ECONOMIC

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Following a recent emphasis on international approaches to commoditypolicy, the United States proposed in the International Wheat Council asystem of nationally held food grain reserves. The reserves, to consist of 30million metric tons of wheat and rice, would be used to add to supplies duringyears of exceptionally low production rather than to defend any particularprice band. They would be acquired and released with reference toquantitative triggers, when world supplies exceeded or fell short of trend bya fixed percentage. No progress was made toward implementation of thisplan. By year-end, however, prospective private carryover stocks of wheatand rice above working stocks in the United States amounted to perhaps 20million tons of the proposed 30-million world total.There were significant policy developments in several other areas in 1976.The Administration attempted unsuccessfully to move toward a marketorientedprogram for peanuts to replace the current reliance on acreagecontrols and high support prices. Dairy price supports were reviewed atquarterly intervals and were raised in April and October to keep the priceof milk used in manufacturing at 80 percent of parity. By the end of theyear substantial Government purchases of butter, cheese, and powdered milkwere being made at the support prices. The President vetoed a bill whichwould have raised dairy supports to 85 percent of parity and under whichthe accumulation of dairy products would have been still larger and theyear-end prices still higher.Other international policy developments concerned imported coffee, sugar,and meat, which in fiscal 1976 accounted for $5.0 billion of the $10.1 billionU.S. agricultural imports. The Senate ratified U.S. participation in a new InternationalCoffee Agreement, which contains provisions intended to stabilizeprices within a band agreed upon by producers and consumers. As withmost such arrangements, there is a danger that the agreement will bemore effective in holding prices above the price floor than in holding pricesbelow the price ceiling when a short crop occurs. The devastating Brazilianfrost of July 1975 is likely to keep prices well above the highest possiblesupport price for at least 2 more years. In regard to sugar and meat, measureswere taken to protect domestic producers from imports. The tariff on sugarwas increased 1.25 cents per pound, and quantitative restrictions were imposedon imports of beef.Government regulation of agriculture continued to grow last year. TheEnvironmental Protection Agency suspended most uses of the pesticidesheptachlor and chlordane. The Grain Standards Act of 1976 will greatly increaseFederal supervision of the weighing and grading of grain for export.The Farmer-to-Consumer Direct Marketing Bill was enacted to encouragethe purchase of food in places other than grocery stores. Other regulatorydevelopments included increasing health and safety regulation, the banby the Food and Drug Administration of several food additives, and thedecisions, first to permit and then to deny the use of mechanically debonedred meat for human consumption.98
While circumstances have enabled a movement away from restrictive programsfor grains and upland cotton, most of last year's policy developmentswere not in the direction of less regulated markets. With farmers pressingfor intervention to forestall lower grain prices, and with increased interestin achieving grain price stability through grain reserves, the potential existsfor a further turn from the market orientation that has been brought about inthe last decade. The costs of such a turn are discussed in Chapter 4.99
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ECONOMICTRANSMITTEDTO THE CONGRESSJ
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CONTENTSPageECONOMIC REPORT OF THE
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ECONOMIC REPORT OF THE PRESIDENTTo
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manent tax rate reductions. My prop
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will help shield us from disruption
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executive branch must undertake a c
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lasting implications of the changes
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THE PRESIDENT:LETTER OF TRANSMITTAL
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CHAPTER 2. ECONOMIC REVIEW OF 1976
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List of Tables and Charts—Continu
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CHAPTER 1Economic Policy and Outloo
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GENERAL POLICY PRINCIPLESTo assure
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3. Economic initiatives should be b
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TABLE 1.—The market value and the
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on investment would increase with i
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MONETARY POLICYThe Federal Reserve
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like the latter part of 1976. The 4
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PRIVATE CONSUMPTIONThe growth of re
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NET EXPORTSIn real terms net export
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LABOR FORGE AND UNEMPLOYMENTIt is e
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led to large first-year catchup inc
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Consumer prices of fuels during 197
Page 53 and 54: other workers. Productivity is meas
Page 55 and 56: Since the mid-1950s a dramatic chan
Page 57 and 58: women's labor force participation;
Page 59 and 60: The full-employment benchmark has b
Page 61 and 62: Chart 4Gross National Product, Actu
Page 63 and 64: groups can be a useful supplement t
Page 65 and 66: TABLE 7.—Changes in gross nationa
Page 67 and 68: Relative price movements were appar
Page 69 and 70: August was followed by a 20 percent
Page 71 and 72: main price indexes were significant
Page 73 and 74: A broader measure of labor costs, c
Page 75 and 76: TABLE 13.—Output, profits, net in
Page 77 and 78: TABLE 15.—Federal Government rece
Page 79 and 80: In the unified budget the total sho
Page 81 and 82: The permanent changes in the Tax Re
Page 83 and 84: tial output and the full-employment
Page 85 and 86: For this reason, although the rate
Page 87 and 88: quarter a year later. The actual gr
Page 89 and 90: Partly as a result of the desire of
Page 91 and 92: widespread among demographic groups
Page 93 and 94: of longer-term trends. Over the pas
Page 95 and 96: ment and earnings show little cycli
Page 97 and 98: production or real GNP, and this al
Page 99 and 100: percent from 1973. The cost of petr
Page 101 and 102: COMMODITY MARKETS AND FOOD PRICESWo
Page 103: TABLE 25.—Real income per farm an
Page 107 and 108: The policy actions taken in 1975 an
Page 109 and 110: TABLE 27.—Changes in industrial p
Page 111 and 112: States some underspending by public
Page 113 and 114: continued strong domestically gener
Page 115 and 116: GENERAL DEMAND TRENDSEconomic devel
Page 117 and 118: PUBLIC SECTOR DEFICITSThe economic
Page 119 and 120: insurance funds. The requirement th
Page 121 and 122: TABLE 29.—Export shares in trade
