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The original documents are located in Box 56, folder "1976/02/17 - Economic Policy Board"
of the James M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 56 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
NATIONAL ARCHIVES AND RECORDS SERVICE
WITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)
FORM OF
CORRESPONDENTS OR TITLE
DATE
RESTRICTION
DOCUMENT
1. Memo
Edwin H. Yeo to the Economic Policy Board
Undated
A
Executive Committee re the Current Situation
(ca. Feb.
in Italy ( 4 pp. )
1976)
FILE LOCATION
Domestic Council
Cannon
Meetings and Appointments File - Economic Policy Board, 2/17/76
RESTRICTION CODES
(A) Closed by Executive Order 11652 governing access to national security information.
(B) Closed by statute or by the agency which originated the document.
WHM, 9/19/80
(C) Closed in accordance with restrictions contained in the donor's deed of gift.
GENERAL SERVICES ADMINISTRATION
GSA FORM 7122 (7.72)
EPB MEETING
Tuesday, February 17, 1976
9:00 a.m.
Roosevelt Room
THE WHITE HOUSE
WASHINGTON
February 13, 1976
FOR ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE
The attached will be discussed at the Tuesday,
February 17 EPB Executive Committee meeting.
GERALD R. FORD LIBRARY
This form marks the file location of item number
/
as listed
on the pink sheet (GSA form 7122 Withdrawal Sheet) at the front of the
folder.
W.H.M. 9/19/80
THE WHITE HOUSE
WASHINGTON
FOR EPB EXECUTIVE COMMITTEE MEMBERS
The attached materials are for your
information.
2/10/76
Secretary of the Treasury, William E. Simon, today
called for the broadening and intensification of an Internal
Revenue Service drive to uncover tax evasion and avoidance
through the improper deduction of bribes and similar
wrongful payments both abroad and in the United States.
He said he intends to see to it that all those who have
made improper payments and bribes do not profit through
reducing their Federal tax liabilities. Secretary Simon
considers this action essential for the protection of the
integrity of the tax system and of the U.S. business
community.
The Internal Revenue Service has been working closely
with the Department of Justice and the SEC to deal with
tax evasion and avoidance through the improper deduction
of bribes and other wrongful payments to or for government
officials both abroad and in the United States. Commissioner
Alexander assured the Secretary that the IRS will give this
investigation increased and vigorous emphasis.
FORD
February 13, 1976
Office of the White House Press Secretary
NOTICE TO THE PRESS
The President has designated Frederick B. Dent, Special Representative
for Trade Negotiations, to serve as a member of the President's Economic
Policy Board. Ambassador Dent was appointed March 26, 1975.
# # #
FORD is LIBRARI 07V830
FOR IMMEDIATE RELEASE
Office of the White House Press Secretary
THE WHITE HOUSE
STATEMENT BY THE PRESIDENT
As I have indicated on a number of occasions, the small
business sector of our economy is vital to private job creation,
technological innovation, competition and individual liberty.
In this era of bigness, our Nation must maintain an environment
in which small businesses can flourish.
To foster innovation and productivity gains, it is important
that we have a dynamic economy in which new enterprises can be
formed and will prosper. Without the ongoing search for new
ideas and better ways of doing things, our competitive system
would become progressively less efficient. Our historical
experience indicates that innovative ideas often originate in
the laboratories and workshops of small businesses. New
enterprises are a basic source of innovative ideas and serve
to push the entire economic system to higher levels of efficiency,
thereby enhancing our competitive position in world markets.
The strength of small business must be preserved if this innova-
tive climate is to be maintained.
In addition to its economic role, small business provides
the entrepreneur with a means of self expression. The chance to
create, own and manage a business is one of our most important
freedoms. My Administration considers the healthy individualism
of the small business entrepreneur an essential element in our
economic and political system. The freedom to create and operate
one's own business does not exist in many parts of the world.
Because of its value to our free society, this avenue for
individual opportunity must be nourished and promoted.
The largest corporate complexes started as small businesses,
but most small businesses never become international, billion-
dollar companies. Rather, most small firms are likely to remain
relatively small. In many communities throughout our Nation,
the small businessman provides the leadership so vital to
community life. Since this involvement in community affairs
is of great value to the quality of life in our country, I am
committed to the continued health and vigor of small businesses.
At a time when we so urgently need increased private job
creation, I am particularly impressed by the fact that our
9.4 million small business firms employ about 55 percent of
the private sector labor force in this country and produce
about 48 percent of our gross business product. The continued
FORD 3 LIBRARY OFRALD
growth and prosperity of this vital sector is critically
important 1f we are going to generate the expanding number
of private, productive jobs required in the coming years.
more
2
The Small Business Administration was created in 1953,
during the Eisenhower Administration, to provide small business-
men with advice and assistance and to promote the interests of
the small business community. The intent of this legislation
was to "aid, counsel, assist and protect
the interests of
small business concerns in order to preserve competitive enter--
prise as the basis for economic well-being and the security of
the Nation. The SBA is the primary instrument of the Federal
government in promoting the important interests of the small
business community. I supported the creation of SBA in 1953 and
strongly support it today. As evidence of this commitment, my
fiscal year 1977 budget requests an increase of 33 percent in
the SBA's major loan guarantee program. This will increase the
ability of the SBA to assist in financing the many small
businesses which cannot obtain needed financing in commercial
markets.
In addition to supporting the work of the SBA, my
Administration is taking a variety of actions to foster a strong
small business community. Of paramount importance, of course,
is our effort to achieve sustained economic growth without in-
flation by moderating the increases in Federal spending and by
reducing our budget deficit. To also provide additional funds
for business investment and growth, I have proposed a permanent
extension of the corporate surtax exemption and the 10 percent
investment tax credit currently in effect and have also called
for a reduction in the maximum corporate tax rate from 48 to
46 percent.
I have proposed changes in the estate tax laws to encourage
expansion in family businesses. This reform will help ensure
the survival of smaller businesses for future generations and
allow them to expand their current operations.
Vigorous competition is necessary if small businesses are
to expand and flourish. Accordingly, I have increased the
antitrust resources for the FTC and the Department of Justice
and emphasized the importance of vigorous antitrust enforcement.
I consider it essential to reduce the burden of government
imposed regulation and paperwork. I have, therefore, initiated
a comprehensive review of all Federal regulation and paperwork
in order to eliminate or improve those requirements and rules
which are outdated or unnecessary.
I will designate Mitchell Kobelinski, our new Administrator
of the Small Business Administration, as a member of the Econ-
omic Policy Board. This will help ensure small business parti-
cipation in the formulation of our economic policies. It will
also help provide me with the advice and expertise of the Small
Business Administration in my consideration of economic policy
FORD
issues.
These initiatives and efforts represent important and
GERALD
LIBRARY
necessary improvements in the environment for small businesses
in America.
EMBARGOED FOR RELEASE
February 13, 1976
UNTIL 12 NOON (EST)
Office of the White House Press Secretary
THE WHITE HOUSE
BACKGROUND INFORMATION
REASONS FOR THE PRESIDENT'S VETO
TO H.R. 5247, THE
"PUBLIC WORKS EMPLOYMENT ACT OF 1975"
Summary of Reasons for the Veto:
The President opposes this bill for the following principal
reasons:
-- It would not be effective in creating Jobs for the
unemployed.
Relatively few new jobs would be created. The
estimates by the bill's sponsors that it will
create 600,000 to 800,000 jobs are not support-
able. A more realistic estimate is a total of
250,000 person-years of employment spread over
a number of years, with a peak impact of only
100,000 to 120,000 jobs.
By comparison, the employment statistics for
January 1976 showed a one month increase in
employment of 800,000, and a reduction of over
450,000 in the number of unemployed in the labor
force.
Most of the relatively small number of new jobs
produced by these programs would come in late
1977 and 1978, not now. Because public works
projects are notoriously slow in creating jobs,
the peak impact would occur in late 1977 or in
1978, when the economy will be well along the
road to full recovery and the added stimulus is
likely to be counterproductive.
