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White House - GOP Leadership Meetings
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White House - GOP Leadership Meetings
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George H. W. Bush Papers
Republican National Committee Files
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Originally Processed With FOIA(s):
FOIA Number:
S
S
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection: Donated Historical Materials
Collection/Office of Origin: Bush, George H.W., Collection
Series:
Personal Papers
Subseries:
Republican National Committee
OA/ID Number:
25864
Folder ID Number:
25864-003
Folder Title:
White House - GOP Leadership Meetings
Stack:
Row:
Section:
Shelf:
Position:
G
5
1
5
5
PR
From the desk of
GEORGE BUSH
personal
I
JK
File = Feb 6
Leadership meeting
with RN
Need file -
R leadership meet
2. Caburt met
Photocopy - Preservation
THE WHITE HOUSE
UNTHINKABLE ALTERNATIC
1) 2) HAT what
hand pow's
news to
4 build a communit Foro policy
cait on a broken
Issue us 90 to and
it small vs. "impose will" on SUN.
country - protect
that mat NoHe understood -
THE WHITE HOUSE
Lineoln- " serve we prison
mumber of days you
spent out A county"
Pres. put No. = about
of there other"
RN- hopes that could here
pulled of off before
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THE WHITE HOUSE
KEY
TAXES - held
PRICES- down
JOBS- up
Toget it budget" "responsible
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***
THE WHITE HOUSE
normal 6% - we now hold 3.57
IMPORNOMENT
Griffin react yesday
J.
'Nother page on this
3.3% withholding
59 7.5-8.790
6.7
LBJ
marge - 6% normal 72 our
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*
THE WHITE Research HOUSE
Limola
1
Day
4 yr record = response
to social needs.
increase = and t cludy. education
A
hunger-
blind
cancer
Dramative
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THE WHITE HOUSE
Reform
Hit
NO longer diduct , at
on montgage !!
"No " Easy way out"
some good in there
1
programs.
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THE WHITE HOUSE
Gritting putition record yeat.
Exec. Privelege
we've done it = 3 times
in 4 years.
JFK- - 6 times in
less there 3 years
RN - 3 times in 4 yrs.
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THE WHITE HOUSE
*
Education
Thru spec. nev.
shaing offset
categ. - grants for
colueation
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THE WHITE HOUSE
Educ. get it
1. to students- -
less to elitist instit.
2 prof.educators wont
it to institution - are
want it to studuits
to people
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THE WHITE HOUSE
defense
Bigadough 5 to
Big schools -
subsidere attachs on
defense.
:
sabotage Faculty quents mukus - ROTC
throm out-
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THE WHITE HOUSE
Ash briefing
p.50 budget
shows cuto.
To HIGHLIGHT MORE
use GRAPHS
BY THIS
ADMIN. CONCERN FOOD STAMPS NEEDS 403- 1-500%
Elday- - 100% - up.
HUMAN
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THE WHITE HOUSE
RN-
Homing - need
real in looh"
)
old not working
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THE WHITE HOUSE
PEACE
Pres. Met unth
Col. Nolte family -
5 children
82 old father -
talk yr. like heartland of U.S.
ai) father essay did on why - 17yr. urs old
6)
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THE WHITE HOUSE
1. pear inth dishonon
2. loze emedibility and
trust -
3. pues. disus amount
we ins vally right --
we cart have it - what
helpens to Nolte -
Lincoln wented to give
amenting - to south -
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THE WHITE HOUSE
stroy issue-
new peace structure of pease
PRC
user.
problem Eun ME.
SE Aria -not
blow again -
550,000 Anneus 4 years dp
now its our
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THE WHITE HOUSE
Budget
RN
4 know it's difficult
2 Not know thing
3. No ta x pledge
to be kept.
% economy real gassed
If will have
razon-edge up balance
Photocopy - Preservation
THE WHITE HOUSE
5. Reform argument
6. If confiscated
all money from
over 50,000
Deplition etc
one
7. page Treasur Form on
Photocopy - Preservation
THE WHITE HOUSE
WASHINGTON
Older Americans Comprehensive Service
Amendments
Research on Aging Act
Labor, HEW, and Related Agencies
Appropriations Act
Public Works and EDA Act Amendments
Amendments to Mining and Mineral Policy Act
Airport Development Acceleration Act
Floor Control Act
Upgrading of Deputy U. S. Marshals
National Cemetaries Act
Veterans Health Care Expansion Act
Rehabilitation Act
Total 7 bill.
over 3 years.
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FOR IMMEDIATE RELEASE
OCTOBER 30, 1972
Office of the White House Press Secretary
THE WHITE HOUSE
MEMORANDUM OF DISAPPROVAL
I
have
announced
today
the
signing
of
H.R.
bill
which
represents
tremendous forward step in improving the income position and health
services for older Americans. Two other bills concerning the elderly have
also come to me for signature the Older Americans Comprehensive
Service Amendments of 1972 (H.R. 15657) and the Research on Aging Act
of 1972 (H.R. 14424). Although I support some of the goals of these
two bills, careful review has persuaded me that neither bill provides the
best means of achieving these goals. Both authorize unbudgeted and
excessive expenditures and would also require duplications or fragmentations
of effort which would actually impair our efforts to serve older Americans
more effectively. I have decided therefore to withhold my approval from
these two pieces of legislation.
