On August 10, 1972, President Richard M. Nixon and members of the Cost of Living Council, including George P. Shultz, Donald H. Rumsfeld, Hebert Stein, Peter G. Peterson, Caspar W. ("Cap") Weinberger, Gen. George A. Lincoln, Virginia H. Knauer, Arthur F. Burns, James T. Lynn, Laurence H. Silberman, J. Philip Campbell, James W. McLane, C. Robert Lane, Marvin H. Kosters, William I. ("Bill") Greener, Jr., Joseph Mullaney, Richard B. Cheney, I. David Wheat, Jr., Marina con Neumann Whitman, William Walker, Ronald L. Ziegler, and the White House photographer, met in the Cabinet Room of the White House at an unknown time between 5:07 pm and 11:59 pm. The Cabinet Room taping system captured this recording, which is known as Conversation 107-002 of the White House Tapes.
Transcript (AI-Generated)This transcript was generated automatically by AI and has not been reviewed for accuracy. Do not cite this transcript as authoritative. Consult the Finding Aid above for verified information.
That's what he sees.
Mr. President.
Thank you.
Thank you.
Okay, start wrapping then.
Well, shall we start, George, by...
All right, sir, I thought I might make a comment or two on an overall basis, and I'll call on various people to get into different subjects, all in the nature of how to make sort of an overview of where we are and what our problems are at this point and what the accomplishments have been in the last year and the new economic policy.
I think that
We can say right now that we have an economy that is expanding very rapidly.
The second quarter, the increase in GMT, as you know, is simply astounding.
The reports we've had since on new information about the second quarter suggested anything that we could do to help address the issue.
In spite of the flood?
In spite of the flood.
But at any rate, we have an economy expanding on all fronts with employment rising by 2 million or so in a year.
We have a rate of inflation declining.
You know, it hit a rate of about 6.6% in the first quarter of 1969.
It was about 6.1% for the year.
Since then, it has gradually come down.
Each year, 1970 a little less, 1971 prior to the freeze, 3.8%.
Since the freeze, 2.7%.
In the last four months, the CPI's rate of increase was under 2%, so that we have seen a convergence of many things that we have thought to be desirable.
It's always hard to know just what causes what.
say that certain things are done before the end of the demonstration.
And in the new economic policy, at least more or less associated with these, we see an outcome that is extremely good.
I suppose on inflation, perhaps an indicator of the sentiment of financial markets is the rate of interest.
Rates of interest are down quite sharply from their level a year ago.
And that applies to government securities of various durations of various other kinds, short-term and long-term.
We had a meeting with Dr. Burns, Chair of the Financial Bureau under the auspices of the Committee on Dividends about two weeks ago.
Since then, the prime rate seems to have
drifted off a little bit, has increased at least.
And I think we had a useful discussion of the situation so far as financial markets are concerned.
So I think on the whole, we have a result that is excellent.
Now, we have problems.
We know we have a problem in the area of food prices, and it's particularly severe there because it hits the pocketbook of the housewife regularly.
And we have tried to attend to that, and Bill will report on that a little bit later.
We have a problem in the lumber industry.
We have a problem in that.
Area 5, I suppose our greatest long-term problem as we look ahead is the problem of the budget, which your cap will talk about almost as though this is where we came in.
Things are looking good, and now is the time when discipline has to be exercised.
Otherwise, the kinds of controls, really without controls, we will not have a continuation of the inflationary, good results on inflation that we have seen.
So that is sort of my...
The brief overall version here, I think, on the international side, the Sicilian agreement rates are broadly speaking holding.
And we have supported that.
And at the same time, the strength of the dollar and the underlying sense of being related to an economy that is powerful and is expanding, that is
growing goods to this market, I think it's a great contribution to the world economy that our economy is so strong in that sense.
The strength of the dollar is strong in that sense and also strong in that the rate of inflation in the U.S. is less than the rate of inflation in almost all of our trading partners.
So in that most fundamental sense, I think we have made headway there and we are looking forward to working on
working out an international monetary trading arrangement that would be more stable and long-term sense.
Given that the budget has been so central to all of us and represents perhaps the biggest single problem right now in our hands, perhaps the first person to go on is Captain.
Mr. President, we have a reverted party of current, but there has to be a Scrooge present and, unfortunately,
I know, I've been here too long.
All the information, all the news does look very good, and there is one cloud on the horizon.
The good part first is that with respect to the three things you ordered down in the budget area at Camp David, the reductions that are being made in the federal budget and the reductions in the federal payroll designed to match the reductions in the tax revenues have been reasonably well accomplished.
We were able to
He's got the 2.9 billion savings by deferral and reductions in programs in 72 that we discussed there.
We did not partner for 5%.
Personnel reduction, as you requested, we got about 4.2%, and we had hoped to achieve a savings of about 2 billion, which we had in that payroll saving, which we would have achieved, but the Congress, of course, had the pay increase to federal employees granted four months ahead of time, if you recall, over our objections, and so we were only able to make about a billion in savings as a result of that payroll reduction.
It was a really positive budget.
You should have in mind, too, the guardrails, some of the rest of you have been around that period.
If we hadn't have done this, this is a question, but the fact that it would have gone up, I mean, the number of employees would have gone up by 5% instead of, this is, not that it's, excuse me, but this defensive action simply kept a little of us, a little bit of the lid off.
Yes, I think there's no- We've got this problem on the Congress.
It is always exceeding the budget, and it's just very, very difficult for the administration to be responsible.
Well, we try to be responsible, but very, very difficult to carry out that is responsible.
It really is, and we have a bill that's going to come down here that's beginning, whatever it is.
A lot of the political teams say you've got to sign it.
The school teachers, the doctors, and all the rest will be not very much available, but they can't be signed.
One other aspect to this that I think is important in connection with this work, and that is that the government, of course, is the largest purchaser of goods and services in the world, and the things that the government has to buy are tasks that are made easier by the work of this group because the
price controls and the action on inflation lowered the rate of increase of prices of all of those items by quite a bit, something the figures are actually the things we have to buy increased at a rate of
well over 4% less than the rate of increase in the prior year.
And so this resulted in a very real savings.
We also, through the regulations purchasing review board, insisted that the government purchase only from firms that are in compliance with the stabilization program.
We also believe that the 72 budget, which on a full employment basis came out very close to balance,
And it helped create the environment in which the cost of living council and the economic stabilization program operated, the environment being one of a recognition with a submission of that budget that we were not going to get into a fiscal stimulus that would make inflation more difficult to control.
