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    "title": "American Society of Personnel Administration, Miami, FL, May 19. 1966",
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        "Gerald R. Ford Congressional Papers",
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        "Budget deficits",
        "Economics",
        "Inflation (Finance)",
        "Taxation"
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    "ocrText": "The original documents are located in Box D20, folder \"American Society of Personnel\nAdministration, Miami, FL, May 19. 1966\" of the Ford Congressional Papers: Press\nSecretary and Speech File at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. The Council donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nSpeech Cards for Miami and Monterey\nmay 19 + 21\nJOHNSON'S SO*CALIED PROSPERITY\n1. Flows from such ideas as cutting taxes when government is running a\ndeficit.\n2. Possible for Kennedy and Johnson Administrations to adopt B highly\nexpansionist policies because the Eisenhower Administration had wrung all the\ninflationary pressuresmи out of the economy.\n3. In 1965 everything changed because the economy became overheated.\na. Overheated because of annual budget deficits, increases in the\nmoney supply, substantial increases in credit, and heavy spending on Great\nSociety programs and the Vietnam War.\nb. The Eisenhower \"legacy\" had run out.\nGERALD FORD\n2/ Cards for Miami and Monterey\nECON_OMY OVERHEATED BUT...\n1. Administration has adopted wait-and-see attitude\n2. Administration admonishes *** housewives, busine ssmen, and state and\nlocal officials to cutienback on spending.\nBY While Administration marks time, industry is plagued by shortagesmix\nof skilled workers and raw materials, increases in overtime, and the need to\nuse obsolescent facilities and equipment.\nDEMAND, COSTS AND PRICES ARE GOING UP\n1. Managers find wages and prices are being bid up; marginal machinery\nhas to be put into operation; overtime and maintenance costs are rising;\nrate of productivity is falling off.\nDigitized from Box D20 of The Ford Congressional Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library\n3/ Cards for Miami and Monterey\nBOOM CARRIES WITH IT THE SEEDS OF RECE S SION\n1. This boom is no exception.\n2. Longer we wait to deal with it the more serious the consequences could be.\nDEFICITS HAVE BECOME A WAY OF LIFE WITH THE JOHNSON ADMINISTRATION\n1. It's shocking to find this administration headed toward large deficits\nat a time when the economy is overheated and runaway inflation of the push-pull\nvariety is more than just a threat.\n2. Policy of chronic deficits can only lead to financial disaster.\n3. Prosperity in America does not depend on deficit spending.\na. Had prosperity in 20's without deficits--had surpluses then.\nb. Had slump in 30's despite big deficit spending.\nGERALD ADVHEIT\n4/ Speech 6ards for Miami and Monterey\nGOVERNMENT AN ART BUT ALSO A BUSINESS\n1. What think of a business that goes into red every year?\n2. What think of division in a business that serves fewer people each year\nbut keeps adding to its payroll?\na. That's Ag Dept, which has 20 per cent more employes today than\nin 1960 although farm population has declined 20 per cent since then.\nb/ Ag\nDept. has 22 per cent bigger budget for fiscal\n1967 than it had in 1960.\n5/ Speech Cards for Miami and Monterey\nAIM'NS\nCHIEF WEAPON AGAINST INFIATION HAS BEEN WAGE-PRICE GUIDEPOSTS\n1. The guideposts are not really voluntary--stockphle dumping\nthreatened to blackmail such industries as steel and aluminum.\n2. Government uses the guideposts to make villains of labor and management\nand thus diverts attention from its own inflationary actions.\nGUIDEPOSTS INEFFECTIVE WHEN INFLATION GATHERS ANY REAL FOR CE\n1. Wholesale industrial price index has gone up 1.5 per cent in last\nsix months--an annual rate of 3 per cent.\n2. The index covers ne arly 2,000 items--and there's hardly a major\ncategory where prices have not risen.\nGERALD 1848817\n6/ Speech Cards for Mimmi and Monterey\nADM'N ALMOST CERTAINLY WON'T BE ABLE TO HOLD WAGE GUIDEPOST AT 3.2% FOR 167--\n1. The 3.2 per cant is unrealistic wage guidepost for 167 because of\nall the consumer price rises.\n2. It's not only unrealistic but unfair and unenforceable. Could only\nbe called fair if prices were stable.\nCRITICISM OF WAGE-PRICE GUIDEPOSTS DOES NOT MEAN IMBOR AND MANAGEMENT SHOULD\nIGNORE THE PUBLIC INTEREST--\n1. Labor and Management should consider public interest carefully B\nwhenever they make major decisionaf affecting wages and prices.