On November 11, 1971, President Richard M. Nixon and Charles W. Colson talked on the telephone from 5:25 pm to 5:50 pm. The White House Telephone taping system captured this recording, which is known as Conversation 014-053 of the White House Tapes.
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Yes, sir, Mr. President.
Any report on the pay board?
Well, no, they're still working, and it's been going on back and forth all day.
Good meeting, though, this morning with Meany, and attitude is very good, Mr. President.
I think if they come out of there today with some kind of a reasonable regulation or reasonable compromise, that we'll be fine.
As a matter of fact, we may be fine anyway.
I don't know whether you...
I've had a report on this, but the Building Trades Convention is going on, and our fellows down there have been doing a bang-up job.
The statements are coming out supporting Phase 2.
They are not sharing in Meany's criticism.
A couple of them are, but the heavyweights down there are saying that they're going to stick with the thing.
Now, Meany, as you know, is most responsive to the building trades.
He came out of the building trades and
They're the biggest part of the AFL, and I think they may be extremely helpful in holding this in place regardless of what happens today.
We did get a week's delay, as you may also know, in the legislation in the Congress that would have rolled this.
In other words, the bill coming through Patman's committee that contained the amendment that reversed the decision of the pay board on retroactivity.
has been stalled for a week.
So that gives us time to work it out ourselves without having the Congress undercut the pay border, without having the committee put out that legislation.
So I feel, I must say, I feel better about it today than any time this week, mainly because the pressures on Meany are very great.
Now the situation, incidentally, with regard to both the pay and the price board is that they have to be in by next week, isn't that right?
No, I'm sorry.
By the end of this week.
By the end of this week, yes.
The price board came out today.
How'd they come out with it?
Is it all right?
Yes.
In fact, I think that if the goddamn jackass business community reads it right, they will see that...
I don't expect that.
I've got some thoughts on that, how we can shake those guys up a bit, which they need.
But no, the pricing came out very, very well.
And Grayson is a good fellow.
He handled it beautifully.
It's a 2.5% for the year as a whole, in other words, the whole economy.
And he makes it very clear that there will be some prices that will not go up.
Some will go down.
Others will go up more than 2.5% because we're going to take into account everybody's freeze profit margins.
Now, business should read that as a very encouraging thing.
This has to come out.
Let's see, the price decision is today.
The pay regulations will be tonight or tomorrow.
Depends on how long they keep going in the negotiations.
The standards yesterday were very well received because they exempted a hell of a lot of people.
In other words, they're not as...
I mean, with the page tatters.
Well, both.
It applies to the kinds of companies that have to be submitted.
That, on balance, should turn out...
I think it should start... We're never going to get rid of the uncertainty.
The thing that the business community has got to understand, and I think I have some ideas on this, is that uncertainty is just part of the freeway of life.
Exactly.
And businessmen have never had anything certain, for Christ's sakes, if they...
Go back to the history of business, men have always gambled.
That's the norm.
Well, I'll tell you, we just got to take that, how much the market go off today.
Oh, about like yesterday.
Another 11?
No.
I have a 3 o'clock figure here that was down 9 points at 3.
Well, that's that.
I don't think I can get the closing figure.
I don't care.
I don't care.
It...
But they still say it's uncertainty that does it, huh?
That's what the press is saying about it.
Oh, here it is, Mr. President.
Yeah, what's the closing?
11.
Ended up at 815.
Yeah.
That's what the press is saying, and that's what is being reported, and I don't believe it.
What do you think it is, then?
I talked to Cleary this morning, who...
I still think is the soundest guy on Wall Street.
And he said, hell no.
Larry of what?
Of Eastman Dillon.
Eastman Dillon.
Oh, yeah, yeah, yeah.
And a tough Irishman, and he's been very perceptive over the years.
He said, no, it isn't that.
He said, sure, there's a little uncertainty, and businessmen are being jackasses.
But he said, what is happening?
There hasn't been much money flowing into the equity market.
In fact, there hasn't been any.
