Nixon phone call with Colson on Consumer Price Index and Wage-Price Freeze

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Hello.

Good evening, Mr. President.

Any late developments today?

Well, we caught a bad headline in the Star tonight on the CPI story, I guess, as we expected.

But the wires are generally running pretty well.

I'm not too concerned.

And Hodgson did have a good press conference.

They worked him over pretty hard, but I understand he hung in and explained why this figure is really unrelated to the freeze.

I get into it in depth with them last night after I talked to you, and I now understand the problem.

They only select certain items and they take it over a period of months, so it may never show up in the CPI the way it should.

That's just the way the CPI is calculated.

So we're developing a system today as a result of this

try to do a separate measurement of major prices from August 15th, say, to October 1st, and then October 1st to November 1st.

We're just going to have to use some other arrangement, the way BLS does the CPI.

It's so confused that it probably will never really show the full effect of the freeze.

And Hodgson tried to explain this.

The wires ran very good.

The only thing that thus far we've had is kind of a poor star headline, but

well the stars is usually another on the economic side chuck they've always been pretty bad they really have it's uh it's hard it's lee cohn you know and that bunch i guess he he's of course he's a bit he's a son of a gun but uh yeah we've never gotten a break on the star headlines i must say and that's the first thing we see so we react to that but oh hell i wouldn't worry about it no i've talked to some people this afternoon who said that the more sophisticated people who said they

They understand how the CPI works.

Of course, the public doesn't, so we'll just hope the television carries Hutch.

Well, they'll say that the administration probably got disappointing news, that sort of thing.

Is that what you mean?

Of course, it hit the market also today because... How much did the market drop?

Well, this is what stresses me.

At noon, it was holding its own.

It was down a couple of points.

six million shares, then the wires carried the CPI story and it dropped nine points.

Nine more.

Well, no, a total of, went off a total of nine today.

Yeah.

But it's strictly the story.

Yeah, it shows you how sensitive it is.

Well, I think you can, of course, oh yes, it does.

I mean, that's the success of the freeze is what

those fellows up there watch, and a story like this throws them off, and then tomorrow they'll all figure it out, and it'll go back up nine points, or it'll recover it.

It'll recover some.

You'll undoubtedly get a question on it tomorrow night, so I have put a memo together, which I'll get into you on how this system works.

It does not reflect, the CPI does not reflect what happened in the month of August.

It reflects basically what happened in the months prior to August, and it

takes selected items over a period of time, some of which are under the freeze, some of which aren't.

It's a one-day shot, I think.

Yeah, but we have to play it that way in any event, because we know the freeze is working.

Of course it is.

You know, NBC... Everybody knows it's working.

I don't know whether you read the news summary today.

You probably haven't had time.

Yeah, I read it.

That retail sales thing that NBC did last night was absolutely sensational.

I had a rerun today.

I couldn't believe it.

where they were interviewing purchasers, consumers in the department stores and people in automobile lots.

Everybody's saying that people are buying and the attitudes are good and the consumer confidence is back.

That, of course, has more effect on the public when they see that on television for a four-minute clip, which it was on NBC.

That's very unusual for NBC to give us that.

I couldn't believe it.

It was really one of the best things they've done economically

from our standpoint this year.

Well, they ought to get some credit for it.

Well, I thought about calling them, but maybe I will.

William Goodman said that we were very pleased to see that story, you know.

That'll give them a little encouragement, because they're usually the toughest guys.

Oh, boy, particularly on that side.

CBS is bad in the war, and they're bad in the economy.

But that was four minutes of the best advertising we could ever have.

It's people walking through stores and

and interviewing store clerks.

We've got something going on this tomorrow, so we've got a bunch of gals that Virginia Now has organized that are going to start out in the supermarkets and get petitions signed, and we've got the networks alerted to it.

Hope Lewis's group is doing this, and they've...

Petitions signed for what?

Well, supporting the freeze, showing that housewives are behind it, and some interviews with store owners...

saying that they're holding the prices.

Well, the thing on the CPI is just to knock it down in terms of saying, well, it doesn't reflect the freeze, period.

That's right.

Categorically.

And if you read the copy in the Star, it says that.

Hodgson made it very clear.

Looking to see if I have his wires here.

Yeah, his press conference was excellent.

And, of course, the gasoline price increase came before the freeze, and that was the major element in it.

Hodgson

in fact said it showed a continuing trend to lower increases than last year and oh there was no increase in food at the supermarkets for the first time in this year yeah and you know i i have some i have some very very grave doubts about that goddamned uh bls though that's i just think that they may have deliberately jiggered this figure

this one particularly.

Just as they jiggered the unemployment last month.

I think they did.

This Friday is the day that the change takes place over there.

I raised hell with our fellows this morning about getting our new man in.

They apparently have been narrowing it down to two people and haven't decided which one.

Just get a goddamn good loyal partisan and put him over there because

It's absolutely clear that they can do what they want.

There's just no question of that.

Absolute law unto themselves, and they can...

I personally think that it's a hell of a lot better than we think.

You know, I think, for example, on the unemployment thing, I think that, as you said, those New York statistics just are not consistent with the national statistics.

No, and I now find that every state, it's the same thing.

After I talked with you last night, I got...

Matt is a hornet, and I got Hodgson.

We talked for an hour at 11 to 12, and he can't explain it.

He said, well, the state figures aren't as reliable as ours.