\n26 But lasting assurance of price stability can come only from the\ndiscipline of a free market and from the responsible actions of business and\nlabor leaders acting in atmosphere generated by sound and impartial government.\nArr. 8 Virgin Pole\nBun of Int. Revenue\nMansfull\ntheat, great man\nTHURSDAY, MAY 19, 1966\nSPEECH BEFORE AMERICAN SOCIETY OF PERSONNEL ADMINISTRATION, MIAMI, FLORIDA\nIt is often said in politics that \"you can't beat prosperity.\"\nThis is not a political speech, but I'd like to talk a bit about\nthe status prosperity--the four 1 kind of overheating presperity we're in The experiencing 10mmg right now. you of amms\nan fridar It with The Inv unemployment frgunds -the scarcity of labon. But, also\nflowe-from the economic theories of one John Maynard Keynes, the The ancrease\nPithaps Arme 7 the good + prohap Ame of The bad we RM now Typenencing flows form\nin the white\nauthor of such unconventional ideas as cutting taxes at a time when a Price Index,\nThe Empremer Price\ngovernment is running a deficit.\nIndex,\nThe thinking behind such a tax cut, of course, is to stimulate the\neconomy by boosting purchasing power and generating job-creating forces\nwhich ultimately also produce fresh tax revenue.\nIt is in line with Keynesian philosophy that the Administrations in\npower since 1961 have pursued expansionary policies, allowing the supply\nof money and credit to grow at rates in excess of the growth in national\nproductivity.\nBeneficial tax changes were made in the last 5 years.\nsupport\nIn 1962, the administration initiated and Congress enacted a speedup\nFORD\nn\n(MORE)\nGERALD\nLIBRARY\n-2-\nAMERICAN SOCIETY SPEECH\nin depreciation allowances to encourage capital investment and productivity\nincreases. This was based on a principle Republism leaders have advocated\nmany economists of some political\nfor decades. Obstacles to investment were reduced. The result was\nincreased economic growth and more jobs.\nIn 1964, the administration recommended an income tax cut and Congress\nwith i-partisan support\napproved it. The tax cut was accompanied by temporary restraint in\nmonty spending. impored Again, by consumer Congressional demand action was in stimulated The Wouse and of curbs benate on\ngovernment\ninvestment were loosened.\nDuring the 1961-65 period, chronic balance of payments deficits and\noutflows of gold tended to lessen inflationary pressures at home by\nexporting them abroad.\nBut in 1965 all of this changed.\nInaderlatty\nranking specials in the Johnn almontation preatity confided\nIt changed because the economy became overheated. One of the highest\nPrior to 1961, the Eisenhower Administration had removed all the\ninflationary pressures from the economy. of It was this inflation-free were memod\nfrom the end f The Korean war the cost of driving increases\neconomy that the Democratic administrations began to feed with expansionist,\nKeynesian policies nearly 5½ years ago.\nBERALD FORD LIBRABY\n(MORE)\n-3-\nAMERICAN SOCIETY SPEECH\nBy late 1965, annual budget deficits, increases in the money supply,\nsubstantial increases in credit, and heavy spending on Great Society\nprograms and the Vietnam War had created inflationary stresses and strains.\nThe Eisenhower legacy had run out.\nThe economy has become overheated, and the Administration had been\nreally effective to mut the growing crims,\nunwilling to do anything but Valk about it. The Administration has\ninsisted on adopting a wait-and-see policy while admonishing housewives,\nthe businessmen, and state and local government officials to cut back on\nThe President reals with pride about reductions in his budget In F.Y.1967 totally about\nspending. Belatedly, the Administration has also talked about cutting 1350 another in\nHe does not mention that the same badget, calls politically for $3.2 consitive Whom have\nfederal spending but hasn't done much about it. There are been thriats\nof a second was time tax increase in 1966 but apparently mo from\nWhat is happening in the country while the Administration talks and decision,\nwaits and ees?\nIndustry is plagued with shortages of people in various skill categories,\nshortages of raw materials, increases in overtime, and the need to make\ngreater use of obsolescent facilities and equipment.