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Now, on this point,

I should say that, once again, from the end of the meeting, it was very well introduced guidance.

It's quite important that, what it said after the meeting, where we're going and how soon.

The fact that even though we'll even have to freeze at the moment, if they don't think about what's going to happen,

And of course, we haven't made a decision.

We're looking at a decision.

Shall we say something over the next two months?

I won't say it's gonna be two or two, I won't say it's gonna be, I will say it won't be two days away, but it won't be that.

We're looking at something like a magnitude.

But we want to hear not only the leadership, but the selective, what we call wild, in particular.

It probably won't be possible today.

But it won't be possible today either because of the time frame to get your views.

Also, you may want to think about it a bit and then pass it on.

I've been working on it all week long.

And all your views were counted.

Now, to get this in proper perspective, as you know, we ordered a 60-day freeze.

We indicated that the freeze would phase forward into an attack.

We have asked for certain legislation, one which would give the president more power in the field of control of exports, particularly so far as exports are concerned, and

indicated also that in terms of the future, that we did want to program.

stronger than the one that was in Bay Street.

And yet there's a full protection for the freeze on the other than a totally controlled economy.

Today it can be said the freeze is working, as well as the freeze can work, under all these inflationary pressures.

It has repeated, however.

as compared to the breeze of 1961, far more distortions.

And the reasons are obvious.

In 1971, when the economy was not working, the relevant coal production

At that time, there was not a big push that he and Arnold had in places and all the rest of them to get a very different situation.

The freeze worked very well over 30 to 90 days.

Now, with all the inflation, we're starting to see the economy bumping along at a high rate.

Not all, but many of them are failing the cost price push and of course are calling for removal of the freeze.

Not only the freeze, but they don't want more controls at all.

That's one side of it.

On the other hand, looking at the summaries, all of you know that the wholesale price index

still has to wait, it's an alarming rate.

It went up 5%, 5% in one month to be less than the indication it came in on a doctoral freshman of 10%, which we would have thought was a shocking rate two years ago, but these days it's a little less than it was perhaps before.

But nevertheless, there are those problems.

Now, on the plus side, before I turn this over to George Shultz and the experts

I would say enlighten us all on this subject.

On the plus side of it, I thought I'd never see the day that my unemployment got to the fourth percent range that we would all be happy about it.

That has happened, you know, the drop to fourth and eighth.

And if you really look at those numbers and look at it in terms of what we call the

The wage earner has distinguished from the U.S. coming in, burying in the train, moving in and out of the labor force.

If you look at those numbers, you could say this economy is running full-fledged with the rest of the economy.

If you have any doubts about it, go to various parts of the country.

You don't have to hire anyone.

You see what I mean?

Certain societies, places like the United States of America and others,

We are also in the midst of inflation.

And this is a small comfort to those who have to go to the bank to balance the family budget.

And inflation, which is less than that of the major industrial countries in the world.

We also have it in the back of our mind what we would have a program, and we have follow-on now to phase four, which will not be permanent or semi-permanent.

Now, I may be in a minority there, but I think the worst thing that we could do in this administration would be to fasten on this economy of ours, a controlled program.

So, shall we say, it's not possible, but so accepted that the business people would say, well, we'd rather have this to keep those labor guys alive.

And labor guys would say, well, this is better than having prices go up.

And consumers would say, thank God we have something.

If that is the legacy that this administration leaves for this country, I would say it's good short-term politics.

Disastrous in terms of what it means for the country in the future.

I don't believe in that.

So these are just some of the thoughts we have in mind.

Some of you may have different ones.

So George will...

Now, the moderator of our team of experts, believe me, they work night and day.

They didn't take a vacation.

Majority would start.

Thank you, Mr. President and gentlemen.

If you would, you have no objection.

Well, Mr. President, what we had thought would help us the most is to

a brief overview of the economy as it stands now, and you've already done a bit of that.

As it stands, we would like to listen to people's observations about the breeze, the management of the breeze, the timing of movement from the breeze to phase four,

and then, most particularly, about what kind of a phase four we should have.

And I suppose, just to plug one thought that occurs in the minds of those of us who have been working on this, we can't get ourselves away, we think, from the fundamentals of this budget policy, monetary policy, and from the standpoint of budget policy,

We believe that somehow or other we have to figure out a way and get a determination in Congress, as well as in ourselves, some way to have at least a balanced budget.

This was set before everything is doable.

But we need to have a real balanced budget.

I'm not talking about a full employment balance or any of these notions that none of you like.

The balanced budget is called for from the standpoint of the economics of the situation right now.

As an amateur and observer of politicians and politics, I wouldn't be surprised if I were a reasonably good politician.

But we will be asking you about phase four and so on and the controls, but I think

We would also like to stimulate some discussion about what can we do about the budget, because we think it is so fundamental.

Let me ask Kurt Stein to start us off by a sort of overview on the economy, and then we'd like to open it up to discussion.

And we have, we'll interject when we go along here, but mainly,

Mr. President, I have a little to add to the general picture you've given.

The American economy on its real side has been very strong in the first half of this year.

In fact, for the past two years, it has been rising very rapidly.

You may have noticed the figures that came out on employment last Friday indicated an increase of one month of about 650,000 in employment.

which brought the total increase for the preceding year up to almost 3 million, which is an enormous increase, quite unprecedented.

We have been having very rapid increase in production.

Industrial production is up by 8 or 9% above a year ago, and our figures for

for total output as measured by the gross national product are not yet out for the second quarter.

We believe they will show some slowdown in the rate of increase in the second quarter.

The slowdown is desirable and necessary, although we think there are certain inconsistencies in the figures that are probably not showing any.

exaggerate the slowdown in the second quarter, and probably exaggerate the figures, exaggerate the increase in the first quarter, but without bothering about the

those slight variations of the fact that we've been having a very strong and expanding economy in the first half of this year.

And also an economy which, despite the slight spot in place, has generated an unprecedentedly high level of real income for the American people.

That's one that's very hard to cross.

It becomes very hard to tell people that they're not suffering from the fact that they weren't and aren't.

But nevertheless, the down age fact that everybody finds about the economy in the first half of this year and still is that we had a very high rate of inflation from January to May, which was the latest consumer price index.

So we have consumer prices rose at an annual rate of about 9%.

It was under 9%.

Most of that increase was in food prices, and most of the increase

by far the largest part of the increase in the rate of inflation as compared to last year was in food prices.

And nevertheless, the increases were rather widely spread, and there's a long list of causes for that, which I won't go into.

The basic fact is that this high rate of inflation was causing anxiety in the country, and not only among consumers, but in financial markets.

The fact of fear of inflation was one of the main factors.

influences probably leading to the steady, disconcerting decline of the stock market.

And it's undoubtedly contributed to the decline of the dollar in recent weeks.

Now, so to get to the background of the freeze was imposed.

And as far as we can tell from all information, the freeze has

done its most simple job, which is .

But of course, it has caused a number of problems, of which you are all aware, I'm sure.

As we look ahead to the period after the freeze, whenever it may come to an end within a 60-day period,

Mr. President, that has a maximum duration.

We believe that

there will still be strong inflationary tendencies in the country.

We will still be in a situation, we believe, where demand pressures are very strong, even though we see some abatement from the extremely high rate of expansion that the economy was experiencing in the early part of the year.

Nevertheless, we think the demand pressures will continue strong during the remainder of the year.

We will still be suffering, and probably would still have been suffering, even in the absence of whatever effects the freeze may have had.

We will still be suffering from lagging food supplies, which had their true origin back a bunch of years ago.

Also, we will have a special factor that the freeze has held some prices down below their market levels, and there will be a tendency for them to try to

first, for them to rise if they are relieved of the freeze.

And also, the freeze will have bottled up a certain number of cost increases, which businesses would try in the absence of freeze to push on into higher prices.

I don't think that the...

And the underlying tendency for price increases after the freeze will be as strong as it was in the first half of the year.

