Nixon, Shultz & Woods on Wage and Price Freeze

2:02:15I agree with it.
2:02:16I agree with it, except that it's a sort of an idle gesture that this man conquers.
2:02:23Well, that's the problem.
2:02:25And frankly, I guess we were developing it partly with that in mind.
2:02:29In other words, what could we do to bat the ball back into their court?
2:02:35Now I have a new variant of that, which I think I like a little better.
2:02:39Yeah.
2:02:41Tell me this, on the wage price, wouldn't you really have to have a free search to make it work?
2:02:54Uh, this is, uh, I saw something I ran into that, Inspector.
2:02:58I, I inclined to think that you'd rather freeze for a little while, and then you might have a freezing shot, and then back away with this kind of, uh, you know, a backstop.
2:03:08And this would be the second step.
2:03:10Second step.
2:03:15Yes, it's a little later.
2:03:16There'll be no doubt about it.
2:03:18Well, I'll leave it.
2:03:19Yeah, all right.
2:03:21Thanks.
2:03:21We'll see you tomorrow at 4 o'clock.
2:03:23All right.
2:03:23You can tell her that I have a call.
2:03:26Yes, sir.
2:03:27We just want to get there in time, or we'll crash the economy that you probably want.
2:03:30We'll see how things are going.
2:03:32Okay?
2:03:32All right.
2:03:33All right.
2:03:33Get out of here.
2:04:06Do you see your sources of freedom?
2:04:06Good kids.
2:04:06Don't get on with me if you like that story or something.
2:16:32Well, this will never reach.
2:17:00Ok.
2:17:33It's quite an experience.
2:17:34Have you ever gone through those old folk songs?
2:17:38No, I haven't gone through one of those.
2:17:41Depressing.
2:17:42Depressing.
2:17:43Because, you know, it's so damn sad.
2:17:46You see all those people.
2:17:49This is one of the better ones, of course.
2:17:56Yeah.
2:17:58She was impressed with the work that you and Mrs. Nixon managed to get across.
2:18:09You know, I just talked to Paul McCracken, and I told him that I...
2:18:23Waterham, and his three colleagues, and you, and I said, I want you to talk about what you think about the economy and so forth.
2:18:33Now, the one thing where we've got, and I told him, and I told him, I said, I want to think about, are you concerned about air quality?
2:18:41I said, I'm not concerned about that like everybody else, and I said, because I'm just not going to talk to people about it, because he just had the beliefs, and it was just Scott Collins, and so on, and so on.
2:18:53Jesus Christ.
2:18:54That kind of thing.
2:18:56It's just murder.
2:18:58It's the idea that we are going to start somebody.
2:19:01Sure.
2:19:02So I decided we can't talk to anybody except you, Connie, and myself.
2:19:10It's a terrible, it's an awesome task.
2:19:14It's a good decision to do all the things that we're trying to do.
2:19:18But I think between the three of us, we can figure it all out
2:19:24The one problem Connelly seems to be concerned about when he's going to be staying over here tomorrow, is whether something will create a run on the dollar, you know, on the gold, depending to whether it's by the French or something.
2:19:40I guess that would be what the French, the Germans want, the British want.
2:19:51We can't have a discussion over the issue until it is used by the two of us.
2:20:02The real question I guess we have is whether what your evaluation is.
2:20:11I don't know.
2:20:21There's a danger, he said this morning on the phone.
2:20:25We've got to... We've got to play a role of sitting hard and tight.
2:20:32But I do know this, we can't have more talking about it.
2:20:34We've got to carry about it in some calm balance.
2:20:38I quit talking.
2:20:39Crackers people have got to quit talking.
2:20:42Computers have got to quit talking.
2:20:47And comedy has got to talk.
2:20:50I'm so scared now.
2:20:54I've got work to start on.
2:21:16With different people on different aspects of the thing.
2:21:19Very good, very good.
2:21:19Including the wage price.
2:21:21What I told our people was that we're obviously going to be hearing it on this wage price review board after the Congress.
2:21:30No doubt I'll have to testify, so I want to get material on wage price review boards, wage price freeze, wage price controls.
2:21:37Right.
2:21:38Everything Lincoln must get.
2:21:40I may run over a couple of those things in my own mind, some thoughts I'd like you to think about before the meeting tomorrow.
2:21:46First, an international thing.
2:21:48Do you have any further thoughts on that that you want to pass on before coming to leave tomorrow?
2:21:54Or do you want to say that we just feel it's the thing to do is to sit as tight as we can at this point?