Older Americans Comprehensive Service Amendments of 1972 (H.R. 15657)
Last March, I submitted to the Congress a plan for strengthening and
expanding service delivery programs under the Older Americans Act. This
program would begin the development of more comprehensive and better
coordinated systems for delivering services at the local level. In addition,
I submitted a proposal to broaden the highly successful Foster Grandparents
objectives. Program. The Administration will continue its vigorous pursuit of both these
However, the Congress added to the bill containing these provisions a range of
narrow, categorical service programs which would seriously interfere with
our effort to develop coordinated services for older persons. This is
particularly the case with two categorical manpower programs which were
added on the floor of the Senate and were considered without regard to
manpower programs already serving older persons. Furthermore, this bill
would authorize new funding of more than $2 billion between now and fiscal
year 1975 far beyond what can be used effectively and responsibly.
I cannot responsibly approve H.R. 15657.
Research on Aging Act of 1972 (H.R. 14424)
In my Special Message to the Congress on Older Americans last March, I
also emphasized the need to develop a comprehensive, coordinated program
of aging research one which includes disciplines ranging from biomedical
research to transportation systems analysis, from psychology and sociology
to management science and economics. The Secretary of Health, Education
and Welfare has since appointed a new Technical Advisory Committee for
Aging Research to develop a plan for bringing together all the resources
available to the Federal Government in the aging research field.
H.R. 14424, however, would set up an entirely separate aging research
institute that would duplicate these activities. This bill would create additional
administrative costs without enhancing the conduct of biomedical research for
the aging. In fact, it could even fragment existing research efforts. This bill
also contains a new grant program for mental health facilities for the aging
which duplicates the more general and flexible authorities contained in the
Community Mental Health Centers Act.
(MORE)
(OVER)
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STe,
2
In sum, I feel that both research and mental health programs for the aging
should be carried out in the broader context of research on life-span
processes and comprehensive mental health treatment programs now
underway.
TO MUCHAROM
H.R. 14424 would not enhance and could inhibit Federal efforts to respond state 1
to the needs of the elderly and I cannot give it my approval. to was soote
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Photocopy - Preservation
FOR IMMEDIATE RELEASE
October 27, 1972
AIIN
Office of the White House Press Secretary
THE WHITE HOUSE
MEMORANDUM OF DISAPPROVAL
I have promised the American people that I will
do everything in my power to avoid the need for a tax
increase nextOyear. Today, I take another important
step the bfulfillment of that sincere pledge.
asidincing
Thisweffort really beganrlast January when I
submittedsthe Federal Budget for fiscal year 1973 to the
Congress. briAs explained at the time, that budget was
carefully prepared so that all justified Federal programs
could be provided without any need for higher taxes
and without causing higher prices.
When it became clear that the Congress was exceeding
the budget in many bills, I proposed that a spending
ceiling of $250 billion be adopted as insurance against
a 1973 tax increase.
The Congress rejected that spending ceiling. Instead,
it approved spending far in excess of my no-new-taxes
budget.
Some of these bills have presented very difficult
decisions about whether to sign or to veto A number of
them have attractive features, or would serve very worth-
while purposes -- and of course I have received strong
advice that to veto them just a few days before the
Presidential election would be politically very damaging.
However, in this memorandum are nine measures which I
cannot sign without breaking my promise to the American
people that I will do all in my power to avoid the neces
sity of tax increase next year.
madeothat promise in good faith, and I believe in
keeping theopromises I make, and in making only those
promises thatel am confident I can keep.
If I were to sign these measures into law, I would,
in effect, be making promises that could not be kept --
since the funds required to finance the promised services
are not available and would not be available without
the higher taxes Inhave promised to resist.
I believe that political leaders must lay the facts
on the line,sito talk straight to the people and to deliver
on the promi they make to the people
coletvorg attlened
Although the choices are not easy I am ithholding
my approval from 9, Congressional spending programs that
would breach thenbudget by $750 million in fiscal year
1973 and by inearly $2 billion in fiscal year 1974
Each of these measures by itself might seem justi-
fiable, or even highly desirable. But the hard fact is
that they cannot be considered by themselves; each has to
be considered in the broader context of the total budget
in terms of showethat total weighs on the taxpayers and
how it affects the struggle to curb rising prices
more
(OVER)
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2
I am withholding my approval from the following bills:
Labor - HEW and Related Agencies Appropriation Act
(H.R. 16654) --
This is the second time I have vetoed inflated appro-
priations this year for the Department of Health, Education
and Welfare. This amounts to a textbook example of the
seeming inability or unwillingness of the Congress to
follow a prudent and responsible spending policy. In my
budget for fiscal year 1973, I requested that the Congress
provide an increase of $2.1 billion over fiscal 1972 funds
for the HEW programs contained in this bill. On top of
that generous increase which would have provided sub-
stantial expansion while recognizing competing priorities
in other program areas -- the Congress (amassed a budget-
breaking additional increase of $1. 8 billion. I vetoed
this in August because it was clearly excessive and
unwarranted.