The cost to the taxpayers of producing jobs under
this bill would be unreasonably high, probably in
excess of $25,000 per year of employment.
Many of the jobs funded under this bill would
simply replace jobs funded from other sources,
without a real increase in employment.
Excessive Federal spending as represented by this
kind of bill can close the door on reducing income
taxes of families and businesses, which is a far
more effective way of stimulating the economy and
FORD
investment and creating good Jobs, both in con-
struction and in the production of goods and
services.
GERALD
This bill will contribute significantly to excessive
Federal deficits, which draw capital resources away
from the private sector, due to increased Federal
borrowing, and inhibit the growth of private
employment which is needed to sustain economic
prosperity.
2
--- The direct cash assistance to State and local governments
under Title II of the bill would provide undesirable in-
centives and is inequitable.
It addresses the cyclical problems of State and
local governments just at the time when those
problems are beginning to abate, and when,
generally, the revenues of those governments
will be rising faster than their expenditures.
It gives preference to those with the highest taxes
and the biggest budgets, without any distinction
between those jurisdictions which have and those
which haven't been efficient in holding down costs.
This could weaken incentives to improve government
productivity and end low-priority spending.
--
The proposed public works programs would result in a poor
allocation of capital resources.
Unlike construction in the private sector, public
works construction does not add to the tax base of
the communities.
Although it won't speed up the creation of jobs,
the premium on speed in obligating the funds will
encourage many to apply for money for projects
which are of low community priority but which can
be quickly packaged into a grant request.
The 100% Federal funding of specific public works
may encourage irresponsibility by State and local
officials who would not have to account to their
constituents for the construction of unnecessary
or extravagant public facilities with Federal funds.
---
The bill would authorize funding which would push Federal
spending to even higher levels.
1977 spending could be increased by about $2.5
billion. 1978 spending could grow by over
$1 billion, and spending in 1979 and beyond
would be increased by another $1.5 billion or more.
Although over 90% of the outlays from the bill
would occur after fiscal year 1976, Congress has
proposed this without considering the total budget
picture for 1977 and beyond. Congress has not
identified acceptable program reductions that
could offset the cost increases of this bill.
--- Much of the bill is completely unrelated to current
unemployment problems.
The allocation formula for Title II does not
limit the grants to areas of very high unem-
ployment. The rate of local taxation is a
large part of the allocation formula.
more
FORD VIBRAST
3
The $1.4 billion increase for wastewater treatment
facilities grants is not an anti-recession action.
It would have no impact on jobs now. With the current
legislation expiring. it is important that the Congress
consider the Administration's proposals for program
reforms before authorizing additional funds.
The $100 million for an urban renewal program to be
administered by the Commerce Department clearly would
have no short-term impact.
--
The bill would be almost impossible to administer
effectively.
Effective allocation of $2.5 billion for Title I public
works on a project.by-project basis would take many
months or years.
The provision that project requests be approved auto-
matically unless the Commerce Department acts within
60 days will preclude any useful review of the
requests, and prevent a rational allocation of funds.
The bill extends the Job Opportunities program, which
is almost impossible to administer effectively due to
the complex process for allocating funds through other
Federal agencies on a project-by-project basis.
The provision in Title III to permit interest subsidy
grants to private businesses provides no criteria for
allocating this subsidy. It would be very difficult,
if not impossible, to provide this subsidy only to
those firms which need it in order to maintain or
increase their employment levels.
---
The bill would resurrect an ineffective urban renewal
program in the Commerce Department.
It would create a new categorical grant program for
urban renewal less than two years after the Congress
replaced a nearly identical program, and others, with
the broader, more flexible Community Development block
grant program.
All activities and cities eligible under the proposed
program already are eligible under the block grant pro-
gram; the bill merely duplicates existing authorities.
The Commerce Department has no experience with urban
renewal, and is not equipped to effectively administer
such a program.
The current program of the Commerce Department to
assist economic development activities in areas of
chronically high unemployment or low income would be
disrupted and distorted.
--- The President has proposed realistic alternatives to
overcome the unemployment problems and avoid a new round
of inflation. These proposals will avoid the problems
mentioned above.
more
GERALD FORD LIBRANA
The 1976 Budget includes more than $18 billion in
outlays for important public works such as roads,
energy facilities wastewater treatment plants, and
veterans' hospitals. The 1977 Budget will increase
spending for these public works by more than
$3 billion, or nearly 17%. The spending level
already included in the Budget for 1977 will finance
public works that are really needed and which can
be funded efficiently in the next 15 to 18 months.
Tax incentives are proposed for private construction
initiated in the next year in areas of high unem-
ployment which will result in much quicker and much
more effective creation of jobs.
Renewal of the General Revenue Sharing program will
permit State and local governments to maintain employ-
ment in basic services.
Additional permanent income tax reductions of over
$10 billion will permit a quick and major increase in
take-home pay, in buying power and in private invest-
ment, all of which will creat real, rewarding Jobs in
the private sector.
The 1977 Budget provides $3.2 billion for Community
Development block grants to States and local
governments --- about $450 million more than in
1976. These grants are allocated on the basis of
relative need, and permit the States and local
governments to carefully plan for the use of these
funds.
Tax incentives are proposed for investment in
residential mortgages by financial institutions, to
stimulate capital for homes rather than for public
monuments.
Tax incentives are proposed to induce broader
ownership of common stock to stimulate investment
which will provide long term productive jobs,
rather than increasing public, make-work Jobs.
The President's economic policies are expected to
foster the creation of 2 to 2.5 million additional
jobs in 1977. This will include jobs for nearly
one million of those now unemployed, as well as about
2.5 million jobs for workers who will be entering
the labor force during this period.
In his veto message the President indicated that he
believes an alternative proposal before the Congress,
H.R. 11860, represents a more reasonable approach in
addressing the immediate needs of those areas of the
country with exceptionally high unemployment rates.
Under H.R. 11860, the funds would be provided to
communities with unemployment in excess of 85 and
would provide them in direct proportion to unem--
ployment beyond 8%. The program would be in effect
only as long as national unemployment exceeds 7%.
more
GERALD FORD LIBRAST
5
Also under H.R. 11860, funds would be provided
for distribution each calendar quarter in an amount
determined by multiplying $15 million times each
1/10 of 1% by which unemployment in the next
preceeding quarter exceeds 7%.
The Community Development Block Grant Program is
already in place with an experienced staff and
regulations and could be administered without the
creation of a new bureaucracy and without the delay
which would be encountered under H.R. 5247.
The program would fund eligible activities based
on priorities identified by local governments as
part of their community development programs.
The following paragraphs discuss several of the above points
in more detail.
Public Works Construction Is Not Effective in Creating Jobs
Quickly
The bulk of the funds that would be authorized by this bill
would be used for public works, including $2.5 billion for
Title I, $1.4 billion for EPA wastewąter treatment facilities
and $600 million for other Commerce Department public works
programs.
For more than four years the Economic Development Administra-
tion has been trying to find the fastest ways to create jobs
through public works projects. This effort, the Public
Works Impact Program (PWIP), has shown the difficulty of
quickly creating jobs for the unemployed by funding public
works.
The facts are as follows. During the year in which the funds
are appropriated for accelerated public works, only 10% of
the funds are actually spent. During the full second year
after appropriations, half of the funds are used. And after
four years, 10% of the funds are still not spent for the
approved projects.
It is very time consuming for the Federal government to
allocate a large amount of money on a project-by-project
basis. Even with the small PWIP program, it has required
about 9 months to allocate the funds to individual projects.
It has taken about 17 months from the time of appropriation
to get all of the approved projects under construction.
And two years after appropriation of funds, only about 60%
of the projects were completed.
Although Title I of the bill requires that the Commerce
Department must approve or reject applications for funding
within 60 days of receipt of the applications, this will
not assure speedy allocation of these funds. The bill
provides that appropriations may be provided at any time
through the end of fiscal year 1977, which may delay
more
GERALD LISSANY FORD
6
allocations. Applications for funding may straggle in over
a period of many months. Many of the initial applications
might have to be rejected and resubmitted due to inadequate
information. Accordingly, even with the 60 day approval
or rejection requirement, it could take 18 months or longer
to allocate all of the funds.