\nManagers find that wages and prices are being bid up; marginal, high-\ncost, low-efficiency machinery has to be put into operation; overtime costs\n(MORE)\n-4-\nAMERICAN SOCIETY SPEECH\nare increasing; maintenance costs are going up as equipment is overused;\nand the rate of productivity gains is beginning to fall off.\nDemand is rising, and costs are going up.\ninevitably mine,\nWhen demand and costs go up, prices also have to go up.\nspeculate\ntackle\nI will not tell you why I feel the Administration is reluctant to\nthe Aerious crisis 2\nto deal with inflation. This is not political speech.\nBut I don't think anyone can deny that we are now in the grip of\ninflation because of the continuey excessively expansionary fiscal and monetary\npolicies of this Administration.\nAnd I don't think anyone can deny that the longer we wait to cope with\ninflation, the more serious its consequences can be both in the short pull the long hand\nEvery boom carries with it the seeds of recession. The boom we are The wally\nHestory tells no The higher the \"peah\" (the more the inflation), the deepers\n(or the sharper\nriding now is certainly no exception.\nthe decline)\nThis Administration relies heavily on government spending to stimulate\nthe economy, and The obviously does not fear deficits. In fact, this\nAdministration appears to look upon federah deficits as something desirable on the\nbasis\nground that they expand the money supply and stimulate the economy.\nGERALD FORD LIBRARY\n(MORE)\n-5-\nAMERICAN SOCIETY SPEECH\nFiscal policy--with government incurring a deficit or running up a\nsurplus--can be effective in encouraging or restraining the private economy.\nThe shocking thing is to find an administration headed toward ever larger\ndeficits at a time when the economy is obviously overheated and runaway\ninflation of the classic push-pull variety is far more than just a threat.\nalso\nRepublicans have always favored flexible budget policies. A balanced\nbudget should not be given priority over the economic health of the country.\non the mething needs of the nation.\nYou may recall that the Eisenhower Administration incurred a deficit\nin the recession year of 1958. This was a deliberate move to pull us out\nof that recession as quickly as possible. The 1958 recession was relatively\nshort-lived, and this was no doubt due at least in part to the Eisenhower\nAdministration's decision to accelerate government spending as an anti-\nrecession tool.\nBut there is no reason to believe that prosperity in America must be\nbased on government spending by the federal pressument,\nDuring the 1920's, the federal budget ran a surplus and federal debt\nwas retired every year. Yet this was a period of prosperity.\n(MORE)\n-6-\nAMERICAN SOCIETY SPEECH\nIn the 1930's, the government operated in the red every year but was\nof probably The most severe\nunable to spend the country out of the longest economic slump in history.\nGovernment spending is merely one tool of economic policy. It should\nbe used judiciously and with careful attention to timing.\nA policy of chronic deficits can only lead to financial disaster. In The\npast 6 years we have had 6- with The total being 35 billion with span\nGovernment is an art but it is also a business business that\nprovides services to the people.\nWhat would you think of a business that costs more and more to operate\nevery year and keeps going into the red?\nWhat would you think of a division in a business which serves fewer\npeople each year but keeps adding to its payroll and to its overall budget?\nThe population of this country has grown tremendously since 1960, but\nthe number of farmers in the nation has fallen by 20 per cent.\nWRL,\ndespite the fact that one out offive farm people have fled the farm since\n1960, the Agriculture Department has 20 per cent more employees today and\na 22 per cent larger budget for fiscal 1967 than it had in 1960. Figure\nthat one out, if you can.\n(MORE)\n-7-\nAMERICAN SOCIETY SPEECH\nTo me it also is fantastic that the present administration proposes\nof 2 emphasize more\nto spend $3.2 billion more on Great Society programs at a time when this\n-\nnation is fighting a billion-dollar-a-month war halfway around the world.\nMistakenly, many people believe that defense spending is the major\nwhen the cash bulget-total uppenditures from all accunts no The\ncost of government. This just isn't true And it's also not true that bench month.\nnon-military spending cannot be cut. It can be cut and cut sharply if this\nhold the Airl m Total copenditures as it\nAdministration really wants to reduce its expenditures.