Conversation 128-003

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It's serious now, of course, not so much on the total supplies, but that's statistical.

very important in certain spots and very difficult.

And we've got, of course, concern about the fuel and other fuels as well.

The big fight at the present time is this mandatory allocation of the, some of the independence and almost all of the yell weren't very maddening.

you're not born under it.

But I had to state that they had against it on whatever, the Congress was for it.

You get to talk a little about what you start, where you stop on the allocation.

The political posture of independence going under is another thing that has to be considered also.

Another problem is, as all of you should be aware of, Raj, the whole problem

of the environment .

This is an area where the needs to keep the lights on and to keep the nation running, plans going so that people have jobs over the people that want to keep the Goody Birds flying.

Okay.

We've got a lot of pipelines .

I've been trying to cope with these problems kind of on the side.

You're very glad to see John on the scene.

We can shuttle our problems over to him, but at the same time, we'll help as much as we can.

We'll go to church with you.

Church is great and we love it.

This is important to have a culture.

It's important to keep it and put it back on.

It will, it will in the future.

It's a great idea.

I have a pipeline built before the Senate, I think, on Tuesday.

They want to delay six months to understand.

There are several approaches.

One is a very dangerous one that's been carefully thought out by this fellow Haskell from Colorado, which is an attempt to kill a whole project by divorcing the ownership by making it illegal for principal producing companies to own a stake in a pipeline.

And I'm amazed that the thing has gotten as much interest as it has.

in the Senate and in the Congress just about this, this Hoover rule of rough operation?

Well, this is the question.

It's really the stupidest approach that I've heard of all of the approaches.

And yet, for some reason, it seems to Colorado.

Oh, it has some time to make Democrats for Colorado.

It is for Colorado.

But the point is that I think we've all got to come together

on Tuesday, and there are many interests.

Pete has done a fabulous job of helping us.

Many other members of the cabinet have.

Trent has.

Commerce and areas, they have an interest.

And this time, Earl has, we've just got to get a good showing.

Because if we don't pass this bill by a pretty good margin in the Senate, we're going to have a hard time coming out with any kind of reasonable bill in the House.

I just hope that we win.

We're waiting until Bob Griffin and Maggie and some of those get back, and they'll be back Monday.

And we're going to go.

And the Mondale Buy Amendment, which you see a lot of publicity for, will probably, hopefully, will go down heavily, and so will the House.

We'll pass the bill, and if it passes well, we can get a bill out, at least to the floor, scheduled to go to the floor of the House, I think, before the August recess.

Roger.

What's your point on that?

Well, let me deal with all of his people.

We've got everybody.

We've got all of the organization.

We've got the Timmons group, our own people, and there may be a few cabin officers that we'll have to call for maybe an individual phone call.

We've just got also Mel Rice.

Two of you, would you chat a little bit about this?

This thing that you know is on that list of six that we really gotta get going on.

It's just ridiculous.

It's hard to believe.

The opposition to this pipeline are operating from the most killing form of police that I've ever seen in any controversy in Congress in this size.

I'm just amazed.

The way we'll work on this, we'd like the cabinet officer to explain.

that you have the whole cabinet will help you on that.

In particular, in an area like this, you've got, in addition to the whole cabinet's group, you've got Bryce and Mel and so forth.

Mel, you've got some probably things over there you could use.

I already have.

How do you read it, Mel?

I think it's okay.

Do you think we're gonna get it?

How about the house?

It'll be tougher in the house than it is in the center.

But that's why it's big, big control in the center.

But anyway, the major subject today, which would seem not to be one that we ought to have Bill and Jen here for, but we'd like to get their take on the problem.

That's the problem.

I think there's such great interest in this, the next phase of our NIH program.

As a matter of fact, they are involved, particularly in defense, because budget is involved.

Budget is a very, very internal problem.

It also hinders its design ability.

Oh, the dashboard.

Well, they understand the dashboard.

We're having on tickets at the time.

We've practically done it before in policy in this country.

So I mean, there's a few other things that are coming up.

Well, the problems changed.

We used to worry about the surplus around this table.

Where do we get rid of it and all that sort of thing.

Couldn't we give it away?

We were worried about getting it on a couple of times.

But, you know, I remember President Eisenhower, Bill, used to say, well, you know, it's a great thing to be worried about a surplus, but I wonder if he was right.

Sarah loves and heard this brief, so I won't go into any talking or question asking or anything, so I'm going to leave it to the rest.

We had a meeting yesterday morning with the leaders.

We had a meeting with the top people working on the field.

And so what we will do, I think the best procedure for this morning is to have George take the lead role, which he's been doing, to be the moderator of the discussion.

And have everybody come up for that.

and as far as this is concerned, we're not presenting to you a package this morning that is certain.

It is an indication of the areas in which we are particularly concentrating and perhaps an indication of where we lean

and because we do want to get some views on what some of them have that differ.

Let me say in conclusion that the food area in the paper that was presented to me is split.

The Secretary of Agriculture has a different view in regard to what we do about it.

employers and do other things.

And I understand that.

If I were Secretary of Agriculture, I'd have exactly the same view.

My job is hard enough already.

But nevertheless, it does show you how complicated it is, because everybody's trying to find the right answer to this.

George, you're on.

Well, Mr. President,

I think this area and this particular set of decisions illustrates how pervasive the problem is and how comprehensive the considerations need to be.

deciding anything about it because it involves our wage and price system directly.

It involves the judgment about the state of the economy and the kind of fiscal policy that's appropriate for where we are.

It involves our gold export program.

And that in turn is related to our internal price arrangements.

It has a big impact on the value of the dollar abroad.

which not only has its meaning in terms of international financial markets and our negotiations about trade arrangements and things like that, but also, of course, affects, going back to the energy topic, how much we pay for the oil we import, the lower the value of our dollar, the more, in effect, we have to pay for our import, and so on.

make these comments to show how pervasive the subject is.

We have tried to analyze it in those terms, and I think perhaps the best way to get at the subject is to have her spend four or five minutes just laying out the economic, overall economic picture, and then ask Ms. Dunlop to make a statement or two about

the way the tree is operating, some of the problems in the trees, and the nature of the problems that we see in phase four.

And we would like very much to hear comments from anybody here about how you see the problems and how you see what we should do about them.

So here's a few.

Thank you, Walter, for your kind conclusion to me.

I thought of it already.

I'm sure you know most of these people well.

Ed Carter, the steel retailer.

Keith Larry, from the steel industry.

Jim Rose, who was the chair of the General Motors.

And Steve Bechtel, from the construction side.

On the labor side, we had a majority meeting.

I've been able to see the workers, Paul Ball, the Maritimes, Frank Fitzsimmons, the Teamsters, Leonard Woodcock, and the other workers.

So it was quite a high-powered, comprehensive group, and they issued a statement on the run yesterday.

basically saying we've got to get out of the way to price controls on our own.

And this is the first time we've had to tell CIO people that they're going to go out publicly and say that they have said it to the President a few times and I don't know who else privately, but they've never peaked publicly, but at least they're on the record that way.

Mr. President, I'll be very...

brief because you heard me speak on the subject.

Don't worry about me.

Well, everybody's really glad to be talking to you.

I was going to say that everybody here is very well informed on this subject.

Almost everybody here gets to read Popeye Rowan every morning.