That is, even without control, I wouldn't expect that we would get back to the very high rates of inflation we experienced from January through May and June, primarily because the economy is less expensive, but also because while the food situation still will show

which will be unsatisfactory, will not be as extremely unsatisfactory as it was in the first half of the year.

Nevertheless, the fact is that we have to contend with some fairly strong tendencies for inflation in the post-freeze period.

If we look out further, and I don't know quite how far out this is, but somewhere out there, we can see a situation where prices will be settling down at some moderate rate of inflation,

if we can get through this near-term, this intermediate situation, successful.

Because we do see, in 1974, a further seven-tally demand situation in the economy at large, and somewhere out beyond the middle of 1974, possibly, perhaps towards the end of it, a very marked change in the food situation as we begin to get the retail food supplies available

from the grain crops that we expect this fall.

So that there is somewhere over the horizon a period of reasonable priceability without extraordinary measure, but we have to get through a very difficult to get out of there.

And it seems to me this leads to two questions, both of which one is how it controls to help us get through this interim period without

without doing too much damage to the economy.

We've seen now what we had not seen earlier, the adverse effects of the controls on production and things that are very important to the American people.

And for the first time, people are getting a notion of the trade-offs that is involved.

And it's not a simple matter of just sitting on prices and solving a problem.

I don't have another problem.

And the question is how we can manage, how we can reconcile these during the period while it remains.

And more fundamentally, the problem is how we can shorten this interim period in which we suffer this conflict between

price, ability, and reasonable efficiency in the economy to shorten this interim period by managing our fiscal and monetary policy with prudence, which would enable us to create a situation where we could get out of control before they have done too much damage and without suffering .

Mr. President, to what extent is the devaluation of the dollar that defiers inflation domestically?

Well, it's very hard to put a number on that.

It's very hard to disentangle it.

it has made a considerable contribution.

In a general way, in the most direct sense, the increase in the price of our imports relative to the price of our exports

contributed 15% of the inflation that we had between the fourth quarter of last year and the second quarter of this year.

But then there are secondary effects arising from the fact that when we pay a higher price for an imported product, we also tend to pull up the price of a competing domestic product.

So there's probably more in the

I think you've got to take into consideration the fact that there's a dramatic reduction in the production of poultry, dairy products, and beans right now as a result of the freeze because that's exacerbated a demand situation.

Some way down the line, that's going to be fell in terms of short supply and out of practice, isn't it?

Well, my more optimistic view about the food supply goes out next spring, summer, and beyond that.

But we are expecting that we're going to have a very large

corn crop, very large soybean crop, we're going to have very large supplies of feed.

And by and large, all of that feed is going to be fed to animals of some kind.

And at some time, those animals are going to become food.

We are going through a period in which we have had very short supplies of feed, which is left over from the old crop.

And this is cutting back on feeding the poultry and so on and so on, which will intensify our problem

in the next few months, that is true.

But I think somewhere, when this next crop becomes meat in the store, we don't have any.

And we do expect to, well, we'll know, I think later today, what the crop, the better estimate of the crop, the corn crop and so on, we have right now.

But the generalist is really optimistic about that, so I think he'll be disappointed.

When you tell the argument about it, I think it's the farm bill that I have on it.

Well, for the immediate future, as I understand it, for this year, for next year, the prices set in the farm bill, excluding the case of dairy, those prices are...

Below what we've got in the market, below what we probably have in the market, that probably is not a serious question.

It probably means a very short run, a longer run than it may be.

There's also still the increase in dairy.

Mandatory dairy support level, which hasn't necessarily been a strength factor, could have.

You're assuming you're looking at a house farm, though, without it compromising the standard.

I'm assuming that they've been close to those target price figures somehow, and without the excellent rate.

Bill, I just wanted to point out John's question.

I'm aware of that.

Not only was the freeze announced by the president, but also some steps were taken to control exports, and particularly in some soybean and soybean substitutes at this point.

And the effort there was to bring the cost of the feed down to the level of compatible with making money from the animals that are raised from it.

That has been a step that the president took with great reluctance because it has its impact on our markets for those products and our foreign trade negotiations.

Nevertheless, it's a question of putting the American housewife first.

Those steps have worked, and the price of soybeans has about come in half.

and the same with some of the soybean offshoot products.

So I think there has been an effort both on the cost input side with some of these bar products, as well as on the price side.

We have to have in mind that that has an effect, but sure.

When we start fooling around with that, we change the dollars-to-payments picture, and we change the dollar picture, so the cookie don't take any of these things without a cause for another one.

Well, I think economics has long ago been known as political science, and one of the reasons for that is there's nothing you can do

That looks like something that will benefit you that doesn't have some cost.

And we're always in that area of you get something, you get something.

And trying to make a judgment about what must get sent.

Bill, you had a question.

The question I had was actually about underestimating the time cycle that it takes to get a cab to come out to market.

I think if your policy, as I view it today, is creating a condition where you're selling piggy sales, in order to get cash right now, you're eliminating the future source of supply.

And I don't believe you're going to get a bigger supply by fall or spring.

I think you're talking 18 months or more.

And that's out beyond 1970.

I have a certain family.

about next fall.

I'd like to ask the last question because I just this week learned my piggy's how to live.

I mean, you had to explain it to me.

I never had to explain it.

One more thing.

I think we're going to have to be realistic about what Farmer did today.

I think he changed his attitude about what he's going to do and what he's not going to do anymore.

He's not going to feed cattle.

He's not going to feed pigs anymore if he can't make a profit.

He's gotten to that place.

He's changed his complete mind.

And as I talked to one on the head of state, he said, I should feed two C-100 heads of state.

He doesn't lose money.

Not me.

He said, I'm done.

I said, you don't have any change left?

He said, no.

And this is the attitude of a lot of these fellows now.

They're going to make a profit like the rest of the statements in society.

They're going to make a profit if they're out of that kind of business.

There are fellows who sit around and pay all these cows every day, C-165 days out here.

They're about to quit, a lot of them.

That's the argument.

That's the argument that's come directly to it.

Bill, do you make this to get rid of the controls?

Mr. President, the way to put the consumer versus to, rather than in terms of putting, thinking about the controls, you'd better think about the supply sides.

Right, let's talk about them.

And I'm not nearly as optimistic about these crops.

I'm not either.

But, Mr. President, you can't help the consumer by a short-term policy that creates a shortage in the long term.

And that's what we're afraid of in this particular instance.

We've just as got to have

At least, I mean, you know, even today, the priest, we've got to have something to pass to if you don't have that.

There's no incentive.

At least people aren't going out there, and I can cite it, just hundreds of cases in Tennessee, and it's not atypical.

Why then, John, speaking of your electorate's body, you're an amused junctioner, isn't it?

Seventy-six members of the Senate come out for a 90-day freeze up above.

I want one of them, Fred.

Me too.

But what I have to say is that, as you all know, I'm critical of those who came out for it.

We could have opposed it if we had not done something.

And the House would have, too.

But at that point, the fact of the matter is that, as of the time we imposed the freedoms, people were thinking of the conservatives.

And the conservatives were taking it right on the chops.

So they said, freedoms, right?

Now, any economist who was taking a long-term view of the narrative

And frankly, that was my view.

I was looking at parents with, you guys have no supplies up there, taking care of some food.

Despite there was an increase last month, for example, they said it was not a big one, but it was a very, very minimum increase.

And so probably the next month's figure will be, maybe it will only go up to the minimum postal price, which would be about 2%, maybe 3%.

It doesn't make any difference.

When you're moving to Greece, it will go up 80%.

The point that I make is that we always have this.

We're going to look in this critical area of food, which is the one that really troubles us the most.

It's the one, if we're going to talk politically, it's the one that affects most people more than anything else.

We can get along and push like another aside.

And so the cars go up, the clothes go up, and so forth.

But in this critical area, we are faced with the problem of whether or not we want to give some short-term relief to millions of consumers out there.

And you can use all the polls on it, too, if you're not doing that.

We didn't take any algorithm here.

It's all around, all said.

And a number that was unbelievable.

35% of American people said freeze.

That's what they wanted.

