRoosevelt Room\nWednesday, June 30, 1976\nPRINCIPALS ONLY\n1. Economic Analysis of the Public Works Bill\nOMB\n2. Report on H.R. 12323\nSeidman\n3. Outlook for the CPI\nMacAvoy\nPRESIDENT\nEXECUTIVE OFFICE OF THE PRESIDENT\nOFFICE\nUNITED\nOFFICE OF MANAGEMENT AND BUDGET\nSECURITY\nSTATES\nWASHINGTON, D.C. 20503\nJune 29, 1976\nMEMORANDUM FOR: EXECUTIVE COMMITTEE OF THE ECONOMIC POLICY\nBOARD\nRP.A.R\nFROM:\nDANIEL P. KEARNEY/BURTON MALKIEL\nBM\nSUBJECT:\nPublic Works Jobs Bill, S. 3201\nThis memorandum describes and comments on provisions of\nS. 3201, now awaiting the President's action. Attached is\na recent CEA paper on \"Policies to Increase Employment.\" \"\nSTATUS\nThe last day for Presidential action is July 7.\nThe conference report on the enrolled bill was passed by the\nSenate 69 to 25 and by the House, 328 to 83.\nSUMMARY OF BILL (Relation to vetoed H.R. 5247)\nThe previous public works jobs bill, H.R. 5247, was enrolled\non January 29 and vetoed by the President on February 13, 1976.\nThe House voted 319 to 98 to override the President's veto.\nThe veto was sustained in the Senate by three votes, 63 to 35.\nH.R. 5247 would have authorized $6.2 billion for essentially\nthe same purposes as the current bill, S. 3201. S. 3201, like\nH.R. 5247, would authorize appropriations through September\n30, 1977.\nTitle I authorizes $2 billion for accelerated public works.\nIt is identical to the public works title of the vetoed bill\nexcept that it authorizes $.5 billion less than did H.R. 5247.\nTitle II authorizes and directs the Secretary of the Treasury\nto make revenue sharing payments to State and local governments.\nThis Title is similar to the anti-recessionary title of the\nvetoed H.R. 5247. H.R. 5247 included a complex distribution\nformula based on State and local tax revenues and the degree\nto which unemployment rates exceeded a specified base period.\nThe formula in the current bill has been changed and it is\nnow based on the general revenue sharing distribution and\nthe degree to which unemployment rates exceed 4.5%. These\nchanges result in a more even distribution of funds. The\nauthorization has been reduced from $1.5 billion to $1.25\nbillion, for five quarters.\n2\nTitle III authorizes an additional $700 million for EPA\nwastewater treatment grants. A similar provision in\nH.R. 5247 would have authorized $1.4 billion.\nSeveral other provisions which were included in H.R. 5247\nare not included in this bill: authorizations for the EDA\nJob Opportunities program, an EDA interest subsidy program,\nan EDA Urban Economic Development program and other mis-\ncellaneous amendments to the EDA statute. With the exception\nof the authorization for the Job Opportunities program, these\nprovisions have been included in the EDA extension bill,\nH.R. 9398.\nANALYSIS OF THE THREE TITLES\nTitle I\nDescription\nSecretary of Commerce is authorized to make grants\nto any State or local government for construction,\nrenovation or repair of local public works. The\nFederal share shall be 100% of the cost.\nMay also make grants to cover the State or local\nshare of the cost of any other Federally assisted\nproject; such grants shall make the Federal share\n100%.\nAt least 70% of the funds are to go to areas having\nunemployment rates in excess of the national unemploy-\nment rate, but not less than one-half of 1% or more\nthan 12.5% shall go to any one State. Priority shall\nbe given to projects of local governments.\nThe Secretary must make a final determination on each\napplication for assistance within 60 days of receipt,\nor the request is automatically approved.\nThe authorization of $2.0 billion is for the period\nending September 30, 1977.\nComments\nThe primary arguments against this Title are:\nOutlays from the program would increase the 1977\ndeficit by an estimated $400 million. Estimated\noutlays in 1978 and 1979 are $800 million and\n$600 million respectively.\n3\nSponsors estimate that this Title would result in\n200,000 new jobs. A more realistic estimate would\nbe 120,000 jobs over a four or five year period.\nThus, the probable per job cost would be over\n$16,000 for this Title alone.\nThe peak job impact would not occur until late in\nfiscal year 1977 or early 1978.\nThe requirement for a 100% Federal share reduces or\nremoves State and local government incentives to\nconduct a careful project review or to consider the\npriority of a proposed project against other local\npriorities. The 60 day limit on Federal review also\nwould minimize the Federal ability to screen proposals.\nTitle II\nDescription\nProvides countercyclical aid to State and local govern-\nments when the national rate of unemployment exceeds\n6% during any quarter for the 5-quarter period be-\nginning January 1976.\nAuthorizes appropriation of $125 million for each of\nthe five quarters in which unemployment reaches the\n6% level--plus $62.5 million per quarter for each\nhalf percentage point by which unemployment exceeds\n6%. For example, if the national rate of unemployment\nremained at 7% for a full year, an appropriation of\n$1 billion would be authorized for that year.\nOne-third of the funds reserved for States and two-\nthirds for local governments. Distribution to a\njurisdiction based on the relative excess of unemploy-\nment (over 4 1/2%), multiplied by the Revenue Sharing\namount received by that jurisdiction. Distribution\nto a particular jurisdiction terminates when the rate\nof unemployment falls below 4 1/2%.\nUse of grants restricted to maintenance of basic\nservices. Applications, reports, and assurances\nof nondiscrimination, conformance with Davis-Bacon\nand economization required.\n4\nComments\nThe Administration has consistently opposed this type\nof aid. That opposition has been based on a preference\nfor taking specific Federal actions directed toward\nachieving economic recovery and mitigating the effects\nof unemployment (including extension of unemployment\ncompensation and tax reductions). Other reasons for\nthe opposition are:\nThe estimated outlays under this Title would be\n$250 million in the transition quarter and $1\nbillion during 1977.\nDue to the lag in unemployment statistics, their\nuse in the formula could extend economic stimulation\nwell into full recovery and thus generate new in-\nflationary pressures.\nSponsors have estimated that this Title would result\nin establishing 97,000 jobs. Studies of Revenue\nSharing indicate that less than 20% of such funds\nare used to create new jobs. Thus, substantially\nfewer jobs than estimated would be created.\nCountercyclical aid would not encourage State and\nlocal fiscal responsibility. Rather, it would make\nunnecessary the accumulation of budgetary reserves\nin good years to carry through bad years.\nIf unemployment were to remain above 6% at the end\nof 1977, there would be substantial pressure to\ncontinue such a program, further compounding problems\nof uncontrollable budget items.\nTitle III\nDescription\nAuthorizes an additional $700 million for EPA's waste-\nwater treatment grants. The purpose of the increase\nis to provide \"hold harmless\" funding to allow a\nchange in the formula for distributing funds under\nthis program.\nComments\nSponsors estimate that this provision would create\n28 to 56 thousand new jobs. A more reasonable\nestimate would be 15 to 30 thousand.\n5\nThe job impact of this Title would be more than\ntwo years away due to the long lead time required\nin constructing these facilities.\nThe real effect of this Title is simply to add\nauthorization for wastewater treatment grants, rather\nthan create jobs.\nSUMMARY\nIn summary the primary arguments against the bill are:\nRealistically the number of new jobs created would\nbe less than 160,000--rather than the sponsors'\nclaims of over 325,000.\nBased on this more realistic estimate of new jobs, the\ncost for each new job created would exceed $25,000\n(for all three titles).\nThe major job creation impact would not be until\n1978 and would have an inflationary effect.\nIf appropriations equaled authorizations, outlays\nfor 1977 would be increased by about $1.5 billion.