Nixon & Shultz on Economic Policy and Wage-Price Freeze

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Well, I have a few.

We have an assistant director whom you know in the OMB named Dick Macon, who has been, yes, he wants to go over, he's been a fan of the welfare reform right from the beginning.

Sure.

And actually, he has never gotten along with Cap.

Cap has no confidence in him.

He's a good strike fellow, he's a good philosopher, but he isn't

is good on buttoning things down and drives Cap up the wall, so we're not upset about it.

The fellow that we host Cap in, I think, would be a good replacement, is a guy who's been in the OMB named Paul O'Neill.

He's about 36 years old.

He's a Californian.

And he's bright as he can be.

knowledgeable about these programs.

He has been extremely good at working on all of these programs that have been developed, and we had his registration checked out through Malik and his group, and he's a Republican.

So, isn't that nice?

And we would like to go ahead with him.

I think he's first class.

Well, we try to get, we know it's important to get people who are good in those jobs, and we think that if he does that, I imagine he will do it, but we haven't really put that to him at all.

I wanted to check that out.

Yes, sir.

He's now the director of, he's a GS-18, and he's the division director, who we have promoted because he seemed to be so good and just outstanding as a young fellow, and he stands out.

The lawyer.

He's doing a fine job.

And from all reports, I've checked with defense and others.

No, he's right fine where he is.

He's doing an important job.

But I just thought that... No, he's in charge of our...

He was Schlesinger's replacement for defense and international intelligence and all that.

And remember, he was up there.

He's a lawyer.

He was just marvelous up there at Camp David and checking through all these legal questions.

And is very sharp on all the international things.

Incidentally, he speaks French and German fluently.

So then he sojourned to Europe.

He'd be a handy fellow to have around just from that standpoint.

The second thing I just checked with you

The leftover from that executive pay bill, uh, that had one time that Dr. Burns said, cut all that out.

The leftover has the addition of a pool, a flexible pool of level fours and fives per year.

As the treasury, uh, moves in it and has one

a relatively minor thing in the Justice Department.

Now that actually, that is all set to go.

And we're seeking, we're working with Treasury of whether they want to go as part of the package or just go independently to Ways and Means, which I think John sort of did, which is all right with us.

I think it's a question whether we should go forward with at least the pool of level fours and fives

We're not really pressed for those positions.

Don't do it.

I think it would be unfortunate right now.

Don't do it.

They'll say the government is expanding the time.

In fact, we ought to get into one critical event.

We've got all this tremendous work that's over here.

It's just a force which we're always fighting against.

Don't do it now.

I've got to get crazy with my handle there separately.

It may work out, but I wouldn't do anything myself right now.

Well, why don't we drop the justice one is a minor thing.

Drop the White House ones.

We'll drop all and we'll drop these White House ones.

And suppose I tell John that let him feel that for himself.

Let him just feel what he thinks the traffic will bear and use his political judgment.

It's just very serious.

They have additional responsibilities or something like that.

Correct.

Additional responsibilities.

On the West Coast docks, we go up and down on that.

They have settled one big issue.

They came up to another in almost yesterday.

But we have grave doubts about whether Bridges really has gotten that local, gotten his situation under control.

And we had a disappointment yesterday in that a special agreement had been made with the union

for a ship to go from Hawaii to Vancouver and back and forth and back and forth with essential cargo.

And the San Francisco local got the Vancouver local to refuse to unload that, even though they're not on strike.

And that is a measure of the difficulties bridges are having.

So we're sort of, not quite, but almost at the end of our rope on this thing.

We do have reports by Jim Hudson that the spirit in the locals is more, let's get it settled.

Of course, there is the business who haven't taken all this, and you don't want to put them back and then have to go through it again.

But we announced, I remember you and I talked about this, and you said to go ahead whenever it seemed appropriate.

We have announced today here that council is going out at your request

and was going to be personally involved in the negotiations.

And we feel that he can get his sense of it tomorrow or the next day.

But if it seems to be the way we now look at it, we would think the Taft-Hartley probably on Monday or Sunday.

Why is it that you gave a reason why the management opposed the Taft?

Well, the management is opposed

or is hesitant for three reasons.

The first is that their experience is when people go back to work under these circumstances, they get full pay, but they don't work very hard.

So they have tremendous costs, and they don't like that.

Second reason is that they feel that they are making headway.

And I would say if it were the normal bargaining situation, you wouldn't touch it because

There is motion.

They are gradually moving through these issues.

And so it isn't as though it's just a stagnant situation.

And from their own little point of view, they're getting someplace now.

A third reason is that they have taken this economic warfare for almost two and a half months.

And that makes it dead in people.

And it brings them to the point where they might make a settlement.