The only cause they felt, they said, let's get some relief.

So you see that all the great economists around this people still don't run.

Mr. President, on that side of the coin,

I think you had to do something with these labor-intensive bills going on with the teamsters, with the automobile workers, and electrical workers, and whatever the rest of them were.

This was a very delicate period bill, and I don't like them, and my cash crop people out in Michigan are very upset.

John's group over here won't give our cherry people a break.

And, uh...

I think we solved the apple problem, but, uh...

But I think you've got to look at it from both sides of the coin, Cheryl.

And if you want these negotiations to go on at a proper tempo and with good results during this very critical period,

It's academic to talk about what the supply is going to be in 18 to 24 months.

Now, I just think you have to be realistic about it.

Well, it is true.

And I want to say that I'm arguing in a way that a major factor that led us to our, well, there were two major factors that led to the decision we made.

Leaving out the economic triggers, I suppose, although most of us have been

but there were two major guns.

One of them was the fact that the Congress was looking down our throat.

We were looking down the gun barrel with a 90-day freeze right across the barrel.

I mean, right across the board.

And that 90-day freeze was an utter disaster for the country.

So we had to do something.

The second point was that we were looking down the gun barrel with regard to some upcoming labor negotiations you mentioned, with autos coming up later in the year and others.

And those fellows could not be expected to hold the line

five, five and a half, six, six and a half, whatever percentage you know they may do, at a time that they see CDI going up at the rate of ten.

Put yourself in the position of a labor leader.

See, that was the thing they were looking at.

I must say that most of the labor leaders, except for those that were coming up, however, were not for the trees, seriously enough.

But, uh, Bitt Simmons, Paul Ball reported

and some of the others were not, but they didn't tell any of their, shall we say, servants in the Congress to vote against them, so we have no problem with that.

Mr. President?

Yeah, Chuck.

I'd like to just refer to this meeting for a while, 6-7, the book that was added down, the perusal of my colleagues.

Uh, what we have in this, which they've created just in time, we need to develop phase four, and that's what we're racing against.

And I think it's going to be a package of great many things, none of which are going to be very palatable, which as a package everyone realizes they've all got to give something.

The first item I'd put down is one that we haven't mentioned, the pressure of capital investment now, which is causing inflationary tendencies.

Now, I think there we have to really think whether or not we can, and I've always supported the 7% best tax credit and increased amortization appreciation schedules, and I think they've been absolutely right to bring us up to the level of other countries.

But I think we have to think now in terms of whether we should not have a flexibility.

I think if we have the power now on the President's trip, subject to, say, the same referral to Congress that we have for the Reorganization Act, that it's going to go into effect and be reduced to, say, 3% for the next foreseeable future.

If you had that power in the President's hands now, I think it would dampen down a little bit the pressure that's coming from capital investment.

Provided you could go up to 15% in times of recession or slow business activity.

I've talked with Arthur Burns about it.

Together we've developed a survey to move business.

I have that out in the field now.

Most of it is back.

It's what's about 50-50.

But I have extremely thoughtful letters from most of the business council and a cross-section of small business.

It's going to be very unpopular for some businessmen.

In Illinois, in northern Illinois, John Anderson and I will have problems with it.

But I think if they can see that we're not going to drop the investment tax credit and they've got a chance to go up much higher during periods of slower business activity, they may.

But that would be one thing.

The second thought to just everything we can do to increase supplies

That has to be the fundamental answer, I think, to the farm problem and everything else.

And there's no policy that will really, in the long run, reduce the source of supply, but also we have to think in terms of lessening demand.

And this gets into unpalatable areas, but you have to think in terms of possibly forced savings of couriers like this for corporations and individuals.

I know Paul's history just saw it out in the middle of our campaign years ago, and I argued against it.

I'm beginning to wonder whether I should open up my thinking on this now, because it would dampen down demand at a time of excessive demand now.

I think certainly the reduced strategic supply must be dealt with, and I'm not familiar enough with what we may have in our stocks, but certainly we have to think in terms of releasing whatever we've got at periods of high activity such as this.

The area that we are deeply involved in is controlling federal spending.

We have a markup at 10 o'clock in Little Rock Isle.

We'll be working to mark a bill up that will put rigid, tight ceilings on Congress itself.

It grows out of the work of the bipartisan commission.

And we're divided.

There's a group that wants a flexible rubber ceiling, such as Muskie, and he's fighting very hard to have a ceiling in appearance, but which can be pierced very, very easily in the

If we can get some help in that, I think from Bill Timmons and others, to put an obstructive ceiling on it.

Arthur Burns publicly said nothing could do more good at distracting the dollar than to have the world convinced that Congress is going to control its own expenditure level.

And I'm absolutely convinced we've done four or five months of research on it now.

We're not starting anew.

We could move that program very rapidly, I think.

And we know that it has worked.

George and I have discussed this over a period of years in the past.

I think we have to think in terms of some selective tax increases.

Again, very unfathomable.

But I think the original thought of the administration on a tax on leaded gasoline in Tucson was a good basic idea.

It raises a billion and a quarter in revenue and it gets into the energy area as well as the environmental area.

Certainly in public education, the lesson demand, I think the President's speech, your own speech, on energy was an exceptionally good one.

I picked it up and on a hotline back into Illinois.

It lists seven or eight things every single person can do to lessen demand.

But that gets into the area of public education.

And lastly,

productivity where labor and management must work together.

This is a national common interest vote on the same side of the table that never asks for a wage increase, that does not have a commensurate productivity increase with it.

And that's where I think public education is essential.

These are just a few of what I consider to be the beginnings of what will have to be a very comprehensive package for phase four.

Chuck, let's go to one question before we go over to John .

What's going to happen ?

I guess you know John.

No, not yet.

We've examined, I think, three .

and also selected as active Christians.

So we talk with very friendly people.

And we've done a lot of checking around.

As you know, there is a way, a means,

Now, there's no longer a closed rule, necessarily in the ways in which it is committed.

And in its present nature, it would be irresponsible.

There is, of course, a finance committee in the Senate.

And Russell Long is the chairman of that committee.

He has various views on this, too.

Now, the real question is whether or not it would be possible

to get through the present Congress a tax bill.

I suppose we could ask for that without the whole tree being laid down with all the other items, which would be very destructive.

That's really the problem we're facing.

Do you think you could?

No, no, I have a reason.

No, but that's the reason that I'm not going to say it.

I have to have a reason.

One of the reasons that I hesitated to frankly recommend it to the bipartisan leaders because I looked across the table and they just gave me a cold stare.

They know very well that that isn't going to happen.

In other words, the possibility of getting out of the present Congress a responsible tax bill is nil.

And that's my conclusion.

We can say, well, we'll try.

We'll leave to try.

We'll see.

And actually become irresponsible to be doing it.

And that will probably be upheld.

But the you mentioned virtually all the others can be how we can implement them one way or another.

But Arthur Burns has spoken about this stuff.

He's written about it and so forth.

And it, of course, is the classic solution for all the billet troops on the outside.

And that's a budget ceiling.

And I'm glad to hear there's

progress in that respect.

Of course, you'll have total support.

But on the other side, it's tax.

It's a pretty tough deal.

I mean, I wish that it would change if the Congress was to become more responsible in the last two weeks.

I'm delighted to hear it.

Mr. President, let me say, we have got a prayer of getting that kind of a tax bill through the Congress.

We might as well forget it.

And Chuck, I'm amazed that you're suggesting that

the Congress give to the president a flexible approach to the investment tax credit.

I thought the trend was all to take power away from the executive, and I'm just dumbfounded that there is the...

I think it's a good idea, but I just don't understand that in the light of all the propaganda we've heard about taking authority away from a president.

So Mr. Rosen, part of the Christmas tree aspects of the tax bill, there's been some informal discussion in the ways you mean to have a flexible investment tax credit, and there's no enthusiasm for it at all.

There have been previous suggestions that there be a flexible authority on income tax.

The same arguments apply to the investment tax credit.

in the minds of police news commission members that apply that, namely that it's an aggregation of congressional prerogative.

