Leadership Focus
The Second Bill of Rights
The Full Employment Act
Franklin Roosevelt

 

Wikipedia, February 2007
The Second Bill of Rights was a proposal made by United States President Franklin D. Roosevelt during his State of the Union Address on January 11, 1944 to suggest that the nation had come to recognize, and should now implement, a second bill of rights. Roosevelt did not argue for any change to the United States Constitution; he argued that the second bill of rights was to be implemented politically, not by federal judges. Roosevelt's stated justification was that the "political rights" granted by the Constitution and the Bill of Rights had "proved inadequate to assure us equality in the pursuit of happiness." Roosevelt's remedy was to create an "economic bill of rights" which would guarantee:
  • A job with a living wage
  • Freedom from unfair competition and monopolies
  • Homeownership
  • Medical care
  • Education
  • Recreation

Excerpt from President Roosevelt's January 11, 1944 message to the Congress of the United States on the State of the Union

It is our duty now to begin to lay the plans and determine the strategy for the winning of a lasting peace and the establishment of an American standard of living higher than ever before known. We cannot be content, no matter how high that general standard of living may be, if some fraction of our people—whether it be one-third or one-fifth or one-tenth—is ill-fed, ill-clothed, ill-housed, and insecure.

This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights—among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty.

As our nation has grown in size and stature, however—as our industrial economy expanded—these political rights proved inadequate to assure us equality in the pursuit of happiness.

We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. “Necessitous men are not free men.” People who are hungry and out of a job are the stuff of which dictatorships are made.

In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all—regardless of station, race, or creed.

Among these are:

The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education.

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.

America’s own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens.

Roosevelt was never able to pass his broad bill, and his successor, Harry Truman, was forced to accept a more narrow bill aimed at making the government responsible for the economy; Tthe Employment Act (H.R. 2202, S. 380, 15 USC § 1021 et seq.) is a United States federal law. Its main purpose was to lay the responsibility of economic stability onto the federal government.

By the end of World War II, the nation was finally shrugging free of the drastic economic recession that had culminated in the Great Depression. During that time, unemployment rates soared into the twenties of percent, and only radical government spending seemed to curb further degradation. The U.S. Congress, fearful of another bout of unemployment spurred by the return of discharged war veterans, sought to establish preemptive safeguards against economic downturn.

The United States relied on Keynesian economic theory to develop its strategy. The theory, set forth by economist John Maynard Keynes, contends that unemployment is caused by insufficient aggregate demand relative to the possible aggregate supply generated by full employment. Swings in aggregate demand create a phenomenon known as a business cycle that leads to irregular downsizing and hiring runs, causing fluctuations in unemployment. Keynes argued that the biggest contributor of these shifts in aggregate demand is investment.

To keep aggregate demand fairly consistent and thus minimize the impact of business cycles, the government must keep the rate of investment reasonably constant. To this effect, the government should engage in compensatory spending to counterbalance private sector investment, minimizing its indirect effect on unemployment.

The original bill, called the Full Employment Bill of 1946, was introduced in the House as H.R. 2202 and introduced without change by Congressman Wright Patman in the Senate as S. 380. The bill represented a concerted effort to develop a broad economic policy for the country. In particular, it mandated that the federal government do everything in its authority to achieve full employment, which was established as a right guaranteed to the American people. In this vein, the bill required the President to submit an annual economic report in addition to the national budget. The report, designated the Economic Report of President, must estimate the projected employment rate for the next fiscal year, and if not commensurate with the full employment rate, to mandate policies as necessary to attain it.

There was strong opposition to the wording of the bill. In particular, a number of congressmen argued that business cycles in a free enterprise economy were natural and that compensatory spending should only be exercised in the most extreme of cases. Some also believed that the economy would naturally drive toward full employment levels. Others believed that accurate employment level forecasting by the government was not practical or feasible. Some were uncomfortable with an outright guarantee of employment.

The bill was pressured to take on a number of amendments that forced the removal of the guarantee of full employment and the order to engage in compensatory spending. Although the spirit of the bill carried through into the Employment Act of 1946 (hereafter referred to as "Act"), its metaphorical bite was gone. The final Act was not so much a mandate as it was a set of suggestions.

President Harry S. Truman signed the compromise bill into law on February 20, 1946.

The Employment Act of 1946 was a definitive attempt by the federal government to develop macroeconomic policy. Future economic policy was allowed to grow beyond the constitutionally defined realm of monetary and trade control and into the national economy at-large. Although Congress removed all of the quantitative markers from the final incarnation of the law, the Act keeps the original spirit intact and encourages the federal government to "promote maximum employment, production, and purchasing power." This clause set the foundations for future cooperation and communication between the federal government and private enterprise.

The Act requires the President to submit an annual economic report within ten days of the submission of the national budget that forecasts the future state of the economy, including employment, production, capital formation, and real income statistics. This Economic Report of the President, as the Act names it, sets forth future economic goals of the country and offers suggestions on how to attain it, a marked compromise from the original bill's focus on compensatory spending.

The Act creates the Council of Economic Advisers, an appointed advisory board that will advise and assist the President in formulating economic policy. It also creates the Joint Economic Committee, a committee composed of both senators and representatives instructed to review the government's economic policy at least annually.

Unemployment levels remained fairly steady after the passing of the Act. After 1970, however, the economy began to fluctuate and unemployment rates rose again. The same fears that motivated the creation of the Act in 1946 precipitated an amendment in 1978, entitled the Full Employment and Balanced Growth Act.  Some Congressmen, dissatisfied with the vague wording of this act, sought to modify the Act in a way 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.

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. 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, avoiding harmful trade 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.