Page 123 and 124: Chart 7—ContinuedINDEX, 1973=100
Page 125 and 126: widened and the possibility of borr
Page 127 and 128: Chart 8—ContinuedInterest Rates i
Page 129 and 130: Where stabilization policies are pe
Page 131 and 132: Germany grew more in line with outp
Page 133 and 134: TABLE 32.—Estimated disposition o
Page 135 and 136: ates, and tax changes that facilita
Page 137 and 138: facility is designed to help countr
Page 139 and 140: is necessary that the strongest eco
Page 141 and 142: A freezing of relative prices, eith
Page 143 and 144: implicit and explicit subsidies bui
Page 145 and 146: qualitative conclusions. For exampl
Page 147 and 148: For some youths unemployment is inv
Page 149 and 150: may be as low as 10 percent. Thus t
Page 151 and 152: large subsidies through the tax cre
Page 153 and 154: in the transportation and public ut
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trust exemption permits motor carri
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purchase less expensive air travel.
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produced with higher-cost energy so
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of establishing efficient methods o
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in the future. Consequently current
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demand and supply at support prices
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with stringent controls on peanut a
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aspects of the tax system which imp
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TABLE 35—Change in aUer-tax inter
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and raise the return to capital inc
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come, social security encourages pe
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LETTER OF TRANSMITTALCOUNCIL OF ECO
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RESPONSIBILITIES OF THE COUNCILThe
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the Administration's economic polic
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member of the senior staff, and Rob
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CONTENTSNATIONAL INCOME OR EXPENDIT
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PageB-76. Estimated ownership of pu
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TABLE B-2.—Gross national product
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TABLE B-3.—Implicit price deflato
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TABLE B-4.—Implicit price deflato
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TABLE B~6.—Gross national product
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TABLE B-ll.—Gross domestic produc
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TABLE B-13.—Personal consumption
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TABLE B-15.—Inventories and final
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TABLE B-17.—Relation of gross nat
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TABLE B-19.—National income by ty
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TABLE B-20.—Sources of personal i
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TABLE B-21.—Disposition of person
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19291933Year orquarter1939...194019
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TABLE B~25.- -Number and money inco
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TABLE B-27.—Noninstitutional popu
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TABLE B-28.—Civilian employment a
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TABLE B-30.— Unemployment by dura
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TABLE B-32.—Wage and salary worke
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TABLE B-33.—Average weekly hours
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TABLE B-35.—Productivity and rela
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PRODUCTION AND BUSINESS ACTIVITYTAB
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TABLE B-39.—Industrial production
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TABLE B-41.—New construction acti
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TABLE B-42.—New housing units sta
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TABLE B-44.—Sales and inventories
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TABLE B-46.'—Manufacturers 1 new
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TABLE B-48.—Consumer price indexe
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TABLE B—50.—Consumer price inde
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TABLE B-52.—Percent changes in co
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19291933193919401941194219431944194
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TABLE B-54.—Wholesale price index
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TABLE B-56.—Percent changes in wh
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TABLE B-58.—Commercial bank loans
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TABLE B-60.—Total funds raised in
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TABLE B-61.—Federal Reserve Bank
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TABLE B-63.—Bond yields and inter
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TABLE B-64,—Instalment credit ext
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TABLE B-66.— Mortgage debt outsta
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GOVERNMENT FINANCETABLE B-68.—Fed
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TABLE B-69.—Federal budget receip
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TABLE B-71.—Receipts and expendit
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TABLE B-73.—Receipts and expendit
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TABLE B-75.—Interest-bearing publ
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TABLE B-77.—Average length and ma
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TABLE B-79.—Corporate profits by
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TABLE B—80.—-Corporate profits
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TABLE B1-81.—Sales, profits, and
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TABLE B-83.—Relation of profits a
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TABLE B-85.—Current assets and li
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TABLE B-87.—Common stock prices a
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192919331939Year orquarter19401941
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TABLE B-91.—Farm population, empl
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TABLI. B-93.—Selected measures of
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INTERNATIONAL STATISTICSTABLE B-95.
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TABLE B-96.—U.S. merchandise expo
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TABLE B-98.—U.S. overseas loans a
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TABLE B-100.—U.S. reserve assets,
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TABLE B-102.—Price changes in int
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ECONOMIC

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