So I think the original submission of that budget and the way it finally closed the fiscal year
helped secure the economic stabilization results that have been so favorable in the last year.
The final item is the one that I thought we should emphasize, and that is that this
One cloud we do see on the horizon is the thing you just adverted to, Mr. President, that Congress will, with the spending threats and all, cause a very real problem.
And we do have to get a situation in which we end up with a situation in which the full-blown revenues are grossly exceeded.
And at the moment, there are congressional threats that would take us in.
11, 12-digit over your budget, and to make the work of this group and the whole program very much more difficult.
So we feel that the spending ceiling that you've requested, the rigid 250-digit spending ceiling, is essential to maintain the good results of the control of inflation.
It will be a signal to the United States and indeed to the world that
We are not only that we beat business, but that we have a mechanism for achieving it.
And for that reason, we are pushing as hard as possible in the Congress and in the country the success of this $250 billion ceiling as a way of controlling and pushing what is considered a possibility.
Well, I think much better than I thought before.
Senator Roth has got about 50 signatories in the Senate on his bills, and Mills seems very much more favorable to him.
Mayon talks for it, and I hope will be for it.
Congressman Boe is working very hard, and there's movement now at last.
And I think the events of the last few weeks have taken it on the way they would do it if it had been anyone else.
There are two or three things.
They're talking about putting it on either the new debt ceiling bill or possibly the continuing resolution.
Could it have something to do with it?
Yes, that's right.
But I think there is a somewhat more favorable prospect for it than there was a few months ago.
When we look at the inclusive fault here, we cannot get away from the fact that there were two areas where we overruled a bunch of direction.
We had the black one.
where it was very clear that he was going to go that way.
So we went along.
But that's relevant.
We saw less than a billion.
But then the other one, of course, was the Social Security.
And on the next season, there was no way he'd go.
Because we would have done both, right?
We just checked it out.
In fact, it was about ten to one and quick.
So there comes a time when that happens.
But however it continues.
just to indicate that there are times when we may be able to win some.
Back at 166, House members voted against the HEW appropriations, and in addition to that veto, it will be sustained by 53.
That's a good and solid one.
Yeah.
One of the things, two things we have been emphasizing and discussing in the spending ceiling are, one, we ought to be able to get along on a quarter of a trillion dollars a year.
over about a quarter of a trillion.
That's pretty big to people, and they do think that's enough.
And the other is, as I think you were pointing out in one of our earlier meetings, we have identified this as the acts of controlling taxes, right?
That what this is really all about is keeping tax rates under control, because sooner or later you'll get a tax increase if the spending is much,
And that really goes up.
So both of those themes, I think, have been registering with people.
Yes, if you just oversimplify it, we just have a state that a vote for a spending ceiling is a vote against a tax increase.
That's the way it is.
I guess if you had a vote against a spending ceiling, it's a vote for a tax increase.
Not quite, because there's still fighting.
Only might lose.
The other thing is that they did a whole question of
fighting inflation, the question of avoiding a tax increase is a co-operative action, and the President of the administration invited me to go to Congress, so we're asking Congress to join us.
Another way you could put it, if you want to be less ambivalent, and some of you have to do it more responsibly than others, is to say that voting and spending in Greece is insurance, it's like buying insurance against the tax increase.
It's a responsibility to get it across.
Don will make some comments about the economic stabilization program as such and its machinery and how it's operating.
Mr. President, it's been a year.
Next week seems a lot longer to some of us.
But when you look back and think of what has happened, I think it's a rather impressive record.
The concepts were created by the group of people he put to work.
The mechanisms were in fact established.
An amazing number of very fine people came out of the innards of these various departments in the private sector and kind of served some of them.
And they have done a splendid job for the government of the country.
There was a busy period of getting it going.
There was a public period, as you recall, which we attended.
get, which was that period where business was uncertain.
And it was the most difficult part of the program, was that people, you couldn't get a hold on them.
It was kind of squishy, like a mist hanging over things.
And the numbers just weren't coming along in terms of the expansion of the economy.
That period ended, and I guess the most recent period has been our food period.
Right along with the fall, we've had this upward pressure on food prices.
And that's been a difficult part of what we do.
I look back at the goals very quickly.
The way I look at the goals, you never quite articulate them as extensively.
This is a property of silver for myself.
I think about the goal of reducing the rate of increase in the cost of living.
Here's if you want to, first of all, just tell us what's happened from the same month that preceded here.
You can see where the peak was of about 6% there in late 69, early 1970.
where the program came in and the freeze brought it down and then the bulge afterwards .
The actual numbers, the rate of increase prior to the freeze was 3.9% for the year nine month period there in 71 and it's down to 2.7% and down to about 2.2% for the last three months.
Down to 2.1% if you look at the .
The next goal,
seemed to me was that it had to be done in a way that we didn't show the expansion.
You didn't say go out and charge after inflation.
You said do it, but let's make sure we recognize all the time the importance of the other side of that goal of increasing employment, which has obviously happened because of the expansion, varied policies which we've had, and finally reducing unemployment to some extent.
The third part of it was it had to be done in a way that was equitable, and hopefully .
The re-earnings charts indicate that maybe the program is not very good.
In fact, the allegation that there's some sort of imbalance between the pay board and the price commission is just not valid.
I've not found a shred of economic evidence to support the contention by some people in labor that wages are held down and prices are going through the roof.
It's just plain not true.
The fact that it's not true doesn't necessarily mean that people see that.
And I think if profits continue good and strong, as they are in the coming campaign period, we will have people pointing at the profit levels.
And it will be important for us to keep focusing on the reliance, which George has described as a very important measure of worker well-being, which was, in fact, for almost five years flat and slightly deteriorating.
And that's what caused the frustration.
and the cost to push inflation.
The UNM had to literally get the size of what we used to do.
It's just a stadium, and they're looking at it.
The other thing I felt we had to do was try and operate the program of the realtor in the small bureaucracy we have.
In World War II, it was over 60,000 people, as I recall.
In Korea, it was something over 15,000.
This time, it was under 5,000 people who had been volunteering for 5,000, less than 5,000 man years.
by a substantial amount.
Finally, it was my feeling that it had to be done in a way that we didn't end up sitting on a volcano.
That is to say that patrols were administered in a way that there were not a great many pressures that then would create
The demand in the country to perpetuate controls for fuel that once you release it, you just create another round of inflation.
