Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Source Description
This file contains material relating to Credibility Gap.
Scholar Source Context
Document identity
localId
4526016
label
Sesquicentennial Alumni Celebration, University of Michigan, March 2, 1967
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
4526016
sourceUrl
contentType
document
title
Sesquicentennial Alumni Celebration, University of Michigan, March 2, 1967
description
This file contains material relating to Credibility Gap.
citationUrl
collections
Gerald R. Ford Congressional Papers
Speeches
subjects
Central Intelligence Agency. 12/4/1981-
Economics
Ethics
Inflation (Finance)
Social security
Universities and colleges
Vietnam War, 1961-1975
iiifBase
thumbnailUrl
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
4526016
coverageEndDate
logicalDate
1967-03-31
month
3
year
1967
coverageStartDate
logicalDate
1967-03-01
month
3
year
1967
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
url
mediaId
9f607c67dc49bcf6
ocrText
The original documents are located in Box D22, folder "Sesquicentennial Alumni
Celebration, University of Michigan, March 2, 1967" of the Ford Congressional Papers:
Press Secretary and Speech File 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. The Council 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States of America his copyrights in all of his unpublished writings in National Archives collections.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 D22 of The Ford Congressional Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library
SPEECH AT SESQUICENTENNIAL ALUMNI CELEBRATION, U. OF MICH.
THURS., MARCH 2, 1967
"A CRISIS OF CONFIDENCE"
ANY ANALYSIS OF TODAY'S POLITICAL PICTURE IN AMERICA
OF NECESSITY REVOLVES ABOUT A SINGLE PHRASE-FOUR WORDS--
"A CRISIS OF CONFIDENCE."
THE AMERICAN PEOPLE ARE CONSTANTLY ENGAGED IN A
SEARCH FOR TRUTH--FOR POLITICAL TRUTH, FOR MORAL TRUTH,
FOR TRUTH IN GOVERNMENT, FOR VERITIES IN OUR INTERNATIONAL
RELATIONS.
TODAY THEY ARE DEEPLY TROUBLED BECAUSE THE TRUTH,
ALWAYS ELUSIVE IN PUBLIC AFFAIRS, IS HIDDEN IN A THICKET
FORD
OF CONTRADICTIONS AND MISLEADING STATEMENTS BY GOVERNMENT
LIBRARY
SPOKESMEN.
-2-
TO USE THE EVERYDAY LANGUAGE OF THE POLITICAN, THE
AMERICAN PEOPLE HAVE BECOME PAINFULLY AWARE OF WHAT HAS
BEEN CALLED "THE CREDIBILITY GAP." THIS WAS A LARGE FACTOR
IN REPUBLICAN SUCCESSES IN THE 1966 ELECTIONS. UNLESS
THERE IS A DRAMATIC CHANGE, IT WILL BE IMPORTANT IN 1968.
PRESIDENT JOHNSON CONSIDERS THE CREDIBILITY GAP TO
HAVE BEEN SO DAMAGING THAT HE IS ENGAGED IN A CONCERTED
EFFORT TO BRIDGE IT, PARTICULARLY AS IT APPLIES TO HIM
PERSONALLY.
THIS FIRST BECAME OBVIOUS WHEN THE PRESIDENT ON
JANUARY 10 DELIVERED A STATE OF THE UNION MESSAGE FULL
admissions
had been male
OF CONFESSIONS THAT HE IAD MADE MISTAKES AND SOME OF HIS
PROGRAMS WEREN'T WORKING VERY WELL. AS WE SAY IN
MICHIGAN, IT WAS MODEL CHANGEOVER TIME.
BERALD FORD LIBRARY
-3-
THE 1967 MODEL OF THE PRESIDENCY PURPORTS TO BE THAT
OF A HUMBLE CHIEF EXECUTIVE WHO IS SEEKING THE ADVICE
AND HELP OF OTHERS. IS THIS A CHANGE OF SUBSTANCE? IT
REMAINS TO BE SEEN WHETHER THE PEOPLE WILL BUY THE NEW
White House
LBJ MODEL OR WHETHER THEY WILL SEE IT AS THE SAME
VEHICLE WITH JUST NEW GRILLEWORK.. A NEW FRONT.