And then they go back to work and they have to sort of get conditioned all over again.

And so they're hesitant on that score.

And there are some other things there.

This container issue has been very difficult to get settled and they've got it settled and this would upset it some more.

So that's why they're

We've served on it, but I don't know what we can do if the union is out of control and it just can't settle.

We've gone an awful long time on this, and it's very disruptive.

More disruptive, I have the impression, to the farmers who are looking for these outlets than to anybody else.

So that's where that is, and we'll have our ducks in a row.

We'll get counts of zones.

interpretation.

The union is not anxious to have him come in, but we feel as though he should be put in anyway.

Then there will be the visibility of your concern about it and attention to it, and we feel as though it would be a mistake to just sort of wang in with Taft-Hartley, say, tomorrow, without having the visible mediation effort out there first.

Anyway, one way or another, we feel as though by the time you go out there next weekend or Saturday, either through the tap party or some other way, they should be back to work.

And so we have that in the back of our minds, too.

So that's where that is.

We have a real problem shaping up, and I hesitate to come to you with a problem and not a problem.

I'm not a solution, but in this six-month pay pause for federal employees, I spent the last hour and a half with HR Groves' Republicans, and I think with the exception of one, Larry Hogan, who is on the resolution.

We'll probably get them.

But there is a report going around that you are supporting the October 1 date for the military increase in the volunteer armed force bill to increase right during the freeze bill.

And I said, well, I didn't know whether that was so or not.

As far as I knew, it was not so.

And there was no such signal.

And I knew what we were...

play was to try to just ignore that issue.

And until this vote took place in the Senate, as you know, the cost of living council, John, and everybody is unanimous that we shouldn't allow that to go in during the freeze period.

Absolutely not, John.

I mean, I don't know what that means.

Well, Mel has written, and of course everybody's very tender about this,

No, he doesn't want the bill to go back to committee.

Now, there is a justice opinion that says the executive order on the wage price freeze would be overriding and we could just not pay it.

Dan, all the lawyers that I've talked to think that, as Ken puts it, the idea of a previous executive order overriding a subsequent statute

is a very tough law.

So we question that.

Part McGregor has made the suggestion that if it were to be passed, then we could send a request to Congress to put through a thing saying it goes into effect November 14th or something like that.

But I feel as though we're going to get smoked out on this, and we'll have to have a position.

at some stage of the game, probably it isn't wise to take one quite this soon, but that is an issue.

Another thing that came up there in connection with the vote, and I think it shows the wisdom of saying directly that you will announce a month ahead of time what the thing will be, is the uncertainty about what kind of a program will follow the freeze.

And I would guess my sense out of meeting with the congressmen and listening to their troubles over this vote is that as we meet with these different groups, and particularly after you meet with the congressional group on Friday, that a sort of a strong, there's going to be an effective program, and making that visible to the press and trying to highlight that point is probably an important thing to do.

Would you have sort of, let's say, tomorrow, or just off the top of your head, what do you think?

I don't want to say to the press on that myself.

I may have a chance to say it before Friday.

Okay.

In other words, the very strongest possible language, the program lending, which will follow through on wages, prices, rents, or whatever you want to say.

Yeah.

We've made some responses to be candid.

But we have to load with those, and particularly this... Well, I think about that.

That's something you see if I do something with the press on Thursday, because I have to make sure I don't see one exemption or anything on Thursday, and I'll take some questions on this at the same time.

But I can load it in very hard there.

This is a follow-up on Friday when I meet with the Congress on a recent advice.

Right.

And I think that would be a good thing if, you know, we just got over it and just tried to get it through.

Yeah, but we'll try to get it to be the lead, that's what I think.

If we get the language hard enough, colorful enough, I don't know, maybe it will make it the lead.

There is going to be a ball on firm.

God knows what it's going to be.

Jesus.

Have you listened to all these people?

We had, I don't know whether Bob told you, we had the food at home component of the CPI for next month.

And this, of course, is the reason we have assumed that this is all information prior to the freeze, but that was a zero increase, both seasonally adjusted and non-adjusted, which is pretty good news for us.

Also, I just heard that the second quarter GNP numbers have been revised up another $2 billion.

You remember you said they were?

Although the third quarter, their flash estimate is... Oh, it's the second quarter, yeah.

No, second quarter.

Second quarter.

This is the second time they've been revised up.

They've been revised up to 22.2.

Well, your manager said 23 would be a big number, didn't you?

Their original estimate was 19.3 or something like that.

So they're going up there.

Third quarter, FLASH estimate is 15 point something.

And that would be FLACSAE.

a low GNP deflator, they're estimating a 3.5%.

And then the price is more real growth.

More real growth.

I don't have any detail on it, but that's there.

That will not...