\nIf the countercyclical revenue sharing were extended\ninto 1978 and 1979, outlays would be increased\napproximately $2 billion in each year.\nCOUNCIL OF ECONOMIC ADVISERS\nWASHINGTON\nALAN GREENSPAN, CHAIRMAN\nPAUL W MACAVOY\nBURTON G. MALKIEL\nJune 29, 1976\nMEMORANDUM FOR: EXECUTIVE COMMITTEE - ECONOMIC POLICY BOARD\nFROM:\nPaul W. MacAvoy pm\nSUBJECT: The June-December Outlook for the CPI\nThe May increase of 0.6 percent in the CPI has caused\nsome concern as to renewed price inflation at the retail\nlevel. This memorandum examines the CPI outlook for the\nremainder of the Calendar Year. The view taken here is\nthat changes in supply or demand conditions in certain\nbasic markets over the past several months will largely\ndetermine the changes in the CPI for the rest of the year.\nOur assessment of the most recent information is that the\nbasic picture has not changed. The CPI should be expected\nto rise by about 3.9 percent through yearend - an annual\nrate of 6.8 percent from the end of May through December,\ncompared with the 4.2 percent annual rate during the first\nfive months of this year.\n1.\nThe June to December CPI Forecast\nCPI month-to-month forecasts are made based on CEA\nstaff projections of food and energy wholesale prices and\nof wage settlements, as well as on linear extrapolations\nof past industrial price changes. The forecasting procedure\nbegins with assumptions as to wholesale prices for energy\nand food in future months. Applying estimated markups and\nweights to these assumptions generate CPI forecasts. Energy\nprice forecasts are based on the assumption that the maximum\nincreases allowed under oil and gas price controls will occur.\nFood price forecasts are based on futures prices as quoted\nin organized markets. Industrial price forecasts are based\nin good part on markups of forecast labor costs which, in\nturn, are based on analyses and judgments as to future wage\nREVOLUTION\nsettlements. The WPI projections not based on futures prices,\nAMERICAN\nBICENTENNIAL\n1776-1976\n©\n-2-\nenergy or wage assumptions are linear extrapolations of past\nprice changes.\nThe procedures are tentative, highly judgmental and\nprobably subject to fairly high degrees of error. Nonetheless,\nthey are based upon a systematic effort to draw out the impli-\ncations of recent detailed price forecasts and cost changes\nfor the pattern of overall price changes over the next six\nmonths or SO. As new data are received the forecast index\nlevels are revised. The forecast CPI increase for May\nusing this procedure was 0.65 percent, and the forecast\nfor June is 0.47 percent.\nThe projection of the passenger cars and iron and\nsteel components of the WPI take into account special\nfactors particular to these industries. Passenger car\nprices are assumed to rise at a 2 percent annual rate\nthrough August, then at monthly rates of 1-1/2, 2, and\n1/2 percent in September through November, respectively,\nto reflect the phasing in of new model year cars. The\niron and steel component reflects the steel price increases\nin June and July, and is assumed to rise at a 5 percent\nannual rate thereafter. Lastly, the CPI services index\nis forecast based on linear extrapolations of past price\nchanges in the component indexes and reflects forecast\nwage settlements in the latter part of the year.\nThe forecast pattern of change in the CPI through\nDecember is as follows:\nConsumer Price Index Percentage Change - 1976\n(Seasonally adjusted)\nJune\nJuly\nAug.\nSept.\nOct.\nNov.\nDec.\nAll Items\n0.47\n0.35\n0.59\n0.47\n0.68\n0.76\n0.49\nFood\n0.64\n-0.59\n0.55\n0.23\n1.03\n1.33\n0.23\nNondurables\nless food\n0.13\n0.79\n0.87\n0.55\n0.57\n0.52\n0.44\nDurables\n0.36\n0.32\n0.28\n0.42\n0.46\n0.37\n0.37\nServices\n0.61\n0.66\n0.60\n0.59\n0.62\n0.70\n0.74\n-3-\nBetween the beginning of June and the end of December,\nthe CPI is expected to rise by 3.9 percent, an annual rate\nof increase of 6.8 percent. This will mean a 5.7 percent\nincrease in the CPI from last December to yearend 1976.\n2.\nRisks in the Forecast\nFood Prices. The grain futures prices, upon which the\nfood price forecasts are based, have been subject to con-\nsiderable gyrations in the past couple of months. Crops\nand growing conditions have progressed quite satisfactorily,\nyet the grain markets have not yet given full credence to\nthe likelihood of a very large U.S. grain harvest and a\nconsiderable recovery in the USSR harvest as well.\nOn the supply side, the main risk of price increases is\nweather-induced shortfalls in one or more crops. On the\ndemand side, the level of upcoming export sales is uncertain.\nForeign demand will depend on crops abroad in both importing\nand exporting countries. A rough estimate is that any\ncombination of U.S. grain crop shortfall or increased export\ndemand that amounts to 1 million metric tons will increase\nthe food at home CPI by 0.08 percent. Thus, a 10 million\nton U.S. feed grain shortfall coupled with an unanticipated\n5 million ton increase in grain exports would increase the\nfood at home CPI by about 1 to 1-1/2 percent. The principal\nuncertainty concerns feed grain prices. If marketing of\ncattle slows up more than currently expected this summer,\nan even which could result from lower feed prices causing\nfarmers to retain more cattle for feeding, beef prices\ncould rise more than anticipated. An increase in demand\nfor beef, which so far in the recovery has lagged somewhat,\ncould have the same effect.\nEnergy Prices. Stabilization in fuel prices has\npersisted through the first half of 1976. There is now\nreason to believe that this stability may last through\nthe end of the year. Seasonal price increases for gasoline\nand changes in pricing differentials in world oil markets\nmay complicate the picture somewhat, but the situation looks\nless worrisome today than three months ago.\nThe price of domestically produced crude oil is now\nexpected to remain relatively steady through the end of\nthe year due to problems encountered in the initial\ndetermination of prices under EPCA. To offset the errors\n-4-\nof the first months, lower prices than otherwise would have\nprevailed will be required through the end of the year.\nDecontrol of petroleum product prices is also expected to\nhave little or no effect on consumer prices. The present\nsurplus of refining capacity for production of distillate\nand residual fuel oils provides a substantial guarantee\nthat refiner margins will not become excessive after\ndecontrol.\nThe inflationary risks that might have resulted from\nadverse actions by OPEC nations have also been reduced,\nbut not removed. Contrary to widely circulated stories,\nOPEC did not freeze the prices of all oil at Bali. Instead,\nthe OPEC nations gave approval to a pricing system where\ncrude values are determined by product prices in principal\nexport markets. As a result, differences between heavy\nArabian oils and lighter low sulphur West African oils\nwill increase. This will increase U.S. prices because our\nimports have shifted towards the West African crudes and\naway from heavy Persian Gulf crudes.\nThe new issue in the energy price area is gasoline\nprices. Gasoline prices have experienced very substantial\nseasonal swings during 1974 and 1975, which are only\npartially offset by BLS seasonal adjustments. In 1974\nthey increased by 4.6¢ per gallon from April to their August\npeak while in 1975 they increased by 5.4¢ per gallon.\nSeasonal adjustments reduce the savings by about 1¢ per\ngallon.\nIn 1976 it appears that the same pattern will be\nrepeated. Gasoline prices began increasing in April\nwhen rapid increases in demand forced unanticipated\nreductions in stocks. As a result, prices have already\nincreased by 2 to 3¢. Further increases are expected over\nthe next two months for two reasons. First, most refiners\nhave substantial sums of unrecouped costs which they can and\npresumably will try to capture during the period of peak\ngasoline demand. Second, small independent refiners whose\nlow prices until recently prevented most refiners from\nestablishing prices at maximum levels have had their costs\nboosted substantially by FEA's adjustment in the EPCA man-\ndated small refiner entitlement bias. The impact of the\nincrease will be felt primarily during the summer months\n-5-\nand should be gone by October or November. The effect of\nsuch an increase would be to add as much as a .3 percent\nincrease in the CPI. In the worst case, a very tight\nsummer gasoline market might cause the CPI to increase\nby .4 percent at the peak.