The bill now before me contains the same face amount
as the measure I previously vetoed. In a partial concession
to that veto, however, H.R. 16654 contains authority for
the over-spending to be held to $535 million a result
that would still amount to pressure for higher taxes
This Administration is second to none in its demon-
strated concern and clear accomplishments in health
education and manpower matters. My budget represented a
balanced and rational approach to the funding of many high
priority domestic programs in a time of tight budget
resources, while continuing this Administration' S) shift of
priorities and funds toward the human resources activities
of the Government.
H.R. 16654 is as unwarranted as the version I vetoed
last August.
Public Works and Economic Development Act Amendments
of 1972 (H.R. 16071) --
This bill would unnecessarily add vast new authori-
zations for Federal programs which have been shown to be
ineffective in creating jobs or stimulating timely economic
development. Public works projects have notoriously long
lead times -- so by the time this spending became fully
effective, the need for such stimulation would be passed
and the stimulation would be inflationary.
The bill would stimulate-increased bureaucracy in
the regional commissions by using them as. al funding rather
than a planning and coordinating level of Government.
It would also provide assistance to workers and firms
affected by Federal environmental actions These pro-
visions would be highly inequitable and almost impossible
to administer. The unemployment benefits provision would
fragment and undermine our basic Federal-State unemploy-
ment insurance system and its costs would be essentially
uncontrollable. The proposed vollution control facilities
loan program has only vague and unspecified objectives
Amendments to the Mining and Mineral Policy Act
(S. 635)
This bill would authorize the Secretary of the Interior
to provide matching categorical grants to establish and
support a mineral research and training institute in each
of the 50 States and Puerto Rico, as well as grants for
related research and demonstration projects. It would
more
Photocopy - Preservation
3
fragment our research effort and destroy its priorities.
Such an inflexible program would preclude us from taking
advantage of the best research talents of the Nation
wherever they may be. The Federal Government's ongoing
programs of similar and related kinds of research, currently
funded at about $40 million; annually have provided as
flexible and efficient means of meeting minerals problems
of the highest national priority and can readily bes adapted
to continue to do SO
Airport Development Acceleration Act (S. 3755)
This bill would increase Federal expenditures and
raise percentage participation in categorical grant programs
with specific and limited purposes. I believe this would
be inconsistent with sound fiscal policy Airport develop-
ment funds have been almost quadrupled since 1970 under
this Administration.
Flood Control Act of 1972 (S. 4018)
This measure would authorize federal projects which
would ultimately cost hundreds of millions of dollars
It contains projects never approved or recommended by
the executive branch. In addition, it contains. a. number
of objectionable features such as authorizing 111-defined
and potentially costly new programs, and limiting my
authority to establish criteria and standards to measure
the feasibility of water resources projects in determining
which ones to recommend for Congressional authorization.
However, a number of projects in this bill are in-my
judgment justified and I will recommend legislation to
authorize their construction early in the next Congress
Upgrading of Deputy U.S. Marshals (H.R. 13895)
This would raise the pay of some 500 deputy marshals
by as much as 38 percent through wholesale across-the
board upgrading. There 1s no justification for this highly
preferential treatment, which discriminates against all
other Government employees who perform work of comparable
difficulty and responsibility and whose, pay is now the
same as that of deputy marshals.
National Cemeteries Act of 1972 (H.R. 12674)
This bill would block the orderly system of surplus
land disposal established by general law and Executive
order, by requiring an unusual Congressional approval
procedure before any VA land holdings larger than 100wacres
could be sold.
These property transfer restrictions would underminenthe
executive branch's Government-wide system of property
management and surplus property disposal which is designed
to assure the best and fullest use of Federal property.
It would impede the Legacy of Parks program and the pro-
cedures for disposing of surplus Federal property under
the Federal Property and Administrative Services Act and
Executive Order 11508.
Also, the bill deals inconsistently with the serious
problem of burial benefits for the Nation's veterans and
war dead. It çommissions a study of this problem at the
same time it preempts the results of such a study by
authorizing new burial benefits which would annually add
$55 million to the Federal budget beginning next year.
The Administrator of Veterans Affairs already is at work
on such a study, which will identify the alternatives for
improving burial and cemetery benefits. In the interim,
it would be unwise to commit additional Federal resources
as proposed by this bill.
more
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astimated att yourself LMH 170123
VeteransoMealthoCare Expansion of 1972
(H.R.