\nfaces increased melitary costs in Vist Mam\nBut let's get back to Inflation and what this Administration has\nprofessed to do about it.\nThis Administration's principal weapon against inflation has been its\nwage-price guideposts.\nThe 1966 Economic Report of the President states: \"The general guide-\npost for wages is that the annual rate of increase of total employee\ncompensation (wages and fringe benefits) per man-hour worked should equal\nthe national trend rate of increase in output per man-hour.\"\nThe 1966 guidepost of 3.2 per cent is the same as for 1965 and for 1964.\nThe figures for the two earlier years were based on five-year moving averages\nGERALD\nLIBRAR,\nof productivity improvement.\n(MORE)\n-8-\nAMERICAN SOCIETY SPEECH\nIf the five-year moving average had been used for the 1966 guidepost,\nthe figure would have been 3.6 per cent.\nIt should be obvious why union officials got sore when the 1966 guide-\npost was announced.\nSome union leaders charge that the frozen guidepost is \"morally\ndishonest.\"\nSome businessmen see the Administration emphasis on the guidepost as\na step toward wage and price controls that would suppress inflationary\npressures at the cost of economic freedom and efficiency.\nThere is no question that year-to-year variations in productivity\nare rather erratic. This is true historically, and it is true in today's\nguns-and-butter economy.\nThe truth is that wage and price controls, voluntary or mandatory,\nThey never have of never will,\njust don't work. And, let's face it, wage-price\n1\nare\nguidepostsis an informal, unofficial form of wage and price controls.\nThe fallacy in the wage-price guidepost form of control is that it\ntreats the symptoms of inflation and not the causes.\n(MORE)\n-9-\nAMERICAN SOCIETY SPEECH\nWhen demand is pumped up and the economy is running close to full\ncapacity, wages (the price of labor) and the prices for raw materials will\nbe bid up by the forces of competition. As a result, costs and prices\nwill rise.\nThe worst feature of the guidepost is that it does violence to the\neconomic and political principles of a free nation.\nThe guidepost isn't really voluntary--not when a President threatens\nto dump a stockpiled metal on the market as blackmail to force an industry\nto reverse a pricing decision.\nThe guidepost isn't really voluntary--not when the Administration\ncastigates individuals, or businesses, or unions.\nThe guidepost isn't really voluntary--not when the Administration\nthreatens anti-trust action or a tax inquiry against a company to force\nit to roll back a price increase.\nThe guidepost sounds great in theory. In practice, it is employed\narbitrarily. It is used to whip certain industries and certain executives\ninto line.\n(MORE)\n-10-\nAMERICAN SOCIETY SPEECH\nThe guidepost makes villains of labor and management and diverts\nattention from government policies which feed inflation.\nThe Administration points the finger at industry and labor instead of\nexplaining why it does not reduce its heavy deficit spending.\nincreases in nm - oniting spending STATE\nNION\nSo not only are the guideposts largely ineffective, but they provide\nantiting + discrimunatory\nthe Administration with an alibi for its own excesses.\nThere is no question that this Administration has been unfair in\napplying the guideposts.\nBest proof of that is the fact that it blackjacked the steel and\naluminum industries into rolling back prices but did recent\nnothing for shample about\nincreases in the price of sulphuric acid, coal, shoes and tires.\nAn Administration official recently commented that \"we could not\npossibly go after every price increase even if we wanted to.\"\nof descrimunating\nThat is just the point; the wage-price guideposts are ineffective\nwhen inflation gathers any real force.\nThe guideposts have little usefulness, if any, under conditions of\nyord\nexcess general demand.\nSARY\n(MORE)\n-11-\nAMERICAN SOCIETY SPEECH\nTake a look at what's been happening, as revealed by the wholesale\nprice index for industrial commodities--that is, all items other than farm\nproducts and processed foods.\nThe wholesale industrial index has gone up 1.5 per cent in the last\nsix months. That's an annual rate of 3 per cent.\nThere is hardly a major category where prices have not risen--and the\nindex covers nearly 2,000 items.