Economic Stabilization Act of 1970

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The Economic Stabilization Act of 1970 (Pub.L. 91–379, 84 Stat. 799, enacted August 15, 1970) was a United States law that authorized the President to stabilize prices, rents, wages, salaries, interest rates, dividends and similar transfers.[1] It established standards to serve as a guide for determining levels of wages, prices, etc., which would allow for adjustments, exceptions and variations to prevent inequities, taking into account changes in productivity, cost of living and other pertinent factors.[2]

Background[edit]

Seeking reelection in the 1972 presidential race, President Richard Nixon had to tackle complex economic issues. The radical and rapid changes of the late 1960s such as the Vietnam War and the 1970s Energy Crisis[citation needed], combined with workforce shortages and the rise in Healthcare cost caused the country to face a recession. President Nixon "inherited a mess". President Lyndon B. Johnson was said to have not accepted the "advice of his economists". There was a dilemma; inflation was high and unemployment was low. In the midst of this recession President Nixon was faced with two options. He could either let the economy stay the way it was, meaning allow the inflation and allow Americans to keep their jobs, or he could tackle the inflation by cutting jobs to balance out the economy. Nixon chose the latter.[3] President Nixon had kept the American worker in mind with this decision to tackle the inflation and cut jobs. Nixon proposed that this was a temporary solution, but promised that more was to come in terms of change, hope and "manpower".

The Economic Stabilization Act of 1970 was passed, inaugurating a policy of wage and price controls. Nixon stated in a letter that he wrote to Congress for full support of this act "Our tactics for pursuing this objective are twofold: First, to accomplish much needed and long overdue reform of the manpower programs set up under the Manpower Development and Training Act and subsequent legislation and thus increase their effectiveness in enhancing the employability of jobless workers; and, second, to move toward a broader national manpower policy which will be an important adjunct of economic policy in achieving our Nation's economic and social objectives".[4]

This statement was the essence of his letter and the "promise" of this act. He commented on the futile attempts to contain the economy in the 1960s, and he promised to bring about change by proposing tax cuts over the course of his term to create new jobs.[5] In 1971 Nixon proceeded with the tax cuts under the provisions of phase II of the Economic Stabilization Act as it was amended earlier that year.[6] It was believed by Nixon that America needed a comprehensive manpower policy to bring power back to the United States economy. There was no greater proof that America lacked strong manpower than the economic mishaps of the 1960s that lead to the recession that Nixon inherited. Nixon, along with the Economic Stabilization act, referenced the Manpower Development and Training act of 1962 to utilize the competence of America's workforce and the Manpower Revenue Sharing Act, to make such manpower training programs accessible to local governments to "administer".[7] Referencing the success of these programs, Nixon promoted these acts to increase employment and to support his newly proposed Economic Stabilization Act.

Duties and obligations under this act[edit]

The act provided for limitations on the exercise of Presidential authority and allowed delegation of the performance of any of the President's functions to appropriate officers, departments and agencies of the United States or to entities composed of members appointed to represent different sectors of the economy and the general public.

The act provided for disclosure of information, subpoena power, administrative procedure, criminal and civil sanctions, injunctions and suits for damages and other relief. The Act specified original jurisdiction for judicial review of cases or controversies arising under the Act or regulations issued thereunder in the district courts of the United States, and directed that appeals of final decisions or permitted interlocutory appeals be brought in the United States Court of Appeals for the Federal Circuit.

Public benefits[edit]

This act had special provisions, some of which increased the employment opportunities for minorities, under the local manpower programs. These programs completed two tasks in one. First, this program in addition to providing an equal opportunity for minorities, under the Economic Stabilization Act which lead to the Equal Employment Opportunity Act.[8] This created opportunities for those who were unemployed and "transitional" jobs for those who lost jobs. Secondly this program fulfilled the "unmet needs" for public assistance.[9]

The Secretary of Energy under "power vested" by the act had to submit quarterly reports to the United States Congress in conjunction with the provisions of the Emergency Petroleum Allocation Act of 1973, to ensure the best prices for fuel in the country.[10] The Public did not just benefit from initiatives made in the workforce. In the attempt to save social security from suffering from the effects of the inflation, Supplemental Security Income was established, to provide unemployed Americans with a cushion. Since Nixon had to separate the dollar from the gold standard, since the Gold Value decreased, Nixon decided to increase the cost of imports. The cost of imports allowed Americans to focus on American-made products to keep the money circulating throughout the American economy, resulting in a higher income for American workers.[11]

To lull the anxieties of unemployment and the anxieties about the promises of the Economic Stabilization Act in conjunction with bettering public service,the President signed the Emergency Employment Act in 1971. The Act made specific provision for small businesses and created nearly "150,000 new jobs" in the "public sphere" in such fields as "education, environmental protection, law enforcement, and other 'public works'". The most prominent public work being the mass transportation systems. This Act, like the Economic Stabilization Act that influenced this one, required the President to issue periodic reports on all appropriations to Congress.[12]

Under this act, the United States Congress convened to tackle the issue of rapid economic growth in metropolises and other urban environments. The goal was to provide efficient living for people living in these settings. The goal in more detail was to condense densely populated areas. The Housing and Urban Development department was established to provide good living and "attractive living environments" for these tenants and to conserve the energy and resources that are used in heavily populated urban areas.[13] This Act provided people with low income with subsidized rent for affordable housing in privately owned buildings. This act was the "predecessor to the Section 8 rental subsidies".[14]

Challenging the Stabilization Act[edit]