10880)
add
30
siriogno
liberalizing features of this bill- would unneces
sarily addohundredsvof millions of dollars to the- Federal
budget. dePtq wouldwopenyther VA hospital system to non-
veteranse and would expandy/the type of direct medical
services available from VA. By providing direct medical
services to veterans' dependents, the bill runs counter to
this Administration 'so national health;strategy which would
provide national financing mechanisms for health care and
sharply reduce the Federal Governments/s role in the direct
provision of services at
bloow aids metted I 89829750 befinit :
go The bill also purports tonset mandatory minimums on
the number: of patients treated in VA hospitals In testi-
mony on this bill, the Veterans Administration strongly
objected to this provision on the grounds that it was
totally unnecessary and could) result inefficient medical
treatment and wasteful administrative practices. The
tragic result would be lower quality of medical care to
all patientsinh 20 10 absubited 1800
vd Debandration 10 hevologe Isvas
While I strongly support the VA health care system
and will scontinue to encourage 1ts improvement in the
future, Incannotimapprove ambad bill.ne
of bas stusting
Rehabilitation Act of 1972, (H.R.8395)
727
Thispmeasure would seriously eopardize the goals of
the vocational rehabilitation program and is another
example of Congressional iscal irresponsibility. Its
provisions would divert this program from its basic voca-
tional obj ectives Hinto activities that have no vocational
element whatsoever or are essentially medical in character.
Inladdition, would proliferate a host of narrow cate-
goricaleprograms which [dup] icate and overlap existing
authorities and programs : Such provisions serve only to
dilute {the resources of the vocational rehabilitation
programvandoimpairoit continued valuable achievements
in restoringodeserving :American citizens to meaningful
employment.
Lade
(RM
H.R. 8395 calsonwould `create organizational rigidities
in the vocational rehabilitation program which would under-
mineathe ability of the Secretary of HEW to manage the
programveffectively. weThe bil lso would establish numerous
committees scandsindependent ncommissions which are unneces-
sary swould waste the taxpayers' dollars and would compli-
cate and confuse the direction of this program. L Finally
the bill would authorize funding far in excess of the
budgetmrequestland far ibeyond what be made available
and usedjeffectively.tevs shiw-
Douglash et Iriw enformed
1steb99 :- ABI bar $223
edd DUE CHISS To
glow viregory [sycher: to
TOA aecivite? RICHARD NIXON
ent djin afrer IN
has +11 100 pringnal
THE WHITE HOUSE, 17
V.O To
October 1972
TAX
Hnow
at
#
missi.t
assurance.
Photocopy - Preservation
FR
JK
From the desk of
GEORGE BUSH
Fite
Desk
Leaduship
Cab. Meet
March 20
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leaduship
THE WHITE HOUSE March 20
1) Monetary Crisis -
2) progress on experision side
1)
strong growth in employment
cop. 2.5 will fine you ago)
2)
unumployment reduced
@
3
economy expendidg strongly
strong exponsion of economy
generates some kind of
pressures on prices
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THE WHITE HOUSE
2
Rise A Food Prics
Contrablent need is near an
end- Govt action to
increase supplies is
begining to work.
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THE WHITE HOUSE
3
RN
Easy answer- "put on
controls" - might work
for 90 days-
But if famiura hold
back, growth
gets worse
'Fighting it - several ways'
1) control now marketing
- processing -
2)
Photocopy - Preservation
THE WHITE HOUSE
A
import more- have to
look responsibly at +-ant
bring at move - Crecognize
tough politics)
Food critically important This
year -cuz labor settlemts come
up- "habon-urigmt " habou. agreed
on 2.5 2. 5 " -
Phane II - Phase III not
that different
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THE WHITE HOUSE
5
Brean -
RB 10% for 1st 1½ yrs
but lay men in line. PPP
RN n) ifeasy way (Iverse un) we'd
do it stut --
Dunlop-
Our rate of inflation
IS about 1/2 of other
economic- Jap, FR, Italy 6-7%
ones = 3.7%
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THE WHITE HOUSE
6
Dr. Dunlop
Don't believe Phase III weak.
Don't Feel need impoze controls.
A. wage side.
i key negotiations at time
when food increasing
is climate Mugmut- Labor 13
-
better there even. (wert ke a
better way there "strike")
shutdowns let foreigners get
markets here.
Photocopy - Preservation
THE WHITE HOUSE
7
Dunlop (cont.)
"Labon- pres. Magment Advisory Comittee
appointed
is important -
R.B. figure = 10.5 5/0
Marganment pick up "pension"
unron thair say there to ways
increase
Danlop - office says 5.7% 5.7 %
Cozt of Living commit
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THE WHITE HOUSE
8
Teamsters -
Encauraging what Fronth is
dorag -
Frank getting locals in line
50 "One go smauship"
of part anorded
itred to be Chicago locals
tried to upstage National
Photocopy - Preservation
THE WHITE HOUSE
9
Dunlop office
monitor all settlemits -
Dunlop- PRICE Side
1. retail side are under
mandatory controls.