And I think it's safe to say that most observers of the economy agree today that the bulk of the economy is floating under the Price Commission rules.
The competitive forces are reasonably strong in most sectors.
And there are some exceptions to that.
But I do not believe there is a great volcano bubbling underneath us that's ready to burst
could we alter this at all?
Lastly, as far as goals, was the question of expectations.
And I think that while they have been impacted on, there is a decided line.
We've made progress on the rate of inflation.
Real earnings are up.
But people don't perceive that change of 1% in the reduction in the cost of living.
rate of increase because it takes some time.
They don't perceive an immediate turnaround in real earnings.
right off the bat.
So basically, you look at Gallup polls and Harris polls, people feel, particularly because of food prices, they feel that things are going up.
And the fact that it's not so, I was talking to my wife the other night, and Joyce just said, look, don't ever go out and tell anyone that food prices haven't gone up in the last three months.
And they have.
It's been 0.0.
The consumer price index for food in the last three months.
She said, that's fine now.
Do never say that in public.
You did not believe me.
Just don't even try to make people believe.
And I think what we have to do is what we're doing.
We're just telling people it is a tough problem.
We admit it's a tough problem.
We've looked for some easy answers to it, and there aren't any.
And no one running around the country has come up with any easy answers on the food problem, either.
And that includes McGovern and everyone else who's talking about it.
It's just plain tough.
Wage price controls do not reduce demand, and they do not increase supply.
You've taken them.
into a great many steps on the food thing.
Admittedly, that's a problem.
So other problems, rent control is still a problem.
It's not impacting very well, in my judgment.
It also is one of those things where we kind of put government in between the traditional hostilities and landlords and tenants, and I think it's something that down the road we ought to find ways to solve.
It takes up a very high proportion of the time of the Internal Revenue Service people that are the basic enforcement officers.
It's a loser.
It never works.
in the history of the Senate.
But the only way to control rents is to build them.
And eventually he said, great, it's a housing starts and housing completions.
Well, lastly,
to no one's surprise, this type of wage price controls are not capable of dealing with demand-pull problems.
We know that.
I don't think the rest of the country fully understands the distinction between the two kinds of problems.
We can really be effective only at the mark on a demand-pull problem with respect to the cost-pushing problems.
I think that the controls have had a constructive impact.
But there's always a danger, as Kat mentioned and Jordan mentioned, that people can be lulled into thinking that the existence of the controls can enable you to
or behave with respect to fiscal policy in a way that she wouldn't absent the controls.
And that's not true, because those controls just are not capable of doing much about the kinds of things, namely the manpower inflation that fiscal policy is directing.
And so we've been trying to help people understand that.
I would say one other thing about the last year.
I think that the level of understanding in the country about economics is improving because of all this.
It's not why it was done.
It's not what was intended for it.
Side effects.
And in a country that's guided by consent and not command, it's important that people continuously improve their level of understanding.
It makes a political atmosphere that is more realistic and enables people in public office to do things that are better for the country.
Side effects, that's been something that's happened to us.
Anyhow, I was 40 last month, so I sent out a piece of paper and took all the years of unemployment, all the years of inflation for 40 years, and I came up with these conclusions.
That 4% is not the norm, and 2% inflation is not the norm.
In fact, only twice during this time in my lifetime have we had unemployment under 5%.
That was the third year when you were born.
The third year was a big year.
That was a good year.
But really, only two times in these times has unemployment been under 5% and inflation under 3%.
Not once during these times has it been 4% unemployment and 2% inflation.
And only twice, both during wartime, have we made 4% unemployment, 2% inflation at all.
Today, the unemployment level is 5.5.
The inflation rate is about 2.7.
There have only been seven better years during peacetime in the last 40 years.
So I think it's not the kind of thing, if you say that too much, people say, oh, you're telling us we never had it so good.
And my answer to that is, no, we're just kind of telling you where we are and that it's
Any foreign client with reasonable price stability during peacetime is a marvelous achievement, and it doesn't come easy.
It's easy to do during war, but it is a darn difficult thing to do during peacetime, and we all recognize the magnitude of the tax we've set.
I'll do myself a favor.
Excuse me.
We'll adjust the drums.
Larry Silverman will...
Mr. President, just four things very briefly.
First, Donald Rumsfeld has already mentioned one important thing to us, which is the growth in real earnings, which is by far and away the most important thing in the American working class.
On employment and unemployment, there has been an extraordinary and enormous growth in employment since then.
the economic stabilization of the federal government.
The paradox of labor law enforcement for us has also been an extraordinary growth in the workforce, partly because of defense introductions, partly for the Democratic reasons, partly for greater participation of young people.
But on the employment part, the interesting thing, I think, to say about that is that compared to other recovery periods,
We had twice the growth of employment in this recovery period than we had in the four previous cycle recovery periods.
We do have an extraordinary growth of employment.
On labor relations,
In the first half of 1971, before the economic stabilization program started, we had about 13 million mandates lost in strikes.
In a comparable period for the first half of 72, it's down to about 9 million, which is a sharp drop in strikes, which is probably the best index of good labor relations.
Finally, I would mention one particular time the economic stabilization program, which you will recall, got started even before
in August 1971 with the Structural Stabilization Program.
We had a session with you in the early part of this year to report on that.
Very beautiful work.
That is correct.
I think it's been, again, an extraordinary success by itself, although it draws a great deal of strength from the entire Economic Stabilization Program
In the period prior to your institution of the executive order in March of 1971, which started that on its way, wage increases and discretion were running approximately 15.2%.
And the period between your initial executive order and the economic stabilization reform, actually before November, when the new pay board came out with its new guidelines, they dropped that down to 11.1%, all by themselves.
With the new pay board guidelines,
Since November of 1971, up to the process of the present, they're running at 5.7 increases, which is just slightly off the pay-for-it guideline.
That in itself has been a great success, and it helped through the whole program.
But at a particularly good time, we should have a huge dimension.
That's right.
That is correct.
modified over 1,300 deferred weight increases that were coming through, and which were very large, and then reached in and changed those contracts to lower them.
Quite a remarkable thing that Mars did.
It was remarkable that they went along.
Absolutely.
Because those were the currency junk dollars.
Well, they've just remarkable.
They've seen the growth of non-union consultation and know that they're out of slack.
And so that is the union presidents are working on this very hard.
That's the part.
