Conversation 558-009

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I agree with it.

I agree with it, except that it's a sort of an idle gesture that this man conquers.

Well, that's the problem.

And frankly, I guess we were developing it partly with that in mind.

In other words, what could we do to bat the ball back into their court?

Now I have a new variant of that, which I think I like a little better.

Yeah.

Tell me this, on the wage price, wouldn't you really have to have a free search to make it work?

Uh, this is, uh, I saw something I ran into that, Inspector.

I, 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.

And this would be the second step.

Second step.

Yes, it's a little later.

There'll be no doubt about it.

Well, I'll leave it.

Yeah, all right.

Thanks.

We'll see you tomorrow at 4 o'clock.

All right.

You can tell her that I have a call.

Yes, sir.

We just want to get there in time, or we'll crash the economy that you probably want.

We'll see how things are going.

Okay?

All right.

Get out of here.

Do you see your sources of freedom?

Good kids.

Don't get on with me if you like that story or something.

Well, this will never reach.

Ok.

It's quite an experience.

Have you ever gone through those old folk songs?

No, I haven't gone through one of those.

Depressing.

Because, you know, it's so damn sad.

You see all those people.

This is one of the better ones, of course.

Yeah.

She was impressed with the work that you and Mrs. Nixon managed to get across.

You know, I just talked to Paul McCracken, and I told him that I...

Waterham, and his three colleagues, and you, and I said, I want you to talk about what you think about the economy and so forth.

Now, 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?

I 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.

Jesus Christ.

That kind of thing.

It's just murder.

It's the idea that we are going to start somebody.

Sure.

So I decided we can't talk to anybody except you, Connie, and myself.

It's a terrible, it's an awesome task.

It's a good decision to do all the things that we're trying to do.

But I think between the three of us, we can figure it all out

The 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.

I guess that would be what the French, the Germans want, the British want.

We can't have a discussion over the issue until it is used by the two of us.

The real question I guess we have is whether what your evaluation is.

I don't know.

There's a danger, he said this morning on the phone.

We've got to... We've got to play a role of sitting hard and tight.

But I do know this, we can't have more talking about it.

We've got to carry about it in some calm balance.

I quit talking.

Crackers people have got to quit talking.

Computers have got to quit talking.

And comedy has got to talk.

I'm so scared now.

I've got work to start on.

With different people on different aspects of the thing.

Very good, very good.

Including the wage price.

What I told our people was that we're obviously going to be hearing it on this wage price review board after the Congress.

No doubt I'll have to testify, so I want to get material on wage price review boards, wage price freeze, wage price controls.

Right.

Everything Lincoln must get.

I 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.

First, an international thing.

Do you have any further thoughts on that that you want to pass on before coming to leave tomorrow?

Or 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?

I don't think the right thing to do is to be idle on the 4th of November without any of the other things.

I don't want to do that.

That's panicky.

I want to go through the whole thing.

That's what I'm talking about.

going through the whole thing to resolve that kind of pressure.

It 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.

We 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.

So, that's what I have in mind.

Yeah, I think

Well, it's something to watch.

There's a risk, but I think we'll make it.

You've just got to get everybody to shut up about it.

You've just got to talk to people.

You must speculate about it.

Could you talk to Peterson a little bit about this?

Don't speculate.

I know he's anxious.

He's very volatile.

I know that.

Just say this.

Things that I have something in mind, and you've just got to have a conversation with me.

I 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.

He was up talking to Nellis for an hour or so today, about half an hour, and that is not helpful this month, you know.

Nellis cannot be trusted on this particular front this evening.

He is a little bit naive, I expect, and he said,

He'll probably, I mean, I'm glad we got him.

And once we get ready to go, he'll be grateful to help stop the implement and all that sort of thing.

But he simply must not talk.

He must not talk.

I'm not going to tell him to crack in those streets and not to talk tomorrow.

I'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.

But that's what all we can do.

I'm sure he's not going to talk.

I'm going to see Arthur on Friday.

Have a nice little talk with him.

I pray he won't have long because it's long enough.

I've got to show him.

I've got to listen to him.

I'm going to have lunch with Arthur tomorrow, Joe.

Well, I have had a long, friendly talk with him on the phone and all that sort of thing.

Here's the way we want to lead him.

He's got to be led off of the raise the price of gold thing.

I 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.

Is it perfect now?

I 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.

How would you handle it?

I want you to reach the conclusion, George, that you have to handle wage price freeze first, and then go the other way.

You see, it seems to me that that's the only, the only way that that thing can work.

My reason goes somewhat like this.

First, I don't like anger at the beginning.

Second, 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,

Now when you have that kind of situation,

A very different way, it's like the war.