\nThe chief exceptions are automobiles\nand some other consumer durable goods\nNext year the Administration almost certainly will not be able to\ncontinue the wage increase guidepost at 3.2 per cent. The 3.2 per cent\nfigure is generally regarded as entirely unrealistic for 1967 because of\nall the rises in consumer prices.\nIt's not only unrealistic. It's unfair and unenforceable. It could\nbe called fair only if prices were generally stable. As you and I know full\nwell, they are not.\nI do not mean to imply by these criticisms of the wage and price\nguideposts that business and labor should blithely ignore the public interest.\n(MORE)\n-12-\nAMERICAN SOCIETY SPEECH\nOn the contrary, I think labor and management should carefully weigh the\npublic interest every time they make a major decision affecting wages and\nprices.\nBut it seems to me undebatable that lasting assurance of price\nstability can come only from the discipline of a free market and responsible\nactions by business and labor leaders acting in an atmosphere generated by\nsound and impartial government.\n###\nIn closing 1 Beng Franklin\nDante - The hottest places m hell are\nreserved for there who in a period of moral\ncrisis remain nuctral\n2 suggest - -give your time, talent, treased\n2\nRE: Guidelines of Guideposts\nsee miltish-speeches\nfor original with revisions.\nTHURSDAY, MAY 19, 1966\nSPEECH BEFORE AMERICAN SOCIETY OF PERSONNEL ADMINISTRATION, MIAMI, FLORIDA\nIt is often said in politics that \"you can't beat prosperity.\"\nThis is not a political speech, but I'd like to talk a bit about\nprosperity--the kind of prosperity we're experiencing right now.\nIt flows from the economic theories of one John Maynard Kaynes, the\nauthor of such unconventional ideas as outting taxes at a time when a\ngovernment is running a deficit.\nwhich ultimately Office also produce fresh tax revenue.\nThe thinking behind such a tax cut, of course, Copy is to stimulate the\neconomy by boosting purchasing power and generating job-creating forces\nIt is in line with Keynesian philosophy that the Administrations in\npower since 1961 have pursued expansionary policies, allowing the supply\nof money and credit to grow at rates in excess of the growth in national\nproductivity.\nBeneficial tax changes were made.\nQERALD FORD VIBRARY\nIn 1962, the administration initiated and Congress enacted a speedup\n(MORE)\n-2-\nAMERICAN SOCIETY SPEECH\nin depreciation allowances to encourage capital investment and productivity\nincreases. This was based on a principle Republican leaders have advocated\nfor decades. Obstacles to investment were reduced. The result was\nincreased economic growth and more jobs.\nIn 1964, the administration recommended an income tax cut and Congress\napproved it. The tax out was accompanied by temporary restraint in\ngovernment spending. Again, consumer demand was stimulated and curbs on\ninvestment were loosened.\nDuring the 1961-65 period, chronic balance of payments deficits and\noutflows of gold tended to lessen inflationary pressures at home by\nexporting them abroad.\nBut in 1965 all of this changed.\nIt changed because the economy became overheated.\nPrior to 1961, the Eisenhower Administration had removed all the\ninflationary pressures from the economy. It was this inflation-free\neconomy that the Democratic administrations began to feed with expensionist,\nKeynesien policies nearly 54 years ago.\nGERALD FORD HORRARY\n(MORE)\n-3-\nAMERICAN SOCIETY SPEECH\nBy late 1965, annual budget deficits, increases in the money supply,\nsubstantial increases in credit, and heavy spending on Great Society\nprograms and the Vietnem War had created inflationary stresses and strains.\nThe Eisenhower legacy had run out.\nThe economy has become overheated, and the Administration had been\nunwilling to de anything but talk about it. The Administration has\ninsisted on adopting a wait-and-see policy while admonishing housewives,\nthe businessmen,end state and local government officials to cut back on\nspending. Belatedly, the Administration has also talked about cutting\nfederal spending but heen't done much about it.\nWhat is happening in the country while the Administration talks and\nweits and sees?\nIndustry is plagued with shortages of people in various skill categories,\nshortages of raw materials, increases in evertime, and the need to make\ngreater use of obsolescent facilities and equipment.\nManagers find that wages and prices are being bid up; marginal, high-\ncost, lew-efficiency mechinery has to be put into operation; overtime costs\n(MORE)\n-4-\nAMERICAN SOCIETY SPEECH\nare increasing; maintenance costs are going up as equipment is overused;\nand the rate of productivity gains is beginning to fall off.