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The Full Employment and Balanced Growth Act (known informally as the Humphrey–Hawkins Full Employment Act) is an act of
legislation Legislation is the process or result of enrolling, enacting, or promulgating laws by a legislature, parliament, or analogous governing body. Before an item of legislation becomes law it may be known as a bill, and may be broadly referred ...
by the
United States government The Federal Government of the United States of America (U.S. federal government or U.S. government) is the Federation#Federal governments, national government of the United States. The U.S. federal government is composed of three distinct ...
.


Impetus and strategy

Unemployment and inflation levels began to rise in the early 1970s, reviving fears of an
economic recession An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...
. In the past, the country's economic policy had been defined by the Employment Act of 1946, which encouraged the federal government to pursue "maximum employment, production, and purchasing power" by cooperation with private enterprise. Some Representatives, dissatisfied with the vague wording of this act, sought to create an amendment that would strengthen and clarify the country's economic policy. The Act's sponsors embraced a form of
Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomics, macroeconomic theories and Economic model, models of how aggregate demand (total spending in the economy) strongl ...
, advocating public intervention to increase economic demand and to secure full employment.Cate, T., ''An Encyclopedia of Keynesian Economics'', 2nd ed. (
Cheltenham Cheltenham () is a historic spa town and borough adjacent to the Cotswolds in Gloucestershire, England. Cheltenham became known as a health and holiday spa town resort following the discovery of mineral springs in 1716, and claims to be the mo ...
:
Edward Elgar Publishing Edward Elgar Publishing is a global publisher of academic books, journals and online resources in the social sciences and law. The company also publishes a social science and law blog with regular contributions from leading scholars. About Edwa ...
, 2013)
p. 182
Economists in the Carter administration, in particular the Council of Economic Advisers, pushed for an inflation target in the bill. The economists made references to the
Phillips curve The Phillips curve is an economic model, named after Bill Phillips, that correlates reduced unemployment with increasing wages in an economy. While Phillips did not directly link employment and inflation, this was a trivial deduction from his ...
, arguing that there was a trade-off between unemployment and inflation. Consistent with Keynesian theory, the Act provides for measures to create public jobs to reduce unemployment, as applied during the
Great Depression The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...
. The Act also encouraged the government to develop a sound
monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to affect monetary and other financial conditions to accomplish broader objectives like high employment and price stability (normally interpreted as a low and stable rat ...
, to minimize inflation, and to push toward
full employment Full employment is an economic situation in which there is no cyclical or deficient-demand unemployment. Full employment does not entail the disappearance of all unemployment, as other kinds of unemployment, namely structural and frictional, may ...
by managing the amount and liquidity of currency in circulation. Overall, the Act sought to formalize and expand Congress's role in the economic policy process, as governed by the
Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...
and the President.


