Economic Stabilization Act of 1970
Encyclopedia
The Economic Stabilization Act of 1970 was a United States
law that authorized the President
to stabilize prices, rents, wages, salaries
, interest rates, dividend
s and similar transfers. 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.
had to tackle complex economic issues to achieve reelection. The radical and rapid changes of the late 1960s such as the Vietnam War
and the 1970s Energy Crisis
, 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. 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".
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. 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. 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". Referencing the success of these programs, Nixon promoted these acts to increase employment and to support his newly proposed Economic Stabilization Act.
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
.
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. 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.
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
.
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.
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".
, 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.
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 this 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.
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.
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. 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".
The President in his quarterly statements usually announced the 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".
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 veered as a success by the President and the American people.
and overcoming the economic hurdles of the dark times of the late 1960s to the early 1970s was accredited the Economic Programs set in place in the early 1970s. Productivity
was said to have increased by nearly 3% over the past three years. The industrial economy grew, and higher wages and standards of living became the results of this Act.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
law that authorized the President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
to stabilize prices, rents, wages, salaries
Salary
A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis....
, interest rates, dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
s and similar transfers. 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
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
, cost of living
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
and other pertinent factors.
Background
Seeking reelection in the 1972 presidential race, President Richard NixonRichard Nixon
Richard Milhous Nixon was the 37th President of the United States, serving from 1969 to 1974. The only president to resign the office, Nixon had previously served as a US representative and senator from California and as the 36th Vice President of the United States from 1953 to 1961 under...
had to tackle complex economic issues to achieve reelection. The radical and rapid changes of the late 1960s such as the Vietnam War
Vietnam War
The Vietnam War was a Cold War-era military conflict that occurred in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. This war followed the First Indochina War and was fought between North Vietnam, supported by its communist allies, and the government of...
and the 1970s Energy Crisis
1970s energy crisis
The 1970s energy crisis was a period in which the major industrial countries of the world, particularly the United States, faced substantial shortages, both perceived and real, of petroleum...
, 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
Lyndon B. Johnson
Lyndon Baines Johnson , often referred to as LBJ, was the 36th President of the United States after his service as the 37th Vice President of the United States...
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. 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".
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. 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. It was believed by Nixon that America needed a comprehensive manpower policy to bring power back to the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
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
New Frontier
The term New Frontier was used by Democratic presidential candidate John F. Kennedy in his acceptance speech in the 1960 United States presidential election to the Democratic National Convention at the Los Angeles Memorial Coliseum as the Democratic slogan to inspire America to support him...
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". 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
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 StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
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
Subpoena
A subpoena is a writ by a government agency, most often a court, that has authority to compel testimony by a witness or production of evidence under a penalty for failure. There are two common types of subpoena:...
power, administrative procedure, criminal
Criminal law
Criminal law, is the body of law that relates to crime. It might be defined as the body of rules that defines conduct that is not allowed because it is held to threaten, harm or endanger the safety and welfare of people, and that sets out the punishment to be imposed on people who do not obey...
and civil
Civil law (common law)
Civil law, as opposed to criminal law, is the branch of law dealing with disputes between individuals or organizations, in which compensation may be awarded to the victim...
sanctions
Sanctions (law)
Sanctions are penalties or other means of enforcement used to provide incentives for obedience with the law, or with rules and regulations. Criminal sanctions can take the form of serious punishment, such as corporal or capital punishment, incarceration, or severe fines...
, injunctions and suits for damages and other relief. The Act specified original jurisdiction
Original jurisdiction
The original jurisdiction of a court is the power to hear a case for the first time, as opposed to appellate jurisdiction, when a court has the power to review a lower court's decision.-France:...
for judicial review of cases or controversies arising under the Act or regulations issued thereunder in the district courts of the United States
United States district court
The United States district courts are the general trial courts of the United States federal court system. Both civil and criminal cases are filed in the district court, which is a court of law, equity, and admiralty. There is a United States bankruptcy court associated with each 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
United States Court of Appeals for the Federal Circuit
-Vacancies and pending nominations:-List of former judges:-Chief judges:Notwithstanding the foregoing, when the court was initially created, Congress had to resolve which chief judge of the predecessor courts would become the first chief judge...
.