\nWages. During the first quarter of 1976, first year\nincreases under major collective bargaining agreements were\nabout 10 percent overall. Compensation per man-hour for\nprivate employees increased at an annual rate of 7.5 to\n8.0 percent. The adjusted hourly earnings index increased\nat a 7.7 percent annual rate during the first five months of\n1976. These increases are 1.0 to 2.0 percentage points\nbelow the CEA forecasts made in December 1975.\nThus far this year strike activity has been at a\nrelatively low level. The one important lengthy strike\nhas been among rubber workers who did not have, and now\nseek, a COLA clause in their contract. Most of the\nimportant contracts that terminate later this year have\nCOLA provisions. The lack of union militancy supports\nthe view that collective bargaining settlements will be\nmoderate this year.\nWith a rate of inflation of 5 to 6 percent, compensation\nper man-hour is not likely to exceed our forecast for 1976\n(9.5 percent) and there is a strong likelihood that it will\nbe one or two percentage points below this earlier forecast.\nBecause of the large number of major collective bargaining\nagreements yet to come and the strength of the recovery,\nwe prefer at this time not to lower our estimated range\npublished in January. However, if current developments\ncontinue for another month or two, a downward revision\nwould be warranted.\nSummary. The combination of risks of further price\nchanges than predicted are as follows. Food prices are\nas likely to fall short as to exceed the forecast based\non futures markets prices. Energy prices are more likely\nto exceed, and wages to fall short, of the forecasts. Thus\nthe \"upside risk\" cannot much exceed another 0.5 percent\nincrease in the CPI beyond the 5 percent forecast.\nTHE WHITE HOUSE\nWASHINGTON\nJune 29, 1976\nMEMORANDUM FOR ECONOMIC POLICY BOARD\nEXECUTIVE COMMITTEE MEMBERS\nFROM:\nL. WILLIAM SEIDMAN has\nSUBJECT:\nRedirecting USG Expropriation Policy\nA paper, prepared by the Department of the Treasury, on expro-\npriation policy is attached. It will be discussed at the\nThursday, July 1 Executive Committee meeting.\nAttachment\n(1)\nTHE DI THE DEPARTMENT\nDEPARTMENT OF THE TREASURY\nWASHINGTON, D.C. 20220\n1789\nASSISTANT SECRETARY\nJUN 15 1976\nMEMORANDUM FOR THE HONORABLE L. WILLIAM SEIDMAN\nASSISTANT TO THE PRESIDENT FOR\nECONOMIC AFFAIRS\nFrom\n:\nGerald L. Parsky\nAssistant Secretary\nfor International Affairs\nSubject: Redirecting USG Expropriation Policy\nI am enclosing the paper I promised on expropriation\npolicy. The paper describes the weaknesses of present pol-\nicy, in particular, the failure of present policy to focus\nadequately on the broad USG economic interests affected by\nexpropriations. I believe the paper should be distributed\nto the EPB for discussion at a regular meeting, which\nState should attend. I trust we will have a chance to\ntalk about the date and agenda for discussion.\nREDIRECTING USG EXPROPRIATION POLICY\nA CIEP Working Group has just finished a review of U.S.\nexpropriation policy, and interagency agreement has been\nreached on a few measures which will help to implement exist-\ning policy. The CIEP Working Group, however, has failed to\nexamine USG expropriation policy in a context which takes\naccount of fundamental long-range USG economic interests.\nThe basic goal of present expropriation policy is to\nprotect U.S. investors by helping them to obtain fair com-\npensation after an expropriation has occurred. USG economic\ninterests, however, go far beyond this admittedly important\ngoal, because expropriations can affect the allocation of\nresources world-wide through their impacts on investment\nflows in general, and on the development of the public -- as\nopposed to the private -- sector in LDC economies.\nExpropriations invariably worsen the investment climate\nin the expropriating country, and dissuade other investors\n(both domestic and foreign) from investing or reinvesting\nfurther in the country. Expropriations in one country also\nhave spillover effects in other countries. Those countries\nmay follow suit, as they have in the petroleum sector, or\ninvestors in those countries may be so concerned about this\npossibility that they limit their investment or reinvestment.\nIn all these cases \"political\" intervention in the mar-\nket by one government leads generally to a misallocation of\nresources investors back off from what otherwise could\nbe productive investments. Development is slowed, and de-\nmands for foreign assistance tend to increase. Resources\nare not developed as efficiently as should be the case, and\ncommodity prices are higher than necessary. These results\nare clearly not in the interests of the USG.\nExpropriations also mean increased government interven-\ntion into the private sector of LDCs, and a slower develop-\nment of the private sector. This also is not in the interests\nof the USG. Expropriated -- i.e., public sector --- enter-\nprises are likely to \"politicize\" business and economic\ndecisions and to distort the market's allocation of resources.\nWidespread government intervention in particular sectors\ncould increase the opportunities (such as they are) for con-\ncerted intergovernment controls over price or production,\nand, perhaps, for cartelization.\nFORD is GERALD LIBRARY\n- 2 -\nDevelopment of the private sector free from expropria-\ntion, in contrast, permits investment to flow to the most\nproductive projects. It can provide the basis for better\neconomic cooperation and integration, as U.S. firms can\ngenerally work better with private firms abroad than with\n\"political\" entities. A strong private sector in LDCs will\nattract foreign investment for development, and reduce both\nthe demands and the needs for increasing development assis-\ntance. An improved investment climate will also reduce the\nlong-term need for USG programs (such as the proposed Inter-\nnational ResourcesBank) which accept the LDC investment\nclimate \"as is,\" with a high degree of government involve-\nment.\nAn effective expropriation policy must serve long-range\neconomic goals, improving the climate for foreign (and domes-\ntic) investment in LDCs, and stemming the trend toward gov-\nernment intervention in LDC economies. In addition to\nprotecting the interests of the investor, it must also aim\nat safeguarding the interests of consumers and taxpayers,\nwho should not be allowed to bear the costs of an expropria-\ntion through higher prices and (because of lost tax revenues)\nhigher taxes.\nWeaknesses of Present Expropriation Policy\nOur present expropriation policy is not broadly enough\nfocused to serve long-range USG economic goals in a balanced\nmanner:\n-- The policy aims more at getting governments to pay\nafter an expropriation than it does at deterring government\nintervention in the first place, or at resolving disputes\nat an early stage so that governments are not as impelled\nto enter the private sector.\n-- In many cases U.S. political interests often more\nimportantly affect USG action than do U.S. economic interests.\nBroader USG interests --- supporting the development of the\nprivate sector in LDCs, assuring access to important raw\nmaterials at prices determined by the market, and helping\nthe development process -- seldom affect decision.\nDERALD FORD LIBRARY\n- 3 -\n-- In very important cases the USG often only margin-\nally influences outcomes. The traditional USG policy is\nnot to take positions on the merits of particular cases,\nbut rather to encourage the companies to work out problems\nwith the countries concerned, e.g., the Aramco settlement.