If the Employment Act of 1946 Hadn't Been Watered Down

kernals12

Banned
In 1946, President Truman signed the Employment Act. It declared the Federal Government's responsibility to maintain full employment and created the President's Council of Economic Advisors and Congress' Joint Economic Committee. The bill however was a disappointment compared to what could've been. The act, as originally proposed, would've required the government to make up for any shortfalls in aggregate demand through tax cuts and spending increases. It could've essentially guaranteed a 3-4% unemployment rate as was the case in most of Western Europe until the 1970s. The best part is the resulting stability would've been a self fulfilling prophecy, if businesses knew the government would step in for any loss of demand, they wouldn't cut back on new investment upon hearing about a possible recession. However, conservatives claimed this plan would've brought about inflation and socialism and so it got watered down. It is a serious tragedy this never got implemented.
 
I don't think it's a "serious tragedy", but it's true that things could've been better. The problem is that from 1939 to 1965 the Conservative Coalition controlled Congress. I'm surprised that such an Employment Act was passed at all and it's probably the best that Truman could've gotten under the circumstances.
 

kernals12

Banned
I don't think it's a "serious tragedy", but it's true that things could've been better. The problem is that from 1939 to 1965 the Conservative Coalition controlled Congress. I'm surprised that such an Employment Act was passed at all and it's probably the best that Truman could've gotten under the circumstances.
In that case, it's too bad LBJ didn't get it amended.
 
LBJ wins his 1940 senate primary, wins the election and rises to power early. You get this act and UHC being a thing from 1945/1946 on.
 
LBJ wins his 1940 senate primary, wins the election and rises to power early. You get this act and UHC being a thing from 1945/1946 on.

But then he's only a one term junior Senator in a Congress dominated by Seniority. No matter how hard he might push for the act, and despite all his natural legislative skill, that can't stop the powerful conservative Democrats from working with Republicans to block more ambitious measures.
 
But then he's only a one term junior Senator in a Congress dominated by Seniority. No matter how hard he might push for the act, and despite all his natural legislative skill, that can't stop the powerful conservative Democrats from working with Republicans to block more ambitious measures.
LBJ was a one term senator when he became democratic whip and later senate minority leader.
 
LBJ was a one term senator when he became democratic whip and later senate minority leader.

That was a fluke. The Majority Leader Ernest McFarland was narrowly defeated* in 1952, making LBJ Democratic Leader and then Majority Leader in 1955. In 1941 Barkley is still leader and it won't be eight years until he leaves office to become Truman's VP. That's three years after the 1946 Employment Act. LBJ could become influential relatively quickly, but he won't by any means be powerful enough to pass a tougher bill. That's if he even tries, which he most likely wouldn't since he had a rather conservative record while in the Senate.

*By none other than Barry Goldwater.
 
. . . The best part is the resulting stability would've been a self fulfilling prophecy, if businesses knew the government would step in for any loss of demand, they wouldn't cut back on new investment upon hearing about a possible recession. . .
Yes, I’m liking the smoothing out of the booms and busts of the business cycle , rather than completing eliminating them. For example, we go lighter on infrastructure projects during economic good times, and then heavier with needed and useful projects during economic downtimes.

* People believe in infrastructure so much, a responsible leader would almost need to undersell the number of jobs created, etc.
 
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kernals12

Banned
Yes, I’m liking the smoothing out of the booms and busts of the business cycle , rather than completing eliminating them. For example, we go lighter on infrastructure projects during economic good times, and then heavier with needed and useful projects during economic downtimes.

* People believe in infrastructure so much, a responsible leader would almost need to undersell the number of jobs created, etc.
Why not?
 
We’re just too much asking. I’m not saying booms and busts are a force of nature, but they do seem an embedded part of our current system , even if more a bug than a feature!

The bend-the-curve option would seem to be too smooth them out moderately, but not to expect miracles.
 

kernals12

Banned
We’re just too much asking. I’m not saying booms and busts are a force of nature, but they do seem an embedded part of our current system , even if more a bug than a feature!

The bend-the-curve option would seem to be too smooth them out moderately, but not to expect miracles.
Bank runs used to be an embedded part of our system. There is no reason to have mass unemployment. Leaving all that labor idle is like not picking up a $100 bill from the sidewalk. Just like bank runs, recessions are self fulfilling prophecies caused by panic. And we can see proof of this. Most countries in Western Europe managed to maintain 3% unemployment for 30 years after the war. West Germany was able to get it down to less than 1%.
 
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Bank runs used to be an embedded part of our system. There is no reason to have mass unemployment. Leaving all that labor idle is like not picking up a $100 bill from the sidewalk. Just like bank runs, recessions are self fulfilling prophecies caused by panic. And we can't see proof of this. Most countries in Western Europe managed to maintain 3% unemployment for 30 years after the war. West Germany was able to get it down to less than 1%.
As far as I recall most of those countries had conscription in that period, which would drop unemployment a percent or two on its own. Then you have the whole rebuilding from WWII, replacing stopgaps made in the the immediate aftermath thereof, then catching up to the countries who were not so devastated. Plus unemployment below ~3-4% is a bad thing as it indicates a labor shortage, as a certain amount of unemployment is normal in terms of people looking for first job, deciding to change jobs, or just inherent churn in a market economy
 

kernals12

Banned
As far as I recall most of those countries had conscription in that period, which would drop unemployment a percent or two on its own. Then you have the whole rebuilding from WWII, replacing stopgaps made in the the immediate aftermath thereof, then catching up to the countries who were not so devastated. Plus unemployment below ~3-4% is a bad thing as it indicates a labor shortage, as a certain amount of unemployment is normal in terms of people looking for first job, deciding to change jobs, or just inherent churn in a market economy
That would raise productivity, not employment. And as long as there's no spiral in inflation, then there isn't a labor shortage.
 
That would raise productivity, not employment. And as long as there's no spiral in inflation, then there isn't a labor shortage.
That is partially the point, since productivity has not caught up more people are necessary to do a particular task, plus there is more that needs to be done. There have been occasions where labor shortages and deflation have occurred at the same time so inflationary spirals are not necessarily indicative of labor shortages
 

kernals12

Banned
That is partially the point, since productivity has not caught up more people are necessary to do a particular task, plus there is more that needs to be done. There have been occasions where labor shortages and deflation have occurred at the same time so inflationary spirals are not necessarily indicative of labor shortages
Luddite fallacy
 
Luddite fallacy
Luddite Fallacy assumes that the amount of labor is a static lump sum. That is not the assumption here, more that productivity is farther behind the curve in these countries compared to labor requirements created by advancing technology, resulting in the need for more labor until productivity catches up

In any case Luddite Fallacy only refers to long term technological unemployment
 

kernals12

Banned
Luddite Fallacy assumes that the amount of labor is a static lump sum. That is not the assumption here, more that productivity is farther behind the curve in these countries compared to labor requirements created by advancing technology, resulting in the need for more labor until productivity catches up

In any case Luddite Fallacy only refers to long term technological unemployment
But higher productivity means higher wages which means more spending and more employment.
 

kernals12

Banned
I think of this as like an insurance policy on the entire US economy. In this metaphor, the US government would act as the underwriting company and would pay out for any damage to aggregate demand.
 
But higher productivity means higher wages which means more spending and more employment.
Over the long term and assuming everything else stays the same and no unusual circumstances are in play. My argument is that the period of post WWII European recovery is an unusual circumstance
 
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