In the end, I'm actually one of the first to say, I think it's a very good idea.

Well, let me say, I'm not raising this check.

I don't mean to suggest that the idea should be raised.

And they may not be good.

But I think we do face some practical problems here, particularly with people who are in the makeup.

I mean, in the old days, let's even assume you're talking about the committee.

Yes, sir.

You're talking about the committee and...

The way he means committee was far more responsible than the House.

And he used to say to you, the House was far more responsible than the Senate.

I'm sorry.

That's right.

No, not always.

President, one of the items on Chuck's list was the stockpile bill.

And that's one thing that you have proposed that we have wanted to get action on.

We had a hard time even getting a sponsor for it.

But a hell of a lot, a certain amount of these are about $4.8 billion worth of stuff that our analysis and the NSC and the Defense Department and so on, the analysis is that it's not needed for strategic purposes.

So we have the authority to sell it.

Congress hasn't given us that authority.

Well, here you go.

That would be helpful.

You've got a lot of vested interests that are interested in this and that and the other thing, you know, and they don't want to get those stockpiles.

Let me say this.

I've said this.

I said it, if you remember.

I said this early in 1969.

The stockpile today is an anachronism.

The whole stockpile business has the, I mean, it's an anachronism except for certain vested interests.

And they don't too.

The reason it's an anachronism is that the whole stockpile concept was developed when everybody was thinking in terms of a conventional war.

There's not going to be any conventional war.

We hope there's going to be many ones.

But this idea of having a huge bunch of stuff stockpiled

stockpile in case you know we're going to have this or that or the other.

It's nuts.

Absolutely nuts.

And as they all write long papers about what happened in World War II, they're not going to fight World War II again.

It isn't going to be that.

And so when you get down to the stockpile thing,

purely in the case of some vested interest, controlling the Congress.

The Congress ought to give that authority so we can move this stuff, we can get some of those stockpiles down.

Sure, a lot of people are going to squeal, it's going to bring some prices down, it's going to affect the markets some, but it ought to be done in the interest of the country at the present time.

Well, we've made that speech.

Mr. President, I've talked to Eddie Hebert and some of the people on the Committee on Armed Services.

And that's where most of those bills come from.

Right.

Is there any way we can get any of them moved on the other side?

I thought there was one.

I'll do it again.

Right.

Yeah.

That's the way.

It ought to be done.

I think we can turn our attention to something else then.

Right.

Because all of us, you see what I mean?

with this amount of concern, it's only four or five billion dollars.

We don't get rid of all of them, of course, because that would depress the markets too much.

It would have an enormous effect.

You know, even what we've done on tins is a possible thing.

Frankly, maybe that isn't the one that you would do.

Do something about the never-ending demand.

I don't know what it is, but whatever the case may be, nevertheless, we're not going to be irresponsible here.

But we ought to have a policy to do something about these stockpiles.

If you look at that, they're no longer relevant to the presidential and national situation.

Anybody that needs the argument of national security on this is a nerds.

He's thinking that there will never be again.

Well, okay, Mr. President, I wonder if I can get people to focus a little bit on this question.

And to give you just a brief bit of background, in terms of the 73 questions, we'll know the results by about a week and a half.

that we have quite a lot of information at hand right now that were last made about a month ago about rights and things.

And in terms of the President's goal of having the outlays under $250 billion, we are sure that the President would have made that goal.

So in terms of the fiscal 73 budget, that of course is history, but at least it shows that's

The effort to hold the budget under a number like $250 billion, which people thought six or eight months ago was impossible, has been achieved.

So there it is.

You can do it, but there is determination to do it.

Now in terms of the fiscal 74 figure, we figure that the revenues are on the order of $267 billion or something like that, as opposed to what you can estimate.

And in order to have a balance button, there is no, assuming there's no change in the tax system, and looking at all the various things that seem to be coming down the pike as far as the Congress is concerned, we probably have to buy Roy on the order of six or seven billion dollars, somehow or other, in terms of the realistic appraisal of what needs to be there.

Now that's quite a task, but

That's what is facing us, is we're going to have a balanced budget.

And I think that given the fact, as the President said, we are, for all practical purposes, in full employment, this is the time when the traditional economic discipline must be exercised.

And we can talk ourselves blue in the face about Phase 4 and controls and reasons for one thing or another, and if we don't support that,

with a good, strong fiscal policy that's not going to do us any good.

We're never going to get out to the end of what we're talking about.

So I would wonder how much determination you feel can be engendered in the Congress for really having a joint commitment to try and balance this budget somehow or other.

You can't do it on a tax increase, you can't do it through spending.

Well, let us say this, as you started that, George, this is a very good point.

This is a preacher talking to the choir in this room lately.

What our Republicans have done, and this includes mine, it was the Senate that followed the House, and I'm glad you did that.

Well, I appreciate it.

But no, what they have done, and I'm hoping to meet those in the Senate, and I don't mean for that, we're right every time,

but it took a lot of guts, and they have.

So we've done fairly well in that respect.

However, there are things coming down the pipe.

I would just leave one thought, though, which gets us right back to reality.

Here at the time, we have a very responsible budget policy.

We have an unprecedented, at least in our time, inflation.

And particularly in the food crisis.

Next year,

Maybe we can have a balanced budget.

Let's go back to who we've been.

They've got all of those seats that you were waiting for five years ago.

But for this new concept, we haven't yet.

I can dig mine out.

But a balanced budget, it just doesn't do much good if there are no pigs.

Right?

Mr. President, I think the problem is not getting Congress to hold spending down, but holding it down in the right areas.

Because they'll say, yes, we'll balance the budget.

We'll take it all out, back to the feds.

That's the problem.

Well, I know, but in fairness, we have to say that, we must say that members of the House and Senate made some very tough decisions on the budget.

I think you look pretty good historically.

I hope you look good politically.

Mr. President, in the long haul, though, I really believe that Congress has to set the ceiling.

You couldn't agree more.

Chuck Percy mentioned the work of the Budget Study Control Committee, which was a joint committee, which I think was a very important piece of work.

And I certainly hope that the Senate can implement that.

We're trying to do it on our side, too.

But I think we've got to do it.

We've already done it.

Chuck, what do we need you to support?

We've got a few other horses around here.

We've got Bryce Harlow who ordered his first official meeting.

Bryce, stand up.

Oh, you ordered it?

Roy X, right?

Where's Bill?

Right here.

so you got the whole team i'd like to answer that now first i'd like to say reference this new team i think this is a marvelous meeting i've given faith and the team that's aboard is one of the finest it's ever been assembled and i think that we're all close

I think this is the number one item.

We can do something about it.

I'm realistic about the problem that's been mentioned about the accelerated tax and so forth.

I think here the move of the Congress is reflective of the country.

We want a balance budget now.

Not on full employment, but on actual in-go and out-go.

And I think we can do it.

uh there are a few members i'd like to talk to bill clinton's about who need to see the light with bill brock and bill roth and myself but we think it can be done from the senate side we're going to push hard on it we've got a markup at 10 o'clock it's the only one scheduled for this week we're going to just first that there'll be one every single day that we finish this bill can i ask you a question

No, no, but I have followed their deliberations.

Are you going to be able to come out of that committee with a bill that's tough enough that will allow us to set a CD in January or February and make it difficult for the floor of the Senate and the House to put another?

Well, this is the major principle now that Muskie is fighting us on.

But God is right on our side and Sam Urban is on our side.

How does Muskie fight?

What is he arguing for?

Well, he wants flexible ceilings.

Anything that comes along, it was like the old bill that Senator Williams and I put in in 68 that gave us our balance budget in 69.

It was a rubber ceiling.

And anything that came along, they could overwrite it.

We're trying to write it in so that once we establish this budget and he can't pass an appropriation bill to the ceiling, then it's damn hard to break that ceiling.

And this is the battle that is going to be a farce.

In fact, if we pass the bill once, it will do irreparable damage to our image abroad, because now at least there's some feeling that the country may do something responsible.

We're in an irresponsible act.