\nThe USG seldom has sufficient information to make an in-\nformed judgment on the merits of particular cases or claims.\n(Often U.S. companies do not want USG involvement.)\n-- There is no focal point in the USG for redirecting\nand strengthening USG expropriation policy. A CIEP Working\nGroup is responsible for coordinating USG policy on expropri-\nations, but the bulk of the work is done by country desk\nofficers at State, who often attach more importance to smooth-\ning over bilateral relations than to solving investment dis-\nputes. The CIEP group focuses mainly on monitoring events,\nand is often unable to deal with the real political and\neconomic tradeoffs in the difficult cases, or to assure that\nbroad USG interests are adequately taken account of in indi-\nvidual cases. It works too often only to avoid confronta-\ntion between the USG and expropriating countries.\nExpropriation Policy in Practice\nThe gradual takeover of the U.S. bauxite-producing com-\npanies in Jamaica is an excellent example of the weaknesses\nof the U expropriation policy, Jamaica began by imposing\na substantial tax levy in violation of existing concession\nagreements. At that time the main USG efforts were to avoid\nexpropriation and to encourage a negotiated solution of the\ntax issue. The result was unilateral imposition of the tax.\nSince that date the GOJ has implemented its policy of grad-\nually taking over the companies, and is in the process of\nnegotiating final settlements. (These settlements may have\nbeen slowed by the world recession.)\nThe USG, however, has not exerted any real influence\nover the settlement process, even though (a) the companies\nappear to have passed on some of the costs of the tax and\npossibly the settlement to the U.S. consumers, and (b) the\ncompanies may eventually obligate themselves to purchase\nhigher cost Jamaican bauxite in long-term supply contracts.\nFORD & GENALD LIBRARY\n- 4 -\nTo the best of our knowledge there has been no systematic\nanalysis of USG interests in preserving even a modest degree\nof competition in the bauxite/alumina market, or in bringing\nUSG influence to bear to protect these interests. The USG\nacceded to the wishes of both the U.S. companies and the\nJamaican Government, and has not chosen to exert its influ-\nence directly to affect the outcomes.\nSaskatchewan Takeover of the Potash\nIndustry: An Immediate Problem\nUSG policy toward the Saskatchewan takeover of the potash\nindustry is following the pattern of the Jamaican case:\n-- There has been no full-scale and coordinated exam-\nination of the entire range of USG economic interests that\ncan be affected by the pending takeovers. U.S. interests\ngo beyond protecting the approximately 0.5 - 1.0 billion\ndollars of U.S. investment in Saskatchewan potash. A take-\nover would put a substantial portion of world potash produc-\ntion in government hands, and this, together with the\noligopolistic nature of the industry, could tend to pricing\nwell above marginal cost.\n-- The CIEP staff group has focused mainly on whether\n\"fair market value\" will be paid. In fact, Saskatchewan\nwas not willing to take the loss in revenues if it lost\na\ncourt challenge to a 1974 tax law, and, though its legisla-\ntion promises \"fair market value,\" it assures that assets\nwill be valued as if the contested taxes were imposed.\n-- There has been no systematic study of what the USG\nmight do to dissuade the takeovers, or to moderate their\nimpacts on USG interests. The USG delivered an aide-memoire\nto the Federal Government, and Agriculture is heading a\ntask force to develop contingency plans after an expropria-\ntion has occurred. Other policy instruments, such as high-\nlevel representations to the provincial government, have\nyet to be fully examined by the CIEP group.\nGERALD ? FORD\n- 5 -\nSector Nationalizations in Ethiopia\nBroad USG interests in the healthy development of the\nprivate sector in LDCs apparently have been put to the side\nin the face of large-scale nationalizations of particular\nsectors in LDC economies. When Ethiopia threatened and\nthen nationalized several economic sectors, USG influence\nwas properly brought to bear to obtain adequate compensa-\ntion for U.S. investors. No real attempt was made, however,\nto persuade Ethiopia that it was in its interest to refrain\nfrom nationalizations and to maintain a sound investment\nclimate. On the compensation issue, Ethiopia has dragged\nits heels, and has yet to get a compensation commission\ngoing, some 15 months after the nationalizations.\nRedirecting USG Policy\nOne technique for redirecting USG expropriation policy\nso that it better serves economic goals is to have the USG\nbring its influence to bear in selected cases at the \"invest-\nment dispute\" stage before a dispute becomes an expropriation.\nThe USG would aim at assuring that these disputes are set-\ntled in a fair manner so that (where appropriate) the investor\ncan remain in operation, and at persuading the government\nconcerned that its interests lie in strengthening the private\nsector, rather than in intervening to put more of the private\nsector in government hands The results may be less govern-\nment intervention in LDC economies, and a better investment\nclimate leading to more efficient resource allocation.\nThe USG would bring its influence to bear in this manner\nonly in selected cases where major USG economic interests\ncould be significantly affected by the outcome of the dis-\nputes. While keeping track of all such disputes, the USG\nwould in all probability only become involved in a few impor-\ntant ones. The manner in which the USG would proceed could\nbe tailored to the circumstances of the particular case, so\nthat for some disputes the USG might recommend third-party\ndispute settlement, while in others the USG might take a\nposition on the merits of certain issues.\nLIBERA GERALD ? FORD\n- 6 -\nExperience with the Marcona Case\nUSG involvement in the Marcona case suggests specific\ntechniques for redirecting USG expropriation policy. In\nthat case a prestigious and high-level policy official\n(Under Secretary Maw), who enjoyed the confidence of both\nMarcona and the Government of Peru, was able to use his\ninfluence to move the parties toward a satisfactory settle-\nment. By focusing attention on the relevant business and\neconomic facts, and avoiding polemical argument, the USG\nteam was able to move both the Peruvians and Marcona toward\nan equitable settlement consistent with U.S. principles on\nvaluing expropriated property.\nThe U.S. team was also able to seek independent and\nexpert advice from an outside consultant. The consultant\nbrought industry experience to bear in valuing the national-\nized properties, provided expert information valuable in the\nactual negotiations, and helped set a reasonable negotiating\ngoal for the U.S. team.\nUSG economic interests appear well-served in this case.\nThe USG, by taking firm positions on the merits of particular\nissues, was able to protect a U.S. investor. This will be an\nimportant precedent for future disputes. Marcona was not\nturned over to the Peruvians \"on the cheap.\" The fact that\nthe Peruvians had to pay a fair price could not only deter\nfuture expropriations in Peru, but in other LDCs as well.\nThe techniques used in this case moreover, could stand the\nUSG in good stead even before an expropriation occurred.\nRepresentations by high-level officials could lead to an\norderly settlement of an investment dispute that was not yet\nan expropriation, and fact finding by impartial industry\nexperts could provide the necessary back-up for these repre-\nsentations.\nRecommendation\nIn view of the need to redirect USG expropriation pol-\nicy to better take account of the overall USG economic\ninterests, we recommend that the EPB direct the CIEP Expro-\npriations Group to:\n-- identify and analyze the USG economic interests\naffected by actual or potential expropriation disputes in\nimportant areas, i.e., petroleum, potash, bauxite, etc.\nGERALD FORD LIBRARY\n- 7 PM\n(Political and other interests could, of course, be de-\nscribed.)