Conversation 078-004

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What I would like to do today...

What I would like to do today, if I could have your cooperation, is that I would love to speak briefly with regard to the general outline of what we're going to apply.

Then, because I have to go get a few final touches done on the talk I have to make tonight, I would like to leave here and have John and the others fill you in on the details.

I'll have to let you begin by saying that as far as the details concern, after this meeting is concluded, of all the crackings, resign, leverage, or defaults,

We'll be briefing the press prior to my remarks at 7.30 on the technical aspects.

And John Connolly will have an on-the-record press conference tomorrow, as he did previously at the creation department at 12 building.

That is done.

It will be televised.

Now, let me tell you where we are and also indicate the extent to which your participation

in the previous meeting, has had its effect on our own profession.

First,

We have decided to continue the program for strength.

Second, that program, naturally, must have some budget at the end, hence it's a freeze on investment.

To your honor, many of you raised problems of teachers, deferred wages, and a lot of other things were problems.

And we have to deal with some of those problems in the long term.

The other things that we have in mind is that several of you, when you were here, raised the problem of interest rates.

We looked at that.

We're going to be speaking to that question later in this program.

Several others raised the problem of dividends, where we have a volunteer program.

And we're looking directly into that, and we have formalized something there.

And several of you raised the problem of profits.

which I will not go into these points in time.

You might want to cover reading the Our Father thing.

There's no proclamation or maybe the point that we did not want to excess profits tax, but we ought to not have windfall profits, which is basically the point that we have been wrestling with, believe me, very, very hard to know how to get at this problem so that if somebody who makes a concern that has its wages and costs, their strength,

and then has an unexpected growth in productivity or an expansion in volume so that you get a huge profit, even though its prices are also constrained.

What do you do about that?

Is it counter-effective?

A man as sincere as John McClellan was at a meeting the other day, and he said that you can't allow that sort of thing to happen, even though he is, this is most, I guess all of us are, we want to show that profits are effective in order to have new jobs, new investment, new business, to run the government.

Okay.

So what we have decided is that we have decided to set up first a price board.

It will be completely published in his foundation.

We have a group of very outstanding people who have kind of agreed to skirt it.

We probably have those names by now.

John will have those names by tomorrow.

We have most of them now, but I will not announce them tonight.

It will be, so now there's not a member of management, not a member of labor.

It means basically pretty much from the academic community.

So that's what you have to have in order to be sure that there's no, either the academic community or from political life, or providing political life in the sense that they are not in office, but they have been.

I can show you the type of school we've been looking for.

Second, first, the Price Commission will have its responsibility to train on prices.

It will also have its responsibility in the continuing program on rents.

And it will have its responsibility in the problem of windfall profits and what to do about them.

Then there will be a pay board.

The pay board,

I think you should know that we went through a lot of agonizing bumps.

On the one hand, there was the recommendation of the leaders that they wanted a board and they decided what was going to be done and they didn't have any government action here to override.

On the other hand, you had the representatives of business who, for the most part, came down hard on the side of, you can't have a board in which those that are going to be in control are making the decisions.

And so you ought to have an outside, you ought to be a government board, and they said some things of what they said.

What we have come up with is a tripartite board, business, labor, and government.

Now, we have come up with this for a reason that is quite understandable.

Some of you are perhaps, I don't see how you would not be aware of the fact that George Muniz has said critical things to say about

about our program, and I said, look, you will probably wonder, some of my political friends will wonder, why don't I answer you, and all that sort of thing.

Well, I'll answer good reasons not to.

The main thing is that what we want here is not rhetoric, we want action.

Now, if we're gonna have a program that works in terms of wage controls,

other than pass the freeze, and a freeze is the only thing that we want.

If we have government works, we've got to have a volunteer cooperation of labor.

If we can get it, if we can't get it, then we come up to the hard side, so we have to find some other means, and we do it all, and do that if we have to.

So we want volunteer cooperation.

We've been working very quietly, and George Schultz, my name, has reported that we've had considerable progress.

We think we're gonna get it.

Labor's participation on the wage, business,

public member board, a pay board covering both pay and salaries.

Then third, I've already mentioned our moving on the profit front, which we have not moved on previously.

Third, in the field of interest and dividends, Arthur Burns has agreed to have a committee on interest and dividends.

A committee on interest and dividends, a cash that will be primarily, shall we say,

moral suasion here, but with Merns heading it up, particularly the Hedges sisters, they're gonna have a great deal of clout, and of course, in the background, you can all see, because you know, under the law, I guess, the right view of some of you experts, you know, under the law, the Federal Reserve can move some way on the interest rates, and sometimes I don't understand it, John Compton, he has plenty of money, but anyway, Merns has said it, headed down.

