Nixon, Shultz & Ford on Phase IV and Economic Stabilization Program

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There'll be more at the end of the 60 days.

We didn't make any point.

Now, Mr. General, I don't like to be considered as imminent as the next day or so, but it will come before the end of the 68th period.

We'll move there, as I told you.

We plan to move very soon, but I just don't want to do it all now.

Yeah, probably.

I guess what about mandatory control?

That's great.

indicating that any bills that he, that exceeded, that jeopardized the, that Ronald's budget and so forth would be vetoed.

And the members said they could sustain the vetoes.

But I congratulate the members of the House and Senate for their very responsible action in voting against excessive expansion, voting to sustain vetoes up to this point.

I think a budget ought to be balanced, too, in another sense.

It should be balanced between domestic and defense needs.

Because it's John Palafox who said they can balance the budget.

I think they all heard the thing.

say, Mr. President, what George said, that it looks like the ceiling of $250 billion will be lived within in fiscal 73?

We've said that publicly.

I think it's worth saying again.

At the same time, we can't act as though we've given you any figures.

You can say that the target of living within $250 billion will be met.

that we should do in fiscal 74 on spending as well as we did

I don't even know what to make

version without the escalator.

And, uh, uh, it's not a sanction.

No, it is out of that run directly contrary to what we're trying to do with this whole thing.

You've got the farm side and then you have the food stamp side.

It's the same bill.

If we can take out the escalator clause, if we can prevent

these more expensive versions of food stamps being added.

It ought to be closely looked at as something that could be signed, but if they go hog wild in conference, or if they do that in public, I don't give a food stamp no amount of demagoguery.

I'll never sign it.

It's used for marijuana and about 18 other things.

It's not been interviewed.

We've quite Googled it.

Every time someone, a little boy,

that there will be a follow-on program

of this and get those people

I have not overlooked both of you, I have.

On this great pay raise, I...

members who were there, Neil, Aaron, and others, and made a very strong pitch for the pay raise for himself.

You know, he ought to have one.

Now, that is just an interesting little element to throw into the pot.

I think I know where he's jumped in that case now.

My own feeling is that we've got to do something where people like the Speaker, the Vice President, are concerned.

The Speaker was proposing, as I get it, but as I get it, the Speaker was proposing they'd do something about the Speaker and the Vice President right away, but nothing ever came of that.

And you've been able to run that down with less.

What they are proposing is fundamental legislation that trains the President, the Vice President, and the Speaker, and the leaders,

In the total package.

Oh, that I knew.

No, he wasn't speaking only of the Vice President and himself.

Because under the law that was passed in 1968, the Vice President and the Speaker were left out of the overall...

they're better off getting a pay raise this year than having to vote on one next year.

It seems to me, just pollutingly, I can't see why they all want to push it into next year.

Ted O'Neill is promoting a pay increase.

The enthusiasm Carl Albert shows will come when the Senate passes a bill where they get it out of the House.

Now, he controls the Rules Committee today, and if it gets to the Rules Committee, then he's for it.

So far, it hasn't gotten that far.

We had no count on the Fong-McGee bill, which would set up a two-year commission and include all the...

breaking the comment and shutting it down.

The business of my horse, Satan, and so forth is in Arthur Barron's ploy, and I'm here.

He's a wonderful guy, and he's a great politician in terms of getting things through and so forth.

He'll rumble up there.

He'll give Chuck Percy, the Business Council, and Wilbur Mills, and the Wall Street Journal, and the Scripture Science Monitor, and they have a patch saying it's all good.

dollar, unfortunately, in the last couple of weeks.

The export controls, which have helped us a lot domestically and hurt us there.

There was a meeting last weekend of central bankers in Baal, and they were in touch with their governments pretty much.

I think that has distinct from, say, the middle of last week, when, on the whole, people were not in favor of a cooperative move in interventions.

The sentiment has changed now.

There is a lot of sentiment for intervention.

The dollar moved up sharply yesterday on the strength of that, and again this morning, although I got a note when we were sitting in there that it began to deteriorate.

Don't watch it every day.

Our feeling is that we have this commitment to intervene in the interests of orderly exchange markets.

