To the Congress of the United States:
I am herewith presenting my Economic Report, as required by Section 3 (a) of the Employment Act of 1946.
In preparing this Report, I have had the assistance and advice of the Council of Economic Advisers. I have also had the advice of the heads of executive departments and independent agencies.
Since my Report is long, I present below, largely in the words of the Report itself, what I regard as its highlights.
RECENT ECONOMIC ACHIEVEMENTS
Full employment, rising incomes, and a stable dollar have been cherished goals of our society. The practical attainment of these ideals during 1955 was the year's great economic achievement.
The past year has brought fresh witness to the basic strength and resiliency of our economy. We have broken through to new and higher ground, and have reached the threshold of a 400 billion dollar economy.
Whether we observe economic activity at the stage of production, or employment, or income disbursement, or consumer spending, we find evidence of progress and prosperity. The Nation's expanding income is being shared widely. Employment and wages are at record levels. Both investment and consumer spending are going forward at a good pace. Some groups of people have not, however, enjoyed a full measure of prosperity, and we must keep that fact before us as we build for the future.
THE ROLE OF GOVERNMENT
The mainspring of our economy is to be found in the qualities of the American people. Given free institutions and a favorable physical environment, an expanding economy is the natural fruit of the enterprise of such a people.
Today, we believe as strongly in economic progress through free and competitive enterprise as our fathers did, and we resent as they did any unnecessary intrusion of Government into private affairs. But we have also come to believe that progress need not proceed as irregularly as in the past, and that the Federal Government has the capacity to moderate economic fluctuations without becoming a dominant factor in our economy.
Our governmental policies have concentrated on building an economic environment that favors an orderly expansion of private activities. The Federal Government has not sought to maintain good times by expanding our already huge governmental outlays or by permitting the value of money to depreciate.
The Administration has sought, in cooperation with the Congress, to discharge its responsibility through a series of closely related policies. First, by removing direct controls over prices and wages, which had outlived their usefulness. Second, by preserving an actively competitive environment and assisting new and small businesses. Third, by curtailing governmental activities that could be handled as well or better by private enterprise. Fourth, by restricting public expenditures, and yet adding to the country's defensive strength and its stock of public assets, especially highways, hospitals, and educational facilities. Fifth, by lightening the burden of taxes imposed on individuals and businesses. Sixth, by extending the ties of trade and investment with other nations of the Free World. Seventh, by tempering the impact of unemployment, old age, illness, and blighted neighborhoods on people, yet not impairing self-reliance. Eighth, by extending the automatic workings of our fiscal system that tend to offset or cushion changes in income arising from changes in economic activity. Ninth, by attacking fundamental causes of weakness in the farm situation. Tenth, by acting promptly and resolutely when either recessionary or inflationary influences in the general economy became evident.
To help keep our surging economy in a healthy condition the Government in 1955 held the tax line. The Federal Reserve System shifted from a policy of active credit ease to one of moderate restraint. These policies contributed in large degree to the achievement and maintenance of prosperity without price inflation.
A period of general prosperity, such as we have recently been experiencing, presents a challenge to an intelligent citizenry. We must find ways and means of extending prosperity to the less flourishing sectors of our economy.
The position of farmers in our dynamic economy has aroused deep concern. It is imperative that we strengthen farm programs on the basis of a realistic appraisal of the present situation.
The persisting decline in farm prices and incomes reflects a continuing imbalance between farm output and its ultimate disposition. The imbalance and resulting huge surpluses are to be traced largely to the technological revolution in American agriculture, changing domestic demands for farm products, the expansion of agricultural production abroad, and the repeated extension of wartime price-support levels long after the end of World War II.
Many parts of our agricultural policy are working well and require only moderate changes. Together with the nine-point program built around the Soil Bank put forward in the recent Message on Agriculture, they constitute a many-sided attack on the ills that beset agriculture. There is no easy cure for persisting surplus conditions. The programs now recommended, if framed wisely and adopted promptly, will promote the welfare of farmers and the Nation.
The basic cause of low incomes is low productivity, irregular employment, or both. The Government can do a great deal to help people who have been left behind in the onrush of progress by undertaking special programs for raising their productivity.
One of the largest groups of low-income families is in rural areas, mostly on farms too small for efficient operation. The Rural Development Program is a soundly conceived approach to helping these farm families raise their productivity and thereby improve their economic status. Legislation is needed which will permit the program to be expanded in line with recommendations made last year.
To cope with chronic unemployment which has persisted in some communities, despite the attainment of practically full employment in the Nation at large, a new Area Assistance Program is recommended.
Vocational rehabilitation, widened coverage of the Federal Old-Age and Survivors Insurance Program, and housing needs of older people are fields in which advances should be made.
Relatively few people are as yet protected by insurance against catastrophic illness. The pooling of risks by private carriers, or if need be through a Federal program, would help meet this problem.
A joint Federal-State program for indemnifying flood victims on losses to real property, business inventories, and household effects should be authorized.
BUILDING FOR FUTURE PROSPERITY
Lasting prosperity of the Nation depends far more on what individuals do for themselves than on what the Federal Government does or can do for them. The rate of our economic advance in the years ahead will depend largely on our ability as a people to preserve an environment that rewards individual initiative and encourages enterprise, innovation, and investment.
Government can contribute to the strengthening of competitive enterprise through monetary, fiscal, and housekeeping policies that promote high and rising levels of economic activity; by helping small and medium-sized businesses overcome impediments to their expansion; and by vigorous measures for preventing monopolistic practices and combinations.
For the present fiscal year a balanced budget is in prospect. Once a budgetary surplus comes definitely into sight and economic conditions continue to be favorable, we should begin reducing our huge public debt. Such an act of fiscal integrity would signify with unmistakable clarity that our democracy is capable of self-discipline.
To help meet the pressing need for more schoolrooms, the Congress is urged to authorize a program of Federal aid for school construction which, over a five-year period, could be expected to stimulate the States and localities to sufficiently greater efforts to remove the accumulated shortages.
The country urgently needs a modernized interstate highway system to relieve existing congestion, to provide for the expected growth of motor vehicle traffic, to strengthen the Nation's defenses, to reduce the toll of human life exacted each year in highway accidents, and to promote economic development.
The development of consumer instalment credit has been highly beneficial to our economy. However, it sometimes accentuates movements in the buying of consumer durable goods. Although present conditions do not call for the use of any authority to regulate the terms of instalment credit, this is a good time for the Congress and the Executive Branch to study the problem.
Sound policies to promote the expansion of the international flow of goods, capital, enterprise, and technology will powerfully advance our national security and economic welfare, and help to build a stronger and more unified community of free nations.
Early passage of legislation authorizing membership of the United States in the Organization for Trade Cooperation and providing for further customs simplification is of high importance.
Foresight has helped our Nation make great strides in recent years toward a balanced and sustained prosperity. We have succeeded in expanding the scope of free enterprise, and yet increased the sense of security that people need in a highly industrialized age.
Taking recent developments all together, it is reasonable to expect that high levels of production, employment, and income will be broadly sustained during the coming year, and that underlying conditions will remain favorable to further economic growth.
Great opportunities lie ahead for American businessmen, consumers, workers, farmers, and investors. The recommendations of this Report should be helpful in the realization of these opportunities.
DWIGHT D. EISENHOWER