Once the funds are allocated, it can be expected that
startup and construction of the projects will be no faster,
and more likely slower, than the experience with PWIP
projects.
Thus, we can expect that it would be late 1977 or early
1978 before all of the projects to be authorized by this
bill will be under construction. It will be 1980 or later
before all of the projects are completed.
Appendix A is a table that provides the most optimistic
estimate of the speed with which the funds would be spent.
It is likely to be more realistic to move most of these
spending estimates to about one year later than shown
on the table.
Estimate that 600,000 to 800,000 Jobs Would be Created
is Unfounded
Sponsors of the bill have asserted that it would provide
work for 600,000 to 800,000 people, primarily as a result
of public works projects. This estimate is entirely un-
realistic. A much more likely estimate is 250,000 years
of employment over the next five years with a peak of
about 100,000 to 120,000 in 1977 or early 1978.
When the House acted on its original bill to provide
$5 billion for public works grants, it was estimated
by the Congress that it would produce about 250,000
Jobs. We now. have a $6.3 billion bill, which includes
$1.5 billion in programs with almost no new job impact,
and yet the employment estimates have suddenly increased
by 320%.
Although there are no firm figures on jobs generated by
construction, studies of employment in construction con-
ducted by the Bureau of Labor Statistics show that a
$1 billion (1974 dollars) public works program would
provide only about 40,000 years of employment, off-site
and on-site. Including multiplier efforts there would
be 60,000 years of employment created by $1 billion in
public works spending. Based on the optimistic spending
estimates shown in Appendix A, the peak spending for
public works in 1977 would produce a maximum of about
90,000 years. Since construction wages and other costs
will be higher in 1977 and beyond than they were in 1974,
these estimates of Jobs could be high.
more
GERALD LISBARY FORD
7
It is very difficult to estimate the number of Jobs that would
be created by the $1.6 billion in countercyclical grants
(Title II).
There is substantial indication that State and local govern-
ments would not use much of these funds to hire additional
personnel. Studies of revenue sharing have shown that State
and local governments increased their purchases of goods and
services by roughly one-third of the amount they received.
The remainder was used to repay debt and reduce taxes. In
addition, recent experience with public service employment
indicates that, after the first year of funding, State and
local governments may increase employment by only 10 to 40
percent of the number of public service jobs directly funded
by the Federal government. Despite numerous regulations to
make it difficult to substitute public service employment for
regular employment, the practice is widespread. Title II of
this bill would contain no requirements that these funds be
used for additional jobs or even to maintain existing jobs.
The maximum expected payment under Title II of the bill is
$375 million per quarter. If as much as 50% of this were
used for added jobs, it might create as many as 75,000 jobs.
Given the experience with similar programs, it is more likely
that only 10 to 20% of the funds would be used for added jobs,
providing only 15-30,000 new jobs.
In summary, the peak employment impact is unlikely to exceed
about 150,000, and is more likely to be near 100,000 to
120,000 sometime in fiscal year 1977 or 1978. Total employ--
ment is likely to be about 250,000 years, spread over five
years or more.
If the bill provided a total of 250,000 years of employment,
the average cost per job would be about $25,000.
The Title II Countercyclical Assistance Grants Would Encourage
Government Inefficiency and Would be Inequitable
The recent financial difficulties which have been facing many
cities and other local governments have forced many to under--
take a long-needed examination of their spending programs to
identify the excesses and the inefficiencies. There is no
doubt but that some local governments had reached a spending
level that they simply will be unable to sustain in the
long-term.
Title II allocates funds in large part on the basis of what
the governments spend rather than what they need. More funds
would be provided to those States and local governments with
higher taxes, including those which have been least efficient
in holding down costs. The proposed countercyclical assis-
tance grants would take pressures off those States and local
governments to more carefully evaluate their activities in
terms of benefits produced. If the program becomes permanent,
1t will allow those governments to avoid economy measures,
and then to further expand their programs as their tax
revenue increases with the resurgence of the economy. They
would be led to expect still more Federal assistance the
next time they are in financial difficulty.
more
BERALD FORD VIBRARY
8
The estimates of allocations to specific states and cities
clearly show some of the distortions created by the formula.
Eight States would receive about 65% of the Title II funds,
including both the local and State allocations. This is
over $1 billion of the $1.6 billion estimated for the Title.
Also the program would disproportionately aid New York City,
which would receive about $150 million of the total of
$1.6 billion. This is more than three times as much as
any other city would receive. New York City already is
receiving special Federal assistance to alleviate its
financial problems.
In addition to the above problems with the program, it would
be very costly to administer. The Treasury Department's
preliminary estimates show that it would require approxi-
mately 750 additional employees and approximately $43 million
to administer the countercyclical aid program, as contrasted
to 110 employees and $11 million currently devoted to
administration of the entire General Revenue Sharing program.
$1.4 Billion for EPA Sewage Treatment Grants is Unneeded
and Irrelevant to Current Unemployment Problems
The purpose of this provision of the bill is completely
unrelated to the purported desire to create jobs quickly
for the unemployed.
Even if EPA were to use these added funds now, they would
have almost no job creating impact in the next two years.
It is simply not practical to significantly accelerate the
construction of such facilities.
The real purpose of this provision is to change the formula
for the allocation of funds under the wastewater treatment
grant program of EPA. This would provide an additional
$1.4 billion. to a large number of states without having
considered essential reforms to the current law which could
require an expenditure of at least $333 billion to fully
implement.
It Would Be Administratively Impossible to Effectively
Allocate Over $3 Billion for Public Works Projects Quickly
This bill requires that the Commerce Department attempt to
allocate over $3 billion, on a project-by-project basis,
in a matter of a few months. All past experience would
force a conclusion that this would be reckless and
irresponsible.
Even without any substantive review of requests for funding,
it is highly unlikely that the Department could physically
process the tens of thousands of requests and the thousands
of awards that would be involved, in less than nine months.
The Department's recent experience with the Job Opportunities
program illustrates the point. After its initial experience
in allocating $125 million, it still required six months
for Commerce and the cooperating agencies to allocate the
additional $375 million. Also, that allocation was done
with only a minimum amount of substantive review of the
proposals by the agencies.
GERALD LIBRARY FORD
more
y
The Department received a good deal of criticism from Congress
for relying too heavily on objective criteria to make the
project. $375 million allocation, rather than reviewing each particular
With over $3 billion to award, the Department is likely to be
faced with the choice of taking many months to do a responsible
job, or taking nine months or more to throw Federal tax
dollars at projects as they come through the door.
Large Amounts for Spending on High Priority Public Works are
Already In the 1976 and 1977 Budgets
The attached table shows the amounts of expected spending for
public works in the President's Budgets for 1976 and 1977.
In 1976, a total of over $18 billion is provided. This
includes over $11 billion in grants to state and local
governments. In 1977, the spending for public works would
increase by 17% or by over $3 billion.
The spending for public works in the Budget is focused on the
highest priority national needs, including energy, pollution
abatement, flood control, and transportation. The Budget
estimates reflect expected spending on projects which are
already in the planning stages or under construction.
Therefore, the $3 billion increase will be providing Jobs
in 1977, rather than in 1978 or 1979. These projects will
be helping us achieve important national objectives while
at the same time providing employment opportunities.