\n-- examine possible changes or improvements in poli-\ncies or operations to assure that these USG economic inter-\nests are adequately taken into account. Improvement of the\nexisting \"early warning system,\" better formal coordination\nof key decisions at a policy level, and other techniques\nshould be examined.\n-- formulate guidelines so that the USG can play a\nmore effective role to protect its own economic and other\ninterests in particular cases.\nParticular attention should be paid to whether the USG\ncan take practical and effective action to forestall or\nmoderate the impacts that proposed takeovers like Saskatch-\newan may have.\nThe CIEP group should submit a preliminary report on\nthe general issues and a detailed report by August 15th.\nA final report should be submitted by September 15th.\nFOR IMMEDIATE RELEASE\nJUNE 28, 1976\nOffice of the White House Fress Secretary\n(Dorado Beach, Puerto Rico)\nTHE WHITE HOUSE\nJOINT DECLARATION\nINTERNATIONAL CONFERENCE\nThe heads of state and government of Canada, France, the Federal Republic\nof Germany, Italy, Japan, the United Kingdom of Great Britian and Northern\nIreland and the United States of America met at Dorado Beach, Puerto Rico,\non the 27th and 28th of June, 1976, and agreed to the following declaration:\nThe interdependence of our destinies makes it necessary for us to approach\ncommon economic problems with a sense of common purpose and to work\ntoward mutually consistent economic strategies through better cooperation.\nWe consider it essential to take into account the interests of other nati ens.\nAnd this is most particularly true with respect to the developing countries\nof the world.\nIt was for these purposes that we held a broad and productive exchange\nof views on a wide range of issues. This meeting provided a welcome\nopportunity to improve our mutual understanding and to intensify our CO-\noperation in a number of areas. Those among us whose countries are members\nof the European Economic Community intend to make their efforts within\nits framework.\nAt Rambouillet, economic recovery was established as a primary goal and\nit was agreed that the desired stability depends upon the underlying economic\nand financial conditions in each of our countries.\nSignificant progress has been achieved since Rambouillet. During the\nrecession there was widespread concern regarding the longer-run vitality of\nour economies. These concerns have proved to be unwarranted. Renewed\nconfidence in the future has replaced doubts about the economic and financial\noutlook. Economic recovery is well under way and in many of our countries\nthere has been substantial progress in combatting inflationand reducing un-\nemployment. This has improved the situation in those countries where economic\nrecovery is still relatively weak,\nCur determination in recent months to avoid excessive stimulation of our\neconomies and new impediments to trade and capital movements has\ncontributed to the soundness and breadth of this recovery. As a result,\nrestoration of balanced growth is within our grasp. We do not intend to lose\nthis opportunity.\nCur objective now is to manage effectively a transition to expansion which\nwill be sustainable, which will reduce the high level of unemployment which\npersists in many countries and will not jeopardize our common aim of\navoiding a new wave of inflation. That will call for an increase in productive\ninvestment and for partnership among all groups within our societies. This\nwill involve acceptance, in accordance with our individual needs and\ncircumstances, of a restoration of better balance in public finance, as well\nas of disciplined measures in the fiscal area and in the field of monetary policy\n(M)PE)\n(over)\n-2-\nand in some cases supplementary policies, including incomes policy. The\nformulation of such policies, in the context of growing interdependence,\nis not possible without taking into account the course of economic activity\nin other countries. With the right combination of policies we believe\nthat we can achieve our objectives of orderly and sustained expansion,\nreducing unemployment and renewed progress toward our common goal of\neliminating the problem of inflation. Sustained economic expansion and the\nresultant increase in individual well-being cannot be achieved in the\ncontext of high rates of inflation.\nThe meeting last November, we resolved differences on structural\nreform of the international monetary system and agreed to promote a\nstable system of exchange rates which emphasized the prerequisite of\ndeveloping stable underlying economic financial conditions.\nWith those objectives in mind, we reached specific understandings, which\nmade a substantial contribution to the IMF meeting in Jamaica. Early\nlegislative ratification of these agreements by all concerned is\ndesirable. We agreed to improve cooperation in order to further our ability\nto counter disorderly market conditions and increase our understanding\nof economic problems and the corrective policies that are needed. We will\ncontinue to build on this structure of consultations.\n-3-\nSince November, the relationship between the dollar and mo st of the\nmain currencies has been remarkably stable. However, some currencies\nhave suffered substantial fluctuations.\nThe needed stability in underlying economic and financial conditions clearly\nhas not yet been restored. Cur commitment to deliberate, orderly and\nsustained expansion, and to the indispensable companion goal of defeating\ninflation provides the basis for increased stability.\nCur objective of monetary stability must not be undermined by the strains\nof financing international payments inbalances. We thus recognize the\nimportance of each nation managing its economy and its international monetary\naffairs so as to correct or avoid persistent or structural international\npayments imbalances. Accordingly, each of us affirms his intention to work\ntoward a more stable and durable payments structure through the application\nof appropriate inte rnal and external policies.\nImbalances in world payments may continue in the period ahead. We recognize\nthat problems may arise for a few developed countries which have special\nneeds, which have not yet restored domestic economic stability, and which\nface major payments deficits. We agree to continue to cooperate with\nothers in the appropriate bodies on further analysis of these problems with\na view to their resoution. If assistance in financing transitory balance of\npayments deficits is necessary to avoid general disruptions in economic\ngrowth, then it can best be provided by multilateral means coupled with\na firm program for restoring underlying equilibrium.\n(MC RE)\n- 4 -\nIn the trade area, despite the recent recession, we have been generally\nsuccessful in maintaining an open trading system. At the OECD we\nreaffirmed our pledge to avoid the imposition of new trade barriers.\nCountries yielding to the temptation to resort to commercial protectionism\nwould leave themselves open to a 'subsequent deterioration in their compe-\ntitive standing; the vigor of their economies would be affected while at the\nsame time chain reactions would be set in motion and the volume of world\ntrade would shrink, hurting all countries. Wherever departures from the\npolicy set forth in the recently renewed OECD trade pledge occur,\nelimination of the restrictions involved is essential and urgent. Also, it\nis important to avoid deliberate exchange rate policies which would create\nsevere distortions in trade and lead to a resurgence of protectionism.\nWe have all set ourselves the objective of completing the Multilateral Trade\nNegotiations by the end of 1977. We hereby reaffirm that objective and\ncommit ourselves to make every effort through the appropriate bodies to\nachieve it in accordance with the Tokyo Declaration.\nBeyond the conclusion of the trade negotiations we recognize the desirability\nof intensifying and strengthening relationships among the major trading areas\nwith a view to the long-term goal of a maximum expansion of trade.