But you may not have noticed, if that's your main source, that we have been having a very strong development of the economy on the real side in the first half of this year and in the past two years.

And probably the outstanding, most dramatic evidence of that is the fact that employment in June was almost 3 million higher than a year earlier, which is really an extraordinary increase.

a exceptionally large proportion of the total population at work.

And for the first time in three years, the unemployment rate fell below 5%.

And contrary to the common view of the American consumer, it is a suffering to ground down the fact that even after allowing for inflation and all of that, his per capita real incomes of consumers are at least 3 or 4% higher than a year ago.

It's higher than they could have been before this year.

Nevertheless, we were, for the past year, going through a rapid inflation that was best measured by the fact that the consumer price index was rising to the rate of something like 9%.

And this fact, widely observed at home and abroad, was a source of great anxiety among consumers.

Anxiety reflected in the stock market and the decline of the dollar abroad was against this background.

that the freeze was imposed.

And the freeze has, so far as we can tell, stopped the rise of prices during the period which it's in effect.

But it has not apparently greatly allayed fears about the future of inflation in this country.

And there's uncertainty about what comes after the freeze and great interest in what will come

Most quarters and many quarters desire that the freeze should give way to something else as soon as possible.

There are complaints about the freeze that may be related to its effect on production and particularly on food production.

Of course, it's natural, but...

You put a freeze on prices that people can charge, and once everybody from the freeze applies, feel that this is improper and that there's a good reason why this price should be allowed to rise.

And the federal bill can't apply to the complaints.

But nevertheless, there is a certain reality, a certain reality which we expected at the time the freeze was imposed.

And everybody knew that we were making a decision.

which accepted certain distortions of the temporary economy for the sake of putting a stop to the price increase and permitting something else to be developed.

As we see it, the post-freeze situation contains within it the fairly strong pressures for rising prices.

Some of these were the pressures that were there and would have been there if there had been no freezes, but obviously we saw the threat of a considerable inflation.

the second half of this year, although not as rapid as in the first, even if there had been no freeze.

Without that, it would not have been much money going into the freeze.

And that's because we still have a very booming economy.

We still have a booming world economy.

We have rising prices of basic commodities all over the world, and add to the forces that are internal here.

So that in any case, we would have had to contend in the second half of this year with the regular inflation that we would not have been happy with.

But the freeze itself adds to this certain problems, and it has modeled up some cost increases previously incurred, which would have now been passed through in prices, but which have not yet been passed through in higher prices, which are out there, unliquidated, so to speak.

And it has also held back some price increases which would have occurred as a result of the demand for the product, and those price increases still remain to be contended with.

So the problem, as we have seen it all, is how to get through this period which follows the freeze, how to utilize the controls in a way which will

make the best possible reconciliation of our desire to withstand inflation and of our necessity to keep production high, which is the main source of all our economic well-being, and to avoid distortions in the system and that kind of reconciliation of conflict that is the problem of developing states more.

Now, as we see it, that kind of conflict would be best reconciled in the general economic atmosphere with the

pressure of demand is not excessive and in which there is a kind of general confidence that the reasonable stability of the price level will be achieved.

And for that reason, we think now more than ever that it is essential to establish a restraint on the budget side alongside restraint on the monetary side to establish both the fact and the expectation of

fiscal improvements, which we now have to measure in the old fashioned terms of balancing the budget.

The problem, I think everybody should recognize the problem is complicated by the fact that 1974 is likely to be a year of some economic slowdown.

And this creates, again, a certain conflict between what needs to be done now and what's possible in the future, repercussions maybe.

But it's probably true that we will be able to deal with this slowdown in the way it comes.

more effectively if we have in the interim taken some steps which will reduce the inflation so that we don't meet the slowdown in the context of continuing inflation which would then create terrible dilemmas of policy and we will be able to deal with the slowdown when it comes more effectively than if we had previously taken a strong stand against inflation.

So that's ours.

The problem at the moment is to address ourselves to the inflation and to address it in a fundamental way, which we think is reflected by the question problem.

The reason is to reduce additional factual comments.

The risk of that, yeah.

the international side on the dollar.

Since last Friday, the dollar has improved against European currencies on the order of seven and a half to 10%.

So it's come back against again about where it's been the last two or three months.

On a trade weighted basis, with respect to all our trading partners, it's probably approximately what it was .

It's strong this morning.

It's about 1% up this morning on the European markets.

So there's that.

Second, on the budget side, in terms of fiscal 73, the President set a goal about, gosh, eight months ago, and the President said we were going to get below $250 billion.

And he was widely scorned, and I hope I've grown, and everybody else.

He was hurt in favor of the writer, and stated something in the New York Times.

His wife's favorite writer.

And our calculations are that we would definitely be below the 250, but if we don't have a final number, it'll probably be closer to 248 than it is to 250.

has been achieved by sheer determination of presidential leadership.

It shows what can happen.

Very, very, thank you for cooperating.

Okay, everybody, as we talk about these things, I'm sure I need to address them.

I know how you, all of you, have to work on them.

I wonder if it's worthwhile.

I wonder if it's worthwhile to intervene.

We are being very responsible, physically.

Everybody says we're not going to let up, so what do you do?

wrapped up not as big a deficit as we thought, but it's beyond the order of $16 to $17 billion.

For fiscal 74, our deal expected 28.

At one time, we had a much higher number.

George, I think it's important that that kind of information, that kind of news be kind of held so that it can be announced by the president as well as some other things.

I just don't want it to run out of this room because it should be a presidential announcement.

Well, I wanted to, I agree with that, although we have basically been saying that that was the way it was going to be, and we get sure and sure of each day's additional figures that come into the treasury on the outlays and the revenues.

But I wanted to make that a prelude to be sure that everybody noticed what Herb said about a balanced budget.

We don't think a $16 billion deficit is the right fiscal policy for the year we're now in.

We think that a balanced budget

with maybe some surplus if we could get it as the right policy.

And that has its implications for everybody around the room because while the budget is closer to balance, it also has been perpetual to see it get out of control and go up.

And no doubt we're going to have to be just as fierce about it as we have been in the past year.

So I just wanted to make that additional comment.

John?

If you want to say something about Phase 4, the problem with Phase 4, I've heard some remarks on that one.

I might say that Phase 3 has been discarded as in the action plan.

On the other hand, the accomplishments of Phase 3 are, there are at least some.

Many people thought that the main problem that we had was to have reasonable labor settlements.

and that it was led to be practically impossible.

Well, basically, the collective bargaining here is set, and the labor settlements are, on the whole, moderate, and a lot of the

Mr. President, I can be quick read.

We have talent extended consultations about the

proposed shape of phase four, both in Washington, a number of cities, San Francisco, Chicago, New York, Atlanta, and have received meetings with hundreds of people, three or four hundred written detailed communications from associations and others about the nature of phase four.

If one could summarize those consultations in a sentence, it would be these.

The manufacturers, labor leaders, and the farmers don't like the fees at all and would like to get out.

The consumers somehow think it's great and can't quite see why it shouldn't be continued indefinitely.

That's about the state of public discussion of this report, you know, in some terms.

Secondly, I would say that if one takes a sober appraisal of the freeze at this point, I myself concluded, thus far, that the signs of serious dislocation are beginning to emerge, although up to this point they have not been perhaps faked or critical.