No, this is just this sort of flash thing they do that they don't publish at all.

I'm not sure whether they'll announce this or not.

They'll announce it, but they may wait until they announce the third quarter, which will be a month from now.

They always give this early kind of idea to go up to within the government.

And then it leaks out.

It is up to them.

That they have given this revision, you know.

But the third quarter was a little weak.

And we could see that July was a little weak.

I think August is coming in very strong.

And September has just got to be a hell of a good month.

I don't see how it can miss, really.

I think that the freeze and the import surcharge and all those things are helping us.

And the psychology has been very well affected by all this.

In working with these congressmen today, we go through all the reasons.

And then I get through, and the biggest reason is, here's this program.

It has tremendous support.

The president's all out for it.

You've got to support something the American people are supporting, and you've got to support the president.

And they sort of say, well, I'll put this on the basis of just supporting the president.

And I say, I don't see why not.

This is the president's program, and he is all for it, and he expects you to support him.

And they also wiggle around.

But they'll come along, except for this one fellow.

Well, he's sort of the mic.

I suppose Peter, uh, the, uh, you know, my, the first we stopped, we got married.

What if Peter should be an effective follow-up program?

Right.

Now, that, I don't guess about the school advantage now.

It's a way out, but I'm really confused with this.

I think this is unworkable.

And I think that's it, actually.

That all that's going to happen is, and I trust them right about this, is that by the reason of doing these things, first of all, we will have accomplished something in the international field that needed to be done.

And that's good.

But I think by the reason of doing these things, that when it does work, we're going to have a lot of credit for it.

But I have a feeling George B. Coffey is a hell of a lot better than people think.

I know that lasts on a point of figure glory, 6.1 and so forth, but we just started on a point for a while.

But somewhere, I'm feeling the thing is working.

Well, you know, I think it is.

As I've said many times, I think our problem will be inflation next year.

I hope these numbers are coming in very well.

They're pretty crazy numbers so far.

on inflation and I think that you'll get

I think the freeze is working.

Also the freeze has had a good psychological effect in getting a hell of a lot of retailers to do what they should have been doing long before to compete a little.

That's the technology of people just raising their prices.

Just raise prices without thinking about it.

That's right.

And not competing.

And you know, prices are...

Prices are just, are raised, and the energy is raised because on the interest rates, is there anything we can do with our money?

First, I have no net confidence in bankers as a group.

I sometimes express views about business, and bankers are worse.

They are the most unimaginative, dull, selfish people in the world.

Really, as a group, the rest of the family is the same.

He was the, he was the father.

In fact, I thought the whole business group was good, but I thought, recently, you could tell why he's in the job.

He's in the biggest bank in the world.

But, Maury did a good job.

And Maury had that beauty of the earth.

That was a good job.

And Santa had a heart-picking good job today, didn't he?

Oh, they didn't have much to say.

They didn't have much to say.

But anyway, they loved Santa, didn't they?

Yes, they did.

And I met Gold.

Anyway, the situation on banks, is that there's anything we can do, symbolic, on interest rates that wouldn't hurt how to do it, I must say.

Do you think there's something?

There are things that we can do, let me put it this way, that's such as well-understand.

All the politics, all the politics, believe me,

is to give the banks a kick in the butt.

All of our banks and other institutions.

Because there is one that is, I mean, there is absolutely, don't be concerned about the fact that I've got friends that are bankers and insurance managers and the rest.

They are wrong, totally wrong.

Just like, so, there are things that I can do, and there's, I don't think you'll get consumer credit.

if the Fed could do something where it appeared we were doing just something which we could announce.

Again, it isn't, it's a great start.

I mean, it gets down to eight-tenths of a pint or whatever it was.

But anyway, one thing that would be nice, if we could just announce something.

If we could persuade some of the big banks to lower their prime rate.

God, yes.

And it might be, if that were something that looked like it was in the cards,

and then they can be brought down and kind of... Yeah, I'll do it with some public flair to it.

Mike, Mike, can you...

I, I, all my person and the rest of them get together and we ask them and say, look, and nothing you can do about it, frankly, is to scare the hell out of them and say, look, industry takes many control over the Congress, you know, they're thinking about it up there, industry takes the profits, so why don't you come down, let the president talk to you, let him get a little cricket for it, and we'll require him to get a little...

Wouldn't that be a hell of a thing?

Will you look into that?

I will.

I'll talk to John about it.

Yeah.

John, it's bad.

Okay.

You got that?

I think that the first thing, too, is critical.

It's an international monetary business, isn't it?

That's a big, long-term deal, and that deserves our most careful thought.

We have...

Nixon & Shultz on Economic Policy and Wage-Price Freeze

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Nixon Library Finding Aid

Also recorded on September 14, 1971

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