And
You have a situation where a lot of institutions are liquidating because they figure next year is going to be a boom and they want cash on hand.
That's been a historic pattern.
The market was too high, and this is adjusting downward.
And lack of liquidity.
Now, you said that the signs that money will be eased
the discount rate being reduced.
Had no effect, though.
The discount rate was reduced, so the market goes down again.
Well, he made an interesting point.
He said the discount rate right now is one full point above the regular, the government bond rate, and he said the government security rate.
And he said when that's the case, you have a hell of a job with people in the equities market.
I don't quite understand the interrelationship fully, but he was saying that
that while the discount rate has been reduced to five and a half, that we're selling short-term government securities at four and a half.
And he said, that's just
There's an imbalance.
And he said, when Burns loosens up, the thing will take off like gangbusters.
And he said, we're all hoping that... You just told me what... Did he go to Wall Street yet?
He went there this noon.
Cleary was going to the luncheon.
Probably the damn thing went down because of Burns.
Well, what they're expecting, Mr. President, is that he's going to ease it more.
In other words, they took yesterday's, according... Talking to one person is probably a bad idea, but...
They took yesterday's announcement as being the first of several steps yet to come, and when those happen, then they'll step up.
Now, the other thing that's happening is that the business community is not investing until they see that the tax bill passed.
Jesus Christ.
Isn't that wild?
What a bunch of goddamn...
timid little little bastards.
That's unbelievable.
The tax bill is going to pass.
They all know that.
And I'll tell you when it passes, they'll say, oh, well, we discounted that already.
No, I don't think so.
The machine tool industry, we talked to some of their fellows this week.
They have orders all signed, delivered, undated, and they've instructed machine tool companies on the date of passage of the tax bill, put the date on it, go ahead.
They've got a huge backlog.
ready to go when the tax bill passes.
And it sounds, of course, idiotic to those of us who have been around here, but I suppose in the business community, when they don't understand these kind of things, they're just gonna play it very safe.
We'll snap them out of this.
I kindly speaking in New York on Tuesday, and another thing that hurt the market yesterday,
is that there was a rumor going around that he had a major economic policy statement.
That's not true, is it?
It's not true, so far as I can find out.
And they thought it was going to be a negative or bearish statement or something?
Well, he might do something about the world monetary situation, and they don't understand it, and they're confused.
The market thing, look, it'll turn around.
Just keep our confidence.
Oh, of course it will.
But I do think Conley, Mr. President... How about Reagan?
Have you kept in touch with him?
He's a good man up there.
They run good ads anyway.
He must be worried.
He's a hell of a good man.
No...
He's still bullish on America.
Flanagan said...
I guess Flanagan talks with him mostly, and Flanagan said that he reflects the concern over the international situation, that if there's a recession in Europe, that that's going to have its rub off on us and hurt our business boom.
Right.
right and uh whether it isn't going to be or going to work so so hell and that's that's that is this isn't going to hurt our boom that much either anyway the thing that i think conley can do on tuesday and i'm going to send him a note so that he has it when he gets back and he's just the kind of guy that can do this is just kick the business community right square in the groin and say what the hell's the matter you fellows that's exactly right you have you have these things going you have every consumer
Forecast confidence index rising you have concerned you have retail sales going And you have a huge market out there and you're cutting back on advertising and you're cutting back on the things that sell for America and It will be the first time in history that business hasn't anticipated a huge consumer demand and by God get off here people are at a business that's in business always get the line in business to its great credit over the 200 years of this country's history and
has always been ahead of the people, and they have forecast what people will do, and they lead the people.
Now business, the people are ahead of business, and businessmen are leaders.
They should lead and not be followers, and now the people are leading the business.
There's little of that.
He's good at that, you know, and he's got a bit of that populist pitch in him, and I think he...
I think he could do this.
I think the Vice President could do it at the right time.
I have thought about getting the NAM fellows in here and telling them that they've got to get out and kick their own people right smack in the...
Well, you know, we have, on the other hand, looking at Main Street business, the Chamber of Commerce people, as you recall in their poll, were still pretty good.