Those signs are most serious, I should say, in the raw agricultural area.

in poultry, in pork, in the shutting down of certain smaller meat packing plants in some parts of the country.

And finally, in the general operation of the transaction rule which affects a number of industries like clothing and textile.

Some of those effects are really prospective rather than immediate.

But the point at which some modification of the freeze perhaps is appropriate, in our judgment, is appropriate.

Now, the next point I would make, President, is that from our perspective, the key problem in the design of phase four might be stated in this simple sentence.

How does one manage the bulge of price increases that is underneath?

I think it's very important to recognize that both in the agricultural area and in the industrial price area, for a number of months forward, there is a very substantial volume of potential price increase in the system.

Any notion that prices are going to be stable from this point forward seems to me to be a very serious illusion.

These price increases

in agriculture are on top of already extraordinary, never in our history have agricultural prices risen so rapidly, both at farm level, 38% over a year ago, or at retail, at levels which are already, and which

by the figures that we have at the rate of anywhere from seven-tenths percent to a percent and a half in the food component of the cost of living index.

That is the nature of the fundamental problem.

How does one manage that?

Does one allow that to come through all at once in a very substantial splurge, or does one spread it out gradually and one are so regularly over it that you can't?

I won't take the time, Mr. President, to go out of pre-notification in the industrial area of postponement of price increases of full-cost pastures, for example, using the margins that are numbered.

In the agricultural area, I suspect the critical area is the question of whether one continues any ceilings in the case of red meats.

And there, it's simply stated,

The only way to moderate a substantial rise in these prices, 10% of that order, is to have them in place and put an effect in these products.

The cost of doing so in international terms and output is a matter of...

Nonetheless, that is the nature of the problem, which is my purpose to lay out.

Finally, Mr. President, we are anxious for an indication of the determination which you have so well controlled business at some point, and we at this moment are proposing that several industries, such as the regulated industries, such as lumber, whose price is reported, that we should say they are, and to suggest,

that if their performance did not continue satisfactory, we would go back in, but to then hold out to other industries the notion that they could come in and work out with us various kinds of understandings of performance by which they, too, could escape these controls, could provide real incentive to industries to get out of control.

Finally, Mr. President, we're worried about the wage side.

We have not had extended discussions about that.

The Labor Management Committee yesterday's views on both sides was that the present arrangements should be continued about where they are, and my own view is that some problem on procreation or education or some kind of an education system may be necessary, though that matter is not likely to be solved.

Those are the problems.

What's coming up?

There are two, perhaps,

Well there is, there are perhaps I should mention three contracts.

One is the one that's currently under negotiation in the California can range that I have interest in.

I have no reason to think that, that's within Keenster's, it has some other rival union aspects.

I think that can be resolved.

The second one is meat, which expires, meat packing industry service expires August 31st.

And then finally the auto contract.

The reasonable expectation is that with a reasonable amount of luck,

None of them seem to me to pose a super problem.

I always understood the meatpacker group was a pretty good direction.

What do you think about it now?

I agree with John.

I think we have a problem.

But even with these escalating food prices here.

Well, the last thing that concerns us all, one of the reasons we put the separation.

One of the reasons was that some of our people said, look, unless you do something, we're going to have a heck of a time negotiating or keeping the lid on a reasonable settlement for our guys.

Now, what's the changes that's coming?

Well, there are a number of things.

The cannery problem John mentioned, I talked to the teachers.

You talked to John, yeah.

And the canners claim that the farmers can't afford to buy, so they will close down.

And I told this to the teachers that they would lay off, because the teachers were extremely busy.

We're trying to help them move that along.

And the meat cutters, the butchers, of course, they're caught up in layoffs.

But I can't, they're trying right now to get people back to full employment.

Are these meat cutters in the retail trades?

No, the whole set.

Packers, well, packers really, and it affects the butchers.

They're the ones that stick the little things.

I think what John has said, I agree that the big ones coming up, we should have a continuation of what's happening.

It all sounds strange, but they're not too great a problem at the moment.

Well, if it stays the way it's going now, it shouldn't.

Some of the settlements just the other day, as John knows, had a construction state that were full statewide, 5.5 below.

And that's been doing very well.

Now, the Packers and the Bushes, they're concerned that the Packers are important.

Now, what is the reason?

What is the reason?

How can they possibly for a 5% or a 6% increase when they see their .

Well, there's probably jobs more important than the other jobs.

And I think you will find that the members now are concerned with the future.

I think they're concerned with better pensions, with better bridges.

But the average member is also more sophisticated.

He owns stock.

He owns a home.

He owns an automobile.

He's paying off on mortgages.

He's paying for college education.

And it strikes me as the answer.

and to get as much as you can actually get it, and also get security for the future.

There's many reasons, plus it's become a very, financial stress on the industry.

The record on stress is an issue, and isn't it perhaps one of the lowest levels in how many years?

It has been on a national level.

We've had stuff around the country that's smaller every week or so, but it's probably lost.

I mean, the healthy thing here, Mr. President,

the employment down at 4.8, and the teenage employment, which went from May was 15.4, went to 15.3, and then the block area, it went down from 9.4 to 8.5.

And frankly, he's been the greatest employment in probably the history of the country, and he's a new guy.

It's not just people being called that, and they give us the number too fast.

It's very impressive, is the line, but, you know, the rate or weight and so forth, that's gone around three, like, two or something.

Almost.

And the layoff rate.

One of the reasons I, all these things are relevant, to get the back end is going to get to the budget problem that we have to grapple with.

We've been mirroring the full on budget.

Now, having gone through that, if you really look at the economy today, except for some soft spots,

system recorded against more national defense.

We want to cut the budget for a million dollars.

You're coming in to complain about getting rid of some bases.

That's all right.

We'll .

And this is particularly true throughout the South, much of the Midwest, and so forth.

You're in a full employment situation.

You can't do this, right, people?

The other reason you can't hire people, you've got the, what do you find, John, in Texas, you're giving me that number, it's around 3.5, I believe, unless that's part of Houston, which is the largest.

The city of Texas is the largest industrial base.

The last figures I saw before these recently were 2.7.

2.7?

Now it's consistently been about 1.5.

I mean, you just can't.

There's just no such thing as unemployment in our industry.

You see, that shows why we now can go back to the traditional, like I said, budget-balanced business that we had.

We all understand why.

Well, if I could make a suggestion.

Yes.

Are you going to increase the full appointment budget?

Oh, I believe he is.

Well, if there's going to be a time, then the full appointment budget should be balanced.

And actually, we figure we're just in a slight surplus on that concept.

Right.

And they think that it works that way.

There is an interesting calculation, Mr. President, that's being made on the unemployment rate.

The unemployment rate for different categories of worker varies a great deal.

For teenagers, it's 0 to 5.

For women, it's higher than for men, and so on.

And if you go back and take the composition of the labor force, say, in the mid-1950s, when we had a low unemployment rate in the Eisenhower era, and then assume that the composition

So I think this is another way of saying

We are, for all practical purposes, when you talk about what you're not really talking about that you do in the case of the married man and so on, or for example, the single woman who works down here.

You're really talking about people that go in and out of the labor force.

When is a teenager really available for a fine?

I mean, women maybe want to work this month and maybe not next month.