2:22:04I don't think the right thing to do is to be idle on the 4th of November without any of the other things.
2:22:09I don't want to do that.
2:22:10That's panicky.
2:22:11I want to go through the whole thing.
2:22:14That's what I'm talking about.
2:22:15going through the whole thing to resolve that kind of pressure.
2:22:19It argues against the very measure that the plan going into September 8th is the right way, it's the way to do it, it's orderly, it's measured, it's thought and true.
2:22:29We have a meeting in San Clemente about September 23rd, if you would come, and we work the whole damn thing out, then we'll get Burns and Shirley before.
2:22:41So, that's what I have in mind.
2:22:43Yeah, I think
2:22:46Well, it's something to watch.
2:22:47There's a risk, but I think we'll make it.
2:22:51You've just got to get everybody to shut up about it.
2:22:53You've just got to talk to people.
2:22:58You must speculate about it.
2:22:59Could you talk to Peterson a little bit about this?
2:23:02Don't speculate.
2:23:03I know he's anxious.
2:23:04He's very volatile.
2:23:05I know that.
2:23:07Just say this.
2:23:07Things that I have something in mind, and you've just got to have a conversation with me.
2:23:13I know all the evidence that we have, but don't, but the main thing now is that everybody in this month, so that we can do the right thing, has got to calm down.
2:23:25He was up talking to Nellis for an hour or so today, about half an hour, and that is not helpful this month, you know.
2:23:35Nellis cannot be trusted on this particular front this evening.
2:23:40He is a little bit naive, I expect, and he said,
2:23:43He'll probably, I mean, I'm glad we got him.
2:23:47And once we get ready to go, he'll be grateful to help stop the implement and all that sort of thing.
2:23:54But he simply must not talk.
2:23:55He must not talk.
2:23:56I'm not going to tell him to crack in those streets and not to talk tomorrow.
2:24:00I'm going to lay the law down hard, and then Conway has got to remove his job, and I'm sure he's not going to talk.
2:24:07But that's what all we can do.
2:24:08I'm sure he's not going to talk.
2:24:10I'm going to see Arthur on Friday.
2:24:12Have a nice little talk with him.
2:24:15I pray he won't have long because it's long enough.
2:24:20I've got to show him.
2:24:22I've got to listen to him.
2:24:23I'm going to have lunch with Arthur tomorrow, Joe.
2:24:25Well, I have had a long, friendly talk with him on the phone and all that sort of thing.
2:24:30Here's the way we want to lead him.
2:24:33He's got to be led off of the raise the price of gold thing.
2:24:36I think you'll be persuaded by the logic that this is a step to take, and that what step needs to be taken at some future time is a hard question.
2:24:55Is it perfect now?
2:25:03I would not let Brinkham handle the wage price freeze thing, but I would say, no, aren't there, but President Rudy is interested in hearing what he'll be wanting to talk to you about on Thursday or Friday, and don't tell anybody what you're talking about.
2:25:19How would you handle it?
2:25:22I want you to reach the conclusion, George, that you have to handle wage price freeze first, and then go the other way.
2:25:31You see, it seems to me that that's the only, the only way that that thing can work.
2:25:38My reason goes somewhat like this.
2:25:41First, I don't like anger at the beginning.
2:25:43Second, I remember we are faced with, not a political problem, this is a serious issue, we are faced with the fact that an overwhelming majority of the people in this country, labor and business,
2:25:57Now when you have that kind of situation,
2:26:06A very different way, it's like the war.
2:26:09But probably we should have done about the war is to kick hell out.
2:26:13Into the fight, bring them to their knees.
2:26:16But on the other hand, a great majority of people said get the hell out.
2:26:20So what we did do was not get the hell out, we got it out in a reasonable way.
2:26:24That was the way to handle the issue of democracy.
2:26:28You cannot totally just roll against something.
2:26:33Because the people were here, that means you don't follow people, but you try to at least monitor the extent.
2:26:41Here we had this curious phenomenon.
2:26:43The media had beaten them over their heads so much about inflation and the rest, which is not as significant a problem as we all know.
2:26:51And the economies and the donors and so forth.
2:26:54And the wage price rates and so forth.
2:26:56We've got to have wage and price controls.
2:26:58Now, what do you do there?
2:26:59You do not have wage and price controls on a gallery.
2:27:03That's wrong.
2:27:04That would be like bugging out of Vietnam.
2:27:06What do you do?
2:27:08The other side of the coin, you don't set up a half-assed wage price board, you know, and sputter it around, and nothing happens.