We need that now.

For all of this to work, let me say first, it will require continuing public support.

We believe we have that.

It will require the cooperation of labor management and also of farmers and the cooperation of members of Congress and so forth.

We hope we can get that.

It also must have some sanctions.

You asked Alan last time about what kind of sanctions.

Well, we have them in mind.

But as far as the sanctions are concerned,

If this has to depend upon sanctions alone, it will break down.

I have a few bureaucracies which would pass itself when they come and do more harm than good.

But without sanctions, voluntary restraints simply aren't going to work because the good guys

will be good only as long as the 25% of the bad guys aren't making a problem.

That is why we are asking, and I would like to bring this back formally with you today, for a one-year extension of the wage stabilization, and that gives us a thing.

We are also, on the legislative side, going to ask for stand-by authority on interest and is that a correct job?

And John will explain the kind of legislation.

We will prepare the legislation in a second, send it down.

But I would like to be able to say that I am saying, even now that I am asking the leaders of the Congress to for this legislation and for you to consider it, we will send it down to you.

Let me come to a couple of things on the positive side that should be mentioned.

I'm sure that most of you saw the figures on wholesale prices that came out today.

This is really the best news we've had on the economic front and the inflation front for a long time.

Now, one month doesn't prove anything.

We always say that.

We get bad figures, so I'm going to say it because we get good figures.

But it is significant to note that wholesale prices went down

more than at any time in five years.

Industrial prices have the biggest drop in seven years.

Now, what does this mean?

What will the move mean in the next CBI?

Nobody knows.

What it means in terms of the CBI in two to three months from now is certain.

It's going to have some, of course, alleviating effect.

So the freeze is working.

or has worked, because this does reflect the briefs.

The CPI that came out a few weeks ago does not reflect it, except in certain items, and consequently was not a real test.

The next one will reflect it to a great extent.

The other side that I think I should report on, although I'm not covering this in this speech tonight, but you will see if you want to ask for it,

We have had, and Jack, I know you particularly raised this question of the international situation, and several of you from the agricultural areas raised it, about a month and a half ago about our surcharge as an international monetary thing.

And let me say, a lot of people were taking on John Tompkins, and he was too tough, he was Europe, and now we're not going to get anything.

Let me tell you.

Because I am like this very closely.

I don't go as sophisticated.

But I can say the last week in which the International Monetary Fund was here was, in my opinion, one of the most encouraging weeks on that front as far as the United States is concerned, and basically for monetary stability and fair and free trade in the world to leave at in 25 years.

I don't mean everything has been settled.

I don't mean that there are not any problems left.

The Germans particularly, the Japanese particularly, they're begun to show now the willingness to negotiate.

And that's what we want.

We want to negotiate.

We don't want to come to negotiations where our products get a fair shake.

First, we're opening markets abroad for our products and also

And that means not only with regard to non-tariff barriers, but particularly with regard to the devaluation and so forth of the monetary situation.

We've made great progress there.

It is well not to talk too much about that or talk anything about it.

But I can say that we are moving on that front very effectively and we are very hopeful about progress in that field.

this very strong action, this dramatic experience, which took everybody else up.

It made people feel, oh gee, is the United States going to be isolationist to the rest of them?

But as a result of that shakeup, they began to understand our problem.

And understanding is the first step toward agreement.

And I say this because John may be, shall we say, may not want to share with you his message, it's also ridiculous, but it has moved extremely well, in my opinion, and my reports come from not the central branches, but the political leaders of these countries.

We are going to be able to work something out, not next week, but in a reasonable time.

The final thing I want to say with regard to the program is that this would not have worked without the domestic support of the public and it would not have worked without the support of the Congress.

I know these votes that we've had in the Senate and the House this evening on the federal pay and the borough, they're darn difficult.

I know that I represent California in the Senate and many times there's a lot of government

There are more government workers in California than there are in Washington, D.C., federal government workers.

And so it is a problem.

But I do think that once you hear our program, it is a strong program.

It does have flexibility to agree to it so that we can handle cases of inequity.

But it does tend to hold.

One other thing I can say.

I know some of you were concerned with the fact that I, when I spoke to the Congress, that the 90-day freeze will end in 90 days, even after we realize it had to end then or sooner after.

This one, we are putting no term of aid on it.

I'm telling you here today, we have entered this fight with an instant, but we're going to stay until we do it.

However, I should also say to you that

While we put no terminal base on this, that it is our law that once we achieve our goal, by a goal, I do not refer to zero inflation.

That is not going to be achieved.

We are referring, of course, to something that is more in the ballpark.