Right.

Uh, our feeling is that we probably ought to be doing some intervening now.

Although I hate to do it.

Arthur Burns is very strong for it.

He's just wild to intervene.

He's always poker.

On the whole, I think it's a good idea right now.

I think we're positioned a little different from the typical thing.

That is, we wouldn't be intervening to maintain some race against

rather to keep markets in a reasonably orderly state.

Now apparently in the last hour or so they have been deteriorating, and our feeling is that if we moved it a little bit, probably we could stop that.

On the other hand, we have some major things coming up.

We have a decision on export controls on corn, which probably will...

be wanting to make this afternoon or tomorrow when we will get the crop reports at 3.30.

And then we have your decision on phase four and on the fiscal business and so forth.

Those decisions, depending upon how credible they really appear, will have a major impact on exchange markets.

So we've

Well, I think the exchange market, finance people on the whole, particularly the international ones, the Europeans, have had so much experience with wage and price controls themselves that when you announce a strong wage and price thing, like the freeze or something, they don't give that much credit because they know that their own experience is adverse with those efforts.

They look to fiscal policy, particularly, and monetary policy.

And I think myself that a very strong budget statement would be good for the economy and good for the exchange markets.

And the memorandum, I'll go back and get it over here before the meeting.

But I think we have to figure out how to do that.

The budget side of it is very tough.

But it can be a good issue.

It can be a good issue politically, I think.

Bryce Harlow perhaps expresses himself the best on this in the meeting this afternoon.

At some point you might let Bryce sort of...

The way Bryce talks, he doesn't talk about all the technicalities.

He talks about how you would put it to the country.

And you get a little feeling for it.

that side of it.

And I think that there might be something going there.

But I do think we probably ought to be doing some modest intervening this morning.

And we should be moving on these other matters as fast as you feel comfortable in moving, my judgment.

We think we could be ready to go depending upon what you decide.

You go along with the general structure being proposed.

We could be ready to go 30.

And we think that we'll have to get a good feeling among ourselves and with you about whether we've really got something here.

It's awfully important.

and whether it would justify, say, calling a joint session and addressing them on the economy and emphasizing this or doing something that gives it a little special influence.

A joint session won't do.

There isn't enough there, I can tell from this room here.

Well...

I didn't want to do any intervening in exchange markets without having a chance to mention it to you because this has been

Now, these are the Republicans.

Part of the Democrats.

So we just have to move on and let it go all the rest of the way.

Well, Mr. Brice is a pretty good pick, I think, on how to put this, wherever it's put, whether it's put there or in a talkie or in a statement or however.

pretty well what it is.

It's a little too complicated to support and so on.

Well, basically what we have is a tough phase four with some differential timing in order to, as John Dunlop, I think, puts it very well, to manage the bulge, to spread it out a little bit.

So that's part of it.

The second part of it is on the fiscal side, and there

I think you just have to, as you have before, look at some of these cuts and see whether you think you can do them.

And if we can't do them, and we adhere to this fiscal discipline notion somewhere, we have to find the money.

And I think it means a tax increase.

Or a proposing one.

Or maybe there's a formulation like the one this Joint Committee worked up of saying, all right, have a spending...

And if the spending ceiling is breached, that automatically triggers a tax increase so that there is a coverage there.

But at any rate, that's part of the latter.

Well, it may be that in our discussion that might seem to be the way.

Then we have to say, George...

it has exceeded that tax increase will be.

What kind?

Let it gas.

Not much.

You can talk about more than that.

Well, I think that the budget is out of balance in a real sense.

I'm just trying to assess all the factors and everything.

probably on the order of six to seven billion if you don't do anything about it.

And there are things like vetoing AGW and so on that would reduce that, say, in half.

Then it gets real dicey, and yet it's doable, but it's tough.

And you get the defense.

The defense, there's this terrible dilemma where everyone seems to feel...

that there is on the order of $2 to $3 billion in defense that's going to come out.

And yet, if you take it out, then the Congress will double it.

That's right.

But if you don't take it out, then that leaves you squeaking out now.

We can't be talking about the policy.