There are adequate spending levels already in the 1977
needed. Budget for those public works projects that are really
Additional stimulus to private sector employment also would
be provided by a 23% increase in spending in the 1977 Budget
for major equipment purchases. Spending for this purpose
is to increase by $3.9 billion over 1976, to $20.7 billion.
more
GERALD LIBRARY FORD
10
Changes in Public Works Outlays, Fiscal Year 1976-77
(in millions of dollars)
Description
1976
1977
Change
Direct construction
Civilian programs:
FAP: Strategic petroleum storage
11
164
153
Agr: Forest Service roads and trails
and other
135
173
38
Corps of Engineers: construction and
flood control
1,367
1,424
57
Int: Bureau of Reclamation
410
507
97
Bonneville
135
150
15
NPS, BIA, and other
273
252
-21
HEW: Indian health facilities,
NIH, other
162
138
-24
DOT: Coast Guard facilities
78
63
-15
FAA airway systems
231
236
5
ERDA: Plant, capital equipment, other
439
672
233
NASA: Plant and equipment
115
126
11
VA: Hospitals and other
186
303
117
TVA: Power facilities
1,038
1,137
99
All other
174
165
-9
Subtotal, civilian programs
4,754
5,510
756
Defense programs:
DOD: Military construction
1,713
1,710
-3
Family housing
320
287
-33
ERDA: Plant and equipment
204
215
11
Subtotal, defense programs
2,237
2,212
-25
Total, direct construction
6,991
7,722
731
Grants to State and local governments
FAP: Appalachian regional development
248
242
-6
Agr: Water and waste disposal, rural
development, conservation
198
190
-8
Com: EDA and other
183
154
-29
HEW: Health
213
184
-29
Education and other
51
36
-15
Int: Land and water conservation
and other
274
275
1
DOT: Airports
375
355
-20
Highways
6,202
6,711
509
Mass transit
573
1,179
606
EPA
2,350
3,770
1,420
All other
563
442
-121
Total, grants to State and
local governments
11,230
13,538
2,308
Total public works
18,221
21,260
3,039
more
GERALD FORD
APPENDIX A
Estimates of Outlays
Local Public Works Capital Development and
Investment Act (H.R. 5247)
(Dollars in Millions)
Outlays
Total
1976
Amount
&
After
Program
Authorized
TO
1977
1978
1979
1979
Title I, Public
works grants
2,500
248
1,230
638
137
247
Title II,
Countercyclical grants
1,6253
750
875
Title III
Interest subsidies
125
5
25
25
25
45
Job opportunities
grants.
500
50
246
128
27
49
Urban Development 6
100
1
19
29
22
29
EPA wastewater treat-
ment facility
grants
1,418
ó
30
300
700
388
Total
6,268
1,054
2,425
1,120
911
758
The outlay estimates assume that initial appropriations would
be provided by about March 1, 1976.
This assumes that all funds would be obligated between May 1
and September 30, 1976. Since appropriations are authorized
through fiscal year 1977, it may not be realistic to assume
that all of the funds would even be available by September 30,
1976. In any case, it would be very difficult, if not impos-
sible, to allocate this sum in such a short time, on a project-
by-project basis. The estimate of outlays is based on four
years of actual experience with EDA's Public Works Impact
Program, which provides for accelerated public works to create
temporary jobs. Considering the large size of this proposed
program, and the likely resulting delays in starting projects,
it would be more likely that the outlay peak would occur in
1978 rather than 1977.
3/. This amount would depend on national unemployment rates. This
estimate is based on the rates used in the 1977 Budget
projections.
The outlays for this interest subsidy program would likely be
spread out over the terms of the loans being guaranteed. It
is assumed that loans would have terms of about 5 years.
5/ In view of the changes in the Job Opportunities program in this
bill, it is expected that most of these funds would be used for
public works. The outlay estimate assumes the same spending
FORD
rate as for Title I projects.
6/ This program would have the same timing characteristics as
GERALD
EDA's regular development programs. The outlay estimates are
based on actual experience with EDA's regular public works
programs.
I/ This estimate assumes that these funds would be obligated in
1977 and that outlays would occur approximately at the same
rate as for the current EPA grants.
EMBARGOED FOR RELEASE
February 13, 1976
UNTIL 12 NOON (EST)
Office of the White House Press Secretary
THE WHITE HOUSE
TO THE HOUSE OF REPRESENTATIVES:
I am returning without my approval H.R. 5247, the
Public Works Employment Act of 1975.
Supporters of this bill claim that it represents a
solution to the problem of unemployment. This is simply
untrue.
The truth is that this bill would do little to create
jobs for the unemployed. Moreover, the bill has so many
deficiencies and undesirable provisions that it would do
more harm than good. While it is represented as the
solution to our unemployment problems, in fact it is little
more than an election year pork barrel. Careful examination
reveals the serious deficiencies in H.R. 5247.
First, the cost of producing jobs under this bill
would be intolerably high, probably in excess of $25,000
per job.
Second, relatively few new jobs would be created. The
bill's sponsors estimate that H.R. 5247 would create 600,000
to 800,000 new jobs. Those claims are badly exaggerated.
Our estimates within the Administration indicate that at
most some 250,000 jobs would be created --- and that would
be over a period of several years. The peak impact would
come in late 1977 or 1978, and would come to no more than
100,000 to 120,000 new jobs. This would represent barely
a one tenth of one percent improvement in the unemployment
rate.
Third, this will create almost no new jobs in the
immediate future, when those jobs are needed. With peak
impact on jobs in late 1977 or early 1978, this legislation
will be adding stimulus to the economy at precisely the
wrong time: when the recovery will already be far advanced.
Fourth, Title II of the bill provides preferential
treatment to those units of government with the highest
taxes without any distinction between those jurisdictions
which have been efficient in holding down costs and those
that have not.
Fifth, under this legislation it would be almost
impossible to assure taxpayers that these dollars are being
responsibly and effectively spent.
more
FORD LIBRARY 07V839
2
Effective allocation of over $3 billion for public works
on a project-by-project. basis would take many months or years.
The provision that project requests be approved automatically
unless the Commerce Department acts within 60 days will pre-
clude any useful review of the requests, and prevent a
rational allocation of funds.
Sixth, this bill would create a new urban renewal program
less than two years after the Congress replaced a nearly
identical program -- as well as other categorical grant
programs -- with a broader, more flexible Community Develop-
ment block grant program.
I recognize there is merit in the argument that some
areas of the country are suffering from exceptionally high
rates of unemployment and that the Federal Government should
provide assistance. My budgets for fiscal years 1976 and
1977 do, in fact, seek to provide such assistance.
Beyond my own budget recommendations, I believe that
in addressing the immediate needs of some of our cities
hardest hit by the recession, another measure already
introduced in the Congress, H.R. 11860, provides a far
more reasonable and constructive approach than the bill I
am vetoing.
H.R. 11860 targets funds on those areas with the
highest unemployment so that they may undertake high
priority activities at a fraction of the cost of H.R. 5247.
The funds would be distributed exclusively under an im-
partial formula as opposed to the pork barrel approach
represented by the bill I am returning today. Moreover,
H.R. 11860 builds upon the successful Community Development
Block Grant program. That program is in place and working
well, thus permitting H.R. 11360 to be administered without
the creation of a new bureaucracy. I would be glad to
consider this legislation more favorably should the Congress
formally act upon it as an alternative to H.R. 5247.
We must not allow our debate over H.R. 5247 to obscure
one fundamental point: the best and most effective way to
create new jobs is to pursue balanced economic policies
that encourage the growth of the private sector without
risking a new round of inflation. This is the core of my
economic policy, and I believe that the steady improvements
in the economy over the last half year on both the unemploy-
ment and inflation fronts bear witness to its essential
wisdom. I intend to continue this basic approach because
it is working.
My proposed economic policies are expected to foster
the creation of 2 to 2.5 million new private sector jobs
in 1976 and more than 2 million additional jobs in 1977.
These will be lasting, productive jobs, not temporary jobs
payrolled by the American taxpayer.
This. is a policy of balance, realism, and common sense.
It 1s an honest policy which does not promise a quick fix.
more
GERALD FORD LIBRARY
3
My program includes:
-- Large and permanent tax reductions that will
leave more money where it can do the most good: in the hands
of the American people;
-- Tax incentives for the construction of new plants
and equipment in areas of high unemployment;
-- Tax incentives to encourage more low and middle
income Americans to invest in common stock;
-- More than $21 billion in outlays for important
public works such as energy facilities, wastewater treatment
plants, roads, and veterans' hospitals representing a
17 percent increase over the previous fiscal year;
--- Tax incentives for investment in residential
mortgages by financial institutions to stimulate capital
for home building.