Well, the youth unemployment problem is probably our most serious one.

I think the youth unemployment counts for the order of 60% of the total unemployment.

And particularly in the ghetto youth,

problem getting them into regular work, getting them into the habit of being attached to the labor force is a very important sort of social objective.

But it is not a problem about which pumping up the economy can do very much.

It's got to be worked out through some other means that the police department has for less, especially seven cents a head.

None of the kids will pick it.

Well, I think, Mr. President, that people can see by now the sort of policy areas that we are working on.

There's the structure of the control system, how to manage the boat, and sort of the policy issue is how fast to take the boat and sort of manage it.

There's various ways to do that.

And there are implications for that for everybody's department here.

And then there are the international dimensions, our efforts to promote exports, which Redis has worked up a major program on.

The export control question, of course, has been applied there.

And I think our work on monetary reform and so forth is to go into that.

So all three of these things will come to play somehow or other, and it's going to be a work-terms decision on this.

The right thing to do would be to

flush the whole control system down, including the farm program.

There's a lousy farm bill that's going to come.

I know we haven't supported it because we've got no support on it.

It isn't going to affect anything for two years.

But in the present time, with, as you know, Earl, with the possibility of an enormous foreign sales fraud, and a lot of other things, the World Church and so forth and so forth,

And the United States still is playing around with that.

They say this is no criticism of Earl, but anybody that has worked to try to get some piece of this, this is a lot better bill than we had earlier.

But looking at the world situation today, and I think Bill, you would have testified.

Anybody else today?

All right.

But look at the world situation today.

We have a, the way it's, as we say, an honor problem is terrible.

And they are, and surpluses are terrible.

And we pay five, six billion dollars a year to pay for them.

So there you go.

All right.

The problem today

It's a world situation.

It's a world shortage of meat.

It's a world shortage of grain, and so forth and so on.

Why?

Well, you can say the Russians had bad weather.

Maybe the other term produced it, and so forth and so on.

We've had lousy weather.

We've signed more than just the exact same declarations in the last month than I have signed, perhaps, in the last five years.

What are you going to do this month, then?

I don't know.

But anyway.

The point is that what you have is not only in the world, but in the United States, a massive increase in demand.

And the massive increase in demand is good.

It's a... Well, let's start with the people who... Bill Hiddeus would have a family.

What we can do about India, God knows.

that we always have held previously, but what we can do this time is very serious now.

Take China.

So you've got 700 to 800 million people.

They live on basically the most minimal basis, but they're going up just a little.

When you take 700 million and have it go up just a decimal,

their ability to buy more is enormously increased, and their need is enormously increased.

It takes us so many years.

Let's face it, all of you have been through this so many years.

I'm sure their farmers don't produce enough.

They have too many people on the farm.

We do it with about 4% of our labor force, and they do it with about 45% of theirs, who produce more.

Basically, the major problem that they confront is the new leadership has opted for more consumer goods, better food, et cetera.

So they want more.

Now, Japan, Europe, all the rest, everybody's going up against it.

Not to mention the United States, where our food stamp program is one of the major causes of the problem.

We've quadrupled in this administration the number of people getting food stamps.

Of course, that doesn't affect the food supply thing totally because they use it for booze and marijuana and a few other things too.

But on the other hand, it affects itself.

So there's the food, there's where we go down there.

But basically, in the United States, the reason that we have, that we contribute to ourselves by the fact that our people are doing better

I mean, all of us have grown up, most of us of our age, having a chicken on a Sunday was the only meat we had.

Now, unless you have it three times a day, it's austerity, it's tough.

Well, so much for that.

We've all said it's a world problem, but the reason I made this point is the problem is not going to go away.

The problem's going to get worse.

It's going to get worse because the world's demand is going to increase.

And until people around the world begin to produce more, and until we, you know, produce not just those 40 million acres, but everything else, until we produce more, and maybe each few others produce more, this problem of price and cost of food is just not being witnessed.

You can take Latin America as an example.

I've traveled through there.

I found a very interesting thing.

I was in Peru, where you have the very rich and the very poor.

God, have you ever seen poor people?

The only poor people in the world are in Bolivia, India, Bangladesh, I think.

But nevertheless, when you go through there, in Peru, you find some very rich lands.

I talked to the Peruvian head of their agency,

They had a team in Peru that helped them.

And it was a great team.

Peruians were teaching them how to, I mean, the Purdue people were teaching them how to grow more, grow more, grow more.

It didn't work because 55% of everything grown on a farm in

Peru spoils on the way from farm to market.

They don't have a marching system.

They don't have a transportation system.

Brazil.

If you talk about Brazil, and it's from northern Brazil, as you know, anybody who's been there, it's one of the most horrible places in the world.

They're poor, proud, and terribly hungry.

And yet Brazil is great.

All of its enormous production is sold and stolen.

You've got exactly the same story.

It's not quite as bad.

Only 48% of everything grown on Brazilian farms spoils away the farm for market.

So what it gets down to is that here is the United States.

This is something we're awful good at.

We can raise more.

We do it with less people.

But we know how to market it.

We know how to transport it.

We know how to package it, and all the rest.

And that's why, in this area, with all of our problems, we are the wonder of the world.

And what we need to do is, I mean, I was once accused of saying we should export our farmers.

Not at all.

I would say what we need to do, though, is to do a broader better job.

And try to get other people to understand, not just how to grow,

but how to get this stuff around.

Let me come to another point.

The world situation is going to get worse in terms of the demands.

Now we come to the foreign policy aspect in another way.

A major arm of American foreign policy at this time, when we're moving, you know, confrontation and negotiation, one of the most nice little words we can all speak, and it tickles us,

A major honor of our foreign policy is the economic strength of this nation.

A major factor in that strength is our enormous productivity in the field of agriculture.

Bill, you'll remember when I talked to, we all talked, when I talked to Pompidou, when I talked to Brown, when I talked to even the Italian, particularly Pompidou, Brown, I would beg those fellows to let down the barrier so we could ship more agriculture products.

Now, what happens?

What happens in the wintertime is that here, agriculture, which is our, which could be, could be, and probably will be, is our best potential balance of payments of money, and so forth and so on, because of that.

Now, we find, because of the rising demand in home, weather, et cetera, all of this sort of thing, rising demand around agriculture, now becomes

an area where we are thinking of export controls.

We have to do it on corn because, as I understand, the corn crop is about three, perhaps four percent lower than we hoped.

Maybe that's wrong.

Whatever it was, it was not as high as we hoped.

We put export controls on corn.

We put export controls basically on soybeans.

The prices come down.

$12 to $13 to around $6.

That $6 is still three times as much as it was when they were doing pretty well at $2.

If you put a guy that's been at $2, he goes to $12, and you cut him to $6, and you think you're wrong.

And maybe we are.

But the point is that here are the demands.

The demands are broader than others.

Our foreign policy, our balance of payments,

the dollar and so forth, argue very strongly against export controls.

They argue very strongly for a policy whereby we can use our foods, use them effectively as an instrument for our policy.

That doesn't mean we're going to starve.

It just means maybe instead of a hundred and fifteen pounds a year for

The average American eats 100 and something like that.

That's one way to look at it.

That's the statesman-like way to look at it.