So we've tried to find some formula, like 85% or something.

And that, of course, would affect defense.

Well, if you'll go back and look at this memo.

Well, the intervention, as you know, I'm sure you'll be willing to try anything.

But if you do it, you do it, Doc.

You don't need to go around it.

Well, I have him positioned so desperate as he is, he's over there straining to leave.

He knows that he is our banker and he's not going to move a muscle until he gets to work.

Good.

You see, I kept saying to him, I've kept this to myself,

because of your recommendation, but I want to say this.

You can see the, you can see it, we all love it, you can see artists.

And working a little speech by Percy.

And so much of it was total, total nonsense.

I was glad Barbara spoke up because

the way the means executive session on the debt ceiling came up for some reason.

Those explained Arthur's program very

There, what you can do, as we discussed briefly once before, is thus and hook right to a delayed cut in personal income tax.

All right, here's the variable investment tax credit version.

Oh, half a billion.

does that, raises a lot of money and does it for me.

It is a distinct type of task so that at least

And with it, why you can take the regressivity out by the way you structure the .

So I think .

But if we could generate enthusiasm and fight around here with that group of Republicans and fight in the way that needs to be to get this budget balanced, get a little surplus, it's possible that something could be done.

Well, there's, uh, I'm not sure they have.

You know, they, uh, do a lot of this.

Well, is it in the way that it needs to be?

No, we, uh, we'll take a look at it.

He's a wonderful guy, and he's a great politician in terms of getting things through and so forth.

He'll rumble up there.

He'll get Chuck Percy from the Business Council and Wilbur Mills and the Wall Street Journal and the Scritch and Science Monitor.

I'm saying it's all good things.

The export controls, which have helped us a lot domestically and hurt us there.

There was a meeting last weekend of central bankers in Baal, and they were in touch with their government pretty much.

I think that has distinct from, say, the middle of last week, when, on the whole, people were not in favor of a cooperative move in interventions.

The sentiment has changed now.

There is a lot of stuff before intervention.

The dollar moved up sharply yesterday on the strength of that.

And again this morning, although I got a note when we were sitting in there that it began to deteriorate.

Don't watch it every day.

Our feeling is that we have this commitment to intervene in the interest of orderly exchange markets.

Right.

Our feeling is that we probably ought to be doing some intervening now, although I hate to do it.

Arthur Burns is very strong for it.

It's just wild to intervene with poker on the whole of things.

It's a good idea right now.

thing.

That is, we wouldn't be intervening to maintain some rate against which speculators can operate, but rather to keep markets in a reasonably orderly state.

Now, apparently in the last hour or so, they have been deteriorating, and our feeling is that if we moved it a little bit, probably we could stop that.

On the other hand, we have some major things coming up

We have a decision on export controls on corn, which probably we'll be wanting to make this afternoon or tomorrow when we will get the crop reports at 3.30.

And then we have your decision on phase four and on the fiscal business and so forth.

Those decisions, depending upon how credible they really appear,

will have a major impact on exchange markets you know you're you would argue that you would argue that a strong base for well i believe i believe you've got a little weight yeah well i think the um the exchange market finance people on the whole uh particularly the international ones the europeans have had so much experience with ways in price

when you announce a strong wage and price thing like the freeze or something they don't give that much credit because they know that their own experience is adverse with those efforts they look to fiscal policy particularly and monetary policy and i think myself that a very strong budget statement would be good for the economy and good for the exchange markets

And the memorandum, I'll go back and get it over to you before our meeting.

But I think we have to figure out how to do that.

The budget side of it is very tough.

But it can be a good issue.

It can be a good issue politically, I think.

Bryce Harlow perhaps expresses

himself the best on this and at the meeting this afternoon at some point you might let Bryce sort of he, the way Bryce talks he doesn't talk about all the technicalities he talks about how you would put it to the country and you get a little feeling for that side of it and I think that there might be something going there but I do think we we probably ought to be doing some modest intervening this morning and

We should be moving on these other matters as fast as you feel comfortable in moving them, my judgment.

Oh, yeah, I understand.

I just didn't want to...