Overview

In response to rising unemployment levels in the 1970s, Representative Augustus Hawkins and Senator
Hubert Humphrey Hubert Horatio Humphrey Jr. (May 27, 1911 – January 13, 1978) was an American politician who served from 1965 to 1969 as the 38th vice president of the United States. He twice served in the United States Senate, representing Minnesota from 19 ...
created the Full Employment and Balanced Growth Act. It was signed into law by President
Jimmy Carter James Earl Carter Jr. (October 1, 1924December 29, 2024) was an American politician and humanitarian who served as the 39th president of the United States from 1977 to 1981. A member of the Democratic Party (United States), Democratic Party ...
on October 27, 1978, and codified as 15 USC § 3101. The Act explicitly instructs the nation to strive toward four ultimate goals:
full employment Full employment is an economic situation in which there is no cyclical or deficient-demand unemployment. Full employment does not entail the disappearance of all unemployment, as other kinds of unemployment, namely structural and frictional, may ...
, growth in production,
price stability Price stability is a goal of monetary and fiscal policy aiming to support sustainable rates of economic activity. Policy is set to maintain a very low rate of inflation or deflation. For example, the European Central Bank (ECB) describes price s ...
, and
balance of trade Balance of trade is the difference between the monetary value of a nation's exports and imports of goods over a certain time period. Sometimes, trade in Service (economics), services is also included in the balance of trade but the official IMF d ...
and
budget A budget is a calculation plan, usually but not always financial plan, financial, for a defined accounting period, period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including tim ...
. By explicitly setting requirements and goals for the federal government to attain, the Act is markedly stronger than its predecessor (an alternate view is that the 1946 Act concentrated on employment, and Humphrey–Hawkins, by specifying four competing and possibly inconsistent goals, de-emphasized full employment as the sole primary national economic goal). In brief, the Act: * Explicitly states that the federal government will rely primarily on private enterprise to achieve the four goals. * Instructs the government to take reasonable means to balance the budget. * Instructs the government to establish a
balance of trade Balance of trade is the difference between the monetary value of a nation's exports and imports of goods over a certain time period. Sometimes, trade in Service (economics), services is also included in the balance of trade but the official IMF d ...
, i.e., to avoid trade surpluses or deficits. * Mandates the Board of Governors of the Federal Reserve to establish a monetary policy that maintains long-run growth, minimizes inflation, and promotes price stability. * Instructs the Board of Governors of the Federal Reserve to transmit a Monetary Policy Report to the Congress twice a year outlining its monetary policy. * Requires the President to set numerical goals for the economy of the next fiscal year in the Economic Report of the President and to suggest policies that will achieve these goals. * Requires the Chairman of the Federal Reserve to connect the monetary policy with the Presidential economic policy. The Act set specific numerical goals for the President to attain. By 1983, unemployment rates should be not more than 3% for persons aged 20 or over and not more than 4% for persons aged 16 or over, and inflation rates should not be over 4%. By 1988, inflation rates should be 0%. The Act allows Congress to revise these goals over time. (As of 2017 the Federal Reserve has had a target inflation rate of 2%, not 0%. 0% inflation is not considered ideal and can lead to deflation which can hurt the economy.) If private enterprise appeared not to be meeting these goals, the Act in its original form, though not in its ultimate iteration, expressly allowed the federal government to create a "reservoir of public employment," provided of course that the legislation to establish the "reservoir" managed to become ratified. These jobs would have been required to be in the lower ranges of skill and pay to minimize competition with the private sector. The Act directly prohibits
discrimination Discrimination is the process of making unfair or prejudicial distinctions between people based on the groups, classes, or other categories to which they belong or are perceived to belong, such as race, gender, age, class, religion, or sex ...
on account of sex, religion, race, age, and national origin in any program created under the Act.


Amendments

The language of the Act was amended twice by riders, attached to unrelated or distantly related legislation. # May 10, 1979: Public Law 96-10, attached to H.R. 2283, amended the Act to include federal outlays as a proportion of the gross national product when numerical goals are calculated. # November 5, 1990: Public Law 101-508, attached to the Pollution Prevention Act, required the Economic Report to the President to be submitted within 20 days after the start of the session of Congress instead of 10 days after the submission of the annual budget.


See also

*
Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...
*
Economic policy ''Economic Policy'' is a quarterly peer-reviewed academic journal published by Oxford University Press, Oxford Academic on behalf of the Centre for Economic Policy Research, the Center for Economic Studies (University of Munich), and the Paris Scho ...
*
Monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to affect monetary and other financial conditions to accomplish broader objectives like high employment and price stability (normally interpreted as a low and stable rat ...
*
Job guarantee A job guarantee is an economic policy proposal that aims to create full employment and price stability by having the state promise to hire unemployed workers as an employer of last resort (ELR). It aims to provide a sustainable solution to inf ...


References


External links


The Goals of U.S. Monetary Policy from the Federal Reserve Bank of San Francisco

Bill summary of H.R. 50
* Full-text of reports from 1979-current from the Federal Reserve Bank of St. Louis
House Hearings
an
Senate Hearings

Public Law 95-523, 95th Congress, H.R. 50: Full Employment and Balanced Growth Act [Humphrey-Hawkins Act]


{{DEFAULTSORT:Humphrey-Hawkins Full Employment Act 1978 in American law Economic history of the United States United States federal commerce legislation United States federal labor legislation Hubert Humphrey Full employment Unemployment in the United States 1978 in economic history