\nWe discussed East/West economic relations. We welcomed in this context\nthe steady growth of East/West trade, and expressed the hope that economic\nrelations between East and West would develop their full potential on a sound\nfinancial and reciprocal commercial basis. We agreed that this process\nwarrants our careful examination, as well as efforts on our part to ensure\nthat these economic ties enhance overall East/West relationships.\nWe welcome the adoption, by the participating countries, of converging\nguidelines with regard to export credits. We hope that these guidelines will\nbe adopted as soon as possible by as many countries as possible.\nIn the pursuit of our goal of sustained expansion, the flow of capital\nfacilitates the efficient allocation of resources and thereby enhances our\neconomic well-being. We, therefore, agree on the importance of a\nliberal climate for international investment flows. In this regard, we\nview as a constructive development the declaration which was announced\nlast week when the OECD Council met at the Ministerial level.\n(More)\n-5-\nIn the field of energy, we intend to make efforts to develop, conserve\nand use rationally the various energy resources and to assist the energy\ndevelopment objectives of developing countries.\nWe support the aspirations of the developing nations to improve the lives\nof their peoples. The role of the industrialized democracies is crucial to the\nsuccess of their efforts. Cooperation between the two groups must be based\non mutual respect, take into consideration the interests of all parties and\nreject unproductive confrontation in favor of sustained and concerted efforts\nto find constructive solutions to the problems of development.\nThe industrialized democracies can be most successful in helping the\ndeveloping countries meet their aspirations by agreeing on, and cooperating\nto implement, sound solutions to their problems which enhance the efficient\noperation of the international economy. Close collaboration and better\ncoordination are necessary among the industrialized democracies. Cur\nefforts must be mutually supportive, not competitive. Cur efforts for\ninternational economic cooperation must be considered as complementary to\nthe policies of the developing countries themselves to achieve sustainable growth\nand rising standards of living.\nAt Rambouillet, the importance of a cooperative relationship between the\ndeveloped and developing nations was affirmed; particular attention was\ndirected to following up the results of the Seventh Special Session of the\nUN General Assembly, and especially to addressing the balance of payments\nproblems of some developing countri es. Since then, substantial progress\nhas been made. We welcome the constructive spirit which prevails in the\nwork carried out in the framework of the Conference on International\nEconomic Cooperation, and also by the positive results achieve in some\nareas at UNCTAD IV in Nairobi. New measures taken in the IMF have ,\nmade a substantial contribution to stabilizing the export earnings of the\ndeveloping countries and to helping them finance their deficits.\nWe attach the greatest importance to the dialogue between developed and\ndeveloping nations in the expectation tha it will achieve concrete results\nin areas of mutual interest. And we reaffirm our countries' determination\nto participate in this process in the competent bodies, with a political\nwill to succeed, looking toward negotiations, in appropriate cases. Cur\ncommon goal is to find practical solutions which contribute to an\nequitable and productive relationship among all peoples.\n# # #\nCOUNCIL OF ECONOMIC ADVISERS\nWASHINGTON\nALAN GREENSPAN, CHAIRMAN\nPAUL W. MACAVOY\nBURTON G. MALKIEL\nJune 23, 1976\nMEMORANDUM TO EXECUTIVE COMMITTEE - ECONOMIC POLICY BOARD\nFROM:\nPaul W. MacAvoy pm\nSUBJECT:\nThe Economics of the Democratic Party Platform\nThe June 17 New York Times published excerpts from\nthe Platform to be submitted to the Democratic National\nConvention next month. Assuming that this version\ncontains the major items, CEA staff has analyzed the\nhorn of plenty as follows:\nI. Full Employment, Price Stability and Balanced Growth\nTarget\n\"Make every responsible effort to reduce adult\nunemployment to 3 percent within four years. \"\nComment\nTo achieve the 3 percent goal, public service employ-\nment programs and public works projects would have\nto be instituted in addition to countercyclical\nrevenue sharing. Federal resources would have to\nbe targeted to communities and areas that lag behind\nin the economic recovery. Public service jobs would\nhave to be created to the extent that \"people who\nwill be especially difficult to employ\" cannot find\nprivate sector jobs.\nThe Federal budget cost of attaining and maintaining\nsuch a goal would be in the tens of billions of dollars.\nMuch unemployment in the United States arises from\nREVOLUTION\nvoluntary job changing and from new entrants and\nreentrants to the labor force looking for work.\n(0#\nAMERICAN\nBICENTENNIAL\n1776-1976\n®\n-2-\nThis unemployment reflects both the existence of\njob opportunities and the freedom of workers to\nchange jobs or drop out and then reenter the labor\nforce. Because of this, to attain the 3 percent\nunemployment goal a large-scale public service\nemployment program would have to be created. Yet,\nif these jobs pay the prevailing wage or the\n\"living wage\" for a family, they will attract to\nthe labor force large numbers who would otherwise\nnot seek employment. The Federal budget cost of\nattaining and maintaining such a goal would be in\nthe tens of billions of dollars. In addition, the\navailability of attractive PSE jobs would make it\nmore difficult for private sector employers to hire\nworkers, thereby setting into motion pressures for\nwage inflation.\nThe platform expresses naive optimism that the PSE\njobs that are funded will actually represent net\nincreases in productive employment. Our experience\nto date with PSE programs suggests that this would\nnot occur. Under moderate sized PSE programs, for\nexample, after two to three years about 90 percent\nof the jobs federally funded would have otherwise\nbeen funded from State and local sources.\nIt is politically appealing to assert that useful\npublic service jobs are far superior to welfare\nand unemployment compensation. Unfortunately,\nthe assertion lacks substance. Most of the adults\nwho are on welfare (AFDC, Food Stamps, Supplemental\nSecurity Income) are aged, disabled or women who\nhead households with young children. Very few could\nbe usefully employed in a PSE job. Also, most persons\non unemployment compensation are unemployed for a\nshort period of time while on a temporary layoff or\nbetween jobs. To encourage productive private sector\nemployment it is better for these persons to engage\nin compensated job search. PSE jobs reduce the\ntime for job search, and the incentives for a long-term\nprivate sector adjustment. A PSE program is, therefore,\ncounterproductive in promoting private sector employ-\nment compared to a tax reduction of a similar dollar\nmagnitude.\n-3-\nII.\nGovernment and Human Needs\nTarget\n\"We need a comprehensive national health insurance\nsystem with universal and mandatory coverage.\"\nComment\nInterest in national health insurance in the past\nhad centered on (1) providing adequate coverage\nfor the aged and the poor and (2) providing a\nmeasure of protection for the middle class against\nthe devastating financial effects of a catastrophic\nillness. Although there are problems, by and large\nMedicare and Medicaid do provide access to medical\nservices for the aged and poor. A national health\ninsurance program along the lines proposed cannot\nbe justified on grounds of dealing with the catastropic\nillness problem. National insurance, in fact, would\nextend insurance coverage to expenditures that most\nfamilies now finance on a routine basis.\nTarget\n\"Fundamental welfare reform is necessary.