There's two aspects.
One, the union presidents have always seen this as an opportunity to gain a greater measure all over the local levels.
How so?
Mr. President.
There's a great deal of discipline in our country.
Something that, for example, Great Britain has lost.
That's why ours may have worked better than theirs.
And even better than the Canadians up to this point.
They picked away the trade union leaders.
They called.
They grumbled.
They cussed away.
They went along.
I think it's remarkable.
I think it's.
The construction in particular, I remember we sat around this table so long.
I remember when I was 15, and I met with Roger Ball, and I met with Mr. Buchanan, and he said, well, of course, there are a lot of bust-up deals.
Boy, he can't do that.
He said, it won't work.
I said, well, you try it with the Congress.
He said, what else do you have in mind?
So then you've got to at least be looking at what you can't draw on these tough guys.
They brought up the 15 people left.
But the amazing thing is it's not just five or seven.
They obtained it without striking.
Maybe you've got to give them some credit, a lot of credit for this.
And perhaps they're going to be back to both effectively.
Well, there's another factor there in that the international presence have seen this as an opportunity to gain greater control over their locals.
How do they do that exactly?
Well, any time the action shifts to Washington, that means the international presidents have more to say about not only that wage package, but all sorts of factors which may be related to that.
So you have unions which are largely distributed powers, distributed all around the country.
And so we've done the opposite, busting up the unions.
We've sort of brought them together and given greater power to the internationalists over their locals.
Well, there is one thing you said.
I don't want to digress at this point.
We had to make one price.
However, we've got to give credit to the Peoria Union on that.
Without Peoria Union's support, we would never settle it.
Now, one of the reasons he settled it, however, was
that we sat across the table with, and so it's very interesting that we have the support, political support, we have the letter characters, we have the support of the Lions.
Why?
The reason doesn't have anything to do with
We believe we would rather deal with a responsible union head than with a bunch of irresponsible sergeants down the line.
Because our trouble, if you remember, in the postal thing was not with the big guys, but with some of the jerks, which Meany brought in and just beat them to the line.
Is that right?
He provided the vehicle for negotiation in that they had a union set up of people who weren't accustomed to bargaining.
They were a district lobbying.
And also, there were all these different unions, and they had to be brought together, and somebody had to take charge of them, and he did that.
We also added a lot of credit to the Laker department in that case, and particularly to Husserl.
Husserl did a great job.
I don't think he could get any suit released, but it all helped.
It's interesting that in their subsequent bargaining, both sides have asked for Husserl to come and help them.
And they both trust him.
No, really.
There's a fellow that has the confidence of both sides and who knows how to talk.
I think in this assessing of how these things work, we shouldn't lose sight of the fact that John Dunlop and some other people have done a great job in giving leadership to us.
People have worked at it very hard.
come through now and has a... Well, you know, we sit there, we don't hear about things go wrong.
I remember writing a totally, totally different piece.
I was out of office at the time, and they asked me a little statement.
I said that the tragedy of a man who heads the CIA is that his successors
I never published it.
His failure was always there.
And the only failure he had was significant subversions in many things, which wouldn't have failed, perhaps, in an extremely way if he had helped the rest of us without the deficit.
But the successes have never met.
because of the nature of the public science.
Well that of course is extremely, I'm generally speaking to the government, if you have a department that works real well, and they run along and do things, it means that your successes just don't get the publicity that they deserve.
But every time that, let this little thing go wrong, wham, you're out, you know, you're in, you're in the brain, you're done.
I think George Romney did it.
We're going to have to go up yesterday and get an argument with this church staff and these churches and stuff.
But anyway, do you know what you're doing?
Yeah, I'm trying.
But anyway, a lot of people told me that.
I mean, Rizzo tells me.
But anyway, he gets up there.
But the church is running a good show on this stuff.
So a few people will be doing it.
So they're going to have a great plan.
It's just a job.
But that's the part of the welfare of Bolton, because instead of Bolton, they were taking a lot of heat.
But now that it's working better, it's out of the notes.
And people aren't really getting the credit.
That 5.7 figure on the construction is an amazing thing.
Have we heard from Roger Ball?
He's a very good friend of mine.
He's a great guy.
I'm sure he makes his money, though we never hear from him.
before he goes on I'd say
Other than that, we've done a reasonably good job.
Actually, it's a very good job.
We've been smooth.
The area in the north is a semi-traveling marsh sand.
You know, it was just, of course, you know, a very little credit.
But we got one big thing.
The Jim Brown game.
Of course, he was successful in many different ways.
All of that.
But his major interest is some sort of a roofing set up, you know, organized minority business for black.
And he says, you know, he basically is known as a lot of radicals and so forth.
But he is for us because he said this is the first administration that ever did anything like this.
I'm sure he gets a kind of saying next week.
He really is, he's a, here's a guy that doesn't really have to do it.
We all know that he's taken his stock because he's the kind of guy that does it differently than some others at times.
But nevertheless, the main point about it is that he really is interested in killing people and blacks and the rest of it.
I told you you would.
That's why I have to do it.
President, I started out in the government, as you know, thinking of my position in the international economy.
I thought you might notice briefly how we're doing compared to the other countries in the world.
You'll remember that in the first half of the 60s, we were doing as well as most of the other leading countries in terms of real growth.
In the second half, we slipped to about sixth out of seventh position in terms of growth, and that continued in 71.
But in the three quarters since the new program, it looks like we're leading the pack, including Japan, in terms of real growth and also increase in industrial production.
So that situation is certainly a good deal better.
We don't gain anything by other people's profits, but it might make us all feel better and clean it.
The United States has a negative growth rate in real terms at this point.
The first six months or so.
Minus 0.3.
What's it from?
And I go, don't put it.
He said labor, basically.
Labor.
The productivity in places like this just got awful.
For example, the first half of the 60s, you may remember, we did very well.
I get it.
I just put it out there for the details.
But you remember when he adopted his policy, right?
He got taxes and all the rest.
I was told he was going to get the British loan again.
God, I'm not sure the British should go down to school this time.
They're a great people, huh?
Yeah, it's just a matter of discipline.
I think the British government is virtually out of control.
You didn't say that.
I didn't say that.
What's the matter?
It's a matter of whose fault it is.
I don't know whose fault it is, but it's a crash day when you call it a country electric.
Virtually.
To my mind, we're just on the edge.
We're government.