2. concerned into producturity-
wages and make control
in food area
3. stockpiling sales-' nother tool
Photocopy - Preservation
THE WHITE HOUSE
Rents
10
RN: oil - p.r. night thing to do
energy- eeerg thing to do.
voto at gas bill wrong.
RN : Gas prices west rise-
RENTS -
increases high concentrated
CDC. -N.O.)
generally not bad.
Photocopy - Preservation
THE WHITE HOUSE
11
Legislative picture
1) History at Rent controls
admise to Housing
2) Ran Ag. products - Food for Prico PMO.
maching the
to move - but at this
time poor econ. policy
Expand supply is bittro annur
to control -
3) Pre-notification owea
Photocopy - Preservation
THE WHITE HOUSE
12
Lumber
Admin program
D recognize need move supply
move fount output
72 11.8 billion board ft
73 10.2 " V "
due to environmentaleto- -
"
a Fount surve -
lower output - hugher pure
2) internation trade-
some want embargo to Japan
"negobiate "CJapan bot 2.8 bill)
Admin opposes unbaveo -
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THE WHITE HOUSE
13
3
possible re-emportion
centure controlo on
prices
Photocopy - Preservation
THE WHITE HOUSE
14
Ash
Vocat. Rehab -
gong from 400 to 650 will
per yr.
Bill 3 deficiencies
I. irresponsible- generals adds #1 accounts billion budget is
in thus t 2 years tax increase
-
- on inflation
2. some A titles don't
even next objectives
Photocopy - Preservation
THE WHITE HOUSE
save is medical
2a)
n) kidney machines
nothing to do voccrebat
some is therapeuter-
non-vihab - purpo also
3) can't be managed
reserves all authority and
accountability Finco HEW.
coursioner Ens accontability
sets up separate
Photocopy - Preservation
THE WHITE HOUSE
16
Ash cou,
3 (cont.)
many categorial
grents - activities-
lots of countries,
commisions, conscils,
Budget ton '74 has
more for some A there
purposes.
Laugrabe acceptable substitutes
Photocopy - Preservation
Notes from GOP leadership meeting - Friday, Jan. 26, 1973
1. Call Nelson Rockefeller
1. Budget up 18 billion - 268
actual deficit - 12 billion
2. Add to budget ($268) then ask for tax increase
1. Close to full employment
2. Incomers Policy - wage price system leads to more inflation -
people simply relax - Schulz says "irrefutable"
Attorney General - "impountment" - no judicial decisions
Presidents have always impounded
LBJ - Highway trust funds
3. will not be subject for Supreme Court
cause essentially "political"
'48 Truman - on a 70 wing VS. 48 wing air force - congress wanted him
to spend - veto - override - he still impounded
Argument
1. debt limit - must live in it
Pres. can't - tax
2. What's he expected to do.
1. congress controls tax power
congress controls debt ceiling
"What's he expected, to do?"
1970's
60 to 131
a) defense levelled off
how much will $1 billion pay for
64 - 219,000 mm
74 - 100,000 mm
Soviets buying more houseware - we put more on men
Photocopy - Preservation
2
Youth - all volunteer army - draft
Food stamps and food - assisting way way up
1 billion '69
now 4 billion '73
quadruple civil rights program
impound a bad word
refuse to spend
cut
RN cut budgets back to 250
"restraint"
spenders for tax increase
spenders for price increase
Civil Rights activities
assistance
70
74
1-1
3-2
enforcement up
veterans
outlays for crime reduction
grants to states and local governments "up"
RN - peace and prosperity
peace time budget - more human resources than for defense
3
un savings
un wages
un taxes - all at risk
inevitably - more unemployment if reckless fiscal policy
new dividends of for. policy - USSR - Japan - new deal
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March 20, 1973
FOOD PRICES
In the studies which this Committee has made of food
prices since it was established on January 11, 1973, three
facts have come sharply into focus:
First, the problem of rising food prices is serious
and demands a concerted counter-attack by consumers and
government alike. Food prices are rising faster than at
any time in the past two decades.
Second, the Federal Government is now doing every-
thing within its power to bring this problem under control.
The government acted even before inflation hit the super-
market shelf, and it has taken a number of steps since
then.
C
Third, despite the current seriousness of the problem
today, we can reasonably expect an improvement in food
prices within a few months. The heart of our problem
today is a shortage of food supplies to meet rapidly
increasing consumer demands. We cannot end this shortage
overnight. Because of the strong actions taken by the
government and the actions of the free marketplace, how-
ever, food prices should increase at a much slower rate
in the second half of 1973. It is quite possible, in
fact, that the rate of increase by the end of 1973 will
be near zero.
The rising demands for food which we have experienced,
particularly those for red meats, were generated by a
vigorous expansion in consumer incomes during 1972 and
early 1973. The food price problem has resulted, in part,
from the basic health of our economy.
*A Report prepared by the Cost of Living Council Committee
on Food (March 20, 1973).
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One additional element has been an increase in demand
from other countries, such as the Soviet Union, which
have suffered from poor harvests.