I WILL SIMPLY ADD THAT ALL OF THE PRESIDENTIAL
MESSAGES RECEIVED BY THE CONGRESS THIS YEAR INDICATE
THERE HAS BEEN NO FUNDAMENTAL CHANGE IN THE PRESIDENCY
OR IN THE WAY THE OFFICE IS BEING USED. THE THRUST
TOWARD INCREASED FEDERAL POWER CONTINUES.
THE "CREDIBILITY GAP" SEPARATES THE JOHNSON REGIME
FROM INFORMED PUBLIC OPINDON. PEOPLE WHO ANALYZE
PUBLIC PROBLEMS AND INFORMATION--PEOPLE WHO DISSECT
GERALD LIBRARY
-4-
THE STATEMENTS AND ACTIONS OF PUBLIC OFFICIALS--FIND
THEMSELVES INCREASINGLY ALIENATED FROM THIS ADMINISTRATION.
THE CREDIBILITY GAP CONTINUES; THE CRISIS OF CONFIDENCE
GROWS.
WITNESS THE ADMINISTRATION'S RECEIVED STATEMENTS AND
ACTIONS IN CONNECTION WITH THE CONTROVERSY OVER CIA
FINANCING OF STUDENT AND OTHER PRIVATE ORGANIZATIONS.
1967
IN PALO ALTO, CALIFORNIA, ON FEBRUARY 21,,VICE-PRESIDENT
HUBERT HUMPHREY SAID THAT CIA FINANCING OF STUDENT GROUPS
REPRESENTED "ONE OF THE SADDEST TIMES, IN REFERENCE TO
PUBLIC POLICY, OUR GOVERNMENT HAS HAD." HUMPHREY ADDED
HE WAS "NOT AT ALL HAPPY ABOUT WHAT THE CIA HAS BEEN DOING."
HEW SECRETARY JOHN W. GARDNER SAID ON THE SAME DATE
-5-
THAT IT WAS "A MISTAKE" FOR THE CIA TO HAVE INVOLVED
ITSELF COVERTLY WITH EDUCATIONAL GROUPS.
TWO DAYS LATER--ON FEBRUARY 23--PRESIDENT JOHNSON
UPHELD THE CIA'S CONDUCT IN SECRETLY PROVIDING MILLIONS
OF DOLLARS TO PRIVATE U.S. ORGANIZATIONS THAT OPERATE
ABROAD. THE PRESIDENT ENDORSED A PRELIMINARY REPORT BY
A THREE-MAN ADMINISTRATION COMMITTEE. THAT COMMITTEE--
WHICH INCLUDED SECRETARY GARDNER--PRAISED THE CIA'S
SUPPORT OF PRIVATE GROUPS AND SAID THE CIA HAD ACTED IN
LINE WITH "NATIONAL POLICIES ESTABLISHED BY THE NATIONAL
SECURITY COUNCIL IN 1952 THROUGH 1954." ON FEBRUARY 27,
THE VICE-PRESIDENT REVERSED HIMSELF AND VIGOROUSLY
DEFENDED THE CIA. HE SAID IT "HAS DONE NOTHING BUT
FOLLOW THE POLICIES OF HIGHER AUTHORITY."
-6-
WHAT "HIGHER AUTHORITY" WAS MR. HUMPHREY SPEAKING
ABOUT? THE PRESIDENT HAS REFUSED TO SAY WHETHER HE HAD
PERSONAL KNOWLEDGE OF THE CIA'S FINANCING OF STUDENT
GROUPS. BUT THE COMMITTEE HE NAMED TO "INVESTIGATE"
THE CIA CONTROVERSY REPORTED THAT THE PROGRAM HAD THE
APPROVAL OF THE TRUMAN, EISENHOWER, KENNEDY AND JOHNSON
ADMINISTRATIONS. AND SEN. ROBERT F. KENNEDY, SPEAKING
FROM HIS EXPERIENCE AS ATTORNEY GENERAL, SAID BOTH
PRESIDENTS KENNEDY AND JOHNSON KNEW ABOUT THE STUDENT
TIES TO THE CIA.