The board has no problem, but I didn't want Scott running out and saying the decision is eminent because, you know, it isn't like the free, it's different than the one you say tomorrow or something, and everybody's going to be badgering us.

I know we have to move as fast as we can.

We think we could be ready to go, depending upon what you decide.

You go along with the general structure being proposed.

Ready to go.

We could be ready to go 30.

And we think that, oh, we'll have to get a good feeling among ourselves and with you about whether we've really got something here.

It's awfully important.

And whether it would justify...

say, calling a joint session and addressing them on the economy and emphasizing this or doing something that gives it a little special influence.

A joint session won't do.

There isn't enough there.

I could talk on this group here.

Well, I didn't want to do any intervening in exchange markets without having a chance to mention it to you.

Because this has been a central issue.

You can't move on a joint session, Jerry, on a question that is so... brought total disagreement among these people.

Now, these are the Republicans.

wherever it's put, whether it's put there, or in a talkie, or in a statement, or however.

Well, I'm in even favor of joint session tonight.

It's not a viable alternative, in my opinion.

It's not what we have to offer, but I know it consents pretty well what it is.

differential timing in order to as John Dunlop I think puts it very well to manage the bulge to spread it out a little bit so that's part of it the second part of it is on the fiscal side and there I think you just have to as you have before look at some of these cuts and see whether you think you can do them and if we can't do them and we

adhere to this fiscal discipline notion somewhere we have to find the money.

And I think it means a tax increase or a proposing one.

Or maybe there's a formulation like the one this joint committee worked up of saying, all right, have a spending ceiling.

And if the spending ceiling is breached, that automatically triggers a tax increase so that there is a coverage there.

But at any rate, that's part of the latter.

And that might seem to be the way.

Then we have to say, George, that the tax increase, with your spending ceiling, whatever it is, it has exceeded the tax increase limit.

I think that the budget is out of balance in a real sense, that is, trying to assess all the factors and everything, probably on the order of $6 to $7 billion if you don't do anything about it.

And there are things like vetoing HEW and so on that would reduce that, say, in half.

Then it gets real dicey, and yet it's doable.

The defense, there's this terrible dilemma where everyone seems to feel that there's on the order of $2 to $3 billion in defense that's going to come out.

And yet if you take it out, then the Congress will double it.

But if you don't take it out, then that leaves you squeaking out the house.

We're just going around and around.

or something, and that of course would affect defense.

Well, I'll go back and get this metal, but it's not... Well, the intervention, as you know, I share your view on it, but I think...

But if you do it, you do it now.

You don't need to go around and whistle with Parker and all that.

I have him positioned so desperate as he is, he's over there straining to leave.

He knows that he is our banker and he's not going to move a muscle until he gets to work.

Good.

You see, I've kept saying to him, I've kept it

made because of your recommendation.

But I want to say this.

You can see that we all love her.

You can see Arthur's hand working a little speech by Percy.

And so much of it was total, total nonsense.

I was glad Barbara spoke up because

and the Ways and Means Executive Session on the debt ceiling that came up for some reason.

Those explained Arthur's program very clearly.

But there, what you can do, as we discussed briefly once before, is not snap and hook right to a delayed cut in personal income taxes.

All right, here's a variable of that tax measure.

It does that.

It raises a lot of money, and it does it immediately.

It is a distinct type of tax, so that at least one can separate it out from the income taxes and where all the tax report discussion is.

And whether one realizes that, I don't know, but at least you have quite a chance to say, this is something that's a little different.

It has an energy orientation.

We get this old fiscal model.

beginning with it, why you can take the reversibility out by the way you structure the person .

So I think they're .

But if we could generate enthusiasm and fight around here with that group of Republicans and fight in the way the Means Committee to get this budget balanced, get a little surplus, it's possible that something could be done.

But Mel probably said much better since about tonight.

Well, there's, uh, I'm not sure they have.

You know, they, uh, do a lot of this.

Well, is it in the way that it needs to be?

No, we, uh, we'll take a look at it.

Nixon, Shultz & Ford on Phase IV and Economic Stabilization Program

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Nixon Library Finding Aid

Also recorded on July 10, 1973

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