In the case of Amalgamated Meat Cutters v. Connally, the Amalgamated Meat Cutters sued defendant John B Connally, the then chairman of the Cost of Living Council and the secretary of the United States Treasury. The Meat Cutters approached the court with two arguments, which were condensed into one. The Plaintiffs' primary concern was pursuing a twenty-five cent an hour increase on general wages. It was argued by the Plaintiffs that this was an agreement that was reached in April 1970 and demanded that the wage increase take effect September 6, 1971. The Plaintiffs' second argument was that this act was "unconstitutional and the Executive Order was invalid", because one of the stipulations of the act was that "prices, rent, wages and salaries shall be stabilized for a period of 90-days" as stated by President Nixon.[15]

This was the salient argument because it was the first time that the act was opposed and the Executive Order was being questioned, since the Plaintiffs believed that the order did not do justice to the workers under unions and that the act imposed on the power of the unions, since they had to operate under a 90-day spending freeze. This freeze did not allow the unions to protect the union workers. This was due largely to the fact that the Pay Board and Price Commission, under both the act and the Executive Order both monitored and controlled wages.[16]

The United States District Court for the District of Columbia upheld the act, rejecting an argument that it was an unconstitutional delegation of legislative authority, by citing statutes such as: "Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 507, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959)", for the "government's contention of adequacy of law" and "Field v. Clark, 143 U.S. 649, 692-693, 12 S.Ct. 495, 505, 36 L.Ed. 294 (1892)" for the "permissibility of legislative power within the Government's limits". These were two amongst many cases cited by the defense, all of which proved the legitimacy and flexibility of the Act and the Government's authority and range to enforce this Act.[17]

Administrative history[edit]

By late 1970 it was clear that this act was having little to no effect on the economy.[18] Under a provision in the Economic Stabilization Act of 1970, the Cost of Living Council was established as an independent agency. The purpose of this council was to stabilize the prices, rent, wages and salaries higher than the prices on or before May 25, 1970 and execute phases II-IV of the Economic Stabilization Program. These phases were set in place to ensure the success of this program. Phase I was the 90-day price and wage freeze that was authorized by President Nixon who delegated power to the Office of Emergency Preparedness which acted as the fiduciary agency that monitored business practices. Phase II required that the Cost of Living Council engage in wage and price controls. Phase III of this program required this council to enforce another price freeze to balance out economy. The IV and final phase consisted of a "voluntary compliance and gradual decontrol", this council had to ease off of these businesses and relinquish some control. By April 30, 1974 this council was "abolished".[19]

Having the responsibility of chairman of first the Office of Economic Opportunity then the Cost of Living Council imposed on him Donald Rumsfeld was initially unhappy with his position as chairman of the council and the council's "success" and for a while opposed the idea of the council. He soon realized that his presence there would "be best" for his influence in both domestic and international commerce and appeared satisfied with the council prior to it being abolished in 1974.[20] President Nixon reported that "public support and cooperation" was there for the council when they were making the tough decisions. President Nixon also ensured the American people that the Cost of Living Council always "kept the public interest in mind".[21]

The President in his quarterly statements usually claimed that Rumsfeld and his council were doing a great job, "providing encouraging evidence that the nation continues to make progress in the battle against inflation". Nixon continued to say in his report that "The national economy is now expanding significantly. This makes the success of the stabilization program more important than ever".[22] In 1971 Nixon announced that he amended the Economic Stabilization Act, by signing "into law the Revenue Act of 1971 -- providing tax cuts of some $15 billion over the next 3 years to stimulate the economy and provide hundreds of thousands of new jobs". This program was allowed to expire in 1974 and was viewed as a success by the President.[23]

References[edit]

  1. ^ "Records of the Economic Stabilization Program". Retrieved 2011-03-15. 
  2. ^ "Executive Orders". Retrieved 2011-03-15. 
  3. ^ "Nixonomics". Retrieved 2011-03-15. 
  4. ^ "Message to the Congress Transmitting Annual Manpower Report of the President". Retrieved 2011-03-15. 
  5. ^ "Statements from President Nixon". Retrieved 2011-03-15. 
  6. ^ "Records of the Economic Stabilization Programs, 1971-1974". Retrieved 2011-03-15. 
  7. ^ "Message to the Congress Transmitting Annual Manpower Report of the President". Retrieved 2011-03-15. 
  8. ^ "Richard Nixon:Domestic Policies". Retrieved 2011-03-15. 
  9. ^ "Message to the Congress Transmitting Annual Manpower Report of the President". American Presidency Project. Retrieved 2011-03-15. 
  10. ^ "Archives:Executive Order". Retrieved 2011-03-15. 
  11. ^ "Richard Nixon:Domestic Policies". Retrieved 2011-03-15. 
  12. ^ "Remarks on Signing the Emergency Employment Act of 1971". Retrieved 2011-03-16. 
  13. ^ "Housing Codes". Retrieved 2011-03-16. 
  14. ^ DeHaven, Tad. "Department of Housing and Urban Development Timeline of Growth". Retrieved 2011-03-16. 
  15. ^ "Amalgamated Meat Cutters v. Connally". Retrieved 2011-03-15. 
  16. ^ "Nixonomics". Retrieved 2011-03-15. 
  17. ^ "Amalgamated Meat Cutters & Butcher Work. v. Connally". Retrieved 2011-03-13. 
  18. ^ "Nixonomics". Retrieved 2011-03-16. 
  19. ^ "Economic Stabilization Programs 1971-1974". Retrieved 2011-03-13. 
  20. ^ Pareene, Alex. "RummyLeaks: "The President said that the Senate and the House were a joke"". Salon. Retrieved 2011-03-14. 
  21. ^ "Richard Nixon". Retrieved 2011-03-14. 
  22. ^ "Statements from President Nixon". Retrieved 2011-03-15. 
  23. ^ "Statements from President Nixon". Retrieved 2011-03-15.