Humphrey Hawkins Act - Explained
What is the Humphrey Hawkins Act?
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Table of ContentsWhat is the Humphrey-Hawkins Act?What was the purpose of the Humphrey-Hawkins ActAcademic Research on Humphrey-Hawkins Act
What is the Humphrey-Hawkins Act?
The Humphrey-Hawkins Full Employment Act, more formally known as The Full Employment and Balanced Growth Act, was passed in 1978 to amend the Employment Act of 1946. The purpose of the act was to give clarifying instructions on the use of government spending, job creation, and controlled monetary policy to create economic demand in the system and smooth out economic peaks and falls inherent in the private market.
What was the purpose of the Humphrey-Hawkins Act
The Humphrey Hawkins Act was passed to provide instructions to the government on using spending, job creation, and monetary policy to avoid economic downturns, such as the one suffered during the Great Depression. The idea was that the Government could boost of economic demand by selective spending in cooperation with private industry. The Acts objectives rest in Keynesian theory. Keynes asserted the Governments can augment demand and can minimize shocks in the financial system through selective spending. The Humphrey Hawkins Act called provided the Government with authority to reduce employment by creating temporary government jobs. It also, expanded Congresss ability to control aspects of monetary policy - which is traditionally reserved to the Federal Reserve Board. The Act Laid out 4 goals:
- Full Employment
- Growth in Production
- Price Stability
- Balance of Trade and Budget
The Act further adds that, in achieving these goals, the Government should:
- Allow private enterprise to lead the way in achieving these goals;
- Attempt to balance the budget;
- Attempt to have balanced trade;
- Mandate the Federal Reserve Board of Governors to purse monetary policy that produces long-run growth, minimizes inflation, and promotes stability.
- Mandate the Federal Reserve Board of Governors provide a Report on Monetary Policy to Congress two times per year;
- Mandate the President set numerous goals for the economy and policies to achieve them within the Presidents Economic Report each year.
- Mandate the Chairman of the Federal Reserve to align monetary policy with the economic policies put out by the President.
The Government was authorized to create a pool for public employment in the low-income, low-skill areas sufficient to raise economic demand.
- Interestingly, the Act put in place economic targets that were to be achieved by specific years. The Act allowed Congress to revisit and amend those goals. In reality, very few or none of those goals were achieved within the stated time period.
Academic Research on Humphrey-Hawkins Act
- Historical Amnesia: TheHumphrey-Hawkins Act, Full Employment and Employment as a Right, Ginsburg, H. L. (2012). Historical amnesia: the Humphrey-Hawkins Act, full employment and employment as a right.The Review of Black Political Economy,39(1), 121-136. The article briefly explores some New Deal job-creation efforts and President Franklin Roosevelt's proposal for an Economic Bill of Rights. It then focuses on two major attempts to secure full employment through legislation.
- THE GROWLERY: TheHumphrey-Hawkins ActIs Being Violated, Hawkins, A. F. (1979). THE GROWLERY: The Humphrey-Hawkins Act Is Being Violated.Challenge,22(4), 55-56.
- Origins and Consequences of theHumphrey Hawkins Actof 1978, Dumas, W., Erdenemandakh, J., Karongo, L., Oh, Y. T., Teed, D., Wang, W., & Watkins, J. (2017). Origins and Consequences of the Humphrey Hawkins Act of 1978. This paper uses several statistical analysis methods to determine if there is a quantifiable effect on price stability or employment due to the passing of the Full Employemnt and Balanced Growth Act of 1978, along with discussion of any change in Fed behavior. Further comparisons are made to selected developed countries with central banking systems that have single mandates along with a compared dual mandate country.
- The Old Economic Rules No Longer Apply: The National Planning Idea and the Humphrey-Hawkins Full Employment Act, 19741978, Andelic, P. (2019). The Old Economic Rules No Longer Apply: The National Planning Idea and the Humphrey-Hawkins Full Employment Act, 19741978.Journal of Policy History,31(1), 72-100. This study acts as a guide for reassessing the understanding of the Democratic Party in this decade. It suggests that historians have erred in drawing a sharp distinction between the party's "New Deal" and "New Politics" factions and that the policy goals of those factions dovetailed more often than has been appreciated.
- An assessment of the" official" economic forecasts, McNees, S. K. (1995). An assessment of the" official" economic forecasts.New England Economic Review, 13-24.
- Does the Clarity of Central Bank Communication Affect Volatility in Financial Markets? Evidence fromHumphreyHawkinsTestimonies, Jansen, D. J. (2011). Does the Clarity of Central Bank Communication Affect Volatility in Financial Markets? Evidence from HumphreyHawkins Testimonies.Contemporary Economic Policy,29(4), 494-509. This paper tests whether the clarity of central bank communication affects volatility in financial markets by applying readability statistics to the HumphreyHawkins testimonies given by the Federal Reserve Chairman. The analysis in this paper illustrates the importance of transparent communication on monetary policy.
- THE EVOLUTION OFHUMPHREYHAWKINS, Schantz, H. L., & Schmidt, R. H. (1979). THE EVOLUTION OF HUMPHREYHAWKINS.Policy Studies Journal,8(3), 368-377. This article outlines the major changes made in HumphreyHawkins from its introduction in June 1974 to its enactment in October 1978, the contents of the Full Employment and Balanced Growth Act of 1978, and the politics surrounding its passage.
- Missing the mark: The truth about inflation targeting, Bernanke, B. S., Laubach, T., Mishkin, F. S., & Posen, A. S. (1999). Missing the mark: The truth about inflation targeting.Foreign Affairs, 158-161.
- Twenty Years afterHumphrey-Hawkins: An Assessment of Fiscal Policy, Lipford, J. (1999). Twenty Years after Humphrey-Hawkins: An Assessment of Fiscal Policy.The Independent Review,4(1), 41-62.
- Macroeconomic effects of aHumphrey-Hawkinstype program, Bergmann, B. R., & Bennett, R. L. (1977). Macroeconomic effects of a Humphrey-Hawkins type program.The American Economic Review,67(1), 265-270
- REFORMING THE FED: ITS INDEPENDENCE AND LESSONS FROMHUMPHREYHAWKINS, Barrett, A. (1991). REFORMING THE FED: ITS INDEPENDENCE AND LESSONS FROM HUMPHREYHAWKINS.Contemporary Economic Policy,9(3), 76-81. This paper examines how the current institutional structure, established by the HumphreyHawkins Act of 1978, performed when the supplyside tax cuts were implemented during 1981 and 1982. The findings reveal that authorities barely discussed the necessary policy coordination at the HumphreyHawkins hearings.