Unfortunately, this rising demand at home and abroad
has been accompanied by a falling supply of food on
our farms, particularly in the second half of 1972. The
consequence has been a sharp upsurge in the prices of
raw farm products, an upsurge which has now hit the retail
markets.
During the remainder of 1973, food supplies should
expand significantly, although most of the expansion
will occur in the second half of the year. Once addi-
tional supplies reach the market, farm prices should
move down quickly and we should have a flattening out
in retail prices.
A word of caution about weather is necessary in making
any predictions about food supplies. The outlook pre-
sented here is based on normal weather; unusually favorable
weather would improve the outlook, but unfavorable weather
would worsen it.
In this report, we shall try to explain the basis
for the expectations we have expressed above. We shall
review in particular detail the reasons for the current
acceleration in food prices, the Cost of Living Council's
three-part program to solve the problem, and finally the
basis for our optimistic outlook for food prices and
supplies for the remainder of 1973.
* * *
Committee on Food of the Cost of Living Council
George P. Shultz, (Chairman), Secretary of the Treasury
Herbert Stein, (Vice Chairman), Chairman of the Council
of Economic Advisers
John T. Dunlop, Director of the Cost of Living Council
Earl L. Butz, Secretary of Agriculture
Roy L. Ash, Director of the Office of Management and Budget
Claude S. Brinegar, Secretary of Transportation
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Causes Behind the Problem
Food prices, like the prices of almost everything else
rose sharply in the late 1960's and through early 1970.
Beginning in mid-1970, food prices began increasing at a
much slower pace because of a sharp increase in supplies
that continued through 1971 and the establishment of the
Economic Stabilization Program late that year. Food
supplies in 1972, particularly supplies of meats, fruits
and vegetables, were smaller and consumer demand grew as
the economy expanded vigorously. As a result, food prices
increased at a faster rate while prices of many other goods
and services rose less than in 1971. Tight supplies combined
with strong demand are continuing in 1973.
Several critical developments have converged to cause
an upsurge in food prices since mid-1972.
1. Strong Consumer Demand. Consumer purchasing power
was advancing throughout 1972. By the fourth quarter
disposable income was 9 percent higher than the same quarter
of 1971. Even after discounting the effect of price increases,
there was still a 6 percent increase in real income. Large
increases are continuing in early 1973. Higher hourly earn-
ings (up 6.2 percent); increased employment (up 2-1/2
million), larger social security payments, $3.5 billion in
food assistance programs, greater public assistance, and
larger Federal tax refunds are all working to increase
buying power for consumers. As a result, the demand for
foods and especially meat has continued to grow. Incomes
will continue to grow as the economy moves closer to full
employment, though such increases will moderate as the
economy approaches that goal.
The decline in unemployment and the optimistic business
outlook have also helped to put consumers in a spending mood.
Part of this increased spending is being directed to food
purchases.
2. Expanded Exports. In addition to buoyant demand at
home, there has been an unexpected expansion in our export
markets. Poor weather caused smaller grain crops than
usual in Eastern Europe, the USSR, India, China, Australia
and Argentina. The world crop of cereals in 1972 dropped
more than 4 percent from 1971. Since mid-1972, U.S. exports
of feed grains and wheat have been running about three-
fourths higher than a year earlier. Other industrialized
countries have increased their demand for livestock products
and the feed materials to produce them. Peru placed a ban
on fishing which cut back on supplies of fishmeal and caused
unusually heavy demand for protein supplements (used in
livestock & poultry feed) produced in the United States.
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The adjustments in the value of the dollar relative to
other currencies also helped to expand U.S. farm exports,
and made imported foods more expensive. All these factors
are contributing to all-time record U.S. exports. They
will top $11 billion this fiscal year -- up nearly 40
percent from fiscal year 1972.
World production of grains should increase in 1973
and Peru recently removed its ban on fishing. U.S. exports
are expected to decline from the current year. These develop-
ments will relieve pressures on our production and marketing
system and contribute to receding wholesale food prices in
the second half of the year.
3. Reduced Food Supplies in 1972. A key to today's
food price problem was last year's decline in domestic
food production, a decline which is continuing in early
1973. This has been caused by a series of factors. Red
meat production fell 2 percent in 1972 as declines in hog
production more than offset a small increase in beef.
Earlier depressed prices for eggs and broilers and rising
feed prices have contributed to levels of production which
are now running well below a year ago. Weather also played
an important part in reducing food supplies. Freezes, un-
seasonable weather, and Hurricane Agnes all damaged fruit
and vegetable crops in many parts of the country. And bad
weather during the fall interfered with the harvest and
ruined a part of feed grain and soybean crops.
Food Prices: An International Problem
The same forces that have caused an escalation of food
prices in this country have created problems abroad.
Rising food prices are an international problem. Indeed,
the latest statistics available report larger increases
in food prices for other industrialized countries than
for the United States. In one respect, rising food prices
are a more cirtical problem abroad because consumers in
every other major country spend a larger share of their
income on food than U.S. consumers.