And I said, God damn it, Jim, maybe ours aren't as reliable as the state's.

That's right.

And if we're going to give the benefit of the doubt, why the hell do we always give it to the high side?

I think I shook him up a bit.

Of course we give it to the high side because these people want it to appear bad.

Well, it is.

There isn't any question.

I had a

a couple of businessmen in from Boston this afternoon.

They said, gee, things in Boston are really good.

He said, we don't know where we find this talk.

Bob Finch this morning said that same thing in Los Angeles.

The figures, the local figures, aren't nearly as bad as ours.

They're not as bad, he said.

That's right.

And in the final analysis, Mr. President, we both know it's what's actually out there.

Yeah, it's what people do and show for it.

The CPI figure, of course, it's one day, and

Fortunately, I think it's good that I'm going out tomorrow and making a talk.

Perfect timing.

Just kick him right in the ass.

Sure.

It's an ideal opportunity to knock that down.

Yeah.

But the feelings are still good out there.

Well, we'll get a good continuing battle.

A good lift out of the bill being reported out when Ways and Means does that.

I think that even though it will be changed slightly, it isn't going to be.

No, they won't hurt us.

When will they come out?

Well, they're shooting for the end of this week.

And Conley said yesterday they were moving very fast.

The reports I get are that it will be the Friday or Russ Sienkowski keeps Bradshaw informed.

And he said he thought they would make this Friday.

They may.

be over until next Tuesday, but no later than that.

And Mills wants it on the floor and out by the end of next week, which would be quite a feat if he does it.

And that, of course, gives us a hell of a good boost when that happens.

That ought to help the new orders and everything, you know.

That's the thing there, that all of that is going to be affected.

The business people are not going to...

I mean, they're going to act based on what they see happening, not simply on the basis of what we've asked for.

That's right.

Whereas...

I think the consumer is going to still be the hero of this whole thing, though.

Damn it, he's going to buy.

I do, too, Mr. President.

He's up higher, there's no question.

I noticed, though, that in looking at the news summary, I made a note that Sendlinger doesn't report much change, he says.

Just a little up, but it's up, but not much.

Oh, no.

Well, I don't know whether he was accurately quoted, because I talked to his people yesterday and got it.

What he said was that...

It is well back up from the summer when it was down to 117, but not above the recession level of last year, which it isn't.

But relatively speaking, it took a bounce back that made up for about a six-month decline.

Consumer things, though, those polls don't prove what consumers are going to do each time either.

That's the other thing.

No, and his index isn't always that reliable.

What he showed was a steady four-week increase back to the levels of January of this year, which he considered the bottoming out of the recession.

But you have to take into account that we had dropped very substantially in the months of May, June, and July.

He had us at a real tailspin there.

We've turned that around, but it isn't back above

where it was a year ago.

On the other hand, Passer says that all the statistics that he keeps getting in show very steady and very solid, and he says very encouraging on retail sales.

They didn't go skyrocketing after April 15th, but they've been holding up every week consistently 8% and 9% above last year, which is, I mean, that's damned healthy.

Yeah.

On the CPI thing, as I said, we just can't live and die by these monthly numbers, particularly when we do not consider them reliable.

But do they really think this new guy is going to do better?

I don't understand why Hodgson and Schultz can't ever convince themselves that bureaucrats are bastards.

It's just hard for them to do it, isn't it?

Well, they haven't worked among them.

I...

I did in the early days of the Eisenhower administration.

And if you see these guys operate, you know what they can do to you.

Sure.

You know what they're going to try to do.

Hodgson is new to government.

I can understand.

I gave him a pretty good going over last night.

I'm sure he's back there looking at it today.

But, yes, to answer your question, a good guy in there can challenge some of these things when they come up with them.

Now, this particular figure today, it just happens to be whatever items they selected for sampling, and they do it over a three-month basis.

They check from May, June, July, August.

Oh, I see.

So you never get a one-month change necessarily in there.

You get an accumulation of changes over a period of months.

And Hodgson explained that today.

He did a very good job on that.

Okay.

Well, anyway, we'll knock her down.

And I think as far as the market is concerned, I wouldn't worry about that.

That basically reflects really they're just that way up there.

Oh, hell.

Anything will knock them down.

You know from being up there, they sit around watching that broad tape and they see prices went up in August and bang.

And then tomorrow they come in and...

They've read the New York Times or the Wall Street Journal explanation.

Maybe they change.

Sure.

That's so characteristic of those guys.

They will be more affected, of course, rather than by this.

They'll be more affected by some good news in terms of the tax thing.

I think that'll help them some.

Well, that's the real thing they're all waiting for.

Everybody I talk to says, if you get your investment tax credit, then we know goddamn well that

People are going to, business is going to go into heavy investments.

And we know what that means.

That expands the economy.

No, that's right.

When that comes through, that really will trigger them.

They're all planning on that, as a matter of fact.

I understand all the institutional investors have been trying to get liquid because they expect a big surge when that goes through.

So that's, no, that's totally predictable.

Mm-hmm.

Okay.

Bye.

You'll hit them tomorrow night, sir.

Oh, well.

Yeah, well, we'll see what it does.

Bye.

Thank you, sir.

Nixon phone call with Colson on Consumer Price Index and Wage-Price Freeze

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Nixon Library Finding Aid

Also recorded on September 22, 1971

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