\"\nComment\nThe reform of the welfare system proposed here calls\nfor (a) treating intact and female headed families\nequally, (b) the same income floor for the working\npoor as for those from whom substantial work effort\ncannot be expected (the aged, disabled and female\nheaded households with young children), and (c) a\nsimple schedule of benefit reduction with earnings\nso as to guarantee \"equitable levels of assistance\nto the working poor. \"\nFor those from whom we cannot expect substantial\nwork effort, the welfare system must provide a\nsufficient income or basic benefit to assure an\nadequate consumption of goods and services. If\nthis same program were available to all intact\n-4-\nfamilies, the number of program participants and program\ncosts would easily increase to twice present levels.\nSetting the same basic benefit available to all would\nimply that the welfare program would reach quite far\nup into the income distribution. A much larger program\nand substantially more benefits per recipient would result\nin program costs at least twice as great as present levels\nfor this reason as well. Reform might well mean the\ndevelopment of a program four times the present size.\nIII. Natural Resources and Environmental Quality\nTarget\n\"We should narrow the gap between oil and natural\ngas prices with new natural gas ceiling prices\nthat maximize production and investment while\nprotecting the economy and the consumer.\"\nComment\nThis calls for Congress to set regulated gas prices\nor to require the FPC to use prices based on BTU-\nequivalent prices for oil. Neither would relate\nclosely to market supply and demand conditions.\nEither would have the effect of reducing investment\nincentives because of new uncertainties as to the non-\nmarket or \"political\" price determinants.\nTarget\n\"United States coal production can and must be\nincreased\nstrip mining legislation designed\nto protect and restore the environment while\nending the uncertainty over the rules governing\nfuture coal mining must be enacted.\"\nComment\nSince the reserves for increased coal production are\nlocated primarily in areas where strip mining offers\nthe only means of recovery, strip mining must be\nincreased. However, in many areas present technology\nwould not permit restoration of the land at reasonable\ncosts. Thus, the price of coal will have to be\nsubstantially increased to meet these goals. Whether\ncoal companies will be willing to invest with such\nhigh costs or whether consumers will find the resulting\nhigher prices of electricity acceptable is problematical.\n-5-\nTarget\n\"When competition inadequate to insure free markets\nexists, we support effective restrictions on the\nright of major companies to own all phases of the\noil industry.\"\nComment\nThis wording is no more than a restatement of\nthe present mandate of the Antitrust Division\nto enforce the Sherman Act. However, this could\nbe extended to call for divestiture in the oil\nindustry - an action that would significantly\nreduce the efficiency of the domestic industry\nin the next five years. Such would reduce our\ncapacity to become independent of foreign sources\nof oil and to develop further domestic refinery\ncapacity while not providing significantly greater\ncompetition in the industry.\nTarget\n\"We must continue and intensify efforts to expand\nagriculture as long term markets abroad, but at the\nsame time we must prevent irresponsible and inflationary\nsales from the American grainery to foreign purchasers. If\nComment\nIn general, the platform statement suggests, but does\nnot promise explicitly, a move towards more governmental\nmanagement of exports -- attempting to push exports\nwhen farm prices fall and restricting exports when\nfarm prices rise.\nOther agricultural planks not quoted in the New York\nTimes excerpts are: (1) Support of the Capper-Volstead\nAct in its present form, i.e., continue certain anti-\ntrust exemptions for coops, and general support of\ncoops and farm bargaining associations, (2) curb the\ninfluence of nonfarm corporations in agriculture, (3)\ninsure that imported foods meet the same quality\nstandards imposed on domestic producers. Although\nvague, these proposals would generally require\n-6-\nincreased governmental regulation of agriculture and\nwould most likely lead to economically inadvisable\nactivity. Under (3), if \"quality\" includes such\nthings as size of imported tomatoes and specifications\nfor shipping containers, the plank plays right into\nthe hands of the domestic industry which has been\ntrying for years to get restrictions on fruit and\nvegetable imports.\nIV. International Relations\nTarget\n\"We will support reform of the international monetary\nsystem to strengthen institutional means of co-\nordinating national economic policies.\"\nComment\nThe reform of the international monetary system over\nthe past few years has not included a strengthening\nof the institutional means of coordinating national\neconomic policies. It certainly included an intensi-\nfication of the consultative arrangements among\ngovernments whereby finance ministries and central\nbanks discuss on a regular basis their domestic economic\nand financial conditions and the impact of demand-\nmanagement policies on these conditions, but not the\ncoordination of national economic policies. It has\nbeen CEA's view that the choice and implementation\nof policies should be done on a national level, and\nalthough the effects on international stability should\nclearly be taken into account, there is no need to\ncoordinate policies across into across borders.\nTHE WHITE HOUSE\nWASHINGTON\nFOR EPB EXECUTIVE COMMITTEE MEMBERS\nThe attached materials are for your\ninformation.\nEYES ONLY\nMINUTES OF THE\nECONOMIC POLICY BOARD\nEXECUTIVE COMMITTEE MEETING\nJune 17, 1976\nws\nATTENDEES: Messrs. Seidman, Usery, Greenspan, Dixon, Cannon,\nO'Neill, Gorog, Malkiel, MacAvoy, Jones, Penner,\nPorter\n1. Administration Position on Minimum Wage\nMr. Seidman reported that the President has reviewed the\nmemorandum submitted to him on mimimum wage legislation\nand determined that he would like to meet with his advisers\nbefore making a decision on the issue.\n2. Savings and Loan Monitoring\nThe Executive Committee briefly discussed developments in\nMississippi and other states with regard to savings and loan\ninstitutions.\nDecision\nThe Executive Committee approved the establishment of a\ngroup, chaired by the Department of the Treasury, to monitor\ndevelopments in savings and loan institutions. The monitor-\ning group was requested to provide a summary of recent\ndevelopments in Mississippi and other states for the Executive\nCommittee's consideration next week.\n3. Economic Assumptions for the Mid-Year Budget Review\nThe Executive Committee reviewed in detail the economic\nassumptions for the mid-year budget review developed by\nTroika II. The discussions focused on the GNP, unemployment\nand inflation figures.\nDecision\nThe Executive Committee approved the Troika II economic\nassumptions with minor modifications. The Execuitve Com-\nmittee requested that a memorandum be prepared for the\nPresident outlining the proposed economic assumptions.\nEYES ONLY\nEYES ONLY\n2\n4.\nReport on Task Forces to Improve Government Regulation\nMr. MacAvoy reported on the work of the task forces that\nincluded government regulations. The discussions focused\non the work of the OSHA, FEA, and Export Administration\nTask Forces.\nEYES ONLY\nRBP\nOF\nTHE\nTHE TREASURY\nTHE DEPUTY SECRETARY OF THE TREASURY\nWASHINGTON, D.C. 20220\n1789\nJune 19, 1976\nMEMORANDUM . FOR: Roger Porter\nSUBJECT: Withholding Tax Schedule\nThis is the memorandum for the EPB about\nthe prospects for extension of the present\nwithholding tax schedule beyond June 30 --\nwhich Bill Seidman requested at the EPB\nmeeting last Thursday.