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INTERNATIONAL COMPARISON OF FOOD
CONSUMER PRICE CHANGES FOR FOOD: December 1971 to December 1972
Country
Percent Change
Canada
7.7
United States
4.8
Japan
4.9
France
8.7
Germany
8.0
Italy*
8.4
United Kingdom*
7.9
SOURCE: OECD Economic Indicators, February 1973.
A Program to Stop Food Price Escalation
The Administration is giving the problem of rising food
prices top priority in its anti-inflation efforts. Compre-
hensive steps have been taken in the past 3 months to
moderate pressures on food prices this year.
First, price controls have been retained on food processors,
wholesalers, retailers and food service organizations includ-
ing large restaurant chains. These controls ensure that
middlemen cannot increase their rate of profit when prices
rise and that when farm prices recede, the benefits will
reach the consumer promptly.
Second, to make certain that food supplies and prices
receive top priority, new advisory and decision-making
machinery has been established. The Cost of Living Council
Committee on Food and a Food Advisory Committee are con-
sidering a broad range of steps that Government and the
private sector can take to ensure an adequate supply of
food at reasonable prices. Actions taken to expand supplies
are being closely monitored each week to see that they are
fully implemented and new initiatives are being examined
on a regular basis. A new Food Industry Wage and Salary
Committee is addressing the particular problems of collective
bargaining in the food industry.
Third, positive actions already have been taken to augment
the immediate and intermediate-run supply of food. Expanding
food supplies to keep pace with growing demand is an absolutely
essential ingredient in solving the food price problem.
Actions to date include the following measures:
*November 1971 to November 1972.
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1. The Government is selling its grain stocks with the
objective of literally emptying its grain bins. Since
December 1, 230 million bushels of Government-owned grains
equivalent to about 3 percent of 1972 production have been
sold. All government loans on farm-stored grains are scheduled
for termination. Some of these loans go back to 1968 crops.
Calling these loans will ensure that the equivalent of about
15 percent of 1972 production will be released into commercial
market channels in coming months.
2. The record volume of grains being transported has
caused transportation congestion and shortages of boxcars
and hopper cars. The Department of Transportation has
established a control center to identify and resolve such
bottlenecks. Expediting teams are being sent into acute
problem areas to help resolve problems on the spot.
3. Meat import quotas were suspended in June, 1972 and,
partly as a result, imports increased 15 percent in 1972.
So far in 1973, imports are up 20 percent compared with the
same period a year earlier. Import quotas on nonfat dry
milk were raised in January of 1973 and, on March 8, the
President asked the Tariff Commission to investigate the
possibility of raising cheese import quotas 50 percent
this year.
4. All direct export subsidies on agricultural products
have been discontinued.
5. The rice acreage allotment has been increased 10
percent to encourage increased production.
6. The price support for milk is being held to the
minimum permitted by law -- 75 percent of parity. The
Congress, however, is now considering legislation that would
raise the minimum to 85 percent of parity. The Administration
opposes this legislation. It would have an immediate un-
favorable impact on the prices of milk and dairy products.
7. Most importantly, our farm programs have been sub-
stantially adjusted this year to encourage greater production
of grains and soybeans. In 1972, 60 million acres (about
15 percent of the Nation's cropland) were "set-aside" from
productive use. Because of the new provisions this year,
well over one-half of the acreage "set-aside" in 1972 will
be available for productive use. Moreover, the Department
of Agriculture will permit farmers to "set-aside" acres
for year-around grazing and forage production in return for
a 30 percent reduction in payments. This measure should
encourage expanded livestock supplies in the future. In
short, nearly all of the Nation's cropland can be put to
productive use in 1973.
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The Food Price Outlook in 1973
The more favorable outlook for food prices in the
second half of 1973 rests on a pattern of expanding food
supplies through the year. Farm prices should fall below
current levels after mid-year and should be no higher at
the end of the year than at the beginning. Retail food
prices typically adjust less dramatically than farm prices,
and there is a delay before drops in farm prices are re-
flected at retail. Retail food prices should begin to
level off after mid-year and the rate of increase may be
near zero by the end of the year.
Food Supplies Expand in 1973
Adjustments in farm programs and favorable farm
prices are encouraging farmers to expand food production.
The latest reports indicate greater domestic production
of all major groups of food commodities except dairy
and poultry products. The Administration has taken steps
to increase cheese imports which would help offset lagging
dairy production.
PRODUCTION OF FOOD COMMODITIES
Item
Change from Year Earlier
1972
Estimated 1973
Commodity group
- percent -
Meat
-2
+2
Dairy products
+2
-1
Poultry and eggs
+3
-1
Food grains
-5
+13
Vegetables
0
+1
Fruits and nuts
-10
+12
Although overall food supplies will be larger this
year than last, most of the increases will come later in
the year. During the first part of the year, supplies of
most animal products are running below the same period of
1972. But we expect this picture to change dramatically
by the fourth quarter.