\nDemand is rising, and costs are going up.\nWhen demand and costs go up, prices also have to go up.\nI will not tell you why I feel the Administration is reluctant to act\nto deal with inflation. This is not a political speech.\nBut I don't think anyone can deny that we are now in the grip of\ninflation because of the excessively expansionary fiscal and monetary\npolicies of this Administration.\nAnd I don't think anyone can deny that the lenger we wait to cope with\ninflation, the more serious its consequences can be.\nEvery boom carries with it the seeds of recession. The been we are\nriding now is certainly no exception.\nThis Administration relies heavily on government spending to stimulate\nthe economy and it obviously does not fear deficits. In fact, this\nAdministration appears to look upon deficits as something desirable on the\nground that they expand the money supply and stimulate the economy.\nGERALD ANVERIT\n(MORE)\n-5-\nAMERICAN SOCIETY SPEECH\nFiscal policy--with government incurring a deficit or running up a\nsurplus--can be effective in encouraging or restraining the private economy.\nThe shocking thing is to find an administration headed toward ever larger\ndeficits at a time when the economy is obvieusly overheated and runsway\ninflation of the classic push-pull variety is more than just a threet.\nRepublicans have always favored flexible budget policies. A balanced\nbudget should not be given priority over the economic health of the country.\nYou may recall that the Eisenhower Administration incurred a deficit\nin the recession year of 1958. This was a deliberate move to pull us out\nof that recession as quickly as possible. The 1958 recession was relatively\nshort=lived, and this was no doubt due at least in part to the Eisenhower\nAdministration's decision to accelerate government spending as an anti-\nrecession tool.\nBut there is no reason to believe that prosperity in America must be\nbased on government spending.\nDuring the 1920's, the federal budget ran a surplus and federal debt\nwas retired every year. Yet this was a period of prosperity.\n(MORE)\n-6-\nAMERICAN SOCIETY SPEECH\nIn the 1930's, the government operated in the red every year but was\nunable to spend the country out of the longest economic slump in history.\nGovernment spending is merely one tool of economic policy. It should\nbe used judiciously and with careful attention to timing.\nA policy of chronic deficits can only lead to financial disaster.\nGovernment is an art but it is also a business--a business that\nprovides services to the people.\nWhat would you think of a business that costs more and more to operate\nevery year and keeps going into the red?\nWhat would you think of a division in a business which serves fewer\npeople each year but keeps adding to its payroll and to its overall budget?\nThe population of this country has grown tremendously since 1960, but\nthe number of farmers in the nation has fallen by 20 per cent. Well,\ndespite the fact that one out offive farm people have fled the farm since\n1960, the Agriculture Department has 20 per cent more employees today and\na 22 per cent larger budget for fiscal 1967 than it had in 1960. Figure\nthat one out, if you can.\n(MORE)\n-7-\nAMERICAN SOCIETY SPEECH\nTo me it also is fantastic that the present administration proposes\nto spend $3.2 billion more on Great Society programs at a time when this\nnation is fighting a billien-dollar-a-menth ver halfway around the world.\nMistakenly, many people believe that defense spending is the major\ncost of government. This just isn't true. And it's also not true that\nnon-military spending cannot be cut. It can be cut and cut sharply if this\nAdministration really wants to reduce its expenditures.\nBut let's get back to inflation and what this Administration has\nprofessed to do about it.\nThis Administration's principal weapon against inflation has been its\nwage-price guideposte.\nThe 1966 Economic Report of the President states: \"The general guide-\npost for wages is that the annual rate of increase of total employee\ncompensation (wages and fringe benefits) per man-hour worked should equal\nthe national trend rate of increase in output per man-hour.\"\nThe 1966 guidepost of 3.2 per cent is the same as for 1965 and for 1964.\nThe figures for the two carlier years were based on five-year moving averages\nof productivity improvement.