But probably we should have done about the war is to kick hell out.

Into the fight, bring them to their knees.

But on the other hand, a great majority of people said get the hell out.

So what we did do was not get the hell out, we got it out in a reasonable way.

That was the way to handle the issue of democracy.

You cannot totally just roll against something.

Because the people were here, that means you don't follow people, but you try to at least monitor the extent.

Here we had this curious phenomenon.

The 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.

And the economies and the donors and so forth.

And the wage price rates and so forth.

We've got to have wage and price controls.

Now, what do you do there?

You do not have wage and price controls on a gallery.

That's wrong.

That would be like bugging out of Vietnam.

What do you do?

The 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.

What you do is to do something quite dramatic.

Children.

The wage price for each, whack it out there.

Your 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.

So we're going to delay that kind of between.

There are a number of ways that you can figure this out.

And then, you do that.

Then you come on with the board, where they start another.

But I wouldn't call it that.

I'd call it something else.

The Cabinet Committee, the United Council, the policy or something or other.

Now, this is where we want to get our views.

Now, let me say it for the purpose of it.

The purpose is cosmetic.

The purpose will be to make people think that we care about the issue and that we're working on it.

Come as it does, the board has to be, you know, the phrase is going to work.

It'll work for a while, right?

I think it'll have a temporary, it'll pretty much freeze for that period of time.

Do you think it'll work that long, 90 days?

I think it can.

Well, the charger, I think it won't work.

Would you freeze?

No, sir, I wouldn't.

I don't think that it will.

It's funny you ask me about it, so if you know the wages, that's the simplest part.

And the wages, most of the people have got will let it be.

and we shall freeze those damn wages, that's for sure.

But let us take commodities, let us take commodities to the free market, the number of pricing decisions that are made.

You know what it gets down to?

It really does get down to, I mean, take used cars.

How on the hell do you have a price freeze on a used car?

There isn't any way to freeze it.

Take a commodity like a

It will work.

There's just going to be a hell of a lot of things.

And yet I don't think you could leave anything out.

Services.

Do you have free services?

I don't know.

But if you do, why don't you deliver it?

I think the whole thing really... Our rents will be frozen under this.

This 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.

I mean, you can't specify that, but...

Partiklete ekonomi, that's impossible.

Due 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?

How do you?

So we all know, we all know, we all know what a can of worms is, that's why it must not be too long.

That 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.

One of the reasons is that you've got to have a wage price freeze.

That is one of the reasons.

You cannot, under any circumstances, have an import tax without a wage price freeze.

Because an import tax would just be inflationary as hell.

Would it not?

Well, the goal, the money relationship is inflationary.

The import duty is inflationary.

Yes, the import duty is inflationary, but on the other hand, it can have, at the end, a salutary effect.

It moves around.

You get something selling.

You get... Well, I think that the monetary moves are ambiguously inflationary, and we have to face that kind of thing.

But necessary for the causality.

In fact, we're in a hell of a shit.

I don't think we're in that bad of a shit.

Of course, I...

I'm still much closer to the freedom line of action.

Well, of course, he would have favored it.

Yes, he would.

He's advocated that for years.

Flexible exchange rates.

Why?

Oh, yeah.

But he thinks that's a different problem.

All right.

Now we come to the public argument on that.

Arthur will want to get back to a system of fixed exchange rates as rapidly as he can.

Arthur will welcome this whole approach very much.

Also because he's worried about the international monetary business.

I think everybody's nervous about it.

And this does deal with the crisis problem.

Once you've closed the gold window,

There'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.

But then I'll come in.

Then you come into the period of the border, and that's where we've got to be highly selective and sophisticated.

You have the border where the demos set up.

There, George, I figure, will make a good balance from the fact that our policies, let's assume that our policies on inflation are working.

We say they are, you know, not as well as they should, but some, right?

That's sort of our reasoning.

If that is true, they will continue to run not as well as they should, but some, right?

So maybe you just get a little credit for it.

What's going to happen anyway, you can credit it for trying to make it happen.

And so you run the damn board for about through November 72.

And you get rid of it.

That's going to be my reaction.

If it works that way, if the board comes in and prices subside, everyone will be convinced the board did it.

And then they'll want the board to be permanent because it did the job.

I 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.

It's something different.

People haven't quite caught on to it.

Maybe it does a little good, and then everybody knows the ropes, and it goes out of business.

So you're best off to just establish that as something else.

I love you, sir.

I love you, too.

We can institute the damn thing in January, and let's just have this lie for ten months.

I can assure you that if we're not here after the election, it doesn't make any difference.

I mean, as far as our responsibilities, if we are here, I'll get rid of it as quick as I can.