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ESTIMATED PRODUCTION OF ANIMAL PRODUCTS,
FIRST AND FOURTH QUARTERS OF 1973
Change From a Year Earlier
Item
1st Quarter : 4th Quarter
Commodity
-- percent --
Beef
+2.5
+2.5
Pork
-3.5
+5.5
Broilers
-1.5
+3.5
Eggs
-4.5
-1.0
Milk
-1.0
+1.0
Meat Supplies. The number of cattle coming to market in
recent weeks has been up only moderately from last year.
However, there were 8 percent more cattle on feed at
latest count (March 1) and beef production is expected
to increase slightly in the next few months. Additional
increases in beef supplies will continue to take place
throughout the remainder of the year. Beef cattle
producers are expanding their herds and more beef will be
available for consumers in 1974 and 1975.
The hog production cycle is turning around which
will expand meat supplies in the second half of the year.
Hog producers are raising a 7 percent larger pig crop in
the December - May period than they were a year ago.
As a result, the price of hogs should decline significantly
through the year.
Other Food Supplies
Poultry production is expected to increase 5 to 10
percent in the next few months, but supplies will remain
smaller than in 1972 until late in the year. Production
is expected to continue upward throughout the year because
of more favorable feed prices later this year. As a
result, broiler prices probably will fall substantially
between now and the end of the year. A similar pattern
is expected for eggs.
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Production of fruits this summer is expected to be
well above the weather-damaged crops of 1972. However,
according to preliminary information vegetable production
is expected to expand very little in 1973. Reasons and
possible remedies for this situation are now under intensive
study by the CLC Committee on Food and by the Department
of Agriculture.
Farmers Will Produce More Grains & Soybeans
This Administration's actions to expand the production
of wheat, feed grains and soybeans will help bring feed
prices down to more normal levels by fall. The latest
planting intentions survey (released on March 15th)
indicates that farmers plan to plant nearly 6 percent
more acreage to feed grains, and 14 percent more acreage
to soybeans in 1973. Wheat acreage will be up about 6
percent this year. Current forecasts call for sharply
higher production of these basic commodities.
Feed Grains
up 5 to 10 percent
Soybeans
up 15 to 18 percent
Wheat
up 12 to 14 percent
Prices of feedstuffs play a major part in the
production of livestock, poultry and milk. Over the
past 12 months prices of manufactured animal feed have
risen 60 percent and this has contributed to some of the
current production cutbacks. With expanding supplies,
feed prices should fall sharply by fall and encourage
more production of broilers, eggs and milk later in 1973.
Beyond 1973
Much of the price-restraining benefits of bumper
crops this year will not be felt by consumers until early
1974. The big crops in prospect for 1973 will reassure
livestock producers of ample feed supplies next year and
give them needed confidence for planning to increase meat
supplies in 1974. Today's actions are, therefore, part of
a larger effort to achieve sustained food price stability.
A second part of this effort is to modernize basic
farm legislation. The Administration will support new
farm legislation (which would affect 1974 and subsequent
crops) calling for substantially less government involvement
in farmers' decision making. The new proposal would unhook
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income support payments from the outmoded parity concept
and would substitute whole-farm cropland bases for the
antiquated individual crop allotments. This proposal would
result in lower prices and reduced government payments and
is designed to become effective over a four-year period.
Farmers would receive more of their income from expanded
output rather than from holding back on production.
Finally, the Cost of Living Council is addressing
the long-term problem of costs in the food industry. The
National Commission on Productivity has identified some
eighty different ways to improve productivity and reduce
costs. These measures are being studied and put into
action wherever feasible SO that the gains from more
efficient farm production will not be eaten up by inefficiency
in processing and distribution.
000
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PRODUCTION OF LIVESTOCK PRODUCTS, 1973
CHANGE FROM A YEAR EARLIER
ITEM
1st QUARTER
4th QUARTER
COMMODITY
BEEF
+2.5%
+2.5%
PORK
-3.5%
+5.5%
BROILERS
-1.5%
+3.5%
EGGS
-4.5%
-1.0%
MILK
-1.0%
+1.0%
PRODUCTION OF FOOD COMMODITIES
CHANGE FROM A YEAR EARLIER
ITEM
1972
ESTIMATED 1973
COMMODITY GROUP
MEAT
-2%
+2%
DAIRY PRODUCTS
+2%
-1%
POULTRY & EGGS
+3%
-1%
FOOD GRAINS
-5%
+13%
VEGETABLES
0
+1%
FRUITS & NUTS
-10%
+12%
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INTERNATIONAL COMPARISON OF FOOD
CONSUMER PRICE CHANGES FOR FOOD:
DECEMBER 1971 TO DECEMBER 1972
COUNTRY
PERCENT CHANGE
FRANCE
8.7
ITALY*
8.4
GERMANY
8.0
UNITED KINGDOM*
7.9
CANADA
7.7
JAPAN
4.9
UNITED STATES
4.8
*November 1971 to November 1972
Source: OECD Economic Indicators, February 1973
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