We're law and regulation and a longer respect to the war from zero by increasing, by a large and increasing fraction of the population is free.
That's written today.
Mr. President, the inflation thing we did well in the first half of the 60s, if you remember, we were number one.
That's what quite a bit in the second half.
But in the three quarters,
since your new exotic policy.
It looks there too like we're number one on the in trade in terms of inflation.
I think it's important to not resist.
politically, but it is important in terms of our policies to note that our success in the battle against inflation began before the policy.
I mean, we started to count down.
In other words, our fiscal restraint and some of the other things we were doing was helping.
It wasn't enough, but those numbers we saw earlier
to show that that does play a role.
You're asking about...
I think that the impression is left that the only way to control inflation is to put on controls.
We've lost the battle.
Absolutely right.
That's at least what the speech is going to be.
You're asking about Britain, what the problem is.
Fundamentally, productivity.
And the vote is very low.
Since...
Their new economic policy, their consumer price index is, here it is, 8.5%, way ahead of anybody else.
It's interesting to note, too, without looking at those figures, if I remember the charts right, that our productivity began to come up before our institute started writing.
About the first quarter.
And it was about.
It rose in 1971 at about, I think, about 3.5%.
It did.
We got the first quarter.
of 72 and it was again about three and a half and in this last quarter it was about six percent although with average earnings rising a little less than that we actually had a decline in labor costs per unit of output so i remember we didn't hear those figures
The productivity has improved to an annual rate of 5% in the past three quarters.
That's very high.
One other thing you mentioned is the automotive situation.
Do you remember when you had those 25,000 jobs every 100,000 hours?
It went over 10%.
I remember in the meeting we had in your office with Henry Ford when he was narrowly concerned about
that we can see we're going to become a service economy.
Yes, yes.
Remember, desperation and so forth.
You might be interested here.
Here's the chart of what's happened to the share of foreign automobiles.
And we've got the peak up in there.
And due to the re-evaluation and so forth, we're now down to 14% from 18-8.
You include all the tourists.
You run from 20-9 down to 14-9 total imports.
So it's been a very substantial comeback.
U.S.-made cars have gone up nearly 10%.
Foreign imports have gone down four.
So the automotive store guys are pretty extraordinary.
But as a matter of fact, the board is not doing too bad.
No.
Because it's about as down.
It's just a level off.
A level off, right.
They have nothing to do with it.
That's absolutely right.
That's two things at least that I can understand.
One of the things that drives our labor friends up the wall, and I don't want to be one of those people leaving out the food, but I think they really do.
you can read the orderly reports, record profits.
And I say, when I look here, you know, when I said 5.5 record profits, now I think I know what the answer is.
I guess what it is, profits are in control.
But what I meant is profit margins are in control, but not profit gross margins.
So the reason that profits are going up is that the productivity is going up.
and sales and all the rest of it.
But you see, this can be a very, very tough political issue.
If you say, well, look, we've been held at five and a half.
GM has record profits.
IBM has record profits.
You see IBM stock, for example, going up on the big board yesterday, five points, and it's already over 400 points.
That, at my point, is $600 billion.
The value of those stocks is $600 billion.
I'm sorry, I didn't know that.
Let's talk about that.
What's the answer?
Is there a problem?
If you compare the gross national product at the present with the gross national product in, say, 1966, you'll find that it has risen by about $450 million.
If you now make an comparison with Prophets, you'll find that Prophets now are just above the level in 1966.
So there really hasn't been?
No, there's been...
Prophets have...
There was a squeeze.
Oh, there was an awful squeeze.
And now you have Prophets that sunk
to a dangerously low level, and a recovery, and it's not too much.
The other point, of course, I know the edges on the other side, which we all realize.
The profits, what do they do?
They don't either.
They either pay them out in dividends or they put them in new plans.
That's what makes the thing go around.
Well, the federal doesn't take care of them at all.
I know.
That's why I kept what I said earlier.
We have a dividend guideline of 4%. 4%.
That's for the ceiling.
Is that it then?
I wonder if you should know more about what's going on.
Well, that's a fine thing, Mr. President.
In the first place, it's Cessna and Sanico, or later.
And that's one reason why we put it at 4%.
And another reason is that it means that retained profits, undistributed profits, can now be larger.
Therefore, corporations don't have to go to the open market and borrow as much.
And therefore, interest rates, you say, are not rising, whereas otherwise they would.
Also, another thing.
The less they pay off dividends, the more, too, they pay the tax.
The more they can put back.
And with less borrowing.
Without borrowing.
They're for less pressure on that.
So the answer to the problem is to say that we're poor.
And if people say to you, Mr. President, we haven't done a thing about interest rates, you can answer, first of all, they've gone down rather than up.
And in the second place, by putting a ceiling on dividends, we have forced corporations to reinvest and go to the market for funds on a smaller scale, and this has reduced pressure on interest rates.
Now, I have, my staff estimates that had it not been for the dividend guideline, the payout of dividends on the part of corporations and stockholders would now be about $2.5 billion larger than it is.
So it's not a negative, okay?
President, I'm just asking Herb Stein.
We might want to look at how real wages have gone up versus what you might call real profits in the last five years.
You know, the chart you've got on wages, it could be that when you take into account inflation, the wages have gone up as much or more than the profits have.
Well, we've not taken into account inflation, but over the last few years, the profits have gone down and gone down sharply.
As a matter of fact, I think this is true.
I wouldn't think so.
I mean, I think they can do an awesome thing.
It's like what Tom says.
You talk to these people out there and they say, ah, I don't think they'll come along here.
President, what do you think?
Here, a little bit of a candle.
Also done in a food crash situation.
That has been very uncomfortable for us.
We've done a lot.
We've received some results, but not a few.
Mr. President, I think that
Lord, in the courts we just heard, I don't know how we can do much about food with the growth in real earnings.
It's less unemployment.
We received a command on food and $2 billion worth of food stamps.
I've seen food tanks around the table, but they're good for making different meals.
We put that command in another market.
$2 billion worth of stamps in there.
Food count originally would relate to probably about 60% in this account, so that I'm not misunderstood by the state in terms of the way we did it.
rather than related to commodities, which was the election plan.
So they'd go out and buy porterhouse food.
But nonetheless, I think that we've already been through the highest time, not in the retail market, but in the farm prices, which will be reflected in the retail market.
July and August.
We will see it competing in July and August in the retail market with the high prices we have on the farm.