Yeah, but you see, they reflect the people.
They reflect folks.
That's exactly my point.
It's really, Chuck, as I said, the leader types.
It's the leader business types are the ones that are sitting on their butts and so forth.
It's the 200 top business leaders in the country.
It's the business council group that...
Oh, they're a sad bunch.
Oh, God, don't worry.
They're a sad bunch.
The only thing that I...
It doesn't worry me, Mr. President, because the people...
I am convinced that the consumer will give the economy the boost.
The only thing that you have to worry about is the lag time, the lead time.
In other words, business, if they don't get off their ass pretty quick, the impact won't be felt.
There'll be a hell of a buying demand out there, but if you can't get the products and there isn't the inventory...
There's just too much lag.
We have another two months before that's even a cause of concern.
The other thing is, too, is to keep the heat on Arthur on this money supply thing.
Now, Flanagan and the others have his Wall Street friends badger Arthur at all the pieces.
We have that going on steadily.
Do we?
Yes, sir.
And we know that's having an impact, and we had people up there today
at this luncheon who were going to hit him hard on it.
No, I think you, frankly, I think you did that job.
I think that... Well, I've told him, but I don't know what's going to happen.
No, I think clearly you did.
I think the... To the extent that money supply is the problem.
I'm not sure it is, Chuck.
I'm not sure it is liquidity.
I'm not sure it is money supply.
I know that's the Schultz theory.
I'm inclined to think, by God, it's the psychology of the goddamn businessman.
Well, it can be both, Mr. President.
Well, it could be.
No, I...
Clearly, in the market, the money supply is a problem, because when you see the volume dropping off like this, and yet you see consumer confidence... How big is the volume today?
Oh, let's see, at 3 o'clock, 11 million shares.
It's nothing.
And it's been every day, just inching over 10 million shares.
So it isn't...
And yet the consumer confidence is very high.
And Cleary said the same thing.
He said all of his customers, they're perfectly content.
But people are not going into mutual funds, and institutional investors are reducing their portfolios.
That's liquidity, whether the Fed pumps the money in or whether the consumer does.
It's money in circulation and going into the equity market.
Personally, I think it is a psychological problem with business a hell of a lot more than it is the money supply, but you need both.
You know, they always use excuses.
Gosh, I remember two years ago they said it was Cambodia.
Well, it wasn't Cambodia.
God damn it, you know.
And then they'd say, well, it's uncertainty over foreign policy, and then it's uncertainty over liquidity, and then it's uncertainty over this or that.
And what it really is, it's these goddamn business people.
I mean, this economy's been pretty damn good.
The consumers, as Schultz has said, have been the heroes of the whole thing.
They've kept right on buying, right?
Yes, sir.
This year, they're buying cars, and they're buying houses, and they're buying in the retail stores.
Well, Senlinger has predicted another million car a month for the month of November, and he said the automobile companies agree with him.
Now, you can't sustain that, but...
That's a hell of a shot in the arm right now.
And of course it will continue.
I think really what has to happen, I coincidentally had some of the Union Carbide people in here today saying they wanted to help us politically.
And I said, you guys can help us politically.
Go out and tell the goddamn business community to get off their deaths.
And they said, yeah, that's exactly right.
We're just sitting sort of waiting for somebody to tell us what's going to happen.
And
If you give them a little pep talk, and I think some of our fellows now have got to start doing this.
I think really Connolly, when he comes back, could be damn good at this.
I should talk that way, Connolly.
Too bad, well, anyway, McCracken, because he's doing anything.
He can't just bring himself up to being confident.
No, sir.
He can't.
Well, he can't.
inspire people.
The Vice President can do it.
He's speaking to the NAM two weeks, three weeks.
Yeah, he's doing their speech.
Well, good.
Yes, sir.
And I thought I would...
He's asked me for some suggestions, and I thought I would give him this and tell him here's an opportunity where he could... How about Stans?
Well, Maury left for Russia today.
He's gone for a couple of weeks.