The other statesman-like way to look at this is that in terms of controls, if you really want to get the production up, whether it's on the farm, you've got to breed these pigs.

I hope they buy the beef or not, or the chicken, the broilers, and the beef, which takes about 18 months, perhaps two years to come.

Trying to do that, a farmer who is probably the most cautious and the big farmer today and a clever businessman, he isn't going to do it if he is uncertain about whether or not if he does do that, we're going to slap a ceiling on him or whatever.

Whether or not we're going to, after he's gone to all this suffering, all this work and so forth, to invest.

And it's a lot of work.

It's a very fragile business if we're going to slap a city on what he produces.

So that's why the farmer comes and sure, there's some people he's saying God.

Selfish one.

Selfish.

And that's what made this country.

It wasn't made by a bunch of people trying to be good.

They were doing good for themselves, and the process did good for others.

Nothing to do with it.

It was doing good by itself, too.

That's another great fact.

When you come right down to it, the productivity of America, as we know, depends upon it.

You know your labor leaders, you can come right down to a teacher, they'll be stationed in time when they come down, but they gotta get elected, don't they?

And they gotta get elected, they gotta come home with a bacon, right?

at a price they can afford, or a job.

Otherwise, they're out.

And so it is with the business guys.

Gotta report to the stockholders.

They'll sit around here and say, Mr. President, we'll cooperate hiring people that we know are inefficient, that we know can't do the job, will do everything.

But then when those clowns can't make it, they get thrown out.

So they're very careful when they're getting that policy.

But let's come back to this thing.

Where we really are at the present time is that the statesman likely

If we didn't have a Congress, and if we didn't, if we didn't have a Congress, reflecting of that great mass of consumers who are affected by, and this is part of our system, by commentators and others and so forth, who are not too sophisticated, because they are sophisticated, and they prefer to make a problem for us.

I understand that.

So, because the only, there is no change in the food thing, even with full production, prices are going to come down.

They're going to continue to go up.

We know that.

But it's not going to really come down.

And so, and all the other things, is to get rid of the controls, get rid of the distortions and so forth, and let the market take over.

That's what we should do.

We raise this with the leaders.

The leaders are those from agriculture that can dare to say yes to what our farmers want.

And some of those who have been containing the eclipses of business leaders say yes, that's what our eclipses want.

And a few who have talked to labor leaders who already have their contracts said yes, that's what we want.

Come down to us.

All the sophisticated political people say that if you were to slice off the controls as of now, at the end of the 68 period or even before, what would happen would be an enormous bulge, a bulge in the crisis.

That that bulge would have a traumatic effect on the national psychology.

That every one of them would be terribly discouraged about the relation.

And also that would have an effect

the United States can't handle the pressure.

Nobody would see what we were doing was taking a short-term B in order to make a long-term E. So the best thing to do is to remove the controls now.

Politically, you can't do it now.

So what are we doing?

What we're trying to climb here is a way

This is where our economic people have been sweating about it, thinking about it, and I've been thinking about it, and David Monk at the end.

What we have to do is to find a way to move from the controls to the free market, but to move from any way that reduces the volume.

Won't get rid of it.

So that's why we're leaning in terms of a 60-day period effort, a 60-day period in which, in the case of food support, in which we move away from the freeze.

And even then, of course, we'll have some phase four programs, not all of them.

In case of industrial products, we have a phase four program which would be tougher than phase three and tougher than phase two.

Why?

Is it good economics?

Not at all.

It's lousy economics.

the best for the country?

No, not at all.

Not at all.

Unless you had the problem of a Congress sitting there that would impose upon us if they had the opportunity.

If they see this inflationary thing becoming a big issue, a 90-day freeze or something worse that would go across the board and cripple and paralyze this economy and give it a role to where you could not recover for some time.

So what we're really doing here is trying to find a way

to move from control as quickly as we can to increasing.

But we've got to make that move in a way that still leaves credibility.

And it isn't just for, so they say, average guys eating their pretzels or their beer or whatever they do, you know, looking at the TV and so forth.

But it's a lot of relatively sophisticated people.

It's a lot of the members of the Congress.

It's some business people.

who follow these things, they believe that we need a strong anti-inflation program, apart from fiscal policy.

That's another subject.

Everybody agrees we've got to have a strong fiscal policy and a proper monetary policy in order to deal with controls.

Insofar as controls itself are concerned, I will summarize by saying that there isn't any question in my mind that we ought to

flushing as quick as we can.

And today would be a good day.

There also have been a question that if we did, we would reap the whirlwind because there would be such a large bulge that the political forces that would descend upon us would then lead the Congress, the forces, into action.

It would be very worse than keeping.

So we got the vote from controls.

to what appears, what is, which is credible, speaking only of the control field, which is credible as being a stronger control program than we had in phase three.

That is why the so-called phase four program will be stronger.

The economists recommend it with great reluctance, but the pragmatists, they recognize it as being necessary.

What they have worked out are means, to address these means, will be expeditiously used, whereby various industries and segments will be removed from the program as quickly as possible.

And we have as a goal, we're not going to tell anybody what the date is, we'll be totally away from the controls as soon as possible.

Sorry, enough of all that.

The point that we've finally come down to

It is one that is very, which all of us have to realize as national leaders, which is very disturbing.

Not just among average people, but among many individuals in the community.

Some in the labor community and so forth.

While they don't like to say it, while they, farmers, that they want free enterprise, no government interference, whatever it is, what has happened is that since the 30s, their hands have been held so long by government, they don't want to walk alone.

And so consequently, there is the feeling among us about government should do something about it, protect the businessmen.

Why would a businessman want any of those?

Well, he wants to provide advice to him and the laborer, because he'd rather have the government make the deal with the laborer than him having to manage it.

And there's a lot of this, not the top guys that sit around this, they can handle themselves in the field, and not the top laborers, but there's a lot of that involved in all this too.

As far as our own philosophy is concerned, it reflects mine.

I would simply summarize it this way.

One, the control system was necessary because of great concerns that were expressed in August of 1971.

At that time, it worked for reasons that no longer exist now.

The economy was not in full production at that time.

And as far as markets abroad, John, we love finding them there.

We just love finding them.

And so forth.

And we didn't have a situation.

We had a day of shrugging.

Now we threw in the control system because prices were escalating and all the rest.

And having done it, we now face this very sudden fact.

We have to move away from it.

And we've got to move away from it.

recognizing that public opinion, whatever public opinion is in the broader sense, probably wants

would like controls, would like them, and technically, because they're concerned about what do I take from us, what do I think for him, et cetera, et cetera.

And they think maybe if the government would just step in and hold us down, that would be better.

So our job, therefore, is to try to find a way to manage this movement from controls to a free economy in a way that will not

too much moves public support that we have to have for an economic policy.

That's the type of big problem that George and his colleagues

The program that we eventually will announce, probably soon, will be one I can assure you will set up.

Basically, it doesn't get rid of them right away.

Second, as far as strength is concerned, some will say their base floor is too strong.

Others will say it's too weak because what they want is just a continuation of the breeze.

But there is one point that has to be emphasized from it.

There's no question about the philosophy of everybody who has worked in this program.

We believe we should move away from it.

We believe that the future of this country will be better served by the program that we'll be based on.

shall we say, but with all of those beliefs in mind, we also recognize the practical and political problems that we're trying to deal with.