That's just a facade.

It'll do more damage than if we hadn't even taken the subject up.

Chuck, is there any sentiment in your committee for an automatic tax increase in the event of a ceiling breach?

No, we're not dealing with that aspect of it at all.

That's beyond our jurisdiction.

The town hall we're doing is looking at three or four options, one of which you have to take.

The real argument is whether or not Mosky is going to use the committee chairman by saying, hey, I'm trying to protect your priorities.

That's the political party.

Everybody is about the balanced budget idea.

But it is what it is.

It's actually the rubber.

We're going to need a lot of help.

How do you identify this bill, y'all, these firms?

Just remarking on it.

It comes out of that first bill I had this last year.

That was the first on the genesis of the thing.

And then it went to the interim committee's bill.

And now it's sort of 1541.

That's the one they're marking up now.

This is a very good bill.

The committee clip is a very good bill.

What they're trying to do is water that down.

Mr. President, can I ask you

I have a question before we get out of here about the qualitative elements.

I don't know if he's going to make a presentation.

I don't know what qualitative elements are going to be incorporated in phase four in terms of pass-through, in terms of cost absorption.

Some of the statements that have been made lately have been sort of depressing.

I don't know what...

There was one statement that we might have a 5%, you know, pass through and make retailers absorb two of the five.

Well, retailers don't make 2% through the business, and I... Well, I'm accepting candy, too.

I always accept candy.

I think this thing is crucial.

I think, well, Bill, let me say, we're having the first of a series of meetings this afternoon.

We've got a lot of papers prepared at 3 o'clock, in which we're going into these items, and then we're going to be meeting over the weekend.

Let me emphasize again, and George, you've corrected my wrong.

It's very important that you and Jerry and all of us not indicate that the decision is imminent.

Right, Gary?

I just think it is not common to be disgusted with a consultant and so forth.

But we are working very hard to get her ready.

Right.

Yes, sir.

I do have the feeling that perhaps John could speak to this because he's

not only been sitting in on all the meetings, I've sat in on many of them.

Business people, labor people, farmers, consumers.

He's been in a meeting in San Francisco yesterday.

I think you were in Atlanta, John, listening.

And basically, now, the nature of the talk is very different than it was when we were exploring last December and January.

And it's almost as though you can divide people into two groups.

Those who are producers of things are increasingly disenchanted with weight and price controls.

Because they point out all these difficulties that John has pointed out and others have pointed out that have been in the paper.

Those who are consumers, like a freeze, don't ever deviate from the freeze.

So you get these two things.

But previously, you didn't get the disenchantment from the producers.

because they do not really feel the impact of the control.

But I think that many of the producer sentiments are to the effect that somehow we have to move the phase forward or show that we are going to fairly soon in order to relieve the pressures that are on them.

And we do get that very strong.

But perhaps John has.

would like to make some comments about these consultations and some of our thinking about the baseboard.

Well, John, you're up.

Mr. President, I think all I can do is to pose this kind of issue that we have been discussing all around the country and not only elsewhere, but I think... Of course, John goes on that you don't...

Well, you must read about him in the financial pages and the rest, but you don't follow his schedule.

But he has gone, he does all around the country.

That's literally true.

He's been in the last week.

Every time I look at the press, I'm certain I'll find him.

And he's back with, we're trying to, rather than just go to the New York crowd,

Well, it seems to us that the issues to be posed are something like this.

We face some very immediate problems growing out of a transaction rule which is affecting

to some degree, production in the agricultural area, particularly.

This is the broader, this is the question of eggs and chickens and a number of products of that, tomatoes, fresh vegetables, and the like.

That's one question of what do we do with that.

There is fairly general consensus among, as George said, the producers that we must

take an early step to permit raw agricultural prices to pass on through.

The second and more general question, Mr. President, is the fact that both in the agricultural area and in the industrial area, we have a fair amount, substantial amount of costs

that are suppressed, costs that have arisen by virtue of the very large rise in primary prices, not only in our country, but a good minute of this from the rise in primary prices around the world, metals, oil, and other costs.

And the real problem, I think, President, in the design of Phase 4 is how much cost has to allow, how fast.

you let it go, so to speak, with full cost tax rules, you will perhaps do the most for production immediately.

But you will also provide a very large price increase, make no mistake about that, which in turn may have very substantial effects on a whole series of generating further price increases and generating further wage increases.

Therefore, the issue is how much of this pass-through, how fast, or whether some of it should be spread forward into a number of months, which would be a more modest median impact.

Eventually, it must come out in some form or other.

That issue is the issue we have posed, and as George Schultz has said, every time you talk about those questions,

The consumer groups, a good deal of the media, say, well, why don't we just keep the free zone?

We like it.

On the other hand, every time you say anything like that, the producers of apparel, textile, agricultural products, and the like say, nothing should be worse.

You are very seriously constraining output and eventually jobs as consumers.

Some small meat packing plants, for example, and others begin to shut down.

That is the largest question, Mr. President, of how to manage this surge that is still there.

A second question that I might pose for reaction.

is the more narrow question of the meat ceiling or how do you handle poultry and meat ceilings.

There is one set of ideas which say one could kind of keep those ceilings for a while longer or raise them a little bit and keep them a while longer.

If one could be satisfied that you could get the cost of chili down.

Soybeans are now down below $6 or approaching $6 spot.

They were as high as $12, $11.

That's one view that this sort of an approach on meat and poultry would be necessary to preclude a very rapid and immediate rise in those prices until output could be a difference anymore.

A different point of view would say that you ought to simply remove those ceilings because of the adverse effects in terms of pork, particularly, and poultry, broilers,

and take whatever immediate price consequences there are in that area.

It is those kinds of balancing of the immediate effects upon prices against longer effects upon supply that I think are involved in the discussion.

I would refer to the report on our channel.

I would agree that they're going to have a much quicker effect than it is in terms of .

You can go back a little very fast.

Right through the fourth, sixth, one, two, three, four, five, six, seven, eight.

I'd like to ask John Dunlop, who has been designing a pass-through formula for Phase 4, if you are not going to take into consideration what seem to be the facts that some industries in this country did enjoy huge profits last year, and whereas you have to approach this on a very discriminating basis so that you don't choke off supplies and you have to take into consideration the fact that I think many

food industries do operate on a very small margin of profit.

The rules of pass-through don't have to be the same, do they, for various segments of American industry?

Let me comment briefly about that.

It is true that at retail and wholesale, particularly at retail, in the food business, those margins are very tight and have been quite narrow over the past year, I agree completely.

I would agree that

One does not have, in all respects, to treat all industries the same.

That approach happens, as you know from our previous conversation, to be quite sympathetic with my own approach.

On the other hand, there is an dilemma in this situation, too.

The more different you establish rules for separate industries,

the more you create administrative difficulties, the more you act like God, the more you set yourself up for litigation, the more you set yourself up for differential treatment.

And one of the very real problems in phase four, which is much more difficult than in earlier phases when the system, as Joe pointed out in tighter capacity,

is that differential treatment is required.

In Atlanta yesterday, each businessman said to us, and we talked about textile, paper, and various other categories that were there, treat us separately, handle our problems, don't put us all together.

I'm sympathetic to that, but then that becomes a very difficult administrative matter, as you sure recognize.

And it also means that what is exercised is a great deal of administrative discretion.

Of course, there's another reason if I could just very quickly interject here.

The President expressed the philosophy that we want a control program that people grow so accustomed to and that they're so comfortable with that we can't abandon it.

And one way we're sure of that is to make it pinch a little bit, to make it uncomfortable for enough people so that they will literally long for the day when it will come to an end.

Mr. President, I think there's another factor here, though.

Politically, it seems that you perhaps might want to distinguish the food industry and other industries.

We're not going to get into terrible trouble with the shortage of automobiles, let's say, as far as the consumers are concerned.

There's a shortage of food, and we have to go to rationing and then buy markets and food in this land of milk and honey.

I'll tell you, we might as well not run for office next year.

And it seems to me, therefore, there may be some point in handling the food industry different than you might the other.