IS THE CREDIBILITY GAP WIDENING? I'LL LET YOU BE
THE JUDGE.
FORD
MAY I REMIND YOU THAT ON JANUARY 30 THE ADMINISTRATION GERA ARARY
ADMITTED IT HAS BEEN CONCEALING ROUGHLY HALF OF OUR
-7-
AIRCRAFT LOSSES IN VIETNAM--THAT ACTUALLY THEY WERE TWICE
THE NUMBER PREVIOUSLY publicty REPORTED. Preventy THE ADMINISTRATION
EMPLOYED THE DEVICE OF COUNTING ONLY THE PLANES DESTROYED
IN COMBAT.
THE CRISIS OF CONFIDENCE ALSO EXTENDS TO THE CONGRESS.
IN A SOUNDING OF PUBLIC OPINION AT THE HEIGHT OF PUBLICITY
OVER THE POWELL AND DODD CASES, THE GALLUP POLL INDICATED
A MAJORITY OF THE AMERICAN PEOPLE BELIEVE THAT MISUSE OF
PUBLIC FUNDS IS COMMON PRACTICE BY MEMBERS OF CONGRESS.
FORD LIBRARY
THE PUBLIC'S LACK OF CONFIDENCE IN CONGRESS UNDERSCORES
in the House of Ropresentation
THE NEED FOR IMMEDIATE ESTABLISHMENT OF A SELECT COMMITTEE
ON ETHICS AND STANDARDS TO SEE THAT THE CONDUCT OF HOUSE
The Senate has such a committee.
MEMBERS IS KEPT ABOVE REPROACH. AND REORGANIZATION OF THE
CONGRESS TO MAKE IT MORE EFFICIENT AND EFFECTIVE.
Without violating protocol + comity between the House of benate, 2 believe
2 can suggest The Anote would ao well to brath new vigor into its committee.
-8-
THE TWO MAJOR ISSUES IN ALL RECENT-YEAR NATIONAL
ELECTIONS IN AMERICA HAVE BEEN PEACE AND PROSPERITY.
BOTH OF THESE ISSUES FIGURED IN THE 1966 RESULTS AND
CAN BE EXPECTED TO SHAPE THE OUTCOME OF THE 1968 ELECTION.
WHAT IS THE POLITICAL PICTURE TODAY?
I BELIEVE THERE IS A GOOD CHANCE A REPUBLICAN WILL
BE ELECTED PRESIDENT IN 1968 AND. THAT THE REPUBLICAN
PARTY WILL CAPTURE CONTROL OF THE HOUSE OF REPRESENTATIVES.
I AM NOT GOING TO RATE THAT CHANCE AS 50-50, OR 60-40,
OR GIVE ANY ODDS, BUT REPUBLICAN PROSPECTS DEFINITELY
LOOK Encouraging
MUCH WILL DEPEND ON WHAT HAPPENS TO THE ECONOMY IN
THE NEXT 18 TO 20 MONTHS. MANY VOTES WILL SWING ON ANY
LIBRARY
-9-
SIGNIFICANT DEVELOPMENT IN VIETNAM AND THE PROGRESS--OR
LACK OF IT--TOWARD AN HONORABLE AND MEANINGFUL PEACE THERE.
VIETNAM IS AN EXPLOSIVE AND UNPREDICTABLE ISSUE. IT
IS AN ISSUE IN THE SENSE THAT THE AMERICAN PEOPLE MAY
DECIDE ONLY A NEW PRESIDENT CAN STEER THE WAR TO THE
CONFERENCE TABLE.