2:27:17What you do is to do something quite dramatic.
2:27:20Children.
2:27:22The wage price for each, whack it out there.
2:27:25Your idea of maybe 60 days, I mean, maybe it should be 90, maybe it should be 120, and then we have 120, and then come on with the other earlier.
2:27:34So we're going to delay that kind of between.
2:27:37There are a number of ways that you can figure this out.
2:27:40And then, you do that.
2:27:42Then you come on with the board, where they start another.
2:27:46But I wouldn't call it that.
2:27:47I'd call it something else.
2:27:49The Cabinet Committee, the United Council, the policy or something or other.
2:27:53Now, this is where we want to get our views.
2:27:57Now, let me say it for the purpose of it.
2:27:59The purpose is cosmetic.
2:28:01The purpose will be to make people think that we care about the issue and that we're working on it.
2:28:07Come as it does, the board has to be, you know, the phrase is going to work.
2:28:11It'll work for a while, right?
2:28:13I think it'll have a temporary, it'll pretty much freeze for that period of time.
2:28:19Do you think it'll work that long, 90 days?
2:28:20I think it can.
2:28:21Well, the charger, I think it won't work.
2:28:23Would you freeze?
2:28:24No, sir, I wouldn't.
2:28:26I don't think that it will.
2:28:27It's funny you ask me about it, so if you know the wages, that's the simplest part.
2:28:36And the wages, most of the people have got will let it be.
2:28:39and we shall freeze those damn wages, that's for sure.
2:28:44But let us take commodities, let us take commodities to the free market, the number of pricing decisions that are made.
2:28:53You know what it gets down to?
2:28:56It really does get down to, I mean, take used cars.
2:28:58How on the hell do you have a price freeze on a used car?
2:29:03There isn't any way to freeze it.
2:29:05Take a commodity like a
2:29:37It will work.
2:29:38There's just going to be a hell of a lot of things.
2:29:41And yet I don't think you could leave anything out.
2:29:44Services.
2:29:46Do you have free services?
2:29:49I don't know.
2:29:51But if you do, why don't you deliver it?
2:29:54I think the whole thing really... Our rents will be frozen under this.
2:30:02This is something that has to be specified, and I think the duration of the freeze, the scope of the freeze, and then how you come out of it.
2:30:15I mean, you can't specify that, but...
2:30:32Partiklete ekonomi, that's impossible.
2:30:34Due to the fact, well, if we talk about the others, due to the fact that they're getting a bad judgment by a manager's way, you make them a loan money, you freeze interest rates, and we talk about the problem with these home loans, how do you freeze them out?
2:30:50How do you?
2:30:51So we all know, we all know, we all know what a can of worms is, that's why it must not be too long.
2:31:00That is, it seems to me the theory of the freeze is less one of actually doing something to wages and prices, but more one of saying there's a shock effect and a sort of a drama that the problem is going to get attention, and then you lay the groundwork for something you're going to do next that you hope will have more operational effect.
2:31:25One of the reasons is that you've got to have a wage price freeze.
2:31:30That is one of the reasons.
2:31:35You cannot, under any circumstances, have an import tax without a wage price freeze.
2:31:41Because an import tax would just be inflationary as hell.
2:31:48Would it not?
2:31:49Well, the goal, the money relationship is inflationary.
2:31:54The import duty is inflationary.
2:31:56Yes, the import duty is inflationary, but on the other hand, it can have, at the end, a salutary effect.
2:32:03It moves around.
2:32:04You get something selling.
2:32:07You get... Well, I think that the monetary moves are ambiguously inflationary, and we have to face that kind of thing.
2:32:14But necessary for the causality.
2:32:16In fact, we're in a hell of a shit.
2:32:17I don't think we're in that bad of a shit.
2:32:22Of course, I...
2:32:23I'm still much closer to the freedom line of action.
2:32:29Well, of course, he would have favored it.
2:32:32Yes, he would.
2:32:34He's advocated that for years.
2:32:36Flexible exchange rates.
2:32:39Why?
2:32:41Oh, yeah.
2:32:42But he thinks that's a different problem.
2:32:44All right.
2:32:47Now we come to the public argument on that.
2:32:53Arthur will want to get back to a system of fixed exchange rates as rapidly as he can.
2:32:59Arthur will welcome this whole approach very much.
2:33:06Also because he's worried about the international monetary business.
2:33:11I think everybody's nervous about it.
2:33:16And this does deal with the crisis problem.