Public benefits
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. 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.The Secretary of Energy under "power vested" by the act had to submit quarterly reports to the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
in conjunction with the provisions of the Emergency Petroleum Allocation Act of 1973, to ensure the best prices for fuel in the country. 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
Supplemental Security Income
Supplemental Security Income is a United States government program that provides stipends to low-income people who are either aged , blind, or disabled. Although administered by the Social Security Administration, SSI is funded from the U.S. Treasury general funds, not the Social Security trust fund...
was established, to provide unemployed Americans with a cushion. Since Nixon had to separate the dollar from the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of 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.
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
Public sphere
The public sphere is an area in social life where individuals can come together to freely discuss and identify societal problems, and through that discussion influence political action...
" in such fields as "education
Education
Education in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...
, environmental protection
Environmental protection
Environmental protection is a practice of protecting the environment, on individual, organizational or governmental level, for the benefit of the natural environment and humans. Due to the pressures of population and our technology the biophysical environment is being degraded, sometimes permanently...
, law enforcement, and other 'public works
Public works
Public works are a broad category of projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community...
'". The most prominent public work being the mass transportation systems
Public transport
Public transport is a shared passenger transportation service which is available for use by the general public, as distinct from modes such as taxicab, car pooling or hired buses which are not shared by strangers without private arrangement.Public transport modes include buses, trolleybuses, trams...
. This Act, like the Economic Stabilization Act that influenced this one, required the President to issue periodic reports on all appropriations to Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
.
Under this act, the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
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.
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".
Challenging the Stabilization Act
In the case of Amalgamated Meat Cutters v. ConnallyAmalgamated Meat Cutters v. Connally
Amalgamated Meat Cutters v. Connally, 337 F.Supp. 737 is a court case decided by the United States District Court for the District of Columbia relating to the limits of the nondelegation doctrine. The district court upheld the delegation of legislative power to the executive branch that was...
, 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
Executive order
An executive order in the United States is an order issued by the President, the head of the executive branch of the federal government. In other countries, similar edicts may be known as decrees, or orders in council. Executive orders may also be issued at the state level by a state's governor or...
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.
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 this 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.
The United States District Court for the District of Columbia
United States District Court for the District of Columbia
The United States District Court for the District of Columbia is a federal district court. Appeals from the District are taken to the United States Court of Appeals for the District of Columbia Circuit The United States District Court for the District of Columbia (in case citations, D.D.C.) is a...
upheld the act, rejecting an argument that it was an unconstitutional delegation
Nondelegation doctrine
The doctrine of nondelegation describes the theory that one branch of government must not authorize another entity to exercise the power or function which it is constitutionally authorized to exercise itself. It is explicit or implicit in all written constitutions that impose a strict structural...
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.
Administrative history
By late 1970 it was clear that this act was having little to no effect on the economy. 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".Having the responsibility of chairman of first the Office of Economic Opportunity then the Cost of Living Council imposed on him Donald Rumsfeld
Donald Rumsfeld
Donald Henry Rumsfeld is an American politician and businessman. Rumsfeld served as the 13th Secretary of Defense from 1975 to 1977 under President Gerald Ford, and as the 21st Secretary of Defense from 2001 to 2006 under President George W. Bush. He is both the youngest and the oldest person to...
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. 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".
The President in his quarterly statements usually announced the 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".
In 1971 Nixon announced that he amended the Economic Stabilization Act, by signing "into law the Revenue Act of 1971
Revenue Act of 1971
The United States Revenue Act of 1971 reinstated the investment tax credit, repealed the 7% automobile excise tax, and increased the minimum standard deduction from $1,000 to $1,300....
-- 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 veered as a success by the President and the American people.
Results
The Economic Stabilization Act 1970 was not a public favorite at first and the public was already anxious of public policy, especially in a postwar economy in a recession. Through all the anxieties, the end result was that the Economic Stabilization Act was a success. Signs began to show that the program would make an impact on the economy. It became well received by the public, because of the strives made. Though Nixon resigned in 1974, the effects of the Act he passed had positive effects on America years after his resignation. The restoration of capitalismCapitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
and overcoming the economic hurdles of the dark times of the late 1960s to the early 1970s was accredited the Economic Programs set in place in the early 1970s. Productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...
was said to have increased by nearly 3% over the past three years. The industrial economy grew, and higher wages and standards of living became the results of this Act.