Conversation 128-002

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Before we get into this, this is George Lawrence, this is just Japan.

It's thirsty.

Going back to 1962, our next big event was helping out with Kevin's business.

We entertained him last year.

Right.

And the next ones are in Japan.

They take place on Monday and Tuesday of next week.

Who goes to come on our side?

The present delegation has spoken and has now come to.

I never figured that I was going to do it until I get out of here.

But I'm sure that he would have said all two of them.

Secretary Rodgers and myself.

I'm still a friend of hers, though, deliberately.

Bill, her dad's done that?

Yeah.

I haven't been in Newark, sir.

Newark, Japan.

March, March.

But I don't like that.

You're not going down there?

You don't go up there?

I go to Japan separately.

We talked about it, I don't know.

Let me just talk a little about this in terms of some of the other things.

You see, we're having Tanaka here over the last month, last week.

We're having, this year will be in China, in early August.

We are pretty heavily loaded with, in October probably, not before that, in October, not having any of this.

and oil is probably useful in this country.

And the rest of the people who are making for the Chinese are really making for the Russians.

And really, all that we have to talk to Japan about is economics.

So the Chinese and Russians, economics, well, they can say it's very important on this side, sure.

What's that?

I said the Japanese are under law in the export control.

Yeah.

So I don't have a secretary then.

Yeah, yeah.

Well, on the, on the, because I'm supposed to make Sunday, do we have to grapple with that thing?

You know, I'm supposed to talk about international economics, export controls.

Do you think we ought to say something about this?

Oh, yes, I know.

Towards the line, we're not putting these on as a permanent feature.

This is a, oh, that, that's not reassuring.

Are you going to make a speech on international economic problems?

Yeah.

Well, if you do, and if you do, maybe you're the fellow to make the announcement, Mr. President.

that during the second quarter, we had a balance of payments service.

That's quite clear.

And, uh, typically, the announcement in the...

Probably for the wrong reasons, actually.

No, well, you know, return blow, and, uh, but I think this will be normal bureaucratic procedure as followed.

I think this announcement will be made until mid-August.

And you can, I think you can say that he's, well, if you want to figure, you can get a pretty fair estimate.

When would you be back?

When would the whole group be back?

I was planning to stop by Bohemian Grove on my way home.

Don't hesitate to cancel me out.

I'm trying to think of a way in which we'll keep open.

We'll serve our interests by doing both in terms of our deadline, in terms of six.

That's true.

I noticed, for example, your suggestion of

Can I as well talk about this before we get into the, I'm not supposed to, because the timing is quite important.

Talking about saying I'm going to miss any third of your breath.

Yeah.

That's the same thing.

You could be back by the following third of your breath.

Yes, you could.

Or I could not go.

I would grow out of there.

Well, it might not work, but we'll have to be trying.

This is the best.

Let's see.

Let's figure.

Let's take a look at this.

Do this roll in the last one.

We have a meeting of ministers of the group coming right up after that weekend.

That'll be here in Washington.

It'll be a real big international voluntary meeting.

There'll be a lot of play around that.

What they hope that we could

Yeah, I have this, he's scarred and the helmet doesn't fit, I don't even know, I think if he could be with us.

Yeah, I know, we've been talking about this, that would be fine.

But I think, not because the road, last road weekend is, not this weekend, it's the way from this weekend.

So what do you think this weekend is going to be?

It's the 21st of March.

Well, let's not get, let's keep our minds open about the data on this, and I'd like to talk about it as we go along.

And some of you have a lot more time, most of you have not read the paper yet, but I was supposed to prepare you, so I'd like to encourage you.

You've been a moderator this morning, but you were with the Congress.

All of a sudden, he's talking about the same subject.

I'll hear a paper in July.

I'd like to hear it all again, too.

As we have talked about, we've had a sort of floating craft game in which I think the permanent players have been Herb and Roy and Peter themselves.

And then Mel and Bryce, and now John, of course.

Arthur, I've had a little personal discussion with, but he has not been in these meetings.

He's not in Vermont until the I-9 Twitter deal.

Well, we'll talk about our projects.

The president has to be swept by.

As a matter of fact, the dollar right now is about 8% better than it was Friday against the principal European currency.

That's about right.

Don't watch it, everybody.

Go ahead.

But to the extent that we intervene, the concept will be to maintain early markets and not to maintain any particular rate, which is quite a difference from...

In the past, the speculators could have sent back you up against that rate, but you knew exactly where you were.

This one hit a hell of a hit.

Ron, if there's any question about that intervention, there's one standard answer for the president.

We don't know anything about it.

Oh, gosh.

Yes, sir.

I don't understand what it is.

That's the best question.

Well, John Collin used to explain it to me.

Oh, John?

No, that's not what I said.

Did you, John?

All right, I'll tell you what it is, sir.

Well, at any rate, in this group, we've discussed a lot of things, and we've written this memorandum that you have, which you can pass around.

And whether everybody agrees exactly with everything, I don't know.

But I think there is a general feeling of support, although those who disagree will, I'm sure, express themselves.

But we suggest the following as a program.

First, a tough phase four.

A tough phase four, in our view, means that you have a potential bulge, a situation where a bulge is there and not potential is there.

And it's going to pass itself on into crisis at some point.

And the problem in designing phase four, as John has described it, is how to manage that bulge and how much to spread it out.

The basic threat that the president pays for is to be pretty tough and to let it come through without a bus and spread it out probably over a period of four or five months.

That is, for example, if on industrial products you say that the freeze is in effect going to last until the end of the 60 days and then you have a pre-notification period of 60 days before you can change any price,

you have, in effect, extended freeze as far as those people are concerned by another 60 days.

That's a pretty tough government.

Then you tell them that they can pass through on a dollars and cents basis rather than a percentage basis, which is much tougher than phase two.

It's always on a percentage basis.

So we have here a tough phase four.

It's designed to spread out the vote.

now spreading out of the boat of decision-based primarily political considerations.

What is economically right?

I think, I'll just speak for myself, from the standpoint of the economy, it would be healthier to let it go and get the supply responses.

perhaps not let it go completely, but enough to be sure that you stimulate the responses.

For example, in this program, which Butch does not agree with, we would take off the ceilings on most food prices, but not on red meat, which we would have ceilings if you noticed when you did it in March.

Now, we are beginning to see the accumulated counterproductive effects of that, but we would keep that on until

for a 60-day period.

Well, let's feel that that is going to get you into deeper trouble.

And I guess I would say, from an economic standpoint, at least in my judgment, we better let that go and think about the supply effects of that and how it's going to affect you, say, next spring.

So, but I think that at least as we have talked about it, we more or less agree that we should spread this out, if that's the way to start.

For those of you that were not here, this was a major subject of discussion this morning.

Well, everybody wants it both ways.

That is, you want to not have the counter

the productive effects of the freeze, and you don't want the price increases that are necessary if you are going to avoid some of the counterproductive effects.

Now, we try to counter them somewhat by the export controls, and as was mentioned this morning, that has worked in the sense that the price of soybeans has been cut in half.

But George, let me ask you on that point.

Isn't that growing temporarily?

We have a big downside to them in the following things.

First is raising elvis, which you can already see in our trade negotiations.

Second, from the standpoint of the farmers, the soybean farmers have organized themselves and done a lot to develop these overseas markets.

