FULL EMPLOYMENT ACT OF 1946

The Full Employment Act of 1946 sought to strengthen the economic gains to the U.S. economy that had resulted from massive government spending during World War II (1939—1945). Applying the theory of British economist John Maynard Keynes, who argued that intensive government spending was necessary to end economic depression, President Harry S. Truman (1945–1953) proposed a 21-point program in 1945 to boost the U.S. economy. The plan called for full employment legislation, an increased minimum wage, and better unemployment and social security benefits as well as housing assistance. Truman believed the bill would ensure that the country would not slip back into depression because it allowed the initiation of remedial action, such as tax cuts and spending programs if economic indicators shifted downward.

The Full Employment Act as initially proposed won the strong support of labor as well as liberal politicians, but was fiercely opposed by industry. The National Association of Manufacturers condemned the bill as a socialist measure and argued that government intervention would threaten free enterprise. To placate the business community, Congress cut several key elements of the bill before finally passing a severely truncated version of Truman's proposed legislation. The Full Employment Act passed by Congress in 1946 created a Council of Economic Advisers to report to the president, but failed to authorize governmental intervention to maintain full employment when economic indicators signaled a recession. Instead of giving government the strong role that Truman wanted, the act allowed it only a modest role in economic planning.