It will be the annual rate we estimated at about 12% for July, which will be announced at the last part of August.
And then it will be at the rate of about 9.6% at annual rate to increase in August, which will be the last percentile rate.
Then the last of October report, which will be September, we estimate a reduction.
And this increase is seasonal, plus the previous prices to the farmers, which have been high.
We saw the P&L already paid probably in the prices on beef have rolled back about $4.
And we're up high around $40, back to $36 at the point of the feedlot level.
And I have a rundown of the commodities, but I don't think it's necessary because we'll feed out into the courts in August and September and then have a reduction in the report according to the estimates.
And then back around Christmas, it'll go back up again soon.
So you speak as you're required to, but we watch.
This is a retail food price index.
No, you were talking about prices at the feed level, producer level.
Yes, prices at the producer level have already reached a high.
This is going to be a reflection.
You see, this is time lag that's come along at the retail level.
We've already reached a high in the feed level to the farm, and we've got six weeks left here of the reports.
September, by the end of the year, the estimate will be 9.6.
September...
The report at the end of September will be the August figure.
The report at the end of August will be this month's figure.
July, this month's figure is going to be the high figure in the retail market.
It will be up at a rate of about 12%.
And then the next month it will drop to about 9% of the annual rate.
And then it will drop to a minus 2%.
This is increase.
It will drop off in the...
One of the things that we've been doing, President, considering, for example, the fact that they're following your move on the meat import.
we have seen a decline in the wholesale price of beef, is to try to follow through on that through the Internal Revenue Service and other things that the control system can do to sort of monitor that through the system and see that it does come out at the end in the consumer crisis as rapidly as possible.
And Don, if you could describe that a little bit for us.
Sir, it has been described as the price goes down, the producer level, the female level, and the challenge we face is to see that it goes down three kilo, and ordinarily the price spread widens as the wholesale price starts to decline.
And the lag can be anywhere from three to six weeks, and maybe more.
I was like smoldering three weeks ago.
This time it appears that the retail prices may have started down some very, very preliminary data, which is not really very sensitive and certainly preliminary.
I don't want to hang my hat on it, but it does suggest that retail prices are where it has.
Well, that's right.
But I want to qualify it doubly.
Maybe it's very early, but maybe the retail prices have started
a slight decline in the week ending July 22nd, or one week after wholesale prices started down, it would be a much shorter period.
And that's what we're trying to do.
There are a number of things, and I won't go back into the things that you've done that were reported on by Secretary Schultz out in San Bernardino, but there have been some things that have happened since, and I'd just like to list them very quickly.
To try to ensure that that retail beef price moves down as rapidly as possible and follows the wholesale and producer prices,
We've taken these steps.
We've been in touch with over 100 largest food chains, indicating what the data is.
We know what the data is at the producer and wholesale level.
And we expect them to make every reasonable effort to path along those things as soon as possible.
And also, we've announced a nationwide debt on beef prices by the Internal Revenue Service.
And we've got IRS agents will be one of the largest
firms as of Wednesday, August 9th, which is just a tech retail big presence, just by presence, just being around, being friendly, warm, nice, and Irish.
They're going to monitor these margins on the eats and give us a corner report by the 21st of this month.
We also have the National Association of Food Champions following up our letter to the Food Champions with a letter of their own urging full cooperation by the members.
And the first thing to do is that they will be cooperative with what we've tried.
kind of ambivalent about whether or not we try to beat them bloody around the head and shoulders, these three things.
We know that they're the public enemy, but in the public's mind, we also know in fact they're not.
And we also want their cooperation, because the fact of the matter is, those people
don't have to, under the law, sweep those margins down right fast.
And we want to get them to do it kind of voluntarily, because the way the price emission rules are, they're allowed to lag something.
So we're working with them.
They know they're under pressure.
They really do.
We've got people in their buildings.
So that's the kind of thing that's going on with respect to meat specifically, and I think that the report from the Ag Institute, if I remember correctly, unfortunately the worst month on meat prices is going to be halfway through the Republican convention, and then it's going to ease off between now and the election.
Do you want to work any of your acceptance speech in any way?
In response to Mr. President, to your suggestion about San Clemente, what we meant, we've launched with the Gospel Meeting Council a new program urging the consumers, the housewife, to stop harder is our slogan.
And we've done some little commercials that are going to hit the
And the TV, very shortly, perhaps they won't let you know.
I saw it.
They are on that one.
And the clean stores have promised to follow that up with an advertising campaign.
Use your expertise, shop harder, buy the specials, use the possible foods, and also use human printing.
And this involves the housewife and feeling that she can do something about this massive problem with the old things.
And I hope it will be effective.
Yes.
In this respect, you do have mighty good vibes in your culture.
Yes.
Very.
They've gone up again.
Well, they've dropped off.
Turkey, turkey.
You have your big cello, your brawlers.
Now they've come back from.
from about $0.05 that dropped from $0.33 back to $0.28, which is about a break-even point for this potions of use.
And I'm making money with that.
Of course, eggs are below cost.
We don't know what it is.
That's correct.
But still, the draw of the pig sellers instead of the turkeys.
They may see some of it.
You're selling turkeys for it tonight.
You see more women buying.
Yeah, this is the kind of thing in the future, I'm sure.
You're buying parts of turkeys like the new turkeys.
Like the new turkeys.
So it's a better buy than nothing.
I guess just one comment on the international side, Mr. President.
It's clear that there has been some response to the suspension of quotas.
The Australian would-be has been coming in at a walloping rate for, I don't know if it will continue at that rate throughout the year, but it clearly has been...
Four Australian Prime Ministers have been here for the last two and a half years in the same debate.
Could you raise your hand if you still can't?
No, we can't.
We can't.
I hope the door is open.
I hope it helps.
Well, we've said to them that next year's quotas
We will be looking very closely at what they will be doing in the last part of this year.
Sure, that's not unrelated to the rate at which it's coming down.
Well, that's supposed to be hamburger meat, though, isn't it?
They're made by and large.
Sure, I mean, we're concerned about the price, but most of the imported meat is by and large not the highest.
Sure.
Commercial.
Commercial.
Sure, sure.
Good.
As the Fed estimates now, I guess, are to say that there will be, I guess, an additional 60 to 80 million pounds probably as a result of the lifting of the quotas.
That's not going to make any startling dramatic difference, but it will make some.
Yeah, that's right.
It's true that they are responding.
It's that 50 to 80 million pounds of what we would have gotten anyway.