I have proposed a Budget which addresses the difficult
task of restraining the pattern of excessive growth in
Federal spending. Basic to job creation in the private
sector is reducing the ever-increasing demands of the
Federal government for funds. Federal government borrowing
to support deficit spending reduces the amount of money
available for productive investment at a time when many experts
are predicting that we face a shortage of private capital in
the future. Less investment means fewer new jobs and less
production per worker.
Last month, under our balanced policies, seasonally
adjusted employment rose by 800,000. That total is almost
three times as large as the number of jobs that would be
produced by this legislation and the jobs those men and
women found will be far more lasting and productive than
would be created through another massive public works
effort.
I ask the Congress to act quickly on my tax and budget
proposals, which I believe will provide the jobs for the
unemployed that we all want.
GERALD R. FORD
THE WHITE HOUSE,
February 13, 1976.
####
GERALD FORD LIBRARY
FOR OFFICIAL USE ONLY
Business
Conditions
Report
February 13, 1976
DEPARTMENT OF COMMERCE
*
UNITED AMERICA
STATES OF
GERALD R. FORD
U.S. Department of Commerce
DOMESTIC AND INTERNATIONAL
BUSINESS ADMINISTRATION
Bureau of Domestic Commerce
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
CONTENTS
Page
INDUSTRY HIGHLIGHTS
AUTOMOBILES: January new car sales up, imports down
1-1
STEEL MILL PRODUCTS: Shipments increase in December
1-1
AUTOMOTIVE REPLACEMENT BATTERIES: Shipments down in
1-2
1975
BANKING: Bank holding companies to divest travel
agencies
1-2
AUDIO-VISUAL EQUIPMENT: Bicentennial celebration
contributes to growth
1-3
BUSINESS INDICATORS
LABOR FORCE AND UNEMPLOYMENT RATES
2-1
Manufacturing unemployment rate falls sharply as
overall unemployment drops to 7.8 percent; labor
force rises.
UNEMPLOYMENT -- SELECTED INDUSTRIES: Household Data
2-2
Unemployment rate falls in manufacturing, construction,
and trade; unemployment rises in "all others" category.
WEEKLY HOURS AND EARNINGS
2-3
Marginal increases in hours and earnings in January.
WORK STOPPAGES DURING WEEK: Workers Involved; Man-days
Idle
2-4
Fewer workers involved in work stoppages last week, but
man-days idled increased.
RETAIL SALES
2-5
Total sales drop marginally in January, but still 12
percent above year ago; nondurables sales virtually
unchanged in month as durables fall 1 percent.
i
FOR OFFICIAL USE ONLY
STEEL MILL PRODUCTS: Shipments; Wholesale Price Index;
PRICE INDICATORS
U.S. Trade
2-6
December shipments up 6 percent; WPI remains unchanged;
TUESDAY SPOT PRICES: Wholesale
7-1
imports rise, exports fall slightly.
Foodstuffs prices rise 1.6 percent in week; fractional
increase in industrial raw materials.
KEY COMMODITY PRICES: Copper; Ferrous Scrap
7-2
ENERGY
LME copper price falls 1 cent per pound; U.S. producer
price continues stable; ferrous scrap up slightly.
BOILERS: Anticipated new orders in 1976
3-1
SOFTWOOD PLYWOOD AND LUMBER PRICES
7-3
SUPPLY
February prices up; Western lumber rises 4.6 percent;
standard Western exterior sheathing up 3.8 percent from January.
STEEL RAILS: Possible capacity shortage
4-1
ISSUES
CHLORINE: Decline in output tightens caustic soda
supply
4-1
QUARTZ CRYSTALS: Strong demand creates supply problems
CONSTRUCTION AND FOREST PRODUCTS INDUSTRIES: Monongahela
4-2
Decision leads to legislation proposals
8-1
FERTILIZER: Supply continues to ease
4-3
MOBILE HOMES: New HUD regulations could further depress
8-2
sales
NEWSPAPER PRINTING: Impact of proposed OSHA lead
8-2
Page
standards
LABOR
SECONDARY MATERIALS: Recycling impediment to be investi-
8-3
gated
WAGES: Construction unions agree to pay cuts
PRODUCT LABELING: Extension granted on Drained Weight
5-1
8-3
Proposal
NEGOTIATIONS: First farm workers contracts under
new California law
POTASH: Saskatchewan continues move toward
5-2
8-4
expropriation
AUTO WORKERS: Anticipated recalls in 1976
5-2
NEW AND SETTLED MAJOR STRIKES: Affected companies and
unions, locations
5-2
For further information contact:
PRICES
Mr. Samuel B. Sherwin, 967-5491
Mr. Charley M. Denton, 967-5223
SOFTWOOD LUMBER AND PLYWOOD: Upward price trend
continues
6-1
POLYETHYLENE: Union Carbide announces increases
6-1
Enquiries and suggestions are welcomed.
PHOSPHOROUS: Higher energy costs raise prices
6-2
iii
ii
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INDUSTRY HIGHLIGHTS
AUTOMOBILES: JANUARY NEW CAR SALES UP, IMPORTS DOWN
During January 21-31 U.S. car makers delivered 279,300
units, up 17 percent from 238,300 cars sold in rebate-
influenced comparable 1975 period.
U.S. make car dealers delivered a total of 587,800
cars in January, up 27 percent from 462,800 units
sold in January 1975. Foreign car dealers sold some
90,500 units, down 21 percent from 114,500 a year
earlier.
Decline in import sales suggests that imports are
encountering same customer resistance to small cars
that is responsible for domestic factory shut-downs
planned for February to adjust inventories. (See Business
Conditions Report January 27, 1976.)
If recent upturn in truck sales continues, GMC Truck
and Coach Division plans to recall 500 hourly workers
at its Pontiac, Michigan plant. Additionally, GM
cancelled plans for a 1-week closing of an assembly
line at Pontiac.
STEEL MILL PRODUCTS: SHIPMENTS INCREASE IN DECEMBER
CURRENT Domestic: Steel mill product shipments increased
6 percent in December, 1975 to 6.1 million tons from
low of 5.7 million tons shipped in November. December
shipments were 17 percent below 7.4 million tons shipped
a year ago.
1975 total shipments at 79.96 million tons were down
27 percent from 109.47 million tons shipped in 1974.
In January 1976, raw steel production increased weekly,
averaging 2.24 million tons, up 10 percent from 2.04
million tons produced on average weekly basis in
December. Through week ended January 31, raw steel
production in 1976 was 9.82 million tons, 14 percent
below 11.47 million tons produced in comparable 1975
period.
Inventories of producing mills increased again in
December to 16.7 million tons from 16.4 million tons
as of November 30.
1-1
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o Steel mill shapes in hands of consumers continued
declining to 10.5 million tons in December from
There are 150 banks, or less than 1 percent of all
10.8 million tons in November. Steel service center
banks, that offer travel agency services. 66 percent
inventories also continued their decline in November
of these travel agency services were established with-
(latest monthly data available) to 6.5 million tons from
in the past 15 years.
6.7 million tons in October.
Activities under consideration as permissible activities
Foreign:
by BHCs are armored car services, mortgage guarantee
o
insurance, savings and loan associations, and under-
Imports of steel mill products rose in December for
writing and dealing in U.S. Government and certain
third consecutive month to 1.15 million tons, up
municipal securities.
28 percent from 0.9 million tons imported in November.
Imports in December, however, remain 40 percent below
1.91 million tons imported in December 1974.
AUDIO-VISUAL EQUIPMENT: BICENTENNIAL CONTRIBUTES TO GROWTH
1975 total imports dropped 25 percent to 12.01 million
tons from 15.97 million tons imported in 1974.
o Sales of equipment and supplies for the audio-visual
o
industry grew at average annual rate of 10 percent
Steel mill product exports in December dropped to
from 1967 to 1974, reaching $1.1 billion in 1974.
182,000 tons. This is 1 percent below previous
lowest monthly export tonnage during 1973 to 1975
CURRENT O In 1975, sales rose 14 percent over 1974, to $1.25
period and represents a 61 percent drop from the
billion. Greatest growth was in sales to community
470,000 tons exported in December 1974.
agencies, which rose 20 percent to $175 million.