But once we achieve the goal, once the inflationary pressure sets in, according to the judgment of the cost of living counselors,

and dealt with, then the controls come off.

Because my dedication to, and the dedication of most of us to, the market as the basic force that will move this country along,

It's an effective way of bringing an electronic call, if you will, that's well known.

And I feel very strong that while controls are necessary at this point to deal with the situation, it's very unlikely.

We've got to take the situation and poison out of it.

that we have to set the system up not with the idea that, well, we'll have this from now on out.

We'll have it as long as it's necessary, but no longer than it's necessary.

One final point that I will not discuss in my labeling, and this is something that Russell and I, and Russell and John and I are going to be talking in the morning about this matter.

We're going to be talking more about it on the Senate side.

The tax matters are now over in the Senate.

I doubt actually the Senate will take it.

I mean, it will have to work as well.

But we feel it's extremely important on the job line that at least there be expeditious action on this.

Maybe amendments and so forth.

I just wanted to be sure that that is my heart.

To me, I did emphasize two things.

One, appreciation for the swift action of the House, very prompt action, very, and first, a vote on Senate Bill.

The last time was that it's best to move on now.

rather than throw it in next year, but we've got the State of the Union, the budget, and a lot of other things, and then all of a sudden April is here, and the uncertainty is very, very great.

So those are the highlights of the program.

As a matter of fact, I won't talk quite that much tonight, but I do appreciate the lighthearted way we've approached this problem.

We do have some different views.

Your views have been helpful to us, and they will continue to be helpful for us.

John and I have talked about this.

I think that in terms of a program like this where they're bound to be U.N. constituents and you're going to say, gee, that's an inequitable thing or this and that, we want to continue to have a set up, we've got to set up a very effective message on consultation with members of Congress and service to members of Congress so when that mail comes in, you've got ideas, for example, as to, well, is this,

Is this way to increase, are we being too hard on them here versus if price increases, for example, that could be allowed or something like that, that's easier than, sure, we know you're going to get the heat, and we want the consultation to be very, very complete in this field.

That's one area where we are going to have to guess.

So if I could, if I could move out now, Mr. John, if you would take over.

I don't want to frustrate the community,

I will repeat as little as possible, and I'll ask you some or a reflection on that, about what is going to happen.

First, I actually start with the cost of living now.

The justice is present to constitute the overall supervision for this program.

But as the president said, we created a pay board

They'll have 15 members, five related, five management, five in the public.

The process will be for all the members, including the designated chairman, will be a full-time management.

They will have a trust with small staff with full-time executive directors.

The pay board will have jurisdiction.

over all wages, salaries, strength benefits, and so forth.

Change salaries and other ones.

They will be empowered to create subgroups as they wish.

They will be charged with responsibility of establishing standards and criteria.

to achieve the objectives which we have, the goal which we have, is to continue to fight these inflations, to bring it under control, to do it in an expeditious manner, to do it with economic efficiency within this free enterprise system, and to do it as quickly as possible.

The process is pointed out, the duration is indefinite because the program

It's a follow-on, it's an indefinite way-station on the road to stability of inflation in this country.

And that's why we hope that all aspects of this program can be done well.

There will be created a price submission as far as it's alluded to with fellow members.

He knows until he gets to the end.

Right at this moment.

I'd like to give you a little background on what came about, and then I'll take any questions that you have with regard to it, etc.

And this would be, in this smaller group, one that we can have a quick discussion on, if you want to take it.

The announcement was made the following.

The leaders of the United States and the Soviet Union are there to change during the next year.

I've agreed that a meeting between them would be desirable once sufficient progress has been made in negotiations at the lower levels.

In light of the recent advances in bilateral and multilateral negotiations involving the two countries, it has been agreed that such a meeting will take place in Moscow on the latter part of May 72.

President Nixon and the Soviet leader could review all major issues and review New York's further improvement of bilateral relations.

and hence the prospects for world peace.

Now, to first give you the background as to how this has evolved, as a matter of fact, on this project.

Some of you, of course, have asked about this project.

You may recall that the first restaurant I saw in January of 1969, this was a long time ago, I pointed out that I did not think we should have a summit conference unless something positive would come out of it, that otherwise you'd have to be let down with the, certainly the cosmetics, you know, the real imagination.

Now, that also has been the Soviet view

In April of last year, the Soviet explored with us, not at my level, but at other levels, the possibility of a summit conference.

We did not feel at that time, and they agreed at that time, that there was sufficient items for discussion in which, even at the highest level, history was for purpose.

There have been discussions at various levels since then.

And then, in the past few months,

or particularly I can tell you in the past there have been weeks more than that, the Soviet Union has indicated that they felt that the time had come when they probably both should consider a peace-time meeting.