\n(MORE)\n÷\nAMERICAN SOCIETY SPEECH\nIf the five-year noving average had been used for the 1966 guidepost,\nthe figure would have been 3.6 per cent.\nIt should be obvieus why union officials got sore when the 1966 guidd-\npost was announced.\nSome union leaders charge that the frozen guidepost is \"morally\ndishonest.\"\nSome businessmen see the Administration emphasis on the guidepost as\na step toward wage and price controls that would suppress inflationary\npressures at the cost of economic freedom and efficiency.\nThere is no question that year-te-year variations in productivity\nare rather erratic. This is true historically, and it is true in today's\nguns-and-butter economy.\nThe truth is that wage and price controls, voluntary or mandatory,\njust don't work. And, let's face it, this Administration's vaga-price\nguidepost is an informal, unofficial form of wage and price controls.\nThe fallacy in the wage-price guidepost form of control is that it\ntreats the symptoms of inflation and not the causes.\nGERALD FORD LIBRARY\n(MORE)\n-9-\nAMERICAN SOCIETY SPEECH\nWhen demand is pumped up and the economy is running close to full\ncapacity, wages (the price of labor) and the prices for raw materials will\nbe bid up by the forces of competition. As a result, costs and prices\nwill rise.\nThe worst feature of the guidepost is that it does violence to the\neconomic and political principles of a free nation.\nThe guidepost isn't really voluntary--not when a President threatens\nto dump a stockpiled metal on the market as blackmail to force an industry\nto reverse a pricing decision.\nThe guidepost isn't really voluntary--not when the Administration\ncastigates individuals, or businesses, or unions.\nThe guidepost isn't really voluntary--not when the Administration\nthreatens anti-trust action or a tax inquiry against a company to force\nit to roll back a price increase.\nThe guidepost sounds great in theory. In practice, it is employed\narbitrarily. It is used to whip certain industries and certain executives\ninto line.\n(MORE)\n-10-\nAMERICAN SOCIETY SPEECH\nThe guidepost makes villains of labor and management and diverts\nattention from government policies which feed inflation.\nThe Administration points the finger at industry and labor instead of\nexplaining why it does not reduce its heavy deficit spending.\nSo not only are the guideposts largely ineffective, but they provide\nthe Administration with an alibi for its own excesses.\nThere is no question that this Administration has been unfair in\napplying the guideposts.\nBest proof of that is the fact that it blackjacked the steel and\naluminum industries into rolling back prices but did nothing about recent\nincreases in the price of sulphuric acid, coal, shoes and tires.\nAn Administration official recently commented that \"we could not\npossibly go after every price increase even if we wanted to.\"\nThat is just the point; the wage-price guideposts are ineffective\nwhen inflation gathers any real force.\nThe guideposts have little usefulness, if any, under conditions of\nexcess general demand.\n(MORE)\n-11-\nIRICAN SOCIETY SPEECH\"\nTake a look at what's been happening, as revealed by the wholessle\nprice index for industrial commoditiss--that is, all items other than farm\nproducts and processed foods.\nThe wholessle industrial index has gone up 1.5 per cent in the last\nsix months. That's an annual rate of 3 per cent.\nThere is hardly a major category where prices have not risen--and the\nindex covers nearly 2,000 items. The chief exceptions are automobiles\nand some other consumer durable goods.\nNext year the Administration almost certainly will not be able to\ncontinue the wage increase guidepost at 3.2 per cent. The 3.2 per cent\nfigure is generally regarded as entirely unrealistic for 1967 because of\nall the rises in consumer prices.\nIt's not only unrealistic. It's unfatr and unenforceable. It could\nbe called fair only if prices were generally stable. As you and I know full\nwell, they are not.\nI do not mean to imply by these criticisms of the wage and price\nguideposts that business and labor should blithely ignore the public interest.\n(MORE)\n-12-\nAMERICAN SOCIETY SPEECH\nOn the contrary, I think labor and management should carefully weigh the\npublic interest every time they make a major decision affecting wages and\nprices.\nBut it seems to me undebatable that lasting assurance of price\nstability can come only from the discipline of a free market and responsible\nactions by business and labor leaders acting in an atmosphere generated by\nsound and impartial government.