\nGeorge Grox Dixon\nDate: JUN 18 1976\nMEMORANDUM FOR: ACTING SECRETARY DIXON\nd\nFrom: Dale S. Collinson DC\nTax Legislative Counsel\nSubject: Withholding taxes\nYou have requested our appraisal of the prospects\nfor an increase in withholding taxes this July. The\nproblem arises because the Congress, in the Revenue\nAdjustment Act of 1975, provided individual income tax\nreductions (changes in tax liabilities) in half the\namount that was necessary to maintain through all of\n1976 the 1975 withholding tax rates. (The 1975 rates\nreflected the tax cuts enacted in April 1975 by the Tax\nReduction Act of 1975 and, on an annual basis, are about\n$12 billion below the 1974 rates.) Under present law,\nthe Internal Revenue Service would be required on July 1,\n1976, to reinstitute the higher 1974 withholding tax\nrates.\nWe have been generally proceeding on the assumption\nthat, one way or another, the present withholding tax\nrates will be extended beyond the July 1 deadline. In\norder to avoid unnecessary costs the Internal Revenue\nService has undertaken only minimal contingency planning\nfor the possibility of an increase in withholding rates.\nThe extension of the present withholding tax rates\nmight be achieved in any of the following ways:\nThe Senate might complete action on the Tax Re-\nform Act, including the individual tax cut extension,\nthe Conference Committee might complete its work, and the\nbill might be enacted prior to the July 1 deadline. We\nregard this as very unlikely, given the pace at which\nthe Senate is moving and the great number of controversial\nissues to be thrashed out. Moreover, the Senate bill is a\ntechnical mess, and Congressional and Treasury staff\nwould like several weeks in which to clean up the bill\neven after the Senate and the Conference Committee complete\ntheir action.\nInitiator\nReviewer\nReviewer\nReviewer\nReviewer\nEx. Sec.\nSurname\nCollinson\nnitials / Date\n950\n14/18\nForm 0S-3129\nDepartment of Treasury\n- 2 -\n--The Senate might complete action, the Conference\nCommittee might fully consider the bill and announce it\nhad reached agreement but that additional time was needed\nfor technical drafting work by the staff. A short ex-\ntension of the present withholding tax rates, for perhaps\n30 days, might then be quickly enacted, leaving final\naction on the Conference Committee tax reform bill until\nafter the Democratic Convention. There is a substantial\nquestion whether Congress can proceed even this quickly.\n--The Congress might still have the tax reform bill\nunder consideration (either in the Senate or the Con-\nference Committee) but enact an extension of the with-\nholding tax rates prior to the recess for the Democratic\nConvention. We would expect liberals to seek a short ex-\ntension (e.g., 30 rather than 90 days) in order to main-\ntain pressure for action on tax reform.\nIn general, it should be noted that:\nThe Congress need not enact a further tax liability\nchange for 1976; it could simply direct Treasury to continue\nin force the present withholding tax rates for 30, 60, or\n90 days.\n--An extension of the withholding tax rates could be\nenacted very quickly (perhaps in one day). The Senate\ncould simply attach such a provision to a minor tariff\nor tax bill (Senator Long has a substantial inventory\nof such bills).\n--Since Congress could make an extension of the\npresent withholding tax rates retroactive, as a practical\nmatter the deadline for action is the July recess rather\nthan June 30.\nIt is too early to say which of the described scenarios\nis most likely to occur. Much will depend on the progress\nof the Senate debate on the tax reform bill. We are fairly\nconfident that the Democratic majority in Congress will take\nwhatever action is necessary to avoid accompanying the\nopening of the Democratic Convention with an increase in\nwithholding taxes.\nTHE WHITE HOUSE\nWASHINGTON\nJune 21, 1976\nMEMORANDUM FOR\nTHE EXECUTIVE COMMITTEE\nECONOMIC POLICY BOARD\nFROM:\nWILLIAM F. GOROG WFE,\nSUBJECT: Update of Selected Economic Statistics\n1.\nMoney Stock Measures\nM1 (%Change) M₂\nChange in May from:\nFebruary 1976\n8.9\n10.9\nNovember 1975\n5.1\n10.5\nMay\n1975\n5.4\n10.0\n2.\nTotal Industrial Production (Real terms, seasonally adj.)\n(Index: 1967 = 100)\nIndex\n% Change\nMay\n1976\n123.2\n+0.7\nApril\n1976\n122.3\n+0.5\nMarch\n1976\n121.7\n+0.7\nFebruary 1976\n120.8\n+1.1\nJanuary 1976\n119.5\n+0.9\nDecember 1975\n118.4\n+0.7\n( May 1975 - May 1976)\n+11.9\n3. Retail Sales (Current dollars, seasonally adj.)\nTotal:\n$ Billions\n% Change\nMay\n1976\n52.64\n-1.2\nApril\n1976\n53.30\n-0.1\nMarch\n1976\n53.34\n+1:4\nFebruary 1976\n52.60\n+1.9\nJanuary 1976\n51.59\n-0.8\n( May 1975 - May 1976)\n+9.3\n-2-\n4.\nHousing Starts and Building Permits (Seasonally adj.)\nStarts (annual rates) :\nMillions of Units\n% Change\nMay\n1976\n1,415,000\n+2.5\nApril\n1976\n1,381,000\n-2.5\nMarch\n1976\n1,417,000\n-8.4\nFebruary 1976\n1,547,000\n+25.2\nJanuary 1976\n1,236,000\n-3.7\nDecember 1975\n1,283,000\n-7.1\nPermits (annual rates) :\nMay\n1976\n1,158,000\n+5.7\nApril\n1976\n1,095,000\n-3.4\nMarch\n1976\n1,134,000\nI\nFebruary 1976\n1,134,000\n+1.3\nJanuary 1976\n1,120,000\n+8.9\nDecember 1975\n1,028,000\n-5.3\n5.\nEmployment and Unemployment (Seasonally adj.)\nCivilian Labor Force (CLF) :\nMillions of Persons - 16 yrs.+\nMay\n1976\n94.55\nApril\n1976\n94.44\nMarch\n1976\n93.72\nDecember 1975\n93.13\nMarch\n1975\n91.88\nDecember 1974\n91.64\nEmployment:\nMay\n1976\n87.70\nApril\n1976\n87.40\nMarch\n1976\n86.69\nDecember 1975\n85.39\nMarch\n1975 (low)\n84.11\nDecember 1974\n85.05\nUnemployment:\nMillions of Persons\n% of CLF\nMay\n1976\n6.86\n7.3\nApril\n1976\n7.04\n7.5\nMarch\n.1976\n7.03\n7.5\nDecember 1975\n7.73\n8.3\nMay\n1975 (peak)\n8.25\n8.9\nDecember 1974\n6.58\n7.2\n-3-\nUnemployment:\n(% of Group)\nHeads of Households:\nMay\n1976\n4.8\nApril\n1976\n-\n4.8\nMarch\n1976\n-\n5.0\nDecember 1975\n-\n5.7\nMay\n1975\n-\n6.1\nDecember 1974\n-\n4.6\n6.\nManufacturers' Shipments and Orders (current dollars, seasonally adj . )\nTotal Shipments:\n$ Billions\n% Change\nApril\n1976\n94.12\n+1.1\nMarch\n1976\n93.05\n+2.3\nFebruary 1976\n90.91\n+1.8\nJanuary 1976\n89.28\n+1.9\nDecember 1975\n87.62\n+1.3\nTotal Inventories:\nApril\n1976\n148.22\n-\nMarch\n1976\n148.15\n+0.6\nFebruary 1976\n147.32\n+0.2\nJanuary 1976\n147.03\n+0.3\nDecember 1975\n146.57\n-0.1\nTotal New Orders:\nApril\n1976\n94.41\n+1.1\nMarch\n1976\n93.39\n+3.5\nFebruary 1976\n90.20\n+2.4\nJanuary 1976\n88.08\n+1.5\nDecember 1975\n86.75\n+0.5\n7.\nConsumer Price Index\nAll Items - 12 mos. previous to:\n% Change\nApril\n1976 (+0.4% for month)\n+6.1\nMarch\n1976 (+0.2% for month)\n+6.1\nFebruary 1976 (+0.1% for month)\n+6.3\nJanuary 1976\n+6.8\nDecember 1975\n+7.0\nSeptember 1975\n+7.8\nJune\n1975\n+9.3\nMarch\n1975\n+10.3\nDecember 1974\n+12.2\n-4-\n8.\nWholesale Price Index\nAll Commodities - 12 mos. previous to:\n% Change\nMay\n1976 (+0.3 for month)\n+5.0\nApril\n1976 (+0.8 for month)\n+5.3\nMarch\n1976 (+0.2 for month)\n+5.5\nSeptember 1975\n+6.3\nJune\n1975\n+11.6\nMarch\n1975\n+12.5\n9.\nGross National Product (constant 1972 dollars)\nChange from previous Quarter:\n% Change\nFirst Quarter 1976\n+8.5\nFourth Quarter 1975\n+5.0\nThird Quarter 1975\n+12.0\nSecond Quarter 1975\n+3.3\nFirst Quarter 1975\n-9.2\n10. Real Spendable Earnings\n12 Months previous to:\n% Change\nApril\n1976\n+3.8\nMarch\n1976\n+4.5\nDecember\n1975\n+3.8\nSeptember 1975\n+1.6\nJune\n1975\n+0.2\nMarch\n1975\n-4.6\nJanuary\n1975\n-5.1\n11. Personal Income (current dollars, seasonally adj.)\nAnnual Rate:\n$ Billions\n% Change\nMay\n1976\n1,357.2\n+0.8\nApril\n1976\n1,346.2\n+0.8\nMarch\n1976\n1,336.0\n+0.8\nFebruary\n1976\n1,325.9\n+0.9\nJanaury\n1976\n1,313.6\n+1.0\nDecember\n1975\n1,300.2\n+8.3\nDecember 1974\n1,200.4\n-\n-5-\n12. Composite Index of Leading Indicators\nChange from previous month:\n% Change\nMarch\n1976\n-0.4\nFebruary\n1976\n+0.7\nJanaury\n1976\n+1.2\nDecember\n1975\n+0.9\nNovember\n1975\n+0.2\nOctober\n1975\n-0.5\nSeptember\n1975\n-\nAugust\n1975\n+1.6\nJuly\n1975\n+2.7\nJune\n1975\n+3.0\nMay\n1975\n+1.9\nApril\n1975\n+2.9\nMarch\n1975\n+0.9\nFebruary\n1975\n-0.8\nJanuary\n1975\n-3.4\nDecember\n1974\n-2.2\nNovember\n1974\n-3.1\nOctober\n1974\n-3.9\nTHE WHITE HOUSE\nWASHINGTON\nFOR EPB EXECUTIVE COMMITTEE MEMBERS\nThe attached materials are for your\ninformation."
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