If it isn't working, I don't think it will.

I study this thing a lot more than anybody really knows.

I know what makes people act.

That's the whole point.

People are not giving enough credit to the self-employed.

People don't do things because they want to help the country.

They don't really do it.

They can.

They want to, but they can't.

You know that.

I thought they do things because they're trying to keep their jobs as the head stockholder or whatever the hell they mean.

That's my understanding.

Furthermore, when they do something for themselves that produces a better product at a higher profit, they are also doing something for the society.

That's the whole

...method through which this system operates.

So here we are.

But you see, we're in a box.

And I'm a bit concerned about changing my mind on this.

I think that politically can have a very devastating effect.

I 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.

On the other hand, let me tell you, look at the dollar quote.

If 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.

And so you build that thing.

That, of course, you come in with the tax.

That's a tax name.

That's not having a dramatic effect.

And the difficulty there is what the damn Congress is having.

You're figuring the tax names out, aren't you?

Well, I'll have information on the cost, of course, the personal thing.

Now, the problem is to find the areas of the budget where we can cut, that come to that magnitude.

I mean, we can find plenty of things, but to get them up to that magnitude is hard.

Yeah.

Or we can suggest them, but you get quickly into areas.

One way is to put your import tax higher.

Well, you get something from that, sure.

You'll estimate how much.

You've got your import tax, so you raise the budget.

And you try to get some more from the budget.

It's got to balance out.

It's awfully hard, and we certainly can push back, as you said, we can push back the... Push back the federal pay raises.

We have a technical problem on that, that I just got into, I hadn't realized.

That you must announce your intentions by September 1st, according to the law, as to the next year.

Now,

What 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?

I 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.

Uh...

There's another thing that has to do with psychology in this country.

You 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.,

Now, they like to lunch each other, and think, God, somebody's got to lose all the looners.

Wonder what the president's going to do about anything, you know what I mean?

You know, the self-reliance spirit.

Now, we should not, frankly, cater to or pander to that thing.

This is a good one.

It would be better to let the people say, now, by God, you do what's right.

But at this point...

I 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.

It's because of those things, George.

You can be sure that the media are going to blow up this economic thing till hell or heaven.

And we will be forced into it.

You see my point?

What we're really doing here is to beat them to it.

The Congress, as sure as we sit here, will have some errors and will pass them.

I don't want that.

By the way, it strikes me it's also the way we come up with this.

We'll be a sweat.

Now 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.

Understand?

Well, we can point to a lot of impounding of funds.

That's right.

The trouble is with that, is that we have gotten in so much dutch with what we've already done.

I thought that you could talk about where you're going to cut the first wall.

Family assistance, whatever that saves, does not much.

It's a 72 budget that doesn't much.

We have to protect it.

Revenue 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.

That's a billion and some.

All right, let's do that.

Well, that helps.

That's a good look.

Right.

And then, the pay rates thing, we saved that.

Then I had a big difference cut in terms of personnel and revenue.

Those are ways you can do it.

I just don't see many other ways.

But you understand, it's the appearance of cut that's going to count here.

Because you also have to see, Congress has got to get busy passing things.

Well, we'll have the two big structural changes in the tax system here, the investment tax credit and the auto excise.

Yeah, which costs a total of?

I'm not sure yet, but my guess is it's on the order of $8 billion.

Now, the personal income, well, those things are just moving ahead, things that are already scheduled, so you're going to lose that money anyway.

But 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.

Or unless by really hitting the budget very hard, we can get it down.

Now, if we just had a real gloves-off operation on the budget, we could take that budget way down, but it would be rough.

It would be rough.

And it would have to hit into defense.

I have Mosul Moss waiting for me upstairs now.

He's going to lobby me about the Navy budget.

In my judgment, the Air Force budget's the one that's getting the Army managed better.

The Navy is...

They're pretty well managed.

We have something on the space business that CAP has been working on.

We might show you one of these days.

which in effect has identified some patterns of base closures where we close two sizable bases in Massachusetts.

We do some of those functions on some bases in California.

So we up some and down others and change the regional pattern of the bases.

Incidentally, one space that I think deserves a little ground exploring at this point

Apparently they were bitching about the fact that we didn't move two things down there.

Their unemployment is not very high, but would you take a little more criticism?

Just so that we do something that appears to be...

Okay, we did put... No, I guess it was... We didn't move it from Ohio.

There was a dispute between Ohio and Florida about some testing center.

The other thing I was going to ask you... On the...

On the 20%, as I understand it now, under the law, we can move that around various places.

We'll put most of it in California.

But 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.

I said, hell no, we're not.

I said, I understand we're putting it in California.

He's getting some.

I think New Jersey had some.