\n# # #\nTORD is LIBRARY 07V839\nNEWS\nCONGRESSMAN\nGERALD R. FORD\nHOUSE REPUBLICAN LEADER\nRELEASE\nFOR RELEASE MAY 19, 1966, THURS. - 6:30 P.M.\nSPEECH EXCERPTS--AMERICAN SOCIETY FOR PERSONNEL ADMINISTRATION, MIAMI, FLORIDA\nWage and price controls, voluntary or mandatory, just don't work. And,\nlet's face it, this administration's wage-price guideposts are an informal,\nunofficial form of wage and price controls.\nThe fallacy in the wage-price guidepost is that it treats the symptoms of\ninflation and not the causes.\nWhen demand is pumped up and the economy is running close to full capacity,\nwages (the price of labor) and the prices for raw materials will be bid up by the\nforces of competition. As a result, costs and prices will rise. That is what is\nhappening right now.\nThe worst feature of the guidepost is that it does violence to the economic\nand political principles of a free nation.\nThe guidepost isn't really voluntary--not when a President threatens to dump\na stockpiled metal on the market as blackmail to force an industry to reverse a\npricing decision.\nThe guidepost isn't really voluntary--not when the Administration castigates\nindividuals, or businesses, or unions.\nThe guidepost isn't really voluntary--not when the Administration threatens\nantitrust action or a tax inquiry against a company to force it to roll back a\nprice increase.\nThe guidepost sounds great in theory. In practice, it is employed arbitrarily.\nIt is used to whip only certain industries and certain executives into line.\nThe guidepost makes villains of labor and management and diverts attention\nfrom government policies which feed inflation.\nThe Administration points the finger at industry and labor instead of\nexplaining why it does not reduce its heavy deficit spending.\nSo not only are the guideposts largely ineffective but they provide the\nAdministration with an alibi for its own excesses.\n***\nThis administration has been unfair in applying the guideposts.\nBest proof of that is that it blackjacked the steel and aluminum industries\ninto rolling back prices but did nothing about recent increases in the price of\nsulphuric acid, coal, shoes and tires.\n(MORE)\n-2-\nSPEECH EXCERPTS--INFLATION AND THE GUIDEPOSTS\n***\nAn Administration official recently was quoted as saying, \"We could not\npossibly go after every price increase even if we wanted to.\"\nThat is just the point; the wage-price guideposts are ineffective when\ninflation gathers any real force.\nThe guideposts have little usefulness, if any, under conditions of excess\ngeneral demand.\n***\nTake a look at what's been happening, as revealed by the wholesale price\nindex for industrial commodities (all items other than farm products and processed\nfoods).\nThe wholesale industrial index has gone up 1.5 per cent in the last six months.\nThat's an annual rate of 3 per cent.\nThere is hardly a major category where prices have not risen--and the index\ncovers nearly 2,000 items. The chief exceptions are automobiles and some other\nconsumer durable goods.\nNext year the Administration almost certainly will not be able to continue\nthe wage increase guidepost at 3.2 per cent. The 3.2 per cent figure is generally\nregarded as an entirely unrealistic wage increase yardstick for 1967 because of all\nthe rises in consumer prices.\nIt not only is unrealistic. It is unfair and unenforceable. It could be\ncalled fair only if prices were generally stable. As you and I know full well,\nthey are not.\n***\nI do not mean to imply by these criticisms of the wage and price guideposts\nthat business and labor should blithely ignore the public interest. On the\ncontrary, I think labor and management should carefully weigh the public interest\nevery time they make a major decision affecting wages and prices.\nBut it seems to me undebatable that lasting assurance of price stability can\ncome only from the discipline of a free market and from responsible actions by\nbusiness and labor leaders acting in an atmosphere generated by sound and impartial\ngovernment.\n***\nFiscal policy--with government incurring a deficit or running up a surplus--\ncan be effective in encouraging or restraining the private economy. The shocking\nthing is to find an administration headed toward ever larger deficits at a time\nwhen the economy obviously is overheated and runaway inflation of the classic\npush-pull variety is more than just a threat.\n###"
}