Total 1975 exports of 2.95 million tons declined 49 percent
o
from 5.83 million tons exported in 1974.
Industry attributes much of this increase to preparation
of film presentations by local historical societies,
libraries, cultural centers, museums and other
AUTOMOTIVE REPLACEMENT BATTERIES: SHIPMENTS DOWN IN 1975
community organizations, focusing on the history of the
country or locality.
Shipments of replacement automotive batteries totaled
4.5 million units in December 1975, up 13.1 percent
from November, and up 17.3 percent from December 1974
shipments of 3.8 million units.
Total shipments for 1975 declined 21 percent from 1974,
from 44.4 million units to 39.3 million units.
Decline is generally attributed to less severe weather
conditions and longer life batteries.
BANKING: BANK HOLDING COMPANIES TO DIVEST TRAVEL AGENCIES
CURRENT Travel agencies have been removed from list of per-
missible Bank Holding Company (BHC) activities by the
Federal Reserve.
BHCs which acquired travel agencies after June 30, 1968
must divest them by December 31, 1980. Travel agencies
acquired before 1968 are considered grandfathered.
1-2
1-3
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BUSINESS INDICATORS
LABOR FORCE AND UNEMPLOYMENT RATES
(Seasonally Adjusted)
Million
Rate%
97
16
96
95.6
14
95
Total Labor Force
94
(Left Scale)
12
93
10
92
Mfg. Unemployment Rate
(Right Scale)
8.1
91
8
7.8
90
Total Unemployment Rate
6
(Right Scale)
89
20
4
Mfg. Labor Force
19
(Left Scale)
18.7
2
18
0
0
J FMAMJ J ASONDJ FMAMJ J ASOND J FMAM J JASONDJ FMAM. J JASOND
1973
1974
1975
1976
Source: Bureau of Labor Statistics
2-1
UNEMPLOYMENT SELECTED INDUSTRIES
WEEKLY HOURS AND EARNINGS
Household Data
(Seasonally Adjusted)
(Seasonally Adjusted)
Hours
Earnings 1967 dollars
Thousands
40
115
7,000
Total 1,
6,000
Wholesale & Retail Trade
5,467 (8.1%)*
38
110
5,000
The
1,487 (8.7%)*
Mfg Nondurable
Average Weekly Hours
36.6
4,000
(left scale)
6.88 (8.0%)*
36
105
3,000
Mfg. Durable
1,022 (8.2%)*
102.48
Average Weekly 'Real' Earnings
(right scale)
2,000
Construction
652 (15.4%)*
34
100
1,000
1,618
All Other
0
0
0
JFMAMJ J FMAMJ ASOND FMAMJ J ASONDJ FMAMJ JASOND
J A S 0 N D J F M A M J J A S 0 N D J F M A M J J A S 0 N D
1973
1974
1975
1976
1974
1975
1976
* Unemployment rate
Nonagricultural private wage and salary workers.
Source: Bureau of Labor Statistics
Source: Bureau of Labor Statistics
2-3
2-2
WORK STOPPAGES DURING WEEK
RETAIL SALES
Thousands
WORKERS INVOLVED
(Seasonally Adjusted)
400
Billions of dollars
60
300
51.5
Total
200
50
100
17
40
0
Non-durable
34.9
30
Thousands
MAN-DAYS IDLE
1000
900
800
20
700
Durable
16.7
600
500
400
10
300
200
100
77
0
J
F
M
A
M
J
J
A
S
0
N
D
J
F
M
A
M
J
J
1975
A
S
0
0
N
D
JFMAMJJASONDJFMAMJJASONDJFMAMJJASOND
1976
1974
1975
1976
Source: Department of Labor
Source: Bureau of the Census
2-4
2-5
STEEL MILL PRODUCTS
FOR OFFICIAL USE ONLY
000 Short Tons
SHIPMENTS
11,000
ENERGY
10,000
BOILERS: ANTICIPATED NEW ORDERS IN 1976
9,000
8,000
CURRENT o New orders consisting of 10,000 megawatts (MW) of
nuclear capacity and 13,000 MW of fossil capacity are
anticipated by boiler manufacturers (steam generating)
7,000
for 1976.
O
6,000
Composite projection from the four leading manufacturers
6,071
of steam-generating equipment is about equal to orders
received in early 1970s but considerably less than
5,000
record 30,000 to 40,000 MW years of 1973 and 1974.
(Estimatesof new capacity in 1975 are not yet available.)
0
Source: American Iron and Steel Institute.
Index (1967 = 100)
WHOLESALE PRICE INDEX
220
200
202.2
180
160
140
120
0
Source: Bureau of Labor Statistics.
000 Short Tons
U.S. TRADE
000 Short Tons
2,400
100
2,000
Imports (Left Scale)
800
1,600
600
1,200
1,153
THE
400
800
Exports (Right Scale)
⑉182
200
600
JASONDJ FMAMJJASONDJFMAMJ JASONDJFMAMJ JASOND
0
3-1
1973
1974
1975
1976
Source: Bureau of the Census.
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2-6
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SUPPLY
STEEL RAILS: POSSIBLE CAPACITY SHORTAGE
Steel rail production, limited to three domestic
producers, has been below capacity in recent years
despite deterioration of much installed U.S. trackage.
Due to railroad industry economics, rail was not
ordered and replaced as needed and substantial backlogs
of necessary repairs were accumulated, even by the more
solvent roads.
With the recent enactment of the $6.4 billion Railroad
Revitalization and Regulatory Reform Bill on February 5,
1976, large sums may be available to rehabilitate much
of the northeastern right-of-way, as well as to improve
the Boston-Washington high-speed passenger corridor.
$1.6 billion is also authorized to assist other rail-
roads to enlarge their rehabilitation and maintenance
programs. As a result, there could be insufficient
rail production to meet this increased demand.
On January 29, Colorado Fuel & Iron Company, one of the
three producers, announced a $60 million rail production
expansion program to increase finishing capacity by 50
percent at their Pueblo, Colorado mill. An additional
blooming mill, more heating capacity, and greater
finishing and straightening capability are contemplated
in this three-year program.
The other two producers, U.S. Steel and Bethlehem, have
announced no expansion plans but are studying options.
CHLORINE: DECLINE IN OUTPUT TIGHTENS CAUSTIC SODA SUPPLY
Chlorine, a major chemical building block, is used to
produce organic chemicals, including solvents (47
percent); vinyl chloride (19 percent); pulp and paper
(15 percent); inorganic chemicals (10 percent); and
for miscellaneous uses (9 percent).
4-1
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Chlorine, soda which is produced as a coproduct with caustic
by the electrolysis of brine, was in short supply
o
Problem is expected to diminish as production increases,
through most of 1974, but demand for chlorine fell
however a 90 to 120 day lead time is required to grow
considerably in 1975 as output of solvents, other
crystals.
chlorinated chemicals, and pulp and paper dropped.
Although watch and radio manufacturers produce many of
their own components, quartz crystals are usually
CURRENT Output of chlorine gas in 1975 amounted to 9.28 million
purchased from specialized outside sources, because
tons or 14.8 percent below 1974 production of 10.89
of the difficult production process involved.
million tons, according to Chlorine Institute.
During from same period, capacity increased 9.7 percent,
FERTILIZER: SUPPLY CONTINUES TO EASE
in 1975.
11.36 million tons in 1974 to 12.47 million tons
Until early 1975 nitrogenous and phosphatic fertilizers
As a result, capacity utilization rate fell from 95.8
were in short supply. In 1975, due to high fertilizer
percent in 1974 to 74.4 percent in 1975.
prices and lower crop prices, U.S. farmers applied less
fertilizers to crops.
Production reached a record high average of 31,274 tons
per day in November 1974, fell continuously in early
Two phosphate plants were closed due to high costs of
1975, and bottomed at 22,958 tons per day in July 1975.
operation (see Business Conditions Report, January 23,
1976).