They've developed them.

and all of a sudden we bring the curtain down on them, and they feel pretty upset about it.

So that is a problem, and of course in our balance of trade and payments, we figure what they have done so far costs us an annual rate of three quarters of a billion dollars here in the U.S., and that's not an annual rate, it's an actual 750 million dollar rate.

Well, there's that, plus the fact that we've been reasoning common market companies for years to take more of our annual costs.

And all of a sudden, they're confused.

And they wonder whether we know what we're doing.

This is going to cause all kinds of political problems in this country.

The European countries.

That's the interesting thing.

I talked to, as you know, this year, I talked to Frank and Riyadi.

I guess the latest blue line.

Back and then, of course, to Eden.

Every one of them I made this speech about.

You've got to take more of that.

Every one.

So we're helping the police.

But we'll also argue that the effort to bring these prices down by government action will affect the psychology of the farm and he won't go his all out in his planning.

And he worries, for example, if we put on export controls on corn, we'll have to put them on wheat because they're substitutable.

The next year is where wheat crop is getting ready for the planting process.

It'll be effective.

you'll wind up with less wheat and so on.

It's only an example of how the pattern of controls accumulates and leads you from one thing to the next thing to the next thing.

And it's basically, at least in my view, nobody's smart enough to manage things through controls.

You have to let the market work it out.

People can be aggrieved against the market, but that's a little bit of a problem.

But some of the congressmen this morning were simply arguing with their constituents.

The most coached point was made by our consulate politician, Hugh Scott, who reminded everybody of the great issue that had brought a great number of Republicans to Congress in 1946.

It wasn't the price that made it, it was the fact that there was a kind of

And the thing we've got to be concerned about is whether actions we take now in this area have such an effect on the psychology, which means what farmers do, that whether it's pigs and chickens, they can go pretty fast.

Two years, all right.

There it is, this psychology is going to be so effective.

That's a factor that, and I guess, but what I'm getting at, all this, as I understand, has been taken into consideration in this recommendation.

But even in spite of this... Well, it's a judgment, and you can see the various factors involved.

I have raised poultry by two or three cents.

Well, all right.

Now we got some chickens.

Well, you see, I don't really hate them.

I don't like either of them.

Because these animals don't eat the psychology they eat soybeans and corn.

And they'll eat all the soybeans and corn there is.

And that will give us all the meat that that amount of soybean and corn will produce.

And I think that's about all there is to it.

Aside from that, there's a question of time.

And all we do by these various price controls, given this year's crop, next year's corn crop, which is already planted in quite a common area, it affects the time at which we get the food.

And, uh, so the relative price will have some effect on that.

That's why I, I propose to raise the price of poultry a little because that will divert more of the feed into the poultry and we get more meat out of that quicker than we do out of hogs and cows.

But, uh, yeah, I, but I think that the, the,

what what affects this primary psychology of course what you're dealing with out there in the future is not this week's price or next month's price of poultry or cattle but what we expect is going to be out there in the future when it comes to sell that stuff and

I don't think you need to let it up now in order to shorthand a reasonable price.

If you tell him, in other words, he's going to be able to see that it's going to be off after a certain time, then he'll make decisions.

Or if you tell him that the ceiling is never going to be lower than it is now, these prices, we'd like to take us up to a great extent.

The remaining prices are probably profitable for feeding all the people who die.

Anyway, I think that the assumption that we have any doubts about that corn crop that we put export drills on corn, which means we put export drills on corn.

We did that report.

I've asked it to be brought in.

Let me ask something that I don't mean to do.

I don't mean to hold on to the other things here because I really tried to get the heart of us to make sure that people would have a consideration to do.

Would you agree with your fellow, Bryce?

It's me.

It's both of us.

It's the pigs in our meat, right?

Plus, they have the effects of these actions on mid-year next.

Yeah.

But what I mean is, so that in terms of...

In terms of the cost of living today, it's the food problem, rather than that people can put off the automobile, or the new dress, or the shoes, or even the dentist, or whatever they want to have to do.

But they've got to eat.

It's the food problem that affects the labor leader in terms of his negotiations.

The food problem is everybody around the neighborhood is part of the food problem.

Now, the thing that concerns me about it is, and should concern us all, is this.

Let us not down.

A little earlier, when we put the briefs on, we were looking down the gun barrel of an alternative that was totally unacceptable, and that was a 90-day freeze imposed on the Congress, which would have just been gross.

We're not looking at that right now.

We've all looked at comments on it about early in the summer.

But now, I think we've looked at it before.

what we believe is right in terms of the supply side catching up with the demand at the earliest possible time.

Now, in terms of the supply side catching up with the demand at the earliest possible time, the question that I had

is whether we are paying too much in terms of whatever these proposals are, in order, you know, the 60 days or what have you, and whether we ought to take the heat of the bulge.

Now, the other side of that coin is if you were just to slice it off with no, not slicing over the 60-day period, the gradual removal, the bulge would be messy,

And then we might buy ourselves, again, to a congressional problem.

But I guess I can say that there are times that right now I do not think that we should be thinking primarily of the compromise in order to meet the political situation at the moment.

I think we should be thinking primarily of how we can meet the situation as soon as possible that everybody wants to meet up, getting these supplies up, and that we pay as small a price as possible in terms of doing what we know is the wrong thing.

I don't know.

I'd like to have that subject discussed a bit.

I would like to see it loosened up, Mr. President.

I think we may run into all kinds of shortages I take by myself.

We're going to run it with a shortage then.

I'd rather take the meat now than people say we didn't have.

What does Buzz project for the meat supply to stay next August on if you keep this 60 days here?

The longer we keep it on, the more discouraging it is.

We keep getting these reports about this new animal that we go over in the back called the piggy sow and stuff like that.

What does that not even worry about that in science?

It's an offsetting factor here, George.

If you don't have your exports in trouble, and this has caused violence to a great many of our precepts and objectives over the past several years, and soybeans and the world market go up to $12 a can, and corn leaves the country, and wheat leaves the country, and you can't feed your animals then because of the price of the export value of your commodities, then what would you do?

Then you face the situation you faced.

That's exactly right.

Then you're right back where you were.

I don't think there's a proposal to take off export controls.

Well, I'm talking about that.

That's what I thought we were talking about.

This proposal is not a proposal to take off export controls.

you hold these ceilings on domestic prices down.

And I think this decision about whether to impose export controls on corn and wheat, and they have to be put together, is a very big thing. 58.8.

5,880,000 bushels.

How much more?

5,880,000 bushels.

You want about six.

Six stews.

That's right.

The previous estimate was 6,072,000.

So it's down 3.2% from the previous estimate.

It's up about 300 million bushels from last year's growth.

The wheat is up slightly from the previous estimate.

1748 is compared to 1736.

The soybeans are up.

1588 is compared to 1540.

So I guess you'd have to say the corn graph is minus.

There's something about 5% from last year.

Wasn't that the original?

The original estimate was 6,072,000,000 and the current estimate is about 5880.

John, the question I was addressing now was not the export control, just the question of what we do about this 60-day ceiling and so forth and so on in terms of the, what are we going to, how gradual the day we remove them.

Well, Mr. President, I think you have to choose something about that.

In fact, I think this recommendation does that as far as immediately allowing it to pass through the raw material prices.

That's going to have to affect as far as supply is concerned, and that's immediate.

It's going to allow it after the, I don't know, 60 days.