VIETNAM GAVE RISE TO THE CREDIBILITY GAP. VARIOUS
ADMINISTRATION STATEMENTS AND ACTIONS INVOLVING VIETNAM
INITIALLY ESTABLISHED THE CREDIBILITY GAP AND THEN
WIDENED IT. THIS--AND NOT THE QUESTION OF STAYING THE
COURSE IN VIETNAM--HAS PRODUCED THE DEEP FRUSTRATION
FELT BY THE AMERICAN PEOPLE, A CRISIS OF CONFIDENCE AT
A TIME OF INTERNATIONAL CRISIS FOR THE NATION.
FORD i LIBRARY GERALD
-10-
THE CREDIBILITY GAP HAD ITS BEGINNING WHEN / TOP
e
have
ADMINISTRATION SPOKESMAN WHO HAD MADE FREQUENT TRIPS TO
VIETNAM REPEATEDLY UNDERESTIMATED THE GRAVITY, SCOPE
AND DURATION OF WHAT HAS BECOME THE THIRD LARGEST FOREIGN
WAR IN AMERICAN HISTORY.
IRRESPECTIVE OF THE MOTIVES BEHIND EACH MOVE, THE
ADMINISTRATION HAS ON AT LEAST THREE OTHER OCCASIONS
KINDLED HOPES FOR PEACE IN THE AMERICAN PEOPLE ONLY TO
HAVE THOSE HOPES WITHER AWAY IN DISAPPOINTMENT. TO EMPLOY
AN APPROPRIATE CLICHE, THE AMERICAN PEOPLE HAVE FELT
"LET DOWN."
THE FIRST SUCH INSTANCE WAS THE BOMBING PAUSE IN
EARLY 1966. THE SECOND WAS THE HONOLULU CONFERENCE IN
FEBRUARY, 1966, AND THE IMPRESSION AMONG THE AMERICAN
FORD LIBRARY
-11-
PUBLIC THAT INCREASED MILITARY PRESSURE ON THE COMMUNIST
FORCES WOULD BRING NEGOTIATIONS. THE THIRD WAS THE
1966
JOHNSON TRIP
--JUST BEFORE THERELECTION--TO
MANILA, AUSTRALIA AND VIETNAM.
WHETHER OR NOT IT WAS SO INTENDED, THESE ACTIONS
AROUSED GREAT EXPECTATIONS IN THE AMERICAN PEOPLE. WHAT
HAPPENED? IN EFFECT, NOTHING. RESULT: DISILLUSIONMENT,
FRUSTRATION AND DISENCHANTMENT. THAT IS WHY 57 PER CENT
OF THE AMERICAN PEOPLE DISAPPROVE OF MR. JOHNSON'S HANDLING
OF THE VIETNAM SITUATION, ACCORDING TO THE LATEST LOUIS
HARRIS POLL ON THE QUESTION.
LET'S LOOK AT THE PROSPERITY ISSUE.
THERE IS NO QUESTION THAT THE MASSIVE TAX CUTS OF
FORD LIBRARY
-12-
1964 AND 1965 TOUCHED OFF A BOOM. BUT THERE ALSO IS
NO QUESTION IN MY MIND THAT THE JOHNSON ADMINISTRATION
DOOMED THE BOOM BY FAILING TO SLOW DOWN THE ECONOMY
SUFFICIENTLY WHEN IT BECAME OVERHEATED IN LATE 1965 AND
EARLY 1966.
THERE ARE SEVERAL WAYS TO APPLY RESTRAINTS TO THE
ECONOMY. ONE IS TO RAISE TAXES AND TAKE FROM THE AMERICAN
CITIZEN FUNDS HE MIGHT OTHERWISE SPEND. ANOTHER IS TO
CUT FEDERAL SPENDING. A THIRD IS TO RAISE THE COST OF
BORROWING, PUSH UP INTEREST RATES TO DISCOURAGE EXPANSION
IN THE ECONOMY.