So as you hear what we have to say in this area in a few days, we, you of all we trust and support, and I know you will, we've all kind of talked very enthusiastically, but let me just say one thing.

Don't be optimistic.

And don't overstate what's going to happen in the food area.

Because they're going to be good.

We've been saying the food prices would start to level off around the end of the year.

It doesn't look that way now.

Maybe next year.

I'm not so sure.

It may be that we have to think of food prices in terms of food plant growth.

Because I see these international forces rising.

And also, we can talk about, we can talk about this.

We say, well, look, let's put the American consumer first.

Remember, I said that in the speech, we're going to put the Americans first.

So that means we'll stop the L480 program, we'll stop the sale of foods, and so forth, this and that, and the other product, and we'll have it all consumed here at home.

We can do that.

On the other hand, what we do is to just cut off

two arms and one leg of America's foreign policy at this critical time where economic power is the major stroke we have in the world.

So, Mr. President, we do more than that.

We discourage the production of any next year.

We're on a 12-month cycle after this.

I think the American public has had a dramatic less driven home in recent weeks.

But if you make it unprofitable, you drown the baby chicks.

I was shocked when this came out in the CB, the documentary.

You drown the baby chicks.

It was on a national TV show, so it turned out to be a good thing.

I think they've got millions of housewives in downtown America that if it doesn't pay up, they're going to dry up their supply.

I was shocked by this week.

We have a report that a major salamander facility in Chicago last week had 39% of their salamander pregnant salamander.

This salamander's pebbled down the road.

It makes water.

Yeah.

It makes good sausage and juice, your breakfast sausage.

This salamander's pebbled down the road.

Our placements in feedlots for cattle last two months have been down to the earth.

The cattle are out there, they're on the range, and then we come through the lake, the mid-nature, along the protracted period of growth, and somewhat more quality of meats.

I made a statement yesterday talking to the National Association of Buckeye Wildcats, which is a minor secretary of agriculture in India, that I'm going to return to positive investments.

But we've got to have, it takes more than the Secretary of Agriculture, and we've got to have an economic incentive.

And our job next year, on top of a massive increase in production this year, our job next year is to get the marginal acres back in, is to get the marginal inputs of cost factors, fertilizer, et cetera, back in.

And we talk to the police farmers in terms of lower prices next year.

I'm not arguing the equity of this thing.

Now, a dollar and a half per corn is a good price.

Now it's $2 now, but we're talking about a dollar and a half of gold now.

Except a year ago, a dollar and a half would have seen heaven.

A dollar used to be pretty good.

But it's the psychology of farmers.

A year ago, a dollar and a half would have been a great incentive.

Now we're coming down to something else.

What are you doing with it?

Our job next year is to get all our production for just two months away from Cleveland right now in the southwest.

Right now they have their mines.

I'm going to plant that next 40 back there.

And I'm going to do anything that will discourage them from planting.

Our job next year is to get everything in production we can do.

I'm not arguing to echo you on that, Mr. President.

All I'm saying is, let's not do to the producers of our basic feed crops what we have done to our livestock before, of course, the liquidation of breeding flocks, breeding herds, etc.

That's why you have written papers, Mr. President, and you said you don't have the 60-day feather out, right?

No, I didn't say don't have it 60 days.

I said get off of this thing as quickly as possible.

Again, let's make it fair.

I'm not arguing equity.

Our farmers will make money in a dollar and a half.

They'll make money in two dollars a week.

Our job now is to get that corn and get that wheat next year.

And we talked about putting export and licensing on corn.

You can't do it two days without putting it on wheat, too, because wheat is a good feed.

And then wheat, for that corn to divide on, immediately buy all the wheat they can get.

So if we move in that direction, you've got to make it right straight across the board's rear end, which I didn't mention.

Bill Rogers, gentlemen.

You know we're putting export closer, aren't you?

Well, I did yesterday's crop report.

Preliminary ability is on figures that are closer to it.

You're opposed to putting the expert controls on the box?

Yes, sir.

We had a, did that indicate I had a period of review?

Mm-hm.

Period of review.

Well, I'm personally opposed to it.

Although, if we are going to do it later, we should do it now.

I'm talking about the 73 crop because it's unconstitutional to cut across the contracts as we did with .

It just disrupts everything.

We had an indication yesterday of a 5.9 billion corn crop.

We were shooting for a 6.01.

The 5.9 is a good view of the late planting season we have.

This is corn in the ground.

Last year we had a late spring as we had this year.

Last year, from the July 1 crop report until the October crop report, we increased our corn production by 500 million bushels.

It was a good growing season.

If we have a normal growing season this year, this will increase too.

But again, let me say, my point is, I want to make it so that we can encourage our farmers next year to go all out, and you don't have to go all out to decrease your population.

I think another thing, Mr. President, I don't think food prices are that high.

I've been in the United States all my life.

And compared to American food prices across the board, for staple food, luxury food, that's another thing.

But for basic staple food, and the percent of income, spendable income, any other way you want to figure it, I think we've been subject to a little scare in the area,

I was sensitive to as anybody here, but I think we've got to be awful careful that we deny the marketplace the exercise of forces that will put the whole thing in its proper balance over a period of time by constantly controlling it and tampering with it.

And I think we're just going to see a bigger piece of the income going into

into the grocery store than we have in the past years during the next couple of decades.

I think it's just inevitable because of the world food prices that you're talking about, the world shortages.

We've got to face up to two things.

One is energy.

It's going to cost more no matter how you cut the mustard, whether you get dollar gasoline or whether you don't.

I think the processed foods are highly, the convenience foods, the so-called luxury foods are going to cost more for many, many reasons, not just what the farmer gets for it, but for all of the intermediate reasons, transportation, processing, packaging, and all the rest of it.

i hope that you i hope we can phase it out i i would agree to just to clip the umbilical cord and let the prices explode with the political diamonds but i hope we make it clear that we are actually moving away from this but i think we just got to say that i think we can't go out and talk across the country and defend the administration as we're all trying to do and particularly

now the rest of this summer, which I think we all have gotten to, unless we are indicating very strongly that we are moving away from these controls as a basic American economic principle.

And I'll say one more thing, and I think we have aided in the betterment of this attitude some ourselves by fleeing so readily ahead of this pressure from cheaper food prices.

And we haven't really gotten the story out of the body's points here, and that is, as a percentage of take-home pay, it's low time.

I know that's an average figure.

One more concept.

Herb talked about the votes in command that this pent-up will come suddenly if we take controls off.

The hamburger that we didn't eat two weeks ago is not in demand here before.

I mean, there is no bulge, no accumulated bulge in the demand for food because we didn't get it two weeks ago.

You get my point?

There may be for automobiles or refrigerators or something like that where you can carry the demand forward.

Now, it's true there is a good demand for food, but this bulge argument, I think, is brilliant.

It's not a viable one.

But if we've been holding the price in all the markets, it would go up.

It would go up.

But what we didn't mean to do is go up.

Yes, Mr. President, I believe that the price re-eminated from political advice to 100% of the Democratic Senator caucus voted for 90-day freeze.

I think the fact that we're now considering taking it off indicates that political advice in the economic field is a failure.

Our problem is twofold, supply and demand.

The freeze has done more to destroy the American economy and reduce production than anything.