There's a period that it is provided in this recommendation.

and people will understand that they will have that authority.

I think it comes 1st September.

12th.

12th of September.

Well, or we can change that.

We can change the date.

This recommendation is the 12th of September.

The real judgment.

That is something that these people have to know fairly soon.

That has an effect on supply more than anything else.

The judgment is, does taking the ceiling off today lead a fellow to buying a breeder cow and feeding more than staying to them?

I'm going to take off the ceiling two months from now.

The argument of those who come to know farmer psychology is they want to be free now before they make an investment.

Not only do they want to be free now, if they are free now, they can go ahead and they're told it will be taken off 60 days from now, they're uncertain.

And I think, Mr. President, the most important thing politically is to have an endless supply of those stuffs.

And if you have a cost pass through, you ought to permit that to be permitted promptly.

Take your lumps on that now.

Explain the matter.

It's a highly competitive industry, competition, ought to be able to do the job of monitoring fiscal policies anywhere near the market.

Well, I'm talking about foodstuffs.

Well, it's not just foodstuffs.

Take the, well, not just the farmer, take the food chains.

They operate on an extremely thin margin, at 1% or less.

Oh, my God.

I will not want to see shortages develop, and I think they will.

If we keep these controls on, what's the advantage?

Take it now and get it over with.

Now, this is what was confusing me a moment ago when I thought I was addressing myself to your position.

I understand you.

You say, well, it's a tech control problem.

Now you're talking about foodstuff.

Now you're talking about meat.

Well, it's a tech control problem.

It's not export controls.

I would have control over the tax, the cost of tax.

I think you should know how varied it is whether to keep the ceiling on red meat for some period of time, or to allow the dollar-for-dollar costs involved to pass through the system.

And there are many of them.

And that illustrates the type of thing that you can decide this way or that way that tends to give you the boat right away.

The war tends to spread it out more.

And we talked about the trade office.

Now that wasn't reaching originally because the expectation was supposed to be too big.

I think that a passive system on food, where you have the unprocessed stuff,

I'm control is essentially no price control for everybody that is entitled cost pastor

So the cost pass-through system on food does hold down the retailer and processor margin, but they're not many part of our problem anyway.

So that in that kind of system, you have a sense of uncontrolled food production.

I think our expectation is that even with this meat thing for 60 days, you're going to have quite a bulge in the rest of the consumer food basket, fruits and vegetables and so on, when you move on and just kind of freeze.

And that's actually not just between a lot of food prices arise or have no food price rise.

On the day we move out of the frieze in Hawaii, they said that deferring the meat thing enables you to take the non-meat stuff first.

Well, there's no doubt that if you take off the treatment, have the cost pass you quickly, you'll have more supply by next summer than you would without it.

Now, the fear of voice this morning in the Congressional meeting, which is the only valid argument I've heard, is that your balls will be so big that you'll have Congress looking down your throat again with a 90-day freeze.

But otherwise, I can't see any valid argument against taking the controls off, isn't it?

Can you please put the question on the video?

That's a good question.

From my post of observation, this freeze has caused so much impact among farmers and food processors over the country, and I would expect the congressional sentiment today to be quite different from what it was, having heard from the folks back home what it was two months ago.

Am I right or wrong?

I think you're right.

Well, it isn't as much as I thought it would be, to tell you the truth.

I thought that there would be a hell of a lot more objections from the congressional group that came in here today.

But the consensus was that, really, they don't want the vote draw to come at one time.

It's because you see the concerns.

And they've been looking at these public opinion polls and everything else, and that has a little influence on a politician.

Now, the problem that you have here, Mr. President, I think, is that you beat people.

If you set a date that you're going to allow for the test, the beat people will be able to forecast.

They're bigger people.

They're the trickier people.

The broader people are people that are watching this march.

You'll have trouble with pork on this because pork is raised by smaller farmers, and they don't watch these indicators as well.

Now, the beat people, they will be able to make their plans, and the broader people will be able to make their plans.

Pig people won't, you know, because they're small operatives.

They don't watch this the way I do.

We've got a different situation there.

The pig thing is going to be bad.

The broiler thing, this will give them the relief they need to be able to fly.

And then the pig people, they will be able to do that too.

The pig thing is going to be bad.

You say broiler people will be able to fly.

I just wonder if they...

broilers, the crop is the one that you need the least time.

And I was thinking the 60 days would have the rate effect on that.

Well, if they know they can pass through on the 60 days, their costs, they can make an operator four more broiler crops a year.

A broiler operator can get about four crops a year.

And they're very well controlled by all of these feet.

They're not infant adopters.

They're all pure Vegas.

Their own body is all purina and the rest of it.

They control the broader industry.

Poultry.

I would agree.

I thought it was much about cattle.

60 days would make a difference to them.

That's right.

The hog people are smaller people.

I think that's a relatively smaller number.

But on the other hand, they've got a capacity.

They've got a capacity to increase production in the long-term.

Because if you get two litters a year, your average litter might run in excess of seven pigs per sow.

That's twice a year.

I thought it was three.

Two litters a year.

The hogs, two generally.

And you get about, on the average, you get about 14 pigs per sow.

So you can get back to production pretty quick.

How soon does, I was thinking something else, how soon does a pig go ready for market?

Oh, they'll normally market about 240, 250 pounds a night.

They ought to reach that in 75, 90 days.

It's quick.

It's true they have a long cycle and therefore with the knowledge that 60 days from now we will go from a freeze to a cost pass through and they will be able to adjust to it.

Except one of those adjustments might well be to hold cattle off of the market pending the day when they can pass through the costs and therefore have

and to contribute to it even further shortly during that very 60 days.

The reciprocal of that, though, is that when the 60 days is over, you've got that much more supply on the market

which could have an effect on prices by more.

Of course, the 60 days they're off the market, they're eating some of this very feed tissue and hope not to have them consume.

So while they can plan for the long term, part of that plan might be to wait 60 days before you go to market, since they can hold off the market more than can those raising other products.

And you have to keep in mind that the second and third effect action has to come in the catalyst.

Oh yeah, and sometimes a lot of more grants now, except fees, because grants are cheaper now.

They've got nice weather, haven't they?

So just hold them off the market if they think they're going to get a higher price 60 days later.

You've been listening a lot to people around the country, I suppose.

How do you see that?

How does this thing affect you?

If you look at it here, I assume you just properly represent your point of view.

in order to, or do you think that, you see that, let me, because I think I may have tilted, I agree that I may have tilted this whole group, probably the assistance of some, toward getting, for the general 13th announcement, toward doing some things, which I do as well as anybody else, which are very great, shall we say, doubts economically, which I thought were indispensable because of political problems.

Now, at this time, the situation is somewhat different.

It could be very different because, as I was just saying, we don't want to have this political problem come up next year.

Not for me.

But I don't want to mix the politics and the economics too much.

But you would probably begin by agreeing with George to say the best thing to do is impeach me.

about half a century today, right?

Looking at the economic order, or how do you see it?

Well, Mr. President, I would start by saying that the basic recommendation in this food area, in my mind, is influenced by

a very fine committee that Don Perkins gets, which met for a couple of days the 1st and 2nd of July, heard testimony for many groups around the country, and then worked putting together their recommendations.

Those recommendations have been supplemented by a great deal of staff work, including people with council, the Department of Agriculture, and our staff.