I quite agree with what John Dunlop says, that you affect the credibility of your total control system if you make it too flexible.

Because that's really what happened to us on phase three.

People simply didn't believe there was a wall back in the closet because we were trying to move away from controls.

But the food industry is something else and it seems to me that right there is where we can get in the greatest trouble politically if we have a shortage.

There's a particular difference between a dollar for dollar pass through, for example, on poultry and on oil.

You've got an entirely different formula.

You've got a very competitive distributive system of food.

Highly competitive.

And you do not.

There's a non-quantitative difference between the two.

Bill?

Well, Mr. President, you said initially that we haven't just been back home.

You know, my description, I'd like to reiterate what Barbara and what I was thinking about yesterday.

The number one question that I got followed with, you know, was the reflection of a bar, price of food.

The number one example was about a half a dozen times people pick out a head of lettuce.

Lettuce had gone up 30 cents here, maybe 67 cents, somebody said.

And that's the point that certainly in this phase four that we separate between

and food, and the other products.

Secondly, I think tying all this together is a little bit off the subject, but it's related to what John said.

Any help that you can give?

The question on this international monetary reform down the road in September to get this thing settled better.

I think we're all caught.

I hear more of that now than the dollar floating around up and down abroad.

In general, I'm concerned that people at the back is very definitely increasing.

But I think it ties in, the question.

Phase 4 comes first here.

People do expect hard controls coming along.

You're caught in the political web of the press and the unions and so forth.

They expect some drastic steps because they've all heard that Phase 3 is a disaster.

And it doesn't include to get back to the question, you've got to tie profits to the subject of inflation.

And where we made a mistake in phase three, some of these companies followed these guidelines.

These rubber companies that I got in my district followed it, and they got mad because others said, Mr. Schultz, phase three was, or phase two was falling apart.

And that was true, but to tie the profits and wages, the profits and the prices is a key to, I think, phase four to this increase.

I have one question I'd like to ask John, but I'd like to appeal to any member of Congress who has not had a question yet.

I'd like to make reference to Bob Wilson's comment on devaluation.

I think we're gonna face millions of Americans coming back at the end of this summer from abroad, disillusioned, discouraged, and disheartened over the devaluation of the dollar.

I think it's going to reflect itself very dramatically, very quickly in a great many things.

It's going to, because our food is being bit away from us by foreign countries,

It's going to raise domestic prices and it's going to change our eating habits at home.

It's going to make people unhappy about that.

It's going to increase all imports.

External travel is terribly expensive today.

The dollar just doesn't go as far.

American business interests, I think, are going to be bought out by foreign interests.

The German company can come in and buy American corporations at half the price if they could two years ago, and Japanese at a third the price.

And all of these effects are going to have a psychological effect, I think, on the country.

Considering that I think monetary and fiscal policy is more an art than a science, I have tried to think of what we might do psychologically to get people working together in a common cause.

Common cause, I won't use that word.

But we have passed the legislation.

to create the Productivity Commission in the Senate.

The House and the Senate worked closely together, and John Power and Bob Packwood have been a power of strength to us in the Senate in giving us good legislation.

We've got millions of dollars authorized.

And I'd like to ask John whether or not the President called upon, as a part of phase four, called upon labor and business to create productivity councils in every industry, every plant, every community in the country.

to sit down as we once did when we were in a war before, and had millions of people working in these councils, tens of thousands of councils, labor and management working to win the war.

We're in another kind of war now, and psychologically, people in this country are about ready to realize how serious it is.

It's hurting everyone.

What they need to do is generate, brought together, in some effort, they can do something about it.

And this, I think, unless we're going to have unconscionable wage increases demanded

by labor unions because the price increases, unless we can forestall that by getting them all working together like they are in the steel industry now.

They've got productivity councils in every steel plant.

They have a no-strike contract.

I.W.

Abel has seized on this, and the industry, in a war against the steel industry abroad, has finally realized they've got to come together.

That now has to be faced by literally every industry in this country.

Very few are going to escape the consequences.

What could happen, John?

Can we engender at the highest levels now a call on people that they can do something about it?

All of us in our rhetoric across the country could support that concept.

The legislation is there, the money is there, the commission is there, the staff is there.

All we need to do is invest in it.

Is it practical?

Well, I think George Shultz would agree, if you set them up and they do nothing, it's worse than not setting them up.

But if you set them up and they do something, then I think you, again, psychologically and practically, can have the long-term answer to inflation.

All of these other are band-aid approaches.

That's the only fundamental one, to really have a market industry competitive economy with the new situation we face in the world.

We have a meeting later this morning with our labor management committee, Mr. President, and perhaps Mr. Schultz can explore that with them and see if that makes sense.

We have a productivity commission, but the suggestion goes much further than this.

It's getting it down.

That's correct.

Unless it has the endorsement and support of the people we meet with later today, it wouldn't work.

And I think we should explore that idea.

So on an individual basis, we've been trying to promote that.

As you know, I think the more mass approach that you're referring to, we would have to explore later today.

Mr. President, I was going to say, just as a sideline, I'll let us, first, I think we should meet at the start.

Do it without a cellar.

But you've got to eat lettuce.

You've got to get a garnish or whatever it is.

I don't know what it is.

You know, I was going to give you a little reference.

Curiously, over the other day, I mean, over the, you know, just before a freshman arrived, the Secret Service picked up 50 wet bags, right, who were, overnight, they'd come up the railroad track, which was right along the side of the house in San Clemente, and 50 wet bags were sleeping on them.

I go to my house and pick it up and then just put it on the ground and throw it in the water and just put it out.

This gets you into another thing.

I mean, purely in lettuce and all the rest of it properly.

I mean, do it.

Unless you put it quite bluntly and come out on a climate in California and all the rest of it.

Everybody's going to say no speeches and see the sugar out of the sun.

That's the only reason for it.

Common cause in certain areas and they'll say it's a terrible thing.

I left this to this chief labor from Mexico to come in.

I have to do work that you can't get done by anybody else here.

I'm leaving unemployed in California.

They won't pay for that.

They won't do any student labor.

They never have.

And so you run into another problem.

So I think let us go out because it may go to a dollar.

It's wrong.

I haven't got an answer to it.

I just turned it off psychologically.

I know the lettuce thing is a big fight.

You remember that it was that lettuce was the big deal of the Democrats.

They had the very extreme Texas delegation of all of us.

I guess something like that.

They're saying we won't do it because they don't have the right to believe me.

If you get those later in terms of

lettuce, and asparagus, tomatoes, and all of these food-flavored areas.

The labor there now is pretty high.

You get it at $4 or $5 an hour, and have it done by here, you'll be paying $2 for lettuce.

So that is the problem.

And if it messed up, we'd love it, but we can't do that.

Lettuce is a traditional problem in price control systems, as shown by the following story from the Korean War days.

This lady is in a grocery store, and she picks up a head of caddy, and it's got marked on it 69 cents, and she's outraged.

She goes to the grocery, and she says to him,

Is this price right?

He says, yes, he says.

He says, you know what you can do with your 69 cent head of cash?

And he looks at her and says, I'm sorry, lady, there's already a 99 cent head of lettuce there.

May I make two quick points?

I think that you began this meeting by saying you'd certainly hate to see the legacy of this administration in a system of prolonged control.

I would truly and heartily concur.

We've got three and a half years of this administration left, and certainly some assurance ought to be given to the people that whatever is put in place here is going to be for a temporary, again, hopefully for as short a duration as possible,

Because this uncertainty that prevails out in the country, everybody is tending to pad whatever they're trying to get a little bit of advantage, and we've got to dispel that uncertainty some way.

And then the second point would be that in whatever you determine and decide upon in your presentation,

Couldn't it be done with a little bit of pizazz on the tube, longer than a 10 or 15 minute dissertation by yourself?

But with a, the Democrats' big argument was a 90 day freeze is the answer to everything.

We knew that wouldn't work.

That was only 10, patchwork and temporary.