THE JOHNSON ADMINISTRATION OFFERED NEITHER AN INCOME
in 1966
TAX INCREASE NOR CUTS IN DOMESTIC SPENDING
LAST
COOL OFF THE OVERHEATED ECONOMY. CONCERNED ABOUT STRONG
TO FORD LIBRARY
-13-
INFLATIONARY PRESSURES, THE FEDERAL RESERVE BOARD IN
DECEMBER, 1965, MADE ITS FIRST MAJOR MOVE IN A CAMPAIGN
TO SHRINK THE MONEY SUPPLY. IT INCREASED THE REDISCOUNT
RATE, AND THE NATION'S BANKS RAISED THEIR LENDING RATES
CORRESPONDINGLY.
AS WE MOVED THROUGH 1966, THE ADMINISTRATION FAILED
TO ACT DECISIVELY TO HALT INFLATION. IN CONSEQUENCE,
THE FEDERAL RESERVE BOARD CONTINUED TO TURN UP THE SCREWS
ON INTEREST RATES. THE RESULT: THE HIGHEST INTEREST
RATES IN 40 YEARS, A DEARTH OF MORTGAGE MONEY, AND A
VIRTUAL DEPRESSION IN THE HOMEBUILDING INDUSTRY.
PURSUING POLICIES WHICH FED INFLATION AND HELPED TO
PUSH UP INTEREST RATES, THE ADMINISTRATION STIMULATED
RALO FORD LIBRARY
THE ALREADY OVERHEATED ECONOMY THROUGH HEAVILY INCREASED
-14-
DOMESTIC AS WELL AS MILITARY SPENDING AND WENT INTO THE
SHORT-TERM MONEY MARKET TO BORROW THE MONEY TO DO IT.
BY COMPETING WITH PRIVATE BORROWERS, THE ADMINISTRATION
ADDED TO THE UPWARD PUSH ON INTEREST RATES.
MEANTIME THE COST OF LIVING ROSE SHARPLY, HURTING
ALL AMERICANS BUT ESPECIALLY THOSE ON FIXED INCOMES,
particularly
THE AGED
THE PAST IS PROLOGUE WHEN WE CONSIDER THE PROSPERITY
ISSUE IN THE CONTEXT OF TODAY'S POLITICAL PICTURE. THE
NEXT LINE IN OUR DRAMA IS: WHERE DO WE GO FROM HERE?
FACED WITH HUGE DEFICITS, DO WE CUT DOMESTIC SPENDING
OR DO WE RAISE INCOME TAXES?
FORD LIBRARY
WE KNOW THAT THE 3.5 PERCENT INCREASES IN THE CONSUMER
and 1967 HAVE
PRICE INDEX IN 1966
LAID THE FOUNDATION FOR BIG WAGE
-15-
Revise
INCREASES IN 1967 AS THE WORKER STRIVES TO CATCH UP
THIS IN TURN THREATENS COST-PUSH INFLATION AND ADDITIONAL
PRICE INCREASES--PROBABLY WELL IN EXCESS OF THE 2.5 PERCENT
PREDICTED IN THE PRESIDENT'S RECENT ECONOMIC MESSAGE.
BUSINESS PROFITS NOW ARE SHOWING SIGNS OF DECLINE.
INTEREST RATES ARE EASING. BUT WHILE THIS IS HELPFUL
interest
The U.J.
"AT HOME," IT WAS THE HIGH RATES, OF 1966 THAT ATTRACTED
HOT MONEY FROM ABROAD AND THAT KEPT OUR BALANCE OF PAYMENTS
win
SITUATION FROM BECOMING MORE CRITICAL. THUS, THE GOLD
OUTFLOW SITUATION PROMISES TO WORSEN RATHER THAN IMPROVE
THIS YEAR.
THERE IS SOFTENING IN SOME AREAS OF CONSUMER DEMAND,
AS SHOWN BY THE LATEST UNIVERSITY OF MICHIGAN SURVEY OF
CONSUMER ATTITUDES.
-16-
INDUSTRIAL PRODUCTION HAS FALLEN TO A TWO-YEAR LOW.
AUTOMOBILE SALES HAVE SLUMPED. LAYOFFS HAVE HIT MORE
THAN 25,000 AUTO INDUSTRY WORKERS. AND MAY I REMIND
YOU THAT THE AUTOMOBILE INDUSTRY IS THE BELLWETHER OF
THE ECONOMY.