Now, that committee, Mr. Perkins, recommended not only this two-state ID on food, letting through the raw agricultural products first, and then permitting additional cost markups in the second stage on the grounds that they wanted, they thought that it was necessary to moderate a bid.

the extent to which the price increase would all come surging up at once, if you did it one time.

Now, on the subject of meat, that committee recommended, as I recall it, that we take off immediately the ceilings of cattle and brats.

Those of us in our staff here, including Gary Severs and others, felt that that represented, while that would be desirable, as George has indicated, from a production point of view, the combination of the food impact of raw agricultural products, fruits and vegetables, and the bakery business and other things of that sort, all at this time,

Adding to that, a major upsurge in meat at a time when we had reduced the cost of feed, appreciably, in the soybean area, and we hope, and as far as I'm concerned, these corn figures this afternoon indicate to me clearly that export controls are absolutely necessary on corn if we're to have any reasonable price situation.

We felt that at those costs of

B, people could likely make reasonable money, and therefore one should tolerate the food price increase by postponing the meat halt to a little bit later date.

That, Mr. President, is the logic of the position that we've taken.

It does depend upon the judgment, which we felt your earlier statement of June 13th had kind of managed.

one ought not to take the full thrust of the food increase all in the course of a short time.

It was our view that these first moves on raw agricultural products and things of that sort ought to be made very soon if we were not to have adverse effects upon fresh fruits and vegetables and similar products.

This, I'm sure, is

the process by which this recommendation gets to.

Would that action, for all of those reasons, translate to a created shortage even in the 60 day period?

That's the question, would it translate

Would the response to that be itself an immediate beef shortage?

That's the argument there is that the ceilings have been on red meat no longer.

They go way back to these other products in just 30 days.

And so to speak, everyone's been hurt.

Just adding on some more.

I guess it was the meat shortage that was stressed most of the time.

Sure.

And after that meeting, my son was telling me about the critical crop intake production in his district.

I don't know how much does that deepen rapidly in the next 60 years.

Well, at that quarter price, they're not going to be peaking.

Yes, unless we put an extreme control on corn, the price of corn that that will produce.

I've done a lot of work here, I will, but that suggests that you may have almost the same problem with the states that you have abroad.

Herb has proposed a rise in the little bit in the price of broilers to make it, in the short run, possible for them to take this new, low-priced soybean and turn it into chicken.

But the corn prices are not lower than they are.

So it's the same sort of argument we've taken.

It would depend on whether or not they were psychologically certain that they were going to be able to pass through their higher costs when the ceiling came off 60 days past.

You really have to determine whether the 60-day continuance of the ceiling will inhibit production.

You have to determine what effect that has on the certainty on the confidence of the farmers.

Well, may I intervene one more?

Sure.

And put the point this way.

sure I'm comfortable in arguing this position, but my concern is the following.

That if on top of a very large rise in agricultural prices of non-meat, and we have been estimating anywhere from seven-tenths to a percent and a half a month each month in the food CPI from the end of the year.

So we're not talking about small increases.

We're talking about very appreciable increases.

food prices, if on top of this immediate surge of non-meat, we get a big surge in meat prices, it has been a number of our views, that the effect of that will be very dislocating to consumers, wage people, and might tend to raise a lot of other prices up to these new meat prices.

And we might really be on a meat price standard before we do it at the higher level.

And if one could roll that forward in a more gradual basis, you cannot roll forward into the future the fresh foods and vegetables.

You cannot roll forward into, a month from now, the other elements, non-meat elements, in the food area.

Therefore, the only one you could

continue to push off are some elements of meat.

If you don't push the meat one off, then you will have a double-barreled search in the next weeks.

That is, you know, in a way, the meat, the meat to buy in the next 50 days is already here.

What you do about its price is not going to affect it so much.

And I think it gets overlooked in all these discussions about the price of wheat, the profit of wheat on the farm, is that the price of wheat is a variance.

If you hold down these final product prices, if you hold down the feed prices, if you don't let the stuff go out of the country, if you allow the price of chickens and hogs to rise, the farmers, in an effort to produce more hogs and chickens, to try to buy more feed, the price of feed will go up, but it will not be a very different situation once you get a constant supply of feed that you're not having.

We do think...

Pardon me, I'll just add to that.

Again, back to Pete.

The pressures to buy feed for beef are the pressures to buy feed for beef that will be on the market long after the two-month period.

That is, you're not going to restrain the pressures on buying feed for beef if we've announced at the end of 60 days that they're going to have a cross-pasture.

So by holding the ceiling on, we're not dissuading them at all from buying feed for beef that they see they will sell at a time when the prices will be out of the springs.

Well, in any case, this is an issue that we have stated, and there are a number of things like this that tend to stretch it out or not, and I think it's a sort of question that, Mr. Chairman, has to be made.

Now, we had a lot of discussion of the budget composition issue.

The proposal is that, Mr. President, except that the transaction rules, which have been in effect since the freeze, would be changed

with the first announcement.

Let me ask this question.

In terms of Phase 4 rules that ended with the announcement, is that a program you interpret it by, shall we say, the sophisticates of the economic community as being strong for a week, what?

I would have said, and I went to the Labor Management Committee and they showed some concern,

Because we do believe that it would be interpreted as a very tough program on the front side.

In fact, all of the discussion we've had in that committee and in our group here that has been meeting with the president is that it may be too tough.

I think it is too tough.

We made no provision at all for a loan of freedom, as I understand it, such as we had under Carmel and Price.

That's right.

And I think we ought to have some.

Well, we do have some.

And the permit, permit individual car arms

To raise prices up to a certain figure, say, a weighted average price for the firm, 1%, 1.5%, or 8%, you could have certain constraints.

No single price can go up more than 8% or 10%.

You can require notification on individual prices, but for heaven's sakes, give the individual businessmen a certain opportunity to conduct their business without being win-strung every turn.

Would you consider that every time?

We did.

There's only three.

What about your meeting after meeting with the labor manager?

Would you reconsider that?

No.

President, maybe George wants to talk about it.

You might want to read that.

They have delivered themselves an opinion about the subject of wage and price controls.

I think that expresses the general tone of the discussion.

Everybody, I don't think so.

Sometimes we say that we just got it.

The Labor Management Advisory Committee is deeply concerned that there are tendencies for wage and price controls to be regarded as the solution to the problem of inflation.

Indeed, there are some strongly advocating a support system program with the objective of making controls a permanent feature of American economy.

The Labor Management Advisory Committee said that we have to understand, too, that this is a threefold privilege.

to find top people and put a definite piece of top people's labor in traffic.

We're all at the weather class going through and all that sort of thing.

The Labor Management Advisory Committee believes that continuous wage and price controls are an incompatible investment with the people of the United States.

They impede responsible collective bargaining.

They prevent the achievement of the most productive and efficient economy.

They are not responsive to the needs of our citizens.

We believe all wage and price controls should be eliminated as soon as possible this year, and we believe that all segments of the economy can cooperate in such a way as to make the furthest connection to the state where it is next, unnecessary.

Well, would that only do you any harm with the Congress, Mr. President?

The only thing that doesn't pick up with the Congress is for the individual labor leaders to go talk to them.

And there hasn't been a lot of them that's been right that I have seen.

on this one.

You see there is the crunch.

This is the state's malign position when the word comes to this.

