Employment Act, 1946

   The Employment Act of 1946, passed on 20 February 1946, created the Council of Economic Advisers as part of the White House staff, whose duty was to “formulate and recommend national economic policy” that would further the national goal of “maximum employment, production, and purchasing power.”

   The act was intended to address the fear among many Americans that the mass unemployment of the Great Depression might return after World War II and to provide for economic growth. The idea for the bill emerged from the National Resources Planning Board, the New Deal’s official planning agency, which in the early 1940s promoted the idea of “full employment” as a postwar goal. It also reflected President Franklin D. Roosevelt’s call in 1944 for an “economic bill of rights,” which included “the right to a useful and remunerative job.” Progressive labor and farm groups were also actively lobbying for legislation to promote government-guaranteed full employment, as were leading economists influenced by John Maynard Keynes. When the bill was introduced in Congress in January 1945, it was titled the Full Employment Bill. It called for the president to adopt economic policies that would create jobs for anyone who wanted them by using compensatory federal spending to create jobs if the private sector appeared unlikely to generate enough employment. President Harry S. Truman supported the measure after Roosevelt’s death, as did most New Dealers in Congress. However, after the mid-term elections in 1946, not enough New Dealers remained to enact the original bill.

   After strenuous opposition from employers, who feared that a full employment economy would drive up labor costs, conservatives in Congress diluted the legislation, and the phrase “full employment,” disappeared from both the title and body of the bill, as did all the specific policy requirements that gave the phrase meaning. However, the act did require that the president issue an annual economic report indicating the state of the economy and outlining the government’s economic goals and means of achieving them. The Council of Economic Advisers did at times encourage presidents to choose policies that promoted economic growth. Thus, while the Employment Act did not guarantee full employment, it did help make fiscal policy an important element of economic planning and indicated that the federal government would continue to have a central role in ensuring the nation’s economic well-being in the postwar era.