That's probably just about what the quotas are, but there would have been substantially less than the quotas otherwise.
Maybe a little bit more than the quotas.
How are the Australians doing?
You're talking about the British.
They have some similar problem.
Have you checked that?
My impression is that they don't have it to nearly the same extent.
They don't have the economic problems that the British have.
I don't think so.
No, no.
They certainly don't have negative real growth.
The difficulty is that all three have this highly organized labor.
Well, Brazil is worse than Australia.
But the Austrians, as well, when they first moved in that direction, and after they moved in that direction in World War II, it was an old empire that was the same as what was then the empire later in the Commonwealth, a place that wasn't that nice.
But I recall in 1953, when I traveled to Australia, I got to be looking at the sense that they were having.
It's very uncommon for anybody to work there.
That's the real problem.
The discipline hasn't changed.
Mr. President, the Labor Minister was here just recently, and he suggested to me that they have a serious political problem with small aid elections.
And they had an unemployment rate which seemed to be contestable to me.
And again, it was a very big political problem.
And also in inflation, I think it's a very political problem.
Although he suggested the American people were much more sophisticated about inflation than the Australians were.
Our American people were much less willing to accept inflation than the Australians were.
The Australians were much more concerned about an unemployment figure than we were on balance.
Mr. President, it's not good for us.
Not because of our social ideas, not because of our actual ideas.
We always look to Herb Stein at these meetings to get everything in his proper perspective and to tell us how the government is handling it.
It's a whole other world.
Well, I couldn't afford it.
Don said that he thought popular understanding of economics had improved a great deal during the new economy.
I'll say, I don't know whether that's true, but there certainly may be comments from all the people around this table who wouldn't want money.
So there's little left for me to say.
Obviously the economy has behaved very well in the last year.
I think that economic students will be writing PhD theses within 20 or 30 years trying to determine whether, to what extent, the price-to-wage control system may cause a contribution to this result.
I think we can say that a lot of the deals that we feared, at least that's not what we feared in the system a year ago, did not emerge.
We did not have a great confrontation with labor.
We did not have a slowdown in productivity.
We did not have a deterrent to investments.
We didn't have shortages and misallocation.
And up to this point, we have avoided what has been
and all the post-war efforts of this kind, and that is an encouragement for people to think that they can get close on the manufacturers and rely on this to stop inflation.
Of course, that's our whole campaign now about the budget is to try to keep people from falling into that solution again.
We are quite sure
Okay, but we're quite sure we're not going to see another quarter quite as good as last quarter again for a long, long time.
It's a combination of almost 9% growth and about 2% inflation rate.
But we do expect we're going to see continued strong growth for quite a few quarters in the future.
In the six and a half to seven percent, maybe better for a while.
And
reduction of the unemployment rate at about the rate we hoped for, but weren't quite so sure of, weren't quite so confident of, more attainable than a few months ago.
I think what our viewers indicated that we are going to be getting closer to the zone where
where demand presses more heavily on supply, where we have more cases of demand pressure pulling up prices, and nobody knows just what is the point at which this becomes a dominating feature of the economy, but obviously it will become more common as the fund rate dribbles below 5% and below 4.8% and so on.
I think that we're not now in a position where with the plexiglass epoxy that we now have, or even a little slippage from it, we have to be terribly alarmed about the prospect for regarding the plexiglass.
Obviously, we're close to the marge to the point where we have to be very seriously alarmed and where, if we slip very far, we could repeat the
the process for expansion of 54, 55, or 66, which set this whole thing off again.
It's very interesting that, talking to George Weisman, who referred to the government situation, it's very interesting that some of the Democratic economists are warning us, yes, they're treating the danger
Error of 1959-60, what was it?
They said that we stepped on the brake too hard, too soon, and turned the economy down, which seems the more pertinent lesson.
Is it the error of 65 and early 66 where we neglected to step on the brake when we should have, and that's the...
Much respect for both of those.
I agree.
We have to watch out for both.
We don't seem to be much danger for the 69 and 59.
I get that we were much danger, but I think we are more, I think really we are in less danger of repeating the 69-60 error than we are of repeating the 65-66 error.
The 59-60 error
It was partly just a plain mistake that people didn't know all the time.
So I think that the posture that they were making about
Mr. President, there are plenty of problems.
Nevertheless, on the overall, there's no doubt about the fact that
The economy has improved tremendously.
There have been lots of problems solved.
And we, I think, complete the year through economic policy, able to look back with a great deal of satisfaction.
Much was accomplished, and the situation is much better now than it was.
And we give you a good, strong, upbeat report.
Well, it certainly is.
The basis of the facts were there wouldn't be much question about our doing very well on the economic side.
The problem, as we know, is the perception of these matters.
Perception in the case of
Well, the really key number is how there's a real spendable earnings.
I mean, people are better off.
They need to be wagered.
They're doing better.
They're doing better regardless of the price and the cost.
I mean, as far as the place is concerned, there you could argue, well, the prices are still going up.
So they're going up less.
They're doing better.
It's like crime.
You talked about the analogy of the brakes
I remember the time when we used to drive a car or something like that.
We didn't have a four-wheel brake.
There were two-wheel brakes.
Four-wheel brakes didn't matter whether they worked or whether the car would turn over or whatever it was.
The trouble is, in terms of the brakes we have now, they're still two-wheel brakes.
Maybe we're never going to have four-wheel brakes because if we ever had them in January, we'd turn them over.
But I'm probably not a standpoint to...
I must say, as we think back to that time in Camp David where we were looking at all these things and what we expected, it's turned out much better than we expected.
Many of our fears have not been realized.
Many of our hopes haven't been realized.
The fact that, as I have had to say in many of the other studies, the fact that
and the economy is still not a very good issue for us is because in this field, and I don't want to tell you people too much, but in this field, generally speaking, the liberal, we won't say Republican or Senator, because we have a mix there, but the liberal in economic policy has an enormous advantage over the conservative because they can promise.
an outfit, and regardless of what happens, you can say, well, this is good enough.
And certainly, which most of us, our scopes are, although I think people may bump it up, that the economic policy is rather, shall we say, progressive, or some call radical.
He's not making a speech in Pennsylvania for you to take to your bedroom.
Anyway, there she is.
She was out there buying that stuff.
For example, looking at the situation with regard to food prices, a really significant thing, and I know this has been said, I say to foreign audiences, I also say to other audiences, a significant thing about food in America,
is that food in America takes less of a banding paycheck than in any country in the world.