I mean, when they thought they could go to the Congress, that partisanship really just hardly did it.

They'd rather put us on the spot than go to the Congress and be what can be done.

Well, the business side's real sure, but they don't have much of a constituency.

The President, the first time he met with the LCIO group, hasn't been willing to get out of line this way.

I like this.

I think it's great that they said that.

I don't want to sound that cynical about it, but I mean, I wouldn't count up there.

I mean, the labor people, the influence of the labor members of the Congress.

That'll help.

This program, Mr. President, does go towards that and provides its own freedom by saying we're going to take specific industries and free them up.

And we start right off here, freeing up lumber and public utilities to stay there to be controlled immediately.

How about moving, how about moving more in that direction?

I'm trying to, I'm just trying to.

Well, let me answer those comments this way.

First, it is the view of our staff, which administered the TLP, the Term Limit Pricing Agreements, under Phase 2, that they were worthless, that they were absolutely unenforceable, that you could not check out whether anybody was confined or not.

Well, I don't understand that.

Well, that's...

I'll be glad to go into it.

Well, take the question of, as Kurt said, take General Electric Company.

What is the weighted average price of General Electric Company?

What does it mean in terms of any kind of disbursement program?

George met with our staff group the other night when we went over this, and it is their view that it was not enforceable before.

They do not believe it is enforceable.

Therefore, the people around the country with whom one is dealing will tell you in five seconds whether a program is creditably tough or not, depending upon how one handles decisions.

That's the first point.

The second observation, I think, to be made is that in the kind of markets we now have, the tight capacity situation, unless one begins to deal essentially with separate product groupings, that's where all the action is.

That's where all the competitive forces are.

A company in both lumber, for example, and in paper

An average price that affects both of them isn't any good credit.

A separate ceiling of lumber or a separate ceiling of paper is what is necessary to deal with the situation today.

The term limit pricing does not imply absence of ceilings.

That you can live and should live under the same roof.

But I, as a businessman, if I am restricted to an average price increase for the year of, let's say, 1.5% at a time like this, you give me that little bit of freedom, Mr. President.

I deserve it.

the system that worked out.

Your fellows are not going to be able to control all of these individual crises.

Who's getting whom?

We're not talking about... You don't have an army.

You need an army of inspectors to enforce.

We're talking about product groupings.

We're not talking about individuals.

Well, product groupings for the steel industry, how many product groupings would you have?

Well, I suppose about 10 or 15.

Oh, heaven...

Yes, black rose products would be one category.

Sheets would be another.

Roll bars would be another.

I'm just picking the industries that you mentioned.

But, again, I think, Mr. President, the main question is the one that George Schultz posed, which we have talked out in this group

several times, if one wants a great deal of substantial and immediate cost pass-through, then it's very easy to go back to the rules of phase two, which really provided essentially full and immediate cost pass-through.

Very easy to do that.

There were no restrictions on cost pass-through, essentially, except the profit margin rule, which was a really very minor impact on cost pass-through.

I have a question.

What I want to know is, if you want to loosen the program up, you can use term limit pricing for us, recognizing that it's not enforceable, it's essentially...

self-administering kind of a system that you stand and don't agree on, and that loosens the situation up.

Purchasing agents don't know quite what they're dealing with, in addition to the IRS not knowing what they're dealing with.

So if the idea is to have the loser face poor, that's a way of getting the loser face poor.

I don't think, honestly, I've been over this with my staff,

I have not encountered any serious administrative problems.

I don't, I don't.

Your staff has to investigate.

Perfect.

I think the situation is appropriate.

Well, my, my, I have this thoroughly cleared.

I think the program is basically not administerable.

That is, we can't sit here and check the cost accounting of the General Electric Company and the General Motors Company.

We just don't have the staff for doing it.

The one thing we've got operating for us, I think, is pre-validation.

If we can't do anything for 60 days, then you can see whether they did anything or not.

That's about all you can see.

If we give them any rules, they can increase prices.

caused increases, or based on some problem standards, so that they'll be long gone before we ever check up on whether that was true or not.

And the trouble with the zone of freedom is not that the rule is good, but that it is an alternative to pre-notification.

It is something you tell them they can do by themselves, and they can do it right away.

You mean consigned left with pre-notification?

You have terminal pricing with the percentage being, for example, one and a half percent.

You can set the ceiling on individual products or individual product lines of eight percent.

You can have pre-notification with regard to those products.

Do you want to go above that?

Yeah, if you want to go above it, come up to that point.

If you want to set the figure of eight from it, you can make it five.

It still has its own .

john you've considered all this uh and you you you did your judgment at this point that the uh well this food thing we know is the problem but the base for it regarding the balance is well

If one wants a tough program, Mr. President, can we get out of the way?

Well, of course, any tough rule can be modified on the side as one goes along.

And particularly if we hold open as we want to this notion of individual sectors are to be free.

some to be free and others to be held out the opportunity to be free.

Just one further word, if I may, on the matter.

Our view is that the only way you can enforce the program is to permit a comparison of costs and prices.

You can't do that unless you have product-grouping costs and product-grouping prices.

And when you give a term limit price, when you give an average price, there's no way of comparing the costs with the price stipulated.

Do you still have it on an overall basis?

Well, at least definitely.

The paragraph that appealed to me in the paper here says it's intended to decontrol cycles of the economy as promptly as that can be done without inflation from CERB.

And that, of course, you mentioned two items that you are leaving out at the moment.

and you hope that controls new relations by December 31st 1973, but you don't want to specify, of course.

Where do you want that to be?

I don't really hope so.

I think it's imperative.

Let me ask, I want to elaborate on that.

You believe that we should, in our minds,

in terms of December the 31st, 1973?

Yes, I think for two reasons, if I may state them.

One is that we will be, by that time, facing a new major round of wage changes in 1974.

And I think it will be imperative to know by the end of the year whether one is going to continue some kind of waste control situation.

And if one is going to have

a formal waste control program seems to me the existing arrangements may not very well carry over into 1974.

The standards of 1973 I do not think would be appropriate for 74 for a variety of reasons, so that's one.

Second, at that time of the year, one would have to begin to face up to the question of whether one was going to ask for renewal of the legislation.

And that would get us, in my view, into an immediate hassle when each and every interest group will come in with their preferred amendment to the statute of what you've done to Hyde or what you've done to this industry or that industry.

begin to face a whole series of questions about the amendments to the statute on which one would that be.

Are you talking about controls off of December 31st?

You mean all export controls?

No, feed grains.

Well, why not?

Because the, you know, they watch out for cages and keep it in there if you don't keep it on the other island.

Well, one are export controls with respect to domestic prices, and the other are direct weight and price controls.

Well, see, if we start with certain basic assumptions, I guess, start with the assumption that, number one, the American people are entitled to 115 pounds of red meat per year, per capita.

Number two, you start with the assumption, as far as foodstuff is concerned, that only 15.6% of the American wage earners' income ought to go for foodstuff.

And if any of those vary, then the farmer and the guy at the business has got to pay the freight.

On the other hand, it seems to me there are a lot of considerations that would dictate that export control would be one of the first things you'd lift, because farm produce is one of the few things that's earning us real balanced payments now.

and going to in the future.

In my judgment, it's going to be the big earner of foreign exchange from now to the rest of our lives.

And this is the one place where we really have an opportunity.

Now, if you want to go without making certain basic assumptions, and I recognize, I'm introducing a new ingredient here.