2:33:20Once you've closed the gold window,
2:33:22There's no more crisis in a sense that something drastic that can be done to the United States that causes us sort of dramatic pain.
2:33:34But then I'll come in.
2:33:40Then you come into the period of the border, and that's where we've got to be highly selective and sophisticated.
2:33:46You have the border where the demos set up.
2:33:50There, George, I figure, will make a good balance from the fact that our policies, let's assume that our policies on inflation are working.
2:33:59We say they are, you know, not as well as they should, but some, right?
2:34:05That's sort of our reasoning.
2:34:07If that is true, they will continue to run not as well as they should, but some, right?
2:34:14So maybe you just get a little credit for it.
2:34:18What's going to happen anyway, you can credit it for trying to make it happen.
2:34:23And so you run the damn board for about through November 72.
2:34:29And you get rid of it.
2:34:30That's going to be my reaction.
2:34:36If it works that way, if the board comes in and prices subside, everyone will be convinced the board did it.
2:34:44And then they'll want the board to be permanent because it did the job.
2:34:50I think what happens with these things, under the best of circumstances, is they have a sort of a half-life of a year, year and a half or so.
2:35:04It's something different.
2:35:05People haven't quite caught on to it.
2:35:08Maybe it does a little good, and then everybody knows the ropes, and it goes out of business.
2:35:12So you're best off to just establish that as something else.
2:35:16I love you, sir.
2:35:17I love you, too.
2:35:19We can institute the damn thing in January, and let's just have this lie for ten months.
2:35:25I can assure you that if we're not here after the election, it doesn't make any difference.
2:35:32I mean, as far as our responsibilities, if we are here, I'll get rid of it as quick as I can.
2:35:38If it isn't working, I don't think it will.
2:35:44I study this thing a lot more than anybody really knows.
2:35:49I know what makes people act.
2:35:53That's the whole point.
2:35:54People are not giving enough credit to the self-employed.
2:36:00People don't do things because they want to help the country.
2:36:05They don't really do it.
2:36:06They can.
2:36:07They want to, but they can't.
2:36:09You know that.
2:36:10I thought they do things because they're trying to keep their jobs as the head stockholder or whatever the hell they mean.
2:36:19That's my understanding.
2:36:23Furthermore, when they do something for themselves that produces a better product at a higher profit, they are also doing something for the society.
2:36:31That's the whole
2:36:33...method through which this system operates.
2:36:38So here we are.
2:36:40But you see, we're in a box.
2:36:42And I'm a bit concerned about changing my mind on this.
2:36:48I think that politically can have a very devastating effect.
2:37:16I think it could have, because it would be inflated there, and people would say, Christ, our dollars aren't worth as much, and all that sort of thing.
2:37:23On the other hand, let me tell you, look at the dollar quote.
2:37:27If you have a wage price freeze, the wage price freeze is going to be here as a story, and the dollar quote is going to be there, and the answer package in there.
2:37:36And so you build that thing.
2:37:38That, of course, you come in with the tax.
2:37:46That's a tax name.
2:37:48That's not having a dramatic effect.
2:37:51And the difficulty there is what the damn Congress is having.
2:37:55You're figuring the tax names out, aren't you?
2:37:58Well, I'll have information on the cost, of course, the personal thing.
2:38:02Now, the problem is to find the areas of the budget where we can cut, that come to that magnitude.
2:38:11I mean, we can find plenty of things, but to get them up to that magnitude is hard.
2:38:14Yeah.
2:38:18Or we can suggest them, but you get quickly into areas.
2:38:24One way is to put your import tax higher.
2:38:26Well, you get something from that, sure.
2:38:29You'll estimate how much.
2:38:31You've got your import tax, so you raise the budget.
2:38:36And you try to get some more from the budget.
2:38:41It's got to balance out.
2:38:52It's awfully hard, and we certainly can push back, as you said, we can push back the... Push back the federal pay raises.
2:39:03We have a technical problem on that, that I just got into, I hadn't realized.
2:39:08That you must announce your intentions by September 1st, according to the law, as to the next year.
2:39:17Now,
2:39:19What I'm researching out is, does that really mean September 1st, or does it mean the first day Congress is in session after September 1st?
2:39:29I don't just... Then we could have it that day, but it would be important to make the announcement today Congress convenes if this is the case.
2:39:38Uh...
2:39:46There's another thing that has to do with psychology in this country.
2:39:49You see that the sort of disaster lobby around the United States has gotten the American people so beaten down in terms of their self-confidence, their self-conceptual organization, their desires, their environment, their consumerism, etc., etc., etc.,
2:40:11Now, they like to lunch each other, and think, God, somebody's got to lose all the looners.