Although output rose again in the latter part of the
December year, there was evidence of a leveling off in September-
Potash consumption in the 7-month period (July through
roughly 10 percent below the corresponding 1974 period. per
1975, when output averaged 27,406 tons day,
January) of the 1976 crop year is 16 percent below the
comparable 1975 period.
The reduction in output of chlorine resulted in
Nitrogen sales are reported to be lower than in the
similar drop in production of caustic soda, which a
1975 crop year.
continued to be in tight supply. Substitution of
ash for caustic soda in some applications has kept soda the
70 percent of all fertilizers is traditionally sold in
supply of caustic soda from becoming critical.
the February-June period of the year. Despite slow
start in 1976, some industry sources are projecting'a
12 percent increase in fertilizer sales over 1975 crop
QUARTZ CRYSTALS: STRONG DEMAND CREATES SUPPLY PROBLEM
year, with total sales equal to record level in 1974
crop year. Other industry sources feel that this is
optimistic.
Synthetic quartz crystals are used to maintain
as time base standards in electronic watches.
frequencies in citizens' band (CB) radio equipment correct and
CURRENT At the annual winter meeting of the Fertilizer Institute
in Chicago last week, an optimistic attitude toward
greatly increased sales was not generally apparent
CURRENT and Continued high consumer demand for electronic watches,
among the 900 attendees. There were indications of
rapid growth of the market for CB equipment have
price discounts being offered in order to move materials.
quartz crystals.
resulted in a temporary tight supply situation for
Price decreases were officially announced by the govern-
ment-owned Moroccan phosphate rock companies. These
Crystal buyers are reportedly double-ordering and some
reductions have been met by the Phosrock U.S. Export
hoarding has reportedly developed.
Association.
orders Producers of quartz crystals are carefully screening
and writing non-cancellation clauses into
disruption. mate channels, stop hoarding, and minimize market
contracts in an effort to keep crystals within legiti-
4-2
4-3
LIBRARY GERALD FORD
FOR OFFICIAL USE ONLY
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LABOR
WAGES: CONSTRUCTION UNIONS AGREE TO PAY CUTS
CURRENT
Some construction local unions are accepting pay cuts
or foregoing negotiated wage increases to compete for
nonunion contract bids.
In Dallas-Fort Worth area, union masonry contractors
and Bricklayer, Laborers, and Operating Engineer local
unions entered into one-year experimental agreement
which lowers wages to make union masonry bids more
competitive with nonunion bids. Agreement also affects
certain work rules and restrictive practices.
"Operation Top Notch" in Indianapolis is a cooperative
effort of construction unions, general contractors,
and suppliers to create more productive market in
central Indiana.
--
21 management and labor organizations signed the
memorandum of understanding. Unions pledged not
to strike or picket to settle jurisdictional
disputes, to cut back on overtime, and eliminate
some work rules. Contractors agreed to make work
assignments to the proper craft.
In Pittsburgh, 20 building trades unions and 200 con-
tractors joined to make union construction more com-
petitive with open shop construction in a three-state
area. Union leaders agreed to management proposals to
cut costs and increase productivity.
-- Proposals agreed upon include uniform contract
expiration dates, no organized coffee breaks,
termination for just cause, elimination of non-
working stewards, and uniform starting and quitting
times.
New York City Metropolitan Bricklayers agreed to 25
percent cut in wages and reduction in fringe benefits
in construction of small residences and shopping
centers. Seven local unions and the Associated Brick
Mason Contractors of Greater New York amended their
present three-year contract in this effort to stimulate
construction.
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NEGOTIATIONS: FIRST FARM WORKERS CONTRACTS
UNDER NEW CALIFORNIA LAW
PRICES
United Farm Workers and the Western Growers Association
SOFTWOOD LUMBER AND PLYWOOD: UPWARD PRICE TREND CONTINUES
fornia agricultural bargaining law.
settled the first contracts negotiated under new Cali-
CURRENT During January, softwood lumber and plywood mill prices
Three-year pacts cover 2,000 lettuce workers at Inter-
continued upward trend that began in October 1975.
harvest, Inc., and 500 workers at Meyer Tomatoes.
Bellwether softwood lumber price movements are:
United Farm Workers reached identical contracts with 14
other smaller growers employing 20 to 30 workers each.
-- average of eleven Western softwood lumber items
increased 29 percent from $124 per thousand
Workers in lowest job classifications will receive $3.10
board feet (MBF) in October to $160 per MBF in
and $2.95 at other companies.
per hour, compared to previous $2.37 at Interharvest
early February; and
-- average price of two Southern pine lumber items
of New agreements provide second and third year increases
increased 20 percent from $121 per MBF in October
12.5 cents per hour, and benefits in health, acci-
to $145 per MBF in early February.
dent, and vacations.
Bellwether softwood plywood mill price changes are:
AUTO WORKERS: ANTICIPATED RECALLS IN 1976
-- 1/2-inch standard exterior sheathing increased
26 percent from $130 per thousand square feet in
October (MSF) to $164 per MSF in early February; and
Some 180,000 auto workers are presently on indefinite
layoff, 32,650 from Ford, 137,000 from General Motors,
-- interior 1/4-inch AD sanded mill prices increased
8,300 from Chrysler, and 1,773 from American Motors.
24 percent from $134 per MSF in October to $166
per MSF in early February.
Anticipated 1976 production of 8.5 million passenger
cars should result in recall of 140,000 workers,
o Price increases are attributed to improved housing
publication. leaving 40,000 unemployed, according to an industry
market, reduced seasonal production, and apparent
anticipated curtailment of raw material supply from
U.S. National Forests resulting from the Monongahela
Court Decision. (See related article in Issues.)
NEW AND SETTLED MAJOR STRIKES
(Source: Federal Mediation and Conciliation Service)
POLYETHYLENE: PRICES TO INCREASE
New:
There have been no new strikes in major
and/or significant category since last
Polyethylene (PE) is used for film and sheet, bottles
week's report.
and containers, furniture, housewares, laboratory
ware, toys, disposables, wire and cable coatings,
Settled:
Peabody Coal Company and the SEIU
etc.
Louisville, Kentucky (Muhlenberg
O
County and Hopkins City, Kentucky,
Although PE production in 1975 amounted to 7.2 billion
and Ohio)
pounds, 18.6 percent lower than in 1974, production
1,160 employees (Bargaining unit consists
and sales progressively improved on a monthly basis,
of 40 employees. Another 1,120 employees
during 1975 and into 1976.
honored picket line) ; 1/21/76 through 2/4/76
City of Newark and the Newark Teachers Union
Newark, New Jersey
4,000 employees; 2/2/76 through 2/8/76
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PRICE INDICATORS
CURRENT Effective March 1, Union Carbide will raise low density
TUESDAY SPOT PRICES
PE prices by 9 percent or 2.5 cents to 29.5 cents per
pound for general purpose grade. High density PE will
be raised by 8 percent or 2 cents to 30.5 cents per
1967=100
WHOLESALE
pound for general purpose grade.
300
This Week
Last Week
Union Carbide attributes increase to continuing
Year Ago
higher costs for hydrocarbon materials, energy,
290
9 Foodstuffs
200.0
196.8
237.6
production and distribution. (Three years ago
13 Industrial Raw
183.8
183.1
180.8
ethylene, raw material for PE, was priced at 3 cents
Materials
per pound and is now 11 cents per pound.)
280
These increases could affect polypropylene (PP), a
9 Foodstuffs
plastic material which competes in some of the same
270
markets and is priced at 26 cents per pound. (Propylene,
the raw material for PP, price was 3 cents per pound
three years ago and is now around 7.5 cents per pound)
260
PHOSPHOROUS: HIGHER ENERGY COSTS RAISE PRICES
250
Elemental phosphorous is used to produce high purity
240
phosphoric acid from which sodium phosphates (used
for detergents, food, toothpaste and animal feeds) are
derived. Merchant sales are relatively small.
230
Production of phosphorous in recent years has exceeded
500,000 short tons. No new capacity has been added in
220
a number of years.