If Argentina, and that's a poor example, except a number of countries do it, if a country that

traditionally a beef-producing country can ask their people to eat beef only 15 days a month in order to have beef available for export, maybe it wouldn't be too much to ask the American people to eat only 100 pounds of beef per year instead of 115 per capita if we want to sell corn and soybeans in the world market to improve our balance of payments and get this country back on a sound basis to rehabilitate the dollar and do a good thing.

So I think we're making certain basic assumptions that we don't necessarily have to make.

And maybe other nations in the world, there's no other country in the world lowest to us spends about 25% of their disposable income, this is after taxes, for foodstuffs.

Last year, in spite of all that I recognize in politics and the emotionalism of high food prices, but nevertheless, that last year,

the average American worker, as I recall the figures, had above inflation, had above inflation, a net 4% increase in disposable income, if not by life.

Last year.

After food, after all inflation, after everything.

So they're just not in too bad of shape.

So it depends, I think, on what the objective is.

If the objective is to continue to supply food to us from the American people at this percentage of their disposable income, then we will do certain things.

On the other hand, your objection is to accomplish a few other things.

Seems to me we can do it.

In fact, in terms of lifting export controls, it's time to lift them or everything else.

Well, it seems to me, if you're going to lift them, you'd probably be trying to make a coincide with the new crop year, rather than with the end of the year as such.

But it seems to me there are a lot of arguments in what you say.

The way you get people to eat less is to have the price be higher.

And if we believe in a free economy, let's go all the way.

But whatever we do, let's do it consistently, courageously, and outspokenly.

And let's not change things.

You should talk about, I think, really, John.

People should eat 100 pounds rather than 150.

Now, if we're talking about instituting , I don't think it would in this country, but we could try.

We could talk about

The other way is the late Georgians.

The price is always a pretty good way to keep people from eating more, and that brings us down to the amount that you want.

But in terms of rationing on a

So instead of $115,000, they voluntarily got $100,000.

I agree with all the economics of what John Connolly says.

The question here is entirely a political one.

My institutional interest is that we work on the balance of payments and see us export as much as we can, etc.

But it seems to me the political question that we'll have to ask ourselves at the end of the year is can we

continue to avoid controls in this country.

If domestic food prices are forced up by virtue of exports, and if we have to sacrifice that export market, which will do us damage, which will cause us to pay higher prices and other things because it's going to lower the value of the dollar, that's still less damage in my view.

than to continue a domestic wage and price control system.

So I would hope that these crop prices are such that we won't have to continue any of the controls, but it would seem to me that when the new crop is in September, we'll have to determine whether or not we could get out of domestic wage and price controls only if we limit the pressure on domestic food prices of food exports.

It would be inexpensive, it violates valid economic tenets, but it would be worth it to get rid of these domestic controls.

If the political forces of higher prices improved, it would force us, because of congressional actions, badly to equate the prices to those of what's left.

Well, Peter, let me make one other point on that connection.

We're now, the rest of this program, and I'll jump forward and tell us about what is spending.

to have a balanced budget with which I absolutely agree.

I think that's imperative under these conditions.

And it even recommends that you have to have a tax, a new tax bill to reach that point.

I think I'm going to tax the American people to achieve some of these objectives.

Then it seems to me that it's not too drastic to think in terms of letting the marketplace establish whether or not they have enough meat.

or corn to feed the animals.

And if we can indeed earn foreign exchange through the sale of corn or wheat or soybeans or whatever, let's do it.

I think whatever we do, we have to be absolutely sure in our minds that we're prepared to deal with it.

Whatever course we follow.

I just don't think we can vacillate and be successful.

Do anything.

I don't care what it is.

And I think we can do almost anything if we do it consistently.

And that with controls, as they're outlined here, are going to be turning loose in 60 days.

Mr. President, I would like to support what John Collins has said completely.

I'm not going to make one supplementary observation.

We asked a question, a particular question, and we want a tough program.

I'd say the answer to that is yes, but it should not be so tough

as to create disquietude within the business and financial community.

Now, to me, a critical test of any program is what it does to the sentiment of business and financial people to the environment in this country.

And the program was too tough, and I think this one is.

Sentiment, I think, will deteriorate, and this will have its effects on the

state of the economy quite apart from the crisis, and I would be very fearful of that.

Let's have it tough, yes.

Let's not ignore what I think is vital to this country's economy next year and the years ahead.

Let's not do anything that will destroy

caused significant deterioration in business confidence, and I think we are in great danger of doing that.

What does the feeling have, John, in your case on that one?

I'd like to hear what you heard from George.

You think this program is so tough that it will have an exact reverse effect on your thoughts?

In other words, let's face it, one of the reasons for this program, one of the reasons for the action, one of the reasons for this program and so forth, is that we have been led to believe that unless we took some very precise measures to deal with the problem of inflation, that we were going to continue to have a lack of confidence

at home, among the business and financial community, and abroad in the dollar.

All right, now we've been fighting a pretty good battle in the budget so far, and winning most of them.

We'll be fighting this battle again, assuming that we go along this line.

We want to talk to the people, talk about the tax side of it, as to how realistic it is, which you brought up after we discussed your program this morning with the leaders, you know, on our state borders.

Percy brought up some of those points.

But what would I make here is, is this so tough as to have that kind of a depressing effect on the business?

You must do it all around the country, do you think so?

What do you, her, what do you think?

I don't think so.

I think that what I,

The main source of anxiety in the community is the continuing inflation and the threat of continuing inflation.

And I think that a comprehensive health program would be well.

But I think it would be important, I think it is critical that some others accept

that the package should include a believable attack on the fiscal problem, that if we're just going to rely on this tough control thing, I would say no, it won't do, it won't be believed, and it will look good in new legislation.

But if it's a comprehensive program, I think that these...

rather tough rules on the business side, on the non-food business side, would be accepted, partly because I think, as I said earlier, I think they don't know how to smarten themselves down anyway, with their large accountants being more high-priced and paid than ours.

And that, although here's the accountants every time.

And also that we do have an opportunity to phase out.

I think that's what people will, the business community will want to.

credible belief in getting out of this thing.

And I think mine, just to throw all my cards on the table, I want nothing more than to get out of this.

I would think nothing could be more disastrous than to have another

big upsurge and another big wave of anxiety such as we have in May and June and get right back into it.

So obviously, when we get out of it this time, we want to get out of it to stay.

So we want to get out of it in circumstances in which we have to stabilize prices pretty much and we have to stick with it until we reach that point where we

And I think one thing that must be said, of course, these rules are tougher than the one we had at the beginning of phase two.

But we start with a very much better profit position than we had at the beginning of phase two.

Profit margins are higher.

Total profits are higher.

Business will do very well to keep this current rate of profit margin.

It's going to expand in the volume during the next year.

Your program implies a reduction in profit margins.

We owe a businessman to a businessman.

This is a matter of percentages.

And I accept that.

I think we all should accept that for several months.

But let's not hamstring the business community.

Let us not make them feel that they

are being restricted all around while we do nothing in the labor area.

And there's nothing here above wages, Mr. President.

The herb spoke of business sentiment.

I'll give you my observations.

We have over 200 directors all over the country.

I've had reports from every one of them.

I've had the means in my meetings, and they are a very worried lot.