Couldn't you, couldn't we have a farmer say,

We couldn't live with a freeze because the laboring man, an interview with a quick sense or two with a laboring man, we couldn't buy a freeze because of the small business man.

He couldn't take the freeze because of.

And whether it's a lifting from any one of the television documentaries and what they've been doing going around the country or just on our own solicitation with all these public information officers we got in the government around here today, it seems to me we could put together a kind of a package that

that could very well visibly help tell the story, and it's a problem of education among a good many uneducated people that you've got to get this point across, or whatever good it might be.

I think the, let me ask a couple of questions here, political questions as to what would happen.

We've discussed the tax matter,

The fact that it can't be done doesn't mean that we may not make some suggestions on it.

It's probably to be on the side of the angels and make some suggestions, and the Congress doesn't act to that.

So we don't need to let out either.

Second point is that, and certainly as far as the ceiling is concerned, Chuck, you and the rest aren't able to get the Senate tool on it.

But I understand from talking to Jerry, the House situation is very complicated, too, because they want to do some horrific things.

But if we don't get what we want, still, we should be on the side of the English on that point.

Those are purely political problems.

It's come down to the immediate problems.

If you were to poll the people that they say keep the freeze, the reason they would say keep the freeze is not because it's affected their cause, yet, because it just sounds like, thank God, somebody's doing something.

And if it goes off, they think things are not against them.

I'm thinking about the people, not producers.

Farmers would be 90% against it, or maybe 100.

Most people in business would be against it, unless

unless you were to put a number in on labor, which we don't have at this time.

You see, this federal treaty doesn't have a number on labor.

But believe it or not, with America, and we can talk to the United States government, all they talk of our business friends as being free enterprise and the rest, believe me, I've seen many of them sit around this table who like controls, provided it affects their prices and theirs.

with labor because they would rather have the government handle a problem of tough labor negotiations rather than their having to face that fact too.

So that's why I read Mary's point a moment ago that people can be rather comfortable with controls because it means they don't have to make decisions.

They don't have to face up to the hard battles and so forth.

Nevertheless, the majority of business people would be responsible on this.

And as I say, no, we can't agree with the majority of producers and so forth and so on.

Farmers, of course.

Consumers, great mass of people out there don't think of these more sophisticated terms than say econ, because the cost of living is still catching the wind.

Now that brings us down to the Congress.

What would be the attitude of the Congress today, as we move to a phase four?

And this is where Dr. Benloff's discussion has raised a very serious question.

If you have a total pass through the meeting, you're going to have a bulge.

and it's going to be quite dramatic.

Now, if on the other hand, you have a uterus-selective pass-through, which I think there could be a case made if it could be possibly administered, and that is a sponge.

Or if you have a temporary or a marked, marked reactive pass-through for a period of months, it's going to be very difficult to administer.

But the bulge will not be quite as obvious.

In other words, it will go .

The difficulty with the pass-through, unless it is totaled, unless you just take it right off, is that it creates, let's face it, enormous uncertainty and distortions in the economy.

That isn't the fact.

We will pay for that uncertainty and those distortions.

Not now, but next year, year after, and so forth.

That's the problem you have with having that kind of approach.

Now, the question I raise is this.

If, to see whether it's a viable option, if we were to remove the phrase, if we were to remove it,

in which we will, of course, before the 16-day period, we'll go a little longer than 16 days, let's put it that way, and it will come off sometime before, if we remove it and have a bulge, do we then look down the gun barrel again to a Congress determined to reimpose the treaty and a freeze that would be across the board and in a way to put the buck down here the way we can handle it?

In other words, it's really an option for us to be paying in terms of doing what a greedy, let's face it, I don't want to be quite correct about this, but might as well.

The best thing to do, the best thing to do in terms of the economy for the long run, the best thing, and that would mean even for next year, not just for the next few months, the best thing to do in terms of food prices particularly,

in the long run is to move away from this to allow the pass-through right now and take the heat now and then let the effect of it wear off.

However,

in terms of the, and that also has the least effect of distorting the economy.

So it means that we continue to move on unemployment.

I emphasize again, we must not tend to look at just the negatives.

It's rather pleasant to get unemployment, as I said, below 5% or 4% range, and it's rather pleasant to have the kind of a boom we're having.

Because in 1971, we had inflation

and the recession at the same time.

You're going to have to have a choice.

You might as well have a laugh.

But the point is that what we confront now is a tough decision as to whether or not doing what is really best, if you're looking at longer terms over a two-year period, we should

we can take the heat now, or whether we should temporize with it and move it along and gradually turn.

That decision has not been made.

That's one that Dr. Dunlop and all the rest of our economists will be discussing this afternoon and the rest of the week.

So I ask that question of you.

And do you think we'd be looking down the gun barrel right away to a 90-day freeze when you get those numbers which will come up, let's see, this is the 1st of September, 1st of October?

Very big bump.

I might be talking against the interest of some of my producers, but I think if you run my whole pass-through now, you're going to have such a bubble of shit in there.

increase in food prices.

You've got both the worst of all possible worlds.

The people that we've helped are probably insufficiently grateful to government.

You'll want politics.

And the millions of people you've hurt, the man doesn't tell much.

It just doesn't seem to me to be reasonable.

I would like to see whatever is done should be seen, should be done very clearly.

and there should be some evidence of controls, and I know quite well the promise that the moment you do something, you should promise you're going to stop doing it.

I think the psychological effect of that is tremendous.

What about the effect it has next year?

What about our pigs and our chickens and maybe even our beef cattle?

I don't even grow them out of the plant.

President, I'm not going to talk about that.

I don't even grow them out of the plant in the window.

I'm not going to talk about that.

Mr. President, this heresy, my heresy, doesn't come to me.

An old farmer drove 100 miles and got me on the bed last week.

And because I fry so much up in your hands about how close I am to the president, there's two things that I come down here every morning, and it's incredibly difficult.

And Mr. Pettis was reading me down, and he's one of the local big chicken raisers who were practicing abortion on big chicks.

And he said, if you go down and tell the president

of having these controls, but the Democrats do all the dramatizing, and the Republicans never dramatize anything.

And he said, the hell with this pass-through and getting all the consumers mad.

Remember that 40 years ago, the government was paying the farmers to kill little pigs.

And the president can afford to demagogue

a little bit on just pigs, calves, and chickens.

And instead of having to pass through, they can afford to pay the farmer, the producer, a temporary subsidy to produce, not to kill off, to produce a subsidy, provided that the farmer is followed by releasing

of a portion of their production over the next year or 18 months.

And in that way, the president would dramatize a portion of his program which only had to do with these commodities that would be both satisfying to the consumer and the producer.

And why the hell doesn't he place a policy to do a little dramatizing on that point and subsidize the production

gradual release and building up of a backlog of big chickens and cats.

I've given you... Mr. President, on the... How do you get peanuts out of them?

Well, we don't have any peanuts in the bank.

Yes, sir?

Yes, sir.

On the specific question of legislation,

If you take the lid off or let immediate pass-through to the full extent, I'm sure around September and October you'll have the same element in the House, probably in the Senate, demanding that across the board see it.

Our legislative problem in the House is different than in the Senate.

Any bill that comes out of banking currency is suspect under current patterns.

I think we could either defeat it, or at least it would be subjected to a veto and could be sustained.

Our rules, of course, are much more limited.

We have a germaneness rule, and they can't put such a freeze on

fundamental legislation, whatever it might be, for example, debt ceiling, it would have to be passed.

But the Senate is a different ballgame.

They can put anything on anything, and the debt ceiling will be up again.

And their debt ceiling will be up again.

Now, you could answer that far better than I, but

You probably could have and might well have a crisis like we had a week or so ago.

It wouldn't be precipitated by the House because of our restrictive parliamentary rules of procedure.

On the Senate side, you've got a much different situation.

probably would be a crisis of some proportions if the demagogues prevail.

I think we can sustain a veto in the House

And certainly we can handle, I think, Mr. Patman's committee, but I think you have to look down the road at some of this legislation that is essential for the ongoing of the government come sometime in October.