Industry has been facing environmental problems and
higher energy costs. Producers have passed on in-
210
creases in energy costs on several occasions since
price decontrol.
200
"""
CURRENT o Monsanto Chemical Company and other producers have
13 Industrial Raw Materials
announced an increase of 1.7 percent or $1.00 per 100
pounds, bringing bulk material price to $61.00 per
190
100 pounds and $66.00 per 100 pounds for drums in
carload lots.
180
Producers attribute these increases to higher costs of
energy used in phosphorous production.
170
160
150
0
J ASONDJFMAMJJASONDJFMAMJJASOND
1974
1975
1976
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Source: Department of labor
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KEY COMMODITY PRICES
SOFTWOOD PLYWOOD AND LUMBER PRICES
COPPER PRICES
Dollars per
(As of First Week in Month)
Thousand Square Feet
PLYWOOD
(Wirebar Basis)
200
Cents per Pound
Tuesday Price Each Week
Interior
180
160
This Week
Last Week
Year Ago
Summer
1/4" A.D. Sanded
166
140
160
164
U.S. Producers
63
63
63
LME
53.8
53.8
55.1
120
140
100
120
80
U.S. Producers
100
80
60
Exterior Sheathing
1/2" Standard Western
40
London Metal Exchange
60
20
0
1973
1974
1975
1976
0
FERROUS SCRAP
Dollars per
(Composite Price, No.1 Heavy Melting Steel
Thousand Board Feet
LUMBER
Scrap Pittsburgh, Chicago, Philadelphia)
200
Dollars per Gross Ton
Friday Price Each Week
180
/
Western
160
(11 items)
160
This Week
Last Week
Year Ago
160
140
76.83
76.17
82.83
145
140
120
120
100
100
80
Southern Pine
80
60
(2 items)
60
40
0
20
1973
1974
1975
1976
Source: Compiled by BDC/OBRA from Random Lengths
0
J A S 0 N D J F M A M J J A S 0 N D J F M A M J J A S 0 N D
1974
1975
1976
Source: American Metal Market
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ISSUES
CONSTRUCTION AND FOREST PRODUCTS INDUSTRIES:
MONONGAHELA DECISION LEADS TO LEGISLATION PROPOSALS
U.S. National Forests annually supply approximately
25 percent of U.S. harvest of softwood sawtimber.
O In August, 1975, U.S. 4th Circuit Court of Appeals
upheld lower court decision halting harvest of any
but dead, dying or mature trees on the Monongahela
National Forest.
O
Decision, based on literal intepretation of the 1897
Organic Act, prompted U.S. Forest Service to halt
timber sales from all National Forest lands within
4th District, covering Virginia, West Virginia, North
Carolina and South Carolina. (See Business Conditions
Reports, January 9, 1976 and October 3, 1975.)
o
Similar decision by District Court in Alaska in
December 1975 halted mid-way a 50-year timber harvest-
ing contract on the Tongass National Forest.
U.S. Forest Service estimates that national applica-
tion of Monongahela Decision would reduce harvest on
U.S. forests by 75 percent annually.
CURRENT o On February 4 a bill (S.2926) to regulate Federal
timber management was introduced. Intent of bill
is to end disputes and controversies resulting from
recent interpretation of the Organic Act of 1897.
o
Key provisions would greatly restrict practice of
modern forest management by Forest Service professional
staff.
o
National Forest Products Association estimates that
this bill would reduce current levels of timber growth
and harvest on National Forests by 60 percent.
o
U.S. Department of Agriculture has prepared a draft
bill with the same intent as S. 2926. Draft bill,
not yet introduced, provides guidelines for the Forest
Service, but encourages, rather than restricts, use of
modern management techniques.
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MOBILE HOMES: NEW HUD REGULATIONS COULD FURTHER
New lead regulations would apply to approximately
DEPRESS SALES
1,600 newspaper plants or 20 percent of all U.S. news-
papers.
Mobile home shipments peaked in 1972 at 575,940 units.
0
Industry analysts view these standards as unnecessarily
Shipments in 1973 declined 2 percent to 566,920, and
stringent and feel that they could ultimately force re-
dropped 42 percent in 1974 to 329,300 units.
placement of the lead process. This would force news-
paper conversion at costs in excess of $25 million and
1975 shipments of 215,920 units was lowest total for
eliminate jobs for many employees who are not presently
any year since 1964, 34 percent below 1974 shipments
in truly hazardous occupations, according to the analysts.
and 63 percent under 1972.
Factors contribuing to 1975's severe decline include
SECONDARY MATERIALS: RECYCLING IMPEDIMENT TO BE INVESTIGATED
national recession, limited and expensive financing
(primarily in first half of year), energy situation,
growing inventory of used and repossessed units, and
For a number of years the secondary materials industries
some loss of consumer confidence in product.
had sought legislation to remove the present Interstate
Commerce Commission rate structure which they considered
CURRENT Industry and Government forecasts indicate 1976 ship-
a major economic barrier to expanded recycling.
ments rising 39 percent to 300,000 units.
CURRENT Pursuant to the Railroad Revitalization Act, ICC is
A primary industry concern for 1976 is possible impact
required to determine whether present rate structure
of new Department of Housing and Urban Development
is unjustly discriminatory or unreasonable with
mobile home standard, to become effective in June 1976,
respect to recyclable or recycled materials.
as well as impact of proposed new Federal Trade
If the structure is determined to be unjustly discrim-
Commission regulation.
inatory or unreasonable, ICC is further required to
Industry contends that some provisions of the FTC
issue orders to rectify the deficiencies.
regulation overlap the already approved HUD standard
and will unduly raise mobile home costs, thus
diminishing their market appeal.
PRODUCT LABELING: EXTENSION GRANTED ON
DRAINED WEIGHT PROPOSAL
NEWSPAPER PRINTING: IMPACT OF PROPOSED OSHA LEAD STANDARDS
In November, Food and Drug Administration issued a pro-
posal requiring canned fruit and vegetable processors
to indicate drained weight on product labels. (See
While most newspapers use phototypesetting and offset
Business Conditions Report, November 7, 1975.)
and plastic plates as technological replacements for
the lead process, lead continues to be used by most of
FDA, estimating that proposal compliance would result in
the nation's largest daily newspapers.
$16 million in increased product costs, requested
comments and data from interested parties to allow
CURRENT
Occupational Safety and Health Administration (OSHA)
it to evaluate costs/benefits to consumers.
has proposed a set of standards for airborne contami-
nants, particularly lead, which could adversely affect
CURRENT o Responding to request from the National Canners
the employment of typesetters in the U.S. newspaper
Association (NCA), FDA has granted a 90 day extension
of original February 5 comment filing deadline.
publishing industry.
The OSHA lead standards include:
o A reliable over-all compilation and analysis of
data could not be completed by close of original
monitoring the workplace with particular instru-
comment period, according to NCA.
mentation;
installing engineering controls and requiring
personal protective equipment, clothing and
laundering, all at company expense; and
compulsory medical examinations, taken
during company time.
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POTASH: SASKATCHEWAN CONTINUES MOVE
TOWARD EXPROPRIATION
Canadian Province of Saskatchewan has announced inten-
tions of expropriating some or all potash companies,
whose assets are valued at about $1 billion, 70
percent owned by U.S. companies.
Announcement followed several years of higher taxes
and legal battles between Province and potash companies.
(See Business Conditions Report, December 12, 1975.)
Province has passed two enabling bills. One would set
up provincially owned company which would presumably
run the expropriated companies; the other permits
expropriation of the companies and payments.
CURRENT
Industry sources report that the company which may be
first in line for expropriation may not be International
Minerals & Chemicals Corporation, which would go to
court, but may be another of the nine mines which
would more readily accept payment for expropriation.
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FOREGOING RESTRICTIONS MAY BE REMOVED
90 DAYS AFTER PUBLICATION
AMERICANA REVOLUTION WENTENNINAL
U.S. DEPARTMENT OF COMMERCE
DOMESTIC
1776-1976
BUSINESS I AND ADMINIST ADMINISTRATION S
@
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