We want to know what happens to business sentiment after we put the freeze on, look at the stock price indexes, and look at the foreign exchange market.

Now, this is a measure of the reaction of the business and financial community to the freeze.

And an excessively tough program, I think, will continue that kind of sentiment within the business world.

Let's have a tough program.

But for heaven's sakes, is a businessman a reliable one?

You want to comment on the point you made earlier?

Well, Mr. President, I think that particularly if one is dealing with large-scale and heavy industry, and these are enterprises

over 100 million, 250 million, are the ones where the most comprehensive set of statistical reporting is required, are on the whole, in my view, enterprises that would take a longer period of time in making decisions about expansion, investment, and so forth.

And it does seem to me that a genuine effort

backed by movement to get out of the control program would be highly regarded by them.

And the relatively short period of months that I would like to look forward to as necessary here is one that seems to me would not have as impressive effects as perhaps has been indicated

I think maybe somebody who has not been as close to this as some of us have might explore it with business people and perhaps get a better judgment.

What is really involved in this program is deferring for a period costs that would otherwise come through in a hurry.

And if you're dealing with large scale enterprises, it seems to me that that is understood in those terms.

that that need not have as impressive effects as perhaps it would imply.

That would be my comment.

I think it's a tough program.

I think there's a spirit of rebellion against controls growing in the business community and the labor community.

The more you screw it down, the more the feeling of rebellion will come.

exert itself in just sort of an explosion, or it may exert itself as Herb has suggested, as smart accountants and lawyers getting around the law.

In either case, I don't think it's particularly desirable.

That is, I don't think one of the undesirable aspects of a touch control program is that it leads people to engage in lawless behavior, to have black markets, to figure the way around things, and so on.

a very tough program.

It also seems to me the tougher your program is,

the more and the successful, the more price increases you have suppressed, the more price increases you have suppressed, the more difficult it is to take control of them at some point because you know all of that that you've suppressed is going to come out.

And so a program that is designed to get out will let the pressure come off rather than keep it tightly on.

Do you want to add to what you said earlier?

I think that they will look for their solace to our letting out total industries.

zone of freedom we gave them last time, kept them under control, and said our control is a little less loose.

Here we start right off by saying these industries are out.

Presumably, over the next couple of months, we'll keep pushing additional industries out.

That indicated that our commitment was to get out, as we've so often said, along the lines of this labor management.

I think that is going to be the escape valve that we may live with.

I just want to respond to the point that Arthur made about giving the businessmen a little leeway.

There is some leeway in here that may not be at this moment perceived, but when this is, and I think it will go a long ways in thinking of how I would have reacted if we talked about

controlling not by product, not by TLP, but by product line.

Now, product line generally, except in some businesses, has quite a few products or models that fall within a product line.

And I think there will be a fair amount of leeway taken, enough that it will be quite satisfying to business under the heading of product line control rather than individual product, which is really terribly tight.

or to go all the way to a loose system.

I think that there is, there would be a fairly good response by business, sure and stuff, but that there is moving room, there is the kind of leeway that ought to make use of, and will make use of, even within some constraints that the program has.

We have a rather curious situation here, of course.

We are told that the business community is greatly concerned about inflation, and therefore that we call for a very tough program.

On the other hand, we have a very tough program.

It was so tough that the bridge was on our freedom, so that's not going to be, we're caught full of inflation.

John, what's your feeling about that?

I understand, let's assume that we have a program that is believable as far as balancing the budget, which will,

which could be on the, might be on the spending side, although that's highly questionable in my opinion, would require something on the tax side.

And there, the believability comes strongly into question because of the inability to get a responsible taxable .

But nevertheless, we might, we'll take a hard look at it.

Plus, this relevant, what we call a tough program, that would depress the business community

I think there's some, I think there's some essential differences from what we had before.

It's already been brought up.

First, when we started the sprees in phase two in 1971,

If you will recall, corporate profits were lower percentage of sales than they had been since the Depression days in 1938.

Now, this past 18 months, corporate profits are just going exceedingly well.

They are good.

The second point I made is that

I assume that you are going to lift these as soon as possible.

You're looking at December 31st, so you're looking at maybe five or six months before a great many of these industries are going to be out of hundreds or so completely.

In the meantime, I hope specific industries that are performing well and exempt them maybe in 30 days.

So I think it's unfair.

I think Martha's got a point where you allow pasture without any margin, profit margin being added to it.

It's unfair.

But I'll tell you this, and I don't want to be a spokesman for agriculture, but it's not nearly as fair as imposing export controls on the guy that produces soybeans and grain down here and having his price docked from $12 a bushel to $6.

I don't care that it was $2.80 if you want to pre-order.

He's still getting a bonanza, but I'm just, the corporations have had tremendous profits as well.

All I'm saying is you can't teach both ways.

You can't have both ways.

That's part of the thing that really concerns me about it.

I'm not arguing against the program.

I'm prepared to buy this program.

Let me make that very clear, provided you and everybody else is present and willing to get out and try to sell it.

I'll certainly try to help sell it.

But I do want to make one further comment.

I really think we've reached a change in the whole structure of things in world trade.

I think the United States

can no longer produce all the foodstuffs that we can consume, all that the world can consume as well, and still maintain cheap food prices.

And I underline the word cheap food prices at home.

I don't believe in the book.

I don't think this is a passing fancy, these high prices on corn, soybeans, cottonseed meal, or whatever.

I think it's gonna be something we can live with.

And that's fine, we can live with it.

have these controls for a short period of time, but I think, I just think it's something we have to be aware of, but I don't think it's a passing phenomenon over the next six months.

I think it would end in six years.

But, you know, you add to this, and I know that I would get a great argument, maybe, from my farm expert, Harold, who always talked to me about good farm mills.

You've got a lousy farm mill, let's face it.

We're going to take it.

Bucks is...

And as a tech trade agriculture, you've got to be for it, but it is no good.

Sure, it's not going to affect things for two years, but later on, it's not in the right direction.

If you're going to really move in this thing, you ought to move away from all this stuff.

And that's what we're going to probably have to say.

although I have serious doubts about it.

I'm afraid I'll pick with a lot.

The difficulty, well, frankly, the reason we have to sign it is we need the votes of those people who represent farm areas as Mel and Bill Tennant and Bryce know on some very important things.

I mean, they're right on everything else except agriculture, unfortunately.

But anyway, that's another thing.

It speaks to your point that they, because

If you were to go out, and we're really talking about a farm bill that would move in the right direction of unrestricted production to meet the needs of the rural, that's what we should have.

We're running away with all this nonsense.

That's what, there's nothing to tell you.

As you know, some of you know here, fortunately not now, not this year, but looking down the road here,

We have very big lawyers from the Soviet Union coming in.

We have no problem with them.

And as you know, the Chinese will continue to be more and more, because it's a primitive economy at the present time.

The reason the Soviet...

bought last time or buying this time is not simply because their crop here is bad, but because they're eating more.

Have you ever seen a Nen Russian?

No.

Anyway, only one.

I saw one.

He had leukemia.

They move up just a little bit, just a little bit, 800 million or more.

They move up one grain of rice more or wheat or whatever it is.

And there's an argument, where do they get it?

Here?

Canada?

That's the whole point.

So looking to the future, this is not something that concerns this program, but looking to the future, what you're doing.

Five years from now, 10 years from now, 15 years from now, we've got to get a better farm program in Chicago.