So it seems to me that we need to address this problem of supply and demand, and I suggest an alternative consideration on the supply side.

You call in business, labor,

news people and consumers and explain the strategy as to increase productivity, increase supply, increase total production, not just for the domestic market, but for the essential export market.

And on the supply side, I mean the demand side, we have always promoted this in America.

But I believe that Ann Armstrong, to mobilize the housewives of America, the students and the rest, to conserve

purchases.

until we get over this period of extraordinary demand.

And we tell the world that we're going to increase production in this country.

We're going to dampen demand until we get this bubble.

We talked about how we stretch this bubble out.

We're sitting in the place of God, because at any time, only 50% of the businesses in America are operating profitably.

If we stretch this out over 60 or 90 days,

we're going to lose production.

And to me, the solution is to turn America's productive money off.

And I believe the American people are looking to you for leadership to call on each one of them to play a responsible part in this effort and mobilize America

Get out in the field, put, as you did in the budget battle, this cabinet and all the surrogates out in the country explaining this program to America.

And I think we'll shock the media and shock those who think that anyone can sit and allocate.

And it may be necessary of some of these products that we get into the new crop supply situation to control but notify

and the world and our people, that we're going to see that the free market allocates things in a fair and equitable way, which no massive group such as this can do.

And I know that you have the capacity for leadership to see that this is carried forward and mobilized behind such a network.

First of all, I'd like to thank you.

I'm trying to get it to work.

And that perhaps may help a bit.

As I said, that message is always heard by the doctor.

And I've gotten across to Mr. Henry's job.

It's more obvious than selling them to the purchaser.

That's right.

It's more obvious than selling them to the purchaser.

But this gives me the lane by you to the American people and they're fully under it.

I disagree, Fred.

I put yourself in the position of a congressman who runs every two years.

The president said earlier, and he was absolutely right, the businessman understands it, the labor leader understands it, the expert understands it, as far as the public is concerned, just get my prices down.

And that's all he understands.

And what we've faced in this country for years

and will continue to face it unless business, particularly agribusiness and the regular businessman, spends less money advertising his lab bags and baggies and so on, and does more advertising in the system, is economic ignorance on the part of the American people.

Now that's not damning them.

They've just never been given the kind of an education as to what profit margins are, that nobody's getting rich out there, or if they do, they do it temporarily through a growth period in their business, and then by God, they're running the competition, get it on, and those profits level out and so on.

And I think politically, there's no way of getting that message over a short period of time.

across to the American people.

One of the things that should be done, and the industry was starting to do it, and I hope they're continuing now, is thinking through how much of their advertising value, well spent now, I don't mean selling a bill of goods and overstating a case.

but starting to tell the American people about what their profits really are, what their problems are at halftime during the Super Bowl game, having one of those 30-second commercials be well done on how their business did and so on, rather than selling glad bags.

I think the same thing is true of agribusiness.

I think in our education process, when we were in commerce, we looked at the way they were teaching economics in school.

And it's a lousy job.

It's one of the dullest courses of the way it's taught that you've ever seen in your life.

And to prevent this kind of thing where we do have to respond to political pressures, and the political pressures mean a congressman's got to go back and run, and if his people don't understand the session, by God, he's got to be a man of action.

And therefore, it seems to me that for the long run, this idea of trying to do some education is what this country's about and can do it.

But short of all, there isn't any way in my judgment.

We ran those polls during phase two, for example, as to where we were.

The American people said 90%, no rationing.

I don't want rationing.

But you want the controls tighter, you damn tootin' I want the controls tighter.

Now there isn't any way in a 30-day or 30-day turnaround period of changing our attitude in Africa.

I do think one of the things we can start doing and that we ought to think of for phase four is addressing ourselves and making known that we're addressing ourselves to the structural problems.

The structural problems and agricultural reserves from trying to do, transportation's another area.

After all, the best friend a consumer's got is competition.

He doesn't know it.

He wants an independent consumer agency.

But by God, competition is the best safety valve he's got.

If there are structural problems in industry, if there are industries that aren't responding to competitive pressures, then it seems to me Elliot Schaaf ought to be looking at that damn type of thing in that area.

The productivity commission.

the various areas where savings can be made in our distribution process.

It seems to me all that should be laid out as part of our program in phase four as to how we're working on the structural problems in this area.

But the educational thing is a much longer

process, it seems to me.

But one, we always get these symptomatic things to do, but we never address that particular long-run problem of educating.

Hell, even our economic writers don't understand it.

Your friend, Mr. Rowan, I love him for stuff he reads and he writes.

And it seems to me, industry, on the private side, agriculture, just do a hell of a lot better job than they're doing.

Changing name is a long-term problem.

Now one of the reasons why, and this is a very tricky area, one of the reasons why the business man has been caving in, I've been told by my economic friends over the most recent years,

that more and more the businessman has his capital tied up in heavy, expensive machinery.

The more productive we've become, with more of his total expense being paying the bank for the machinery he's got in the plant, he can't afford to be down even three months because those notes more and more are bigger and bigger every time at the bank.

So sure he wants the collective cover of these controls because it puts pressure on the other side.

Now, these are very delicate areas, and they're very tough areas, but they're ones that it seems to me, for the long haul, we should be looking hard at what the problems are in that area.

Do we still have balance in the collective farming process?

I don't know the answers.

I'm a layman in that particular area.

I remember Paul McCracken, when we were working on phase two, this was the kind of thing we did.

But the structural problems in our economy are things that it seems to me could well be addressed over the period of the next six months.

Because it puts every president of the United States and every congressman and every senator in a hell of an impossible position.

They know what's right in this connection, but you've got to go at it so very slowly because it's all not for the housewife out there and even her husband.

It's just so damn difficult.

Mr. President, I could echo what...

Secretary Lynch says one business community was trying to do these things, trying to write ads, trying to explain things, and also try to increase production.

Nothing happens fast.

And to rely at this point on an educational campaign of stimulus I think would disappoint us.

I think what we have to do is two things.

First is let it be known that controls are going to stay a while so we keep things under control.

And second, it's not a long-term proposition because it doesn't work.

And that two-pronged message has to get to both groups.

I think this is what Jerry is saying.

We can't pull the plug because we aren't managing what's allowed to happen.

But nor can we create the impression this is going to happen very often.

Because pretty soon the resource misallocation is going to get beyond all of us.

The gas and the charges we're talking about is only short in America.

It's not short in Europe.

It's not short in Japan.

That tells us something.

We play around with the system too much.

The government is part of the problem and not the solution in some of these areas.

Mr. President, just very briefly to add, I feel very strongly that I don't know whether there could be a transition period as far as our energy picture is concerned, particularly the fuels.

I don't know how much immediate effect the price is going to have on supply.

It will have some, but I think it's a very, very useful tool at the present time.

It serves to dampen demand and alleviate some of the very severe problems that are becoming, we don't need to raise the price.

Let it go up some, I believe.

I have a question about the fact that these things work.

In the energy area, we have an example right in front of us in the composition of car sales.

The proportion of small cars to the total has been going up at a very rapid rate.

That's a direct response to the fact that these prices have been going up for a long time.

And also miles per gallon.

Miles per gallon.

Mr. President, on another point, I'm delighted this morning that thus far in all the talk of dampening demand, no one has suggested one thing.

