Employment Act of 1946

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EMPLOYMENT ACT OF 1946

EMPLOYMENT ACT OF 1946 was rooted in the dismal experience of the Great Depression and the fear that remained alive during World War II that the United States might emerge victorious from the war only to confront the return of massive unemployment. Liberals especially sought to harness the newly emergent Keynesian economics and the administrative capacity built up under the New Deal to guide the economy successfully into the postwar world.

In January 1945 Senator James Murray (a Democrat from Montana) introduced the Full Employment Bill of 1945. The bill consisted of three main elements. First, it proclaimed the right of all Americans "able to work and seeking work" to regular, full-time employment. Second, it provided a Keynesian planning mechanism, the National Production and Employment Budget, to identify any pending deficiencies in expenditures and investment that might stand in the way of full employment. Third, the bill directed the federal government to address such shortfalls by encouraging private investment and if necessary by federal spending as a last resort.

Congressional consideration of the Full Employment Bill of 1945 occasioned a fierce battle between liberals and conservatives and among a variety of interest groups. The bill's backers viewed the proposed legislation as a lever of liberal reform rather than a mere technocratic tool, and its conservative opponents agreed with that assessment. The bill's supporters included Democratic staffers in Congress and the executive departments, the Union for Democratic Action, the National Planning Association, the National Farmers Union, and important segments of organized labor. The National Association of Manufacturers, the national Chamber of Commerce, and the American Farm Bureau Federation led the charge against the bill.

The final legislation, renamed the Employment Act of 1946 and signed into law by President Harry S. Truman in February 1946, was a compromise measure weighted on the conservative side. Instead of guaranteeing full employment, the Employment Act of 1946 committed the government to pursue "maximum employment, production, and purchasing power." The act dropped the explicit planning mechanism of the National Budget, replacing it with a much weaker requirement for a yearly Economic Report of the President. It also created new entities to help increase the sophistication of economic policymaking, the Council of Economic Advisers in the White House and the Joint Committee on the Economic Report (later renamed the Joint Economic Committee) in Congress.

The final product was much diluted from the initial version, but the Employment Act of 1946 was nevertheless significant. It formally recognized the federal government's new, postdepression role as the manager of national prosperity, and its organizational innovations, the Council of Economic Advisers and the Joint Economic Committee, played important roles in national economic policymaking throughout the postwar era.