Sunday, June 20, 2004

Last week, Rep. Jack Kingston, Georgia Republican, proposed abolishing the Joint Economic Committee of Congress in order to save $3.9 million. As chairman of the Legislative Branch subcommittee of the House Appropriations Committee, his proposals in this area obviously carry a lot of weight. While I think the JEC deserves to stay in business, it might be a good idea for the committee to use this threat to its existence as an opportunity rethink its operations.

I am not a disinterested observer. I was on the JEC staff for four years in the early 1980s and was executive director (chief of staff) for the last two. In those days, I think, the committee did much important work that stands up well 20 years later.

One reason the JEC functioned so well at that time is that there was a serious effort to abolish it in the late 1970s. The JEC had been established in 1946 as the congressional counterpart to the president’s Council of Economic Advisers. But unlike the CEA, which has three professional economists as members, the JEC is comprised of 10 congressmen and 10 senators, who are further divided between Republicans and Democrats.

The more overtly political nature of the JEC has always made it impossible for the committee to function the same way the CEA does. Nevertheless, in the 1950s and 1960s it played an important role in transmitting academic economic thinking to Congress. In part, that is because one of its chairmen was Sen. Paul Douglas, Illinois Democrat, who had been a noted economist at the University of Chicago. Every economics textbook still carries a discussion of the Cobb-Douglas production function that he developed.

The JEC is probably best known for being a major supporter of Keynesian economics and helping to lay the intellectual foundation for the Kennedy tax cut of 1964. Rep. Wilbur Mills, Arkansas Democrat, who managed the tax bill in the House, was a member of the JEC and used its staff, especially economist Norman Ture, to get it passed.

As a hotbed of Keynesian economics, the decline of this school of thought hit the JEC hard. According to Keynesian doctrine, inflation and unemployment can’t go up at the same time. So when this happened in the 1970s, the Keynesians faced a dilemma that they were never able to resolve. That is one reason why the JEC was viewed as being expendable. Also, the Congressional Budget Office, created in 1974, took away much of its work in the area of economic forecasting.

These factors caused the JEC to pull together and find a new reason for being. Under the leadership of Sen. Lloyd Bentsen, Texas Democrat, who was chairman in 1979-80, the committee became a supporter of supply-side economics. This was the theme of its annual report in 1980, which was entitled, “Plugging in the Supply Side.” Even more remarkably, Mr. Bentsen was able to get every Democrat and every Republican on the committee to sign this report, the first time that had happened in decades.

Speaking now with one voice on the need to cut taxes and stimulate production, rather than consumption, the JEC provided crucial support for supply-side economics at a critical moment in history. It forced economists and reporters to take the ideas that Ronald Reagan was starting to espouse much more seriously. As a consequence, the JEC helped pave the way for the 1981 tax rate reduction.

While I was on the committee staff, the JEC held countless hearings and published many studies developing and expanding supply-side ideas. Reagan administration officials would often use the committee as a forum when they had important things to say. One of the JEC’s strengths is an ability to look at issues that cut across the jurisdictions of other committees and those with no immediate legislative consequences, but are important to know about, such as long-term demographic changes.

I left the JEC in 1984, but continued to work with it on a number of things. The work the committee did debunking myths about income distribution while former Rep. Dick Armey, Texas Republican, was a member was especially worthwhile. Mr. Armey had been a professor of economics before being elected to Congress and was very involved in JEC activities. Interestingly, one of his staff people on the committee was Ed Gillespie, now chairman of the Republican National Committee.

Mr. Armey left the JEC when he became House Majority Leader in 1995. Since then, the committee has floundered. The House and Senate Republicans tend to go their own way and the Democrats appear not to be much involved one way or another. The JEC needs to pull together and make itself necessary once again. Otherwise, Rep. Kingston is going to be successful one of these days.

Bruce Bartlett is senior fellow with the National Center for Policy Analysis and a nationally syndicated columnist.

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