And I'm sure sooner or later, several people, probably in Congress and possibly elsewhere, are going to suggest, and that's an increase in taxes.

And I'd like to put in a lawyer's bowl of anticipatory keeping against such a course, against the time when it might be suggested to you.

It is likely to be suggested as a quick way to dampen demand and all kinds of flexible methods with tax rebounds and everything else that could be made later when the situation is straightened out.

Because all it does is, first of all, violate the absolutely solid pledges that everyone in this room and the great many others gave over on the country last year.

uh which would tend to destroy a complete credibility i think but it would also mean to pile up additional governor government resources which in turn would give a tremendous amount of treatments to demands for more spending which apparently make it impossible ever to get the uh the budgetary restraint that we were talking about earlier so all that earlier all i'm saying is that

when that demand comes for more taxes as the way to control inflation, it might be well ahead of time.

The basic argument is that it is completely counterproductive.

It encourages more government spending and it does not solve the problem without getting into the budget problem, which I think we should not at this time because I don't think we can turn around any numbers, George, at this time.

And then it's premature to re-run the rates that we haven't decided yet.

But, uh, looking at the text, I think I know many of you have read about it.

The, uh, Chuck Percy, who, uh, represented basically what is, what is Arthur Vernon's view, which is, honestly, we ought to view by, uh, many conferences.

That is, there should be, uh,

tax credit.

Now, his action, well, it comes with several things, but one would be this giving the present authority to have a variable investment tax credit in order to get down to a down to three in my opinion.

But that's a great thing to lecture about in a class in Columbia.

But leaving out the politics,

I mean, you can't do something that's totally dishonest.

Now, at the present time, everybody in this room knows there's no way, no way,

you can get a responsible tax bill out of the press of Congress.

Go with it.

So you could ask for that.

You could ask for, for example, John, on the suggestion, if it made a 5% gas tax, apart from the fact that the governor should squeal and a lot of other people, which we all understand, maybe make a 10% gas tax.

It would give us a lot more dough.

A lot more dough that we could use for, you know, more food stamps and that sort of thing.

But anyway, the problem is that

that if you were assuming that we decided that right from an energy standpoint right from a budget standpoint and so forth and we ought to have a three to thirty percent variable and we also ought to have like that power in the hands of the president so far uh the uh problem is that with the with the present makeup of the congress and also with the fact that the house is usually responsible

has changed the rules, so they no longer have a change.

I'm going to quote the rule on the Ways and Means Committee.

And with regard to the fact that Mills no longer controls his committee, so he would want to be responsible on this.

The problem is that there's no way that the tax bill this time would come down here that could be signed.

Now, I signed the tax bill in 1969.

It was a mistake.

As I look back, the bad outweighed the good.

I wish I hadn't signed it.

And it'll never be signed again, believe me.

And a tax bill that comes down here and has things in it that I believe are wrong is going to go out.

Even though they'll say we're supporting the best in the business and so on and so on.

Because you see, a tax bill with an open rule of the house, and of course, the Senate has more than one.

Every possible thing would go on for tax reform, closing loopholes, et cetera, et cetera, et cetera.

The time it came down here, it would be a tax measure.

You think controls can repress this economy?

Watch a tax bill in the long time repress this economy.

Really.

It absolutely ruined it.

So the problem is that if we're talking about using taxes as a device, taxes as a device, it doesn't work.

Now, one thing we have thought of, and in the 90 days of employment, is to set up a budget, which is an austere budget, to tell the Congress, in effect, that if the Congress succeeds that budget, that then

It will be necessary to require the request of the Congress for taxes in the amount that it receives to budget.

Now, the purpose of that, of course, would be to restrain the Congress and also to get the justification cap from moving away from the position that we've taken in the campaign.

However, we have to realize that although we may say that, we may say that,

It's real as if it's an empty can, because when you come to the bill, you're looking at the, basically the irresponsibility of the members of the Senate and the House.

Collectively, I'm referring to the divisions, but collectively when the votes come down, their votes on tax payers have always been totally irresponsible since we came into office.

No way.

It's too bad, but it's true.

And maybe it will change sometime.

Maybe it will change.

We hope it does.

So that, you know, the reason I say all this, it leads the ball to right here in this court.

We've got to deal with the budget.

We've got to be responsible with that budget.

And by being responsible, it means that we're tightening the belts even more than we thought.

And believe it or not, it's not a pleasant prospect, because if you think of the battle we went through in the early parts of the years, the details that we've had sustained, the battles that we're having, the courts now pounding.

The fact that Congress had its way, R-162, R-168.5, we've already had R-274, R-275, and everything.

have been proposed and so forth that has to be in one house and the other goes through, we may have a problem.

But let's save the budget thing, Roy, for another time.

Because major purpose of this meeting is very complicated.

So to let you know, we wish there were easy answers.

or just have a strong base, or get rid of, and particularly of the blue area.

So we've thought a lot about all of these things,

We're gonna come up, as I say, with answers that will not satisfy, won't satisfy .

We could have 1% unemployment, half a percent inflation, and then we'd have to seize up the money.

We understand that's partisanship, and I mean a responsible economy .

But it's all right.

What we have to do is to do what we believe is right.

We're going to do it.

But what is right in the long run, and I invite everybody to the talk, what is right in the long run, whatever the political consequences, whatever the political consequences, we're not going to be so anxious as to have the enormous fault that, and this is the important point again, about the Congress.

Uh, and it's the important point, Earl, about the Farm Bill.

I mean, one of the reasons why, of course, I signed that Farm Bill, and they take out the escalator, call it laws.

One of the reasons I'll sign it has nothing to do with the Farm Bill.

I think it's a lot of sense.

But it has to do with the fact that those Farm Senators and Congressmen are among the few that we can really depend upon on other very important matters, namely security.

So what are you going to do, kick them in the teeth?

Uh-huh.

is just to pay and do that in order to get them in other areas.

But in terms of this whole area

I think we have to realize that we have a responsibility in the budget.

We're not moving the controls with this and move away as much as quickly as we can.

We're not going to take the big vote because it will cause too much of a congressional reaction.

I have in mind very much of Senator O'Connor.

He was stuck in his very bright, non-political way about being yesterday.

He said, well, and also, he's a freeze and a control man.

I remember his visit with you and I.

He said he was in Congress and then he didn't turn.

I was elected to be.

Did you remember the issue we were elected on?

I said, sure.

I said, what was it about, though?

It wasn't about the price of meat.

It was about no meat.

And if we run next year into a situation where the problem is not the price of hands and batons and broilers and so forth, but ratcheting hands and batons and broilers and so forth, we have a much more difficult issue on our hands.

And that's why we're going to handle this thing as well as we can.

We've got to have it right.

Bill's problem on the international league is not a thing.

We're going to have to deal with that one.

as effective as we can.

Finally, we're going to come up with a program which we believe will serve, which will deserve support because it will be strong enough to hold in line those who think something ought to be done for a while.

On the other hand, it will have within it those provisions that will allow us to get out of the program as soon as possible.

Our dedication must be to the free.

Our dedication must be to get up.

And to get up even though we know deep down that out across the country there are just awful lot of people that would prefer to have their hands up.

But this country's got to learn to walk again.

And that's what it's all about.

And it will.

It will respond like that.