Because I understand both you and you are looking at the whole House and the Senate.

I would say that looking at it not from the standpoint of what is the state's unlikely view, but from the standpoint of the political point of view, based on the practical of those who are making a gradual mess for its return.

That would be my recommendation on a very highly selective basis.

Now, I'm not knowledgeable enough about all agriculture, but there are

agricultural commodities that come into being once a year.

And if you kill them when they do, or are harvested, there isn't a chance to recoup for another 12 months.

Now, I was talking to some cash crop people last Saturday in Michigan.

Three months ago, onions, according to these people, were $23 per 50-pound bag, and nobody was buying onions.

Today, or last Saturday, they were $5.75 per 50-pound bag.

These are crops where you get more than one production a year, and maybe your rules ought to be different in application.

a year crop than you can have on two or three or four crop harvests per year.

Well there ain't a table program that should have a nationwide program.

That's because people eat under the limits.

Mr. President?

Well actually, lettuce has gone down from $12 for two dozen heads to $7.

That's what it is, but not out there.

It's still like $2.65 a head.

This is where I heard it myself.

I know that it's the... Mr. President, I just want to add this word.

The fact remains that the intention of this country and the vast function of this country is fixed on meat.

It's meat that they're thinking about.

And the hell with meat and all the rest.

It's something...

and not have it pass through immediately, even though it is not to keep the security of all the rest of the program.

I just throw this out to see who agrees with it.

I think that there's a great possibility that you could get by with taking a bulge and swallowing it right away without a freeze.

But if it's further along,

If it became necessary to raise prices again, I think you would undoubtedly be facing the barreling again, which I suppose brings up the proposition that you've got to be prepared to put controls on producers as well.

Because otherwise you're a one-term boat, a one-time boat isn't going to be a one-time boat.

The prices, we have no guarantee that the prices won't go up further.

And if they do, well then you're really looking down the gun.

So I think you've got about two options.

One is to swallow it now and then put real controls across the board as far as producers are concerned.

or to do it gradually and hope that people won't withhold a thing from the market waiting for the next phase of the price increase to take effect.

Two options, Mr. President, and on our cash flow.

Let's move on to that.

Let's talk about those, let's be generous, the Japanese law.

They are still following what Oregon and Washington would be regarding as an excessive number of laws.

What do you think?

We are wood-short, Mr. President, but we would be wood-short if we exported no logs to Japan and imported them to Canada.

You put your recent announcement of the Forest Service in Greece, unless we have a tremendous amount of unfortunate falling off of housing services, we're going to be wood-short.

But on the Japanese log, they're still poking around with this.

They may be people of the system.

Well, I would cut them back substantially, at least to the extent that we are paying, because Canada will not allow the export wallets only finish when we buy very expensive wood in Canada.

And we sell very cheap wood, too.

Did you pay?

It seems like it, perhaps.

The rest of you haven't heard about it.

It seems like there's a small problem with lumber costs, of course.

They will come down on something.

We don't want to kill that house.

Well, we'll keep it at 2 to 2.1.

We'll keep the boom going.

It's still important.

We're breaking it to about 1.8 million.

If we do that next time, it's no good.

And we're talking about crops.

And sure, maybe if they were sturdy, they'd grow a tree.

They'd grow a tree.

Mr. President, the people of Virginia are concerned about the export to Japan, so it's not restricted to the West Coast, our temperament.

I might add one thing that nobody's mentioned, Mr. President, which we all have control over, and psychologically that is this issue of congressional pay increases.

You're going to have to face it before we do.

And when you make the recommendation, that's what I can think of.

There's nothing worse than a pay increase in solid receipts.

Yes, sir.

And I hope you take the burden on this one yourself.

And no matter what your commission might do, it cuts it down before it gets to Congress.

Because I have a fear if it gets to Congress, it will pass.

That's, that's a bad man.

I don't know, I don't understand.

You're going to support, you're going to support him too.

I'm texting you.

Yeah, listen, he never knew a member of Congress who was defeated by Lord Trump.

You know, here I'm just talking about the psychology of it.

You ought to agree if we vote on it.

But in the House, we had no way of voting on it.

Unless the rules, unless the rules, they weren't going to...

We're out of questions, if you can't continue, I think we're going to end the recording.

What are you going to do about these grade 15s?

The next pay increase is going to cut right into the grades for 15.

Then you're going to have 15, 16, 17, and 18.

We'll all be working for the same ceiling around here.

I would separate the Congress, as I read the bill you came in.

I would separate the Congress from the judiciary, from the grade 15s, up to one.

The psychology is in the congressional opinion.

That's right.

The only way you'll get the integration

all increases, I think, is to stick them together.

Because if somebody not said one, another fellow will not have another.

Well, we have one more bill to give you.

Well, we have an opportunity to review your Facebook recommendation for you.

I would say that if you have thoughts,

Ask them on, I think the best way to use it is to go directly to Schultz's office.

And then they'll take a look at it and go on.

The president, in a part shot on this subject, I think he's impressed and sure that whatever you suggest, whatever it's involved in phase four, however it looks,

Those on the other side are going to come out immediately and raise all kinds of hell.

And I think that needs to be considered in your equation so that you ultimately determine what's best and you know that you're going to have to take the heat.

We're all going to have to take the heat no matter what.

Even some sitting around this table may be in that group who go out and speak against what's proposed.

And I just think that you have to assume that that's going to happen and go about your business

Well, I didn't raise the question that a congressman actually purposes of hitting what we're going to do, except in terms of, you know, the very practical point that if we do something and the congress, regardless of what we do, does something worse than we've dealt in the heart of it.

That's the real question.

And if we could, sorry, but let us see what our,

We've done a lot of digging on this.

There's discussions, and it's been very helpful.

It's all a big secret, a secret.

There are no easy answers to it.

There are no answers because there are no easy answers.

And as I say, the reason we've been going through the...

I got a very long paper from Arthur Burns on it.

He has a control fence, and he really believes that fiscal plus tax, by fiscal,

tax, and of course the Federal Reserve policy, one more thing.

Well, and it'd be great if you were God, but unfortunately, and under the circumstances, therefore, we have to deal with the situation as it is.

Mr. President, we'd much rather take heed, most of us, to ensure a sound economic basis, even though the political can't be ignored.

Exactly what Jack says.

I think that's right.

What I was saying, though, that there's always a question of degree here, too.

Do you want to give it a go?

If we can, without too great cost, too much difficulty in administering it, better out of it, that's the real problem.

That's what we're going to put in mind.

And also looking at the selective problem.

I couldn't agree more, too, with the general proposition.

The nature of the game is still food.

It's above everything else because in terms of clothing, in terms of automobiles, in terms of even housing and all the rest, there'll be wine and so forth as they're going to be.

But people can do without.

They can put it off and all the rest.

They'll like it.

in terms of food, that really knocks them right out.

I mean, I say this based on my talk, not just with you, but talk with labor leaders.

That's all they talk about.

They don't raise any of the others.

I mean, they say food is illegal.

President, you came into Congress, and I came back to Congress on that issue of meat.

Yes.

The other point that I would make in conclusion is that since we look down the road and we make this decision, we may have to take some heat now.

If we make the decision, if our evaluation shows that moving in a way that is too political,

That's what we're talking about.

If moving that way is too political and the charts are not, it means that we're going to reap the consequences of having to go to rags in the water.

And the worst thing that could happen is to go to rags.

That is not a good answer.

It won't work.

It worked very poorly.

It worked very well in wartime.

It was a disaster in peacetime.

And at this time, with the economy moving to the high level, it just wouldn't work.

Talk about the black market, too.

We had 46 in the middle of the high world.

And the Indian Congress got elected.

It was nothing compared to that.

At least then, there was still some support.

and we had the controls and all the rest, and I guess we woke up and we got rid of it.

And every family knew what other family was hoarding and what.

So we want you to know that we oppose some of your problems and our problems and we'll improve.

And if you, I'm sure, in the middle of the night, might wake up and come and bring an idea that's not at all true, share it.