Maury would be good at it, but we've lost him.
But Conley next week, Conley does this damn well, and I think we can
lay the problem out for him.
I think get him excited and maybe he'll rattle their cages.
We're glad we're getting back from his trips.
And we can start working on these international things.
This crap about the international stuff, that's going to pass.
I mean, I'm always amused by people saying, oh, Christ, there's going to be a recession in Europe.
And what are we going to do about the surcharge and so forth?
Just wait.
I mean, they get too excited about these temporal problems.
Well, when you think about the economy today and compare it with previous times, times are goddamn good, but business people have got to learn nobody buys anything, they're sold things.
They've just got to get that American spirit back.
We got along very well today in the Senate.
Wasn't that a marvelous fight?
particularly the Senate Amendment thing and then the rest.
The Senate, in other words, had to turn around full tail, particularly on military assistance.
The thing that's ridiculous, Mr. President, yesterday the economic aid goes through by an overwhelming vote.
Today, by 48-42, we add $381 million to the military aid bill.
And yet the damn...
Senate voted the whole combined package down.
There's no way you can equate those two things other than to show what jackass is there.
Now that's a help to us to have that back.
What is the situation, except for Elliott Janeway, as far as economists are concerned, and I guess this Katona at Michigan is bearish, too, isn't he?
Well, Michigan historically is, because they do a year-to-year survey, and there's no way they can pick up trends.
In any event, but beyond that, the time-life fortune, most stuff is fairly bullish for next year, is it not?
It's very bullish.
And they're basing that on the consumer stuff.
They can't be basing it on the goddamn market.
No, that's the irony of it.
We're in a period that I don't think really there's any historic parallel for.
I don't think this ever happened before.
You've got every economist from Orla Heller and Galbraith and over to Alan Greenspan on the most conservative side.
All of them saying that next year is $100 billion growth in the GMT, a real growth of 6%.
Extraordinarily bullish.
I've never seen a year when all of the economists were so unanimous in projecting a hell of a year for next year.
And you've got all the consumer indexes and you've got the retail sales and you've got all of these things and you've got the goddamn business community in a state of paralysis.
And it really is a very...
It's a very unusual, it's a very unique situation, and it comes from there having had it too goddamn easy for too long.
I think you're right.
Fortunately, that affects jobs.
Well, anyway, it'll pick.
It's got to go up.
Of course it will.
Of course it will.
As a matter of fact, Mr. President, I think really that... We'd rather have the blip later than blip now, that's for sure, but...
We keep Burns going.
That's the main thing.
Well, that's a key point.
Another key point is that Rumsfeld, by the way, has done a damn good job this week.
Has he?
I've heard that he has.
Oh, he's done a very skillful job.
This is where being a politician is useful because he got this price thing put together beautifully.
He hasn't been much help on the pay board because he doesn't have the contacts.
But
But the way he's handled the flow of publicity, and I think on all of the regulations, has been very good.
I think the net effect of this week will be they can argue uncertainty because there's uncertainty always, but they can't argue it over phase two because he's done a good job of getting it out.
And that will sink in.
I think it may be that they're right at the point where they'll begin to realize that this thing is working.
the regulations.
Well, they'll turn from this now the international situation, you know, which has nothing to do with most of them.
No, that's right.
That's the way they are, though.
And you're exactly right.
That's the line that this week is beginning to develop is that, well, it's the international problems and concern over the international monetary situation, concern over a recession in Europe.
And they're getting away.
That's right.
You hear less of Phase 2 this week, uncertainty, because we're putting out all the standards and guidelines, and they're good guidelines.
Yeah.
They're bullish guidelines, really, over to now talking about the international stuff.
Exactly right.
Yeah.
We'll knock it out of the box then.
We will.
I'm going to start, as I say, I'll talk to Conley and the vice president and some others, and we'll start getting our fellows to shake them up a little bit.
That's all it takes is make them think about it, kick them a bit.
Yeah.
All right, we'll try that.
Okay.
We'll do it, sir.
Thank you, Mr. President.