Humphrey-Hawkins

How the Phillips Curve Shaped Full Employment Policy in the 1970s: the Debates on the Humphrey-Hawkins Act

This article relates the history of economists’ influence in shaping the content of the Humphrey-Hawkins Act (1978) and its immediate consequences. The Act committed the federal government to reduce as soon as 1983 unemployment to 4 percent and inflation to 3 percent. Initially, the Humphrey-Hawkins bill was conceived as a project to favor economic integration of African Americans and economic planning, and only targeted the unemployment rate. The Republican senators successfully pushed for integrating a numerical inflation target during the debates in Congress in 1978. The Humphrey-Hawkins Act eventually appeared as a bill putting on an equal footing inflation and unemployment. I argue that the economists in Carter’s administration, and notably the CEA, were instrumental, even if unintentionally, in favoring the integration of an inflation target and such an interpretation of the bill. In the debates that opposed them to the supporters of the bill, as well as in the analysis of the bill they produced, they constantly referred to the existence of a trade-off between inflation and unemployment (the famous Phillips curve). They endeavored to anchor their expertise on academic publications, which strengthened the role of the Phillips curve in shaping the debates. Both the business organizations and senators used this reference to the trade-off to undermine the bill and favor the integration of an inflation target.