But that's another story.

Well, I think it has to be next year.

The year after, frankly, I think it's more honest than you realize.

Well, you realize I was born in America.

What I had was a farm bill the reason I sold it.

It doesn't affect things for two years.

But there are dollars all over the world.

And frankly, we're a consuming nation of raw materials right now.

And there's an incredible amount.

And so it's going to be a cost of about $400.

We can't control those prices.

We're not going to control the prices of aluminum and zinc and tin and nickels and so forth.

That's going to be done elsewhere.

We're going to have to pay the bill, just like we're all on hydrocarbons.

We're going to have to pay it.

We don't set that price anymore.

And this is a new experience for us in America.

The only way I see

All of those prices are going to be ground into the industrial society and the commodities that that industrial sector of the society produces.

The only way we have to compensate for it, and I can see it, is through the farm production.

And we have the most efficient farm system in the world, barred on 10 to 1, probably, more efficient than most countries in the world.

And we're going to have to rely more and more on farm products.

How many cases did we release?

40,000. 100,000.

I would like to add.

Do you expect any public vocal opposition from the members of your Labor Management Advisory Board to this Phase 4?

They won't like it.

They recognize there's going to be a Phase 4 and that there has to be some method of managing this boat.

But their concern is, as the President said when he was here, how are we ever going to get untangled?

And they're very concerned about that.

And they think the only way to do it is just to, as they say, be determined and just do it somehow.

Incidentally, John, before we go to Mel and Heather, can I ask you this about the selective decontrol that we talked about?

Yes, sir.

The way we had looked at it, President, was to start to make that credible.

By saying we'll leave lumber out in the regulated industries, we want to check that out for sure, but we're doing that.

Then we would like to... Just a word.

Regulated industries are already regulated on price.

What they were... We're leaving them out.

We're leaving them out.

They're not regulated according to these...

They have been regulated under Phase 1, Phase 2.

Right now, any order of any regulatory commission in the United States is frozen, subject to our rules.

And what we're saying is that from now on, Arthur, they shall only be regulated by one regulator and not two.

Well, that's a blessing.

That's a blessing, yes, but they will continue to be regulated on price.

That's my point.

We wanted to set up a machinery whereby people who

thought they would like to be candidates for deregulation, could come and see us.

We could talk to them about their supply problems, about the prospects in that area, and see if we could work out an arrangement under which they could be decontrolled, subject, of course, always to the, if their performance was not appropriate, we could go back in and take away the exemption that had been given to them.

We would regard that.

We would have a group of people who work full-time.

Our principles would guide you.

Well, that's...

First of all, I think the notion would be that the demand-supply situation was fundamentally in some kind of reasonable balance in that sector.

Secondly, I would say where you might under some circumstances get advanced commitments as to price behavior over the period forward.

And thirdly, where

the public view of it, I think is important.

Let me give you an example.

The cotton textile industry is not one which is a highly competitive industry.

And I'm sure the textile margins are all involved under that.

Hold on, textile margins are very wrong.

Well, I'm not agreeing with that.

I agree with that.

But the problem is that it would be very hard in my mind to see that decontrol at this point because we have had very large prices in the raw material cotton prices.

And to decontrol cotton textiles and hence apparel

also, perhaps, at a time when their prices were going up very, very greatly, and showing up in the wholesale price index and in the CPI would not be a very wise thing to do.

Although it would not be attributable, Arthur, to the behavior of the cotton textile industry or the apparel industry, it would be that they're basic raw materials.

It's some of those kinds of criteria that would have to be taken into account.

Because it would not be very credible, I think, to

let them out at the time each week that the housewife is seeing in the stores, these prices being up.

One of the problems with wage and price control is that they consume all the time that one has to spend in worrying about a problem like inflation.

And in doing so, they do a lot of damage.

That is, they don't

People don't concentrate on the budget.

They don't concentrate on the problem of monetary policy and so on.

And we have endless articles in the press saying we have to have a tough wage and price system so that we can have an easy budget policy, so that we don't have a tough monetary policy, and so on.

And this is the fundamental trap that has...

sub-country after country as they have gone in the way of .

And in our case, we have meant to have a pretty good budget performance in fiscal 73 due to all the tough measures that were taken.

we have a 74 figure that can unravel just as easy as five.

Very quickly get ourselves into a position where we might have, say, a six or seven million dollar deficit.

And I certainly agree with what John Lee said, that from an economic standpoint at this point, we ought to have a balanced budget, we ought to have a surplus.

And it seems to me that this is a subject

We're addressing the inflation point generally, rather than just the inflation point.

I want to come back to that, but getting back to the general question, spend a minute.

What is your, is this program too tough?

Well, Mr. President, I don't think it's too tough.

I think you want a tough program, because I think that's going to move us in the direction of the Labor and Management Advisory Committee, which is in our state today.

I think this is the time to move in this direction.

I have no problems with basically with the phase four recommendations.

But the phase four recommendations taken by themselves mean nothing.

This whole question of attitude has got to be changed in this country, I think.

And this is the major political task facing us today.

balanced budget approach that George is talking about, along with today's tour.

And the whole thing has to be considered together.

We have to have a campaign throughout this country to make people understand, not only in the United States, but throughout the world, that we're serious about this business of inflation.

I think they're beginning, and they have been questioning,

the fact that we are sincere about this battle.

Now we've got this, we stayed below $250 million last year.

And I think when that announcement is made, that's got to be coupled with a very strong position that we're going to take as far as 1974.

That announced along with the phase four that this program is all part of one package.

And that if the Congress is going to go on and spend more money, they're going to have to have the responsibility themselves for the taxes.

And tie this inflation thing up in one package along with the Phase 4 announcement.

Just announcing Phase 4 isn't going to do a darn thing.

Bryce, do you want to add anything on that?

Without nothing, don't say anything to the park.

There's nothing very valuable, Mr. President, about this country.

I really think this is a political question far more than economic, and I think these various arguments that are taking place are just the country doesn't understand at all, and probably won't let's take the terms that we've talked about so far.

The thing is, as I looked around the room there, I knew that three-fourths of those members didn't know what in the world we were talking about, but they had to act as if they did.

I think that the program that is rational, administerable, and reasonably acceptable to the business community and the environment community and so forth,

If you will take that on and with your service as a tremendous charge and really run with it, it will go.

I think it will go and I think the country will follow it.

I think the uncertainties will be dispelled.

I think the same thing will be true.

And if they know this, it will be done with in a reasonable time.

And if that is your determination, and you're going to do this, and that you make that clear, and you carry the flag not only from here but out to the country, and you do these dramatic things that are suggested in here, not telling the Congress that you mean this, this is a crisis for the country, you're asking the Congress not to take their office off, stay here like you're going to fix this problem, and you're going to go after it,

and the whole, I think, the whole country.

No matter what you do, and we discussed this this morning, if you have a tough program, the Democratic Party will say it's too tough.

If you have a soft program, the Democrats will say it's too loose.

If there's any inflation at all that develops after you take off and freeze, they'll say that you've done this very badly.

And so that's the reception you're going to get from the opposition party.

They're going to play it all away.

It's going to be a hell of a fight, no matter what is decided.

And I think that if it's taken on, I think it'll be a fun fight, and I think it can be carried around the country, and I think it'll win it hands down, and I think it'll be out of the controls.

And I don't think this is an opportunity.