Tackling Unemployment: The Legislative Dynamics of the Employment Act of 1946

1 - The Employment Act in Historical Perspective

1 1 The Employment Act in Historical Perspective As the United States approached the middle of the twentieth century , it was undergoing a considerable change in its conception of the role of government and of the government’s responsibility for maintaining the economic well-being of its people. The Great Depression had shaken the country’s economic foundation and posed a threat to the social stability of the United States. The activist programs of the New Deal intervened and, many say, prevented a complete national collapse. What the New Deal did not do, ramping up for the nation’s entrance into the Second World War did: end the economic depression. Direct federal spending for World War II, which stimulated wartime production , lifted America out of the Great Depression. At the leadership level, many concluded that the wartime spending had validated the theories of John Maynard (Lord) Keynes, a British economist who advocated, among other things, deficit spending during economic downturns and depressions. Some policymakers further argued that it would be reckless if the government did not establish Keynesian economics as formal policy. There were quite a few leaders, however, who thought the New Deal had gone too far and who certainly opposed any effort to further strengthen the federal role in the economy. Though the American public knew little of Keynes and his theories on compensatory spending, they did know that they wanted no more depressions. Many people, idle during the 1930s and working overtime during the war, were realizing that they were part of a national economic system and thus were vulnerable to its fluctuations. Moreover , the socioeconomic composition of the population was undergoing change, and the fact of social and economic interdependence was now obvious. The result was a redefinition of the role of government and government responsibility. The push to enact full employment legislation was a pivotal step in this process. An examination of the debate on full employment policy offers an opportunity to identify the forces in this contest, to see how In order to view this proof accurately, the Overprint Preview Option must be checked in Acrobat Professional or Adobe Reader. Please contact your Customer Service Representative if you have questions about finding the option. Job Name: -- /347091t 2 Wasem these forces lined up, and to clarify the issues that distinguished these forces from one another. Full employment legislation provides a case study that enables us to gain a better, albeit incomplete, understanding of the dynamics of redefining government’s tasks. As originally introduced, the proposed Full Employment Act of 1945—hereafter referred to as the full employment bill—mandated a dramatically new role for the federal government in the economy. It was the first piece of seriously considered, comprehensive economic legislation from the perspective of the consumer and working person. More sweeping than protective labor legislation such as workmen’s compensation and minimum-wage laws, the bill stated that all persons able and willing to work were entitled to employment—an employment bill of rights. It also would have established a permanent system for national economic planning and would have required compensatory federal spending in periods of recession. The legislation that was ultimately enacted became the foundation of economic policy for many years. It provided the justification for compensatory spending, tax cuts, job-creation tax credits, and other Keynesian tools, which the many subsequent administrations used to buoy the U.S. economy. It established the President’s Council of Economic Advisers and the congressional Joint Economic Committee— key structures intended to conduct national economic planning. Indeed, it placed the ultimate responsibility for maintaining the nation’s economic well-being upon the federal government. A history of the Employment Act of 1946 is especially pertinent today, as many of the world’s developed economies teeter on the verge of a major economic recession, perhaps depression. The U.S. Congress and the president are again debating the role of the federal government in alleviating unemployment and stimulating job creation. Although full employment is not a common phrase in the current lexicon, the twentieth-century debate over full employment offers lessons for our times. The parallels will emerge as the history unfolds. In order to view this proof accurately, the Overprint Preview Option must be checked in Acrobat Professional or Adobe Reader. Please contact your Customer Service Representative if you have questions about finding the option. Job Name: -- /347091t Employment Act in Historical Perspective 3...