And Romyko came here this time.

He got a formal invitation.

Now, what really, I think, led them to the conclusion that we should move now on this time was, and we don't know what's in their minds, we know what's in ours, was the fact that we had made significant progress.

Actually, it's hard to see the biological weapons.

There's the sea beds.

There's the accidental war hotline agreement that's come out of Seoul.

But most important was Berlin.

Berlin, while it didn't receive a great deal of publicity here, was an enormously significant agreement between these two countries.

I've been away, I don't know how many times, seven, six, seven times.

The Ottomans, those were the, those were mainly,

but it did mean that the Soviet Union and the United States, working, of course, with the other two powers, but without the two of us, there would have been no agreement.

We're able to reach an agreement where our interests clash in a very sensitive area.

The conclusion reached to the Soviet leaders on the basis of that was that

We now could well proceed to our discussions in other areas.

Now, we come to the point as to, well, first, why May, and why not next month?

So, the reason for studying it at that point is, again, this state has suggested for that.

is that we now have underway with us a very intensive negotiation on the U.S. arms limitation.

We are hoping to transfer a grant by the end of this year.

I think most would agree that the likelihood of that being able to be achieved is not great, although we're both setting out as a goal.

But arms limitation.

is high on the agenda for both countries.

Then, there are other areas in which the Soviet Union and we have, at the present time, great matters of future concern, which ought to be discussed.

Let's look at arms for just a moment.

And I think it's, we haven't got arms services.

Well, we've got John Bletze here.

John Bletze here.

And John is in Le Bon.

You all know the stories over the weekend about the huge Soviet build-ups.

We have these stories all the time.

Some say, well, how good is intelligence and all that?

In any event, this we do know.

Their arms build-up continues on the offensive side.

At the present time, we are negotiating a assault that makes considerable progress on the limitation of the defensive side.

However,

that an agreement with regard to the defense's side will not be reached until we also have a simultaneous agreement on the offensive side.

And the reason for that is that on the offensive side, they now are ahead of us.

Significantly ahead.

If we agreed, for example, to carry on the defensive line these qualities, whether it's Moscow or Washington or something like that, and freeze that, and then we agree to freeze their advantage on the offensive side, we would be in a very difficult position.

So, I only mention this as a reason why we have

It is very important from our standpoint that it not be one that would freeze us into a position of inferiority.

Once we go to that time, let's suppose we get a call.

Then, you come to the next stage.

What do you do next?

Here's your system to receive the call.

I said this before coming in here, briefly, just to point out this thing.

We could have no euphoria about this.

The United States and the Soviet Union are great, but is their attitude towards therapy different from ours?

Is their attitude towards Southeast Asia different from ours?

Is their attitude towards Europe different from ours?

And our interests are always perhaps going to be a lot in common.

That's inevitable.

It would be inevitable for whatever kind of government.

It's inevitable for other geographical or historical reasons.

On the other hand, there is one great, significant, overwhelming fact which now is becoming increasingly clear, and that is this.

If there is a conflict between the superpowers, there will be no end.

There will be only losers.

They know that.

We know that.

And at the present time, this is the other side of the equation, neither of the two superpowers will ever let the other get an advantage, which is significant for purposes of a creative stride or for purposes of life.

Now, when you look at that situation, it becomes vital that the two superpowers

for their own interests, even though they may be seeking different goals in this area, to recognize that it's continually non-filled up.

This is where we need to recognize that, and explore those areas where we can not only limit, but maybe eventually reduce.

This is something for the future.

I can mention other things.

There's the problem of European security.

That's very much the study of European security.

There's the problem of the U.K. balance portion of it.

There's the problem of also the trade, which is typically what they have a very vital interest in.

And I'm suggesting that all of these studies

It will be, I'm not sure what the agenda will be.

The announcement simply says that all subjects should be of full interest.

But in any event, when you consider the question of arms control, the question of Europe, the question of trade, you have already a very old play.

Now, often peripheral areas,

And I say they are peripheral, only because they don't have somebody fairly well-directed at each other.

You've got the middies.

We trust that great progress will be made in the communities where we get there.

But Medellin is there.

It's in the back of our minds.

And of course, we have the situation in Southeast Asia.

We trust that, and as the governor, I want to make one thing very clear.

We're going right forward with our program in Southeast Asia.

We're not waiting until May for purposes of

trying to come up with a solution there.

I'm not suggesting that it's going to happen, but I do say that our program, on both the Vietnamization and the negotiations, are just going ahead, full steam, in the region, pushing as quickly as we can.

But we have a problem in some of these stations, and it's future.

And of course, we have the problems in the Caribbean.

All of these matters