WITH SAG AND DRAG IN THE ECONOMY AT THE SAME TIME
STEEL
THAT BARGAINING TALKS LOOM IN
2
AND OTHER
n
MAJOR INDUSTRIES, THIS COUNTRY IS FACING THE PROSPECT OF
COST-PUSH INFLATION ACCOMPANIED BY some POSSIBLE economic adversity RECESSION in the near future
THERE 15A STRONG POSSIBILITY, ITY, THEREFORE, THAT THE
JOHNSON
WILL
WITHORAW
ITS
REQUEST
FOR A
INGOME
TAX
SURTAX
%
SIMPLY
FORD is LIBRARY GERALD
IT IS BECOMING INCREASINGLY APPARENT TO THE AMERICAN timed
to say the least,
PEOPLE THAT THE
-
ADMINISTRATION IS DOING A POOR In JOB
-17-
This
OF MANAGING THE NATION'S ECONOMY.
WAS certainly
REFLECTED IN THE 1966 ELECTION RESULTS. IT ADDS UP TO
LACK OF CONFIDENCE.
THE PRESIDENT'S CURRENT ECONOMIC REPORT MINIMIZES
THE EFFECTS OF 1966 INFLATION, OF COURSE, BUT THE TRUTH
APPEARS IF YOU STUDY THE TABLES IN THE APPENDIX.
THESE FIGURES SHOW THAT AVERAGE SPENDABLE WEEKLY
EARNINGS OF THE AMERICAN WORKER FELL FROM $88.06 IN 1965
TO $87.82 IN 1966. IN OTHER WORDS, HIS STANDARD OF
FORD LIBRARY
LIVING ACTUALLY DECLINED SOMEWHAT.
FARMERS SUFFERED AS THE FARM PARITY RATIO--THE RELATION-
SHIP OF FARM INCOME TO THE PRICES FARMERS MUST PAY--
DROPPED FROM 83 IN FEBRUARY, 1966, TO 77 IN DECEMBER. asof
last feb. 15, it had slipped further to 74.
dropped
NET INCOME PER FARM SLID FROM $5,310 IN THE FIRST
QUARTER TO $4,660 IN THE FOURTH. AND FARM PROPRIETORS'
INCOME DECLINED FROM $17 BILLION IN THE FIRST QUARTER
TO $15.2 BILLION IN THE FOURTH.
THE UNEMPLOYMENT RATE AMONG NON-WHITE WORKERS ROSE
FROM 7 PERCENT IN JANUARY, 1966, TO 7.6 PERCENT IN DECEMBER.
HOUSING STARTS FELL FROM 1,600,000 IN JANUARY TO THE
LEVELS OF 20 YEARS AGO.
MANUFACTURERS' INVENTORIES CLIMBED BY $9 BILLION.
ALMOST THREE TIMES THE RATE OF THE PRECEDING FOUR YEARS.
TAXPAYERS WERE HURT AS INFLATION AND HIGH INTEREST
RATES FORCED GOVERNMENTS TO PAY STEEPLY TO BORROW MONEY
FOR PUBLIC IMPROVEMENTS--AND THE INTEREST ON THE NATIONAL
LIBRAR
-19-
DEBT BALLOONED TOWARD To $14 BILLION A YEAR. an all Time high -the
interest payment ancrease reflecting the mountry debt of higher interest nates.
THE FRUITS OF INFLATION STILL ARE BEING FELT
POLITICALLY. IRONICALLY, SOME POLITICAL LEADERS ARE
SEEKING POLITICAL BENEFIT FROM IT. I REFER TO THE
PRESIDENT'S CALL FOR AN AVERAGE INCREASE OF 20 PERCENT
IN SOCIAL SECURITY BENEFITS AND TO SEN. ROBERT KENNEDY'S
PROPOSAL FOR A 50 PERCENT BENEFITS BOOST.
THERE MUST BE IMPROVEMENTS IN