2:40:18Wonder what the president's going to do about anything, you know what I mean?
2:40:21You know, the self-reliance spirit.
2:40:23Now, we should not, frankly, cater to or pander to that thing.
2:40:30This is a good one.
2:40:30It would be better to let the people say, now, by God, you do what's right.
2:40:33But at this point...
2:40:37I feel that on this particular issue, and it's because of the success, at least our present success in foreign policy, and our present success including down here in the black question, and including down in the cities, and including down in the crime question, you realize all we have to do is go down there.
2:40:58It's because of those things, George.
2:41:02You can be sure that the media are going to blow up this economic thing till hell or heaven.
2:41:08And we will be forced into it.
2:41:09You see my point?
2:41:10What we're really doing here is to beat them to it.
2:41:14The Congress, as sure as we sit here, will have some errors and will pass them.
2:41:21I don't want that.
2:41:21By the way, it strikes me it's also the way we come up with this.
2:41:23We'll be a sweat.
2:41:28Now the other thing you can do if you can't, if you don't get all the money, let me say, the budget cuts can be fictitious if you want them to be.
2:41:38Understand?
2:41:39Well, we can point to a lot of impounding of funds.
2:41:42That's right.
2:41:43The trouble is with that, is that we have gotten in so much dutch with what we've already done.
2:41:49I thought that you could talk about where you're going to cut the first wall.
2:41:58Family assistance, whatever that saves, does not much.
2:42:03It's a 72 budget that doesn't much.
2:42:07We have to protect it.
2:42:10Revenue sharing saves a lot if you want to forego that, but from our discussion you and I and John had, I got the feeling we might take that first quarter and save that much.
2:42:22That's a billion and some.
2:42:24All right, let's do that.
2:42:26Well, that helps.
2:42:27That's a good look.
2:42:28Right.
2:42:31And then, the pay rates thing, we saved that.
2:42:37Then I had a big difference cut in terms of personnel and revenue.
2:42:44Those are ways you can do it.
2:42:46I just don't see many other ways.
2:42:49But you understand, it's the appearance of cut that's going to count here.
2:42:53Because you also have to see, Congress has got to get busy passing things.
2:43:01Well, we'll have the two big structural changes in the tax system here, the investment tax credit and the auto excise.
2:43:12Yeah, which costs a total of?
2:43:14I'm not sure yet, but my guess is it's on the order of $8 billion.
2:43:19Now, the personal income, well, those things are just moving ahead, things that are already scheduled, so you're going to lose that money anyway.
2:43:28But that just makes, for instance, our 73 problem more difficult, except insofar as something comes out in the value-added way that adds that back on again.
2:43:40Or unless by really hitting the budget very hard, we can get it down.
2:43:45Now, if we just had a real gloves-off operation on the budget, we could take that budget way down, but it would be rough.
2:43:56It would be rough.
2:43:58And it would have to hit into defense.
2:44:01I have Mosul Moss waiting for me upstairs now.
2:44:04He's going to lobby me about the Navy budget.
2:44:08In my judgment, the Air Force budget's the one that's getting the Army managed better.
2:44:19The Navy is...
2:44:23They're pretty well managed.
2:44:29We have something on the space business that CAP has been working on.
2:44:33We might show you one of these days.
2:44:36which in effect has identified some patterns of base closures where we close two sizable bases in Massachusetts.
2:44:46We do some of those functions on some bases in California.
2:44:52So we up some and down others and change the regional pattern of the bases.
2:44:57Incidentally, one space that I think deserves a little ground exploring at this point
2:45:04Apparently they were bitching about the fact that we didn't move two things down there.
2:45:10Their unemployment is not very high, but would you take a little more criticism?
2:45:15Just so that we do something that appears to be...
2:45:19Okay, we did put... No, I guess it was... We didn't move it from Ohio.
2:45:24There was a dispute between Ohio and Florida about some testing center.
2:45:29The other thing I was going to ask you... On the...
2:45:33On the 20%, as I understand it now, under the law, we can move that around various places.
2:45:42We'll put most of it in California.
2:45:45But we can do that due to the fact, as I mentioned, John actually raised this point, and he said it must appear to put it all in California.
2:45:54I said, hell no, we're not.
2:45:56I said, I understand we're putting it in California.
2:45:58He's getting some.
2:45:59I think New Jersey had some.

Nixon, Shultz & Woods on Wage and Price Freeze

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Also recorded on August 9, 1971

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