To the Congress of the United States:
I present herewith my Economic Report, as required by Section 3 (a) of the Employment Act of 1946.
The Report was prepared with the advice and assistance of the Council of Economic Advisers and of the heads of the executive departments and independent agencies directly concerned with the matters it discusses. It summarizes the economic developments of the year and the steps taken in major areas of economic policy to promote the sound expansion of employment, production, and income. It also puts forward a program for the year 1960 which, in the context of present and prospective economic conditions, would effectively implement the purposes of the Employment Act.
The major conclusions and recommendations of the Report are set forth below, in part in the words of the Report itself.
By the first quarter of 1959, the recovery that started early in 1958 had already carried production and income to levels higher than ever before attained in the American economy. A considerable further advance was scored during the remainder of 1959, despite the deep effect of the 116-day strike in the steel industry.
The Nation's output of goods and services in the fourth quarter of 1959 was at an annual rate of $482 billion. When adjusted for price changes, this rate of output was 3½ percent higher than the rate attained in the corresponding period in 1958. By December 1959, total employment had reached a record level, 66.2 million, on a seasonally adjusted basis. And personal income payments in December were at an annual rate of $391 billion, $24 billion greater than a year earlier. After adjustment for increases in prices, the rise in total personal income in 1959 represented a gain of nearly 5 percent in the real buying power of our Nation.
As we look ahead, there are good grounds for confidence that this economic advance can be extended through 1960. Furthermore, with appropriate private actions and public policies, it can carry well beyond the present year.
However, as always in periods of rapid economic expansion, we must avoid speculative excesses and actions that would compress gains into so short a period that the rate of growth could not be sustained. We must seek, through both private actions and public policies, to minimize and contain inflationary pressures that could undermine the basis for a high, continuing rate of growth.
Three elements stand out in the Government's program for realizing the objectives of high production, employment, and income set forth in the Employment Act: first, favorable action by the Congress on the recommendations for appropriations and for measures affecting Federal revenues presented in the Budget for the fiscal year 1961; second, use of the resulting surplus, now estimated at $4.2 billion, to retire Federal debt; third, action by the Congress to remove the interest rate limitation that currently inhibits the noninflationary management of the Federal debt. Numerous additional proposals, many of which are described in Chapter 4 of the Economic Report, will be made to supplement the Federal Government's existing economic and financial programs.
Following the budget balance now in prospect for the fiscal year 1960, these three elements of the 1960 program will strengthen and be strengthened by the essential contributions to sustainable economic growth made through the policies of the independent Federal Reserve System. Fiscal and monetary policies, which are powerful instruments for preventing the development of inflationary pressures, can effectively reinforce one another.
But these Government policies must be supplemented by appropriate private actions, especially with respect to profits and wages. In our system of free competitive enterprise and shared responsibility, we do not rely on Government alone for the achievement requires a blending of suit growth. On the contrary, that achievement requires a blending of suitable private actions and public policies. Our success in realizing the opportunities that lie ahead will therefore depend in large part upon the ways in which business management, labor leaders, and consumers perform their own economic functions.
A well-informed and vigilant public opinion is essential in our free society for helping achieve the conditions necessary for price stability and vigorous economic growth. Such public opinion can be an effective safeguard against attempts arbitrarily to establish prices or wages at levels that are inconsistent with the general welfare. Informed public opinion is also necessary to support the laws and regulations that provide the framework for the conduct of our economic affairs.
Further progress is needed in establishing a broad public understanding of the relationships of productivity and rewards to costs and prices. It would be a grave mistake to believe that we can successfully substitute legislation or controls for such understanding. Indeed, the complex relationships involved cannot be fixed by law, and attempts to determine them by restrictive governmental action would jeopardize our freedoms and other conditions essential to sound economic growth.
Our system of free institutions and shared responsibility has served us well in achieving economic growth and improvement. From our past experience, we are confident that our changing and increasing needs in the future can be met within this flexible system, which gains strength from the incentive it provides for individuals, from the scope it affords for individual initiative and action, and from the assurance it gives that government remains responsive to the will of the people.
DWIGHT D. EISENHOWER