compensatory spending

Humphrey-Hawkins Full Employment Act

The Full Employment and Balanced Growth Act (, Humphrey-Hawkins Full Employment Act), is an act of federal legislation by the United States government.

Impetus and strategy

Unemployment and inflation levels began to rise in the early 1970s, reviving familiar fears of an economic recession. In the past, the country's economic policy had been defined by the Employment Act of 1946, which encouraged the federal government to pursue "maximum employment, production, and purchasing power" through cooperation with private enterprise. Some Congressmen, dissatisfied with the vague wording of this act, sought to create an amendment that would strengthen and clarify the country's economic policy.

As before, Congress turned to Keynesian economic theory for a solution, which emphasized economic control through manipulation of demand-side factors. In particular, the government can minimize the shock of business fluctuations by compensatory spending, essentially inserting government investment money where private money used to be.

Furthermore, Congress encouraged the government to develop a sound monetary policy, controlling inflation and pushing toward full employment by managing the amount and liquidity of currency in circulation.

As a last resort, Congress believed that unemployment could be temporarily relieved by the creation of government jobs as they did during the Great Depression.

Finally, Congress sought to involve more elements of the federal government in the economic policy process, and to clarify the role of those elements that were already involved. In particular, the central bank of the United States, the Federal Reserve, and the Presidency.


In response to rising unemployment levels in the 1970s, Representative Augustus Hawkins and Senator Hubert Humphrey created the Full Employment and Balanced Growth Act. It was signed into law by President Jimmy Carter on October 27, 1978, and codified as 15 USC § 3101

The Act explicitly instructs the nation to strive toward four ultimate goals: full employment, growth in production, price stability, and balance of trade and budget. By explicitly setting requirements and goals for the federal government to attain, the Act is markedly stronger than its predecessor. {An alternate view is that the 1946 Act concentrated on employment, and Humphrey-Hawkins, by specifying four competing and possibly inconsistent goals, de-emphasized full employment as the sole primary national economic goal]. In brief, the Act:

  • Explicitly states that the federal government will rely primarily on private enterprise to achieve the four goals.
  • Instructs the government to take reasonable means to balance the budget.
  • Instructs the government to establish a balance of trade, i.e. to avoid trade surpluses or deficits.
  • Mandates the Board of Governors of the Federal Reserve to establish a monetary policy that maintains long-run growth, minimizes inflation, and promotes price stability.
  • Instructs the Board of Governors of the Federal Reserve to transmit an Monetary Policy Report to the Congress twice a year outlining its monetary policy.
  • Requires the President to set numerical goals for the economy of the next fiscal year in the Economic Report of the President and to suggest policies that will achieve these goals.
  • Requires the Chairman of the Federal Reserve to connect the monetary policy with the Presidential economic policy.

The Act set specific numerical goals for the President to attain. By 1983, unemployment rates should be not more than 3% for persons aged 20 or over and not more than 4% for persons aged 16 or over, and inflation rates should not be over 4%. By 1988, inflation rates should be 0%. The Act allows Congress to revise these goals as time progresses.

If private enterprise is lacking in power to achieve these goals, the Act expressly allows the government to create a "reservoir of public employment." These jobs are required to be in the lower ranges of skill and pay so as to not draw the workforce away from the private sector.

Perhaps most interestingly, the Act directly prohibits discrimination on account of gender, religion, race, age, and national origin in any program created under the Act.


The language of the Full Employment and Balanced Growth Act was amended twice by riders attached to unrelated or distantly related legislation.

  1. May 10, 1979: Public Law 96-10, attached to H.R. 2283, amended the Act to include Federal outlays as a proportion of the gross national product when calculating numerical goals.
  2. November 5, 1990: Public Law 101-508, attached to the Pollution Prevention Act, required the Economic Report to the President to be submitted within twenty days after the start of the session of Congress instead of within ten days after the submission of the annual budget.

See also

External links

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