Less than in England, less than in the United States.
Well, you say, well, what about the poor countries?
Certainly that is the case where they don't have much to eat.
Well, food takes 60% of the guy's paycheck.
And of course the British is much higher than ours, all up and down the line.
The Russians, of course they eat a lot more.
They put a lot more in their food than they do here.
They eat a lot of carbon dioxide.
That's right.
They don't all eat caviar.
They give the caviar to us.
aren't weak to their people.
That's all right, too.
But anyway, what we really have here is a situation in which the economy in the United States, as we all know, is the strongest in the world.
People in the United States do better than anybody else in the world.
They eat better.
They earn more.
They live better.
That's the way it is.
But it's not really about that.
Politically, we face that problem.
That problem is frozen.
There is one fact that doesn't come through statistically, and that's the state of confidence.
The state of confidence has improved enormously.
You think so?
It's improved some in the market.
What I was going to say is so that you have... First, I have...
Whatever we may decide, whatever we may say in the course of this election campaign, I think as one who has observed the problem of the economics over the many years and how they affect elections, we have a litigation percentage in the administration.
I would have to admit that perhaps the Eisenhower case in 1956 was a bit better due to the fact that unemployment did slip below 5% and inflation was relatively no problem.
On the other hand, we didn't have, in that year, the enormous growth that we had in terms of the market going up.
We were much too weak at that point, even in 1956.
But it was a good year to run on an economic issue.
This year could be a good year.
It's a lot better this year now than it would have been perhaps if we hadn't done what we did in August of 71.
Mr. President, I think one thing that is significant that does fall on the governor and his crowd is not to attack high food prices.
And I have my serious doubts that they will.
And so I think it's important that we ourselves don't make conditions
because they haven't yet and i doubt seriously completely cut off themselves from the farm vote which is the secretary of freedom made this statement up in new york telling the consumers don't worry food prices are coming down the palm of america let that demonstration in and never got them back
The only thing I'm saying is that thus far the enemy has not attacked high food prices.
And I forget it.
They attacked it in such a way that it's known across the countryside.
But your point was very clever.
The government repressively attacks high food prices.
And the one example is coffee.
Yeah.
All right.
I doubt seriously that they are good in such a way that it's meaningful to the public.
But the point is that they've got to be very careful all the time, just as we have to be careful sometimes, because they've got to think of that Midwestern heartland.
And I think we need to keep this in mind.
We will have it in mind.
Well, I think we need to keep this in mind, but no matter what anybody says, if food prices keep on going up fast, we're going to be hurt, Mr. President.
Well, you feel it.
The point is, you say the numbers, in your opinion, in October may be a little better.
Yes, well, the prices keep coming on down.
It's all $4 now.
It's going to drop some more.
It dropped $40 down to $36, and then it may drop on down to $31.
That's quite a drop.
And we don't think that, and you'd have a seasonal drop anyway at that time here, but we will not have as much of a seasonal drop this year as previously.
Well, I think we could say that if we were all just going to be statesmen this year, then I'd be concerned about the elections.
Just leave things right as they are.
We haven't really changed much.
And, on the other hand, being politicians, we've got to examine these things to see what insurance is going to stay out and to be sure that we're here so that we can be statesmen longer.
The difference between a politician and a statesman, it was best summed up by Khrushchev when he was in the United States in 1969.
He was, of course, the idol of politicians.
But nevertheless, they asked him about the problem.
And he has a marvelous, colored sense of humor.
He says, all politicians are the same everywhere in the world.
They promise to build a bridge when there's no river.
Now, that's what we're up against on the other side.
We've got people promising to build the bridges where there are no rivers.
There may not be problems.
They all think this is a problem, this is a problem.
But we've got to build a bridge.
In our case, we don't see any river here.
We don't see any gulf, particularly on this particular issue.
But on the other hand, if those voters out there think there's a river, we might have a promise to build a bridge.
That's where we should come, politicians.
Of course, I'm not suggesting that we're not honest to the people in that respect.
I just have to say, we have to consider all these things.
It would be far more important than what we do in a political campaign.
It's what we appear to be doing.
And that's where I suppose that's where what you appear to be doing is basically .
But anyway, it isn't your fault what you have accomplished.
All of you have been quite remarkable.
We think you're such good statesmen.
We apologize.
We're going to do our best to see that you continue to be around.
I'm sure the questions have space.
Now, I've got to give to all these people, including the staff people, some of you have anything to say.
Despite the budget restraints, they were able to purchase new cufflinks that are in living color.
So those go to all standards.
And then for the ladies, we've got the blue pimp and the seagull.
We've got the old boat and the old dog.
Now, we don't give these to everybody because they're more expensive than the other ones.
They're still less than $5.
So that's what the cost of the little council gets.
They're always worth it.
Next year, we'll try to buy them.
It'll be all right.
It's $830,000.
Thank you.
You know what he said?
He talked about it.
And wear tennis shoes.
Don't wear high heels.
These are expensive.
They're a state week down at the end.
For my students at that point.
Oh, yes.
Bill Greener, he's head of public affairs.
We brought him to my IRS.
No, no.
Joe Lane, general counsel.
Bill Walker, deputy.
Bob Lane, executive secretary.
Dr.
He's one of the creators of all this.
And I'm just his dad.
He's our liberal.
Oh, boy.
That is slander, isn't it?
We'll try to help the farmers.
They're doing pretty well right now.
We're sure going to kick those coffee farmers in the tail.
Captain, where are we in here?
Captain had a message he wanted to bring up.
I can present this in just under 45 minutes, sir.
This is an item that I presented, and I think perhaps the best thing to do would be to have the staff study it, but it's a matter of some concern.
And that is this very fine wheat contract that we have obtained with Russia.
if it could be filled with grain that we already own and storage for which we're already paying a substantial amount and not subject to an export surplus, a surtax,
export subsets, then I think we would save quite a lot.
And I present that as an item because I also understand that filling the drain order from the private sector stock, so to speak, is having an adverse or upward effect on the price.
Well, that's an item which I present to the council.
What can we do exactly?
What would you like us to do on this?
That's an improper way of presenting an issue to the council.
They're supposed to go to the staff first, right?
Yes.
By the chairman and I have a parliamentary privilege.
What you would like is for the staff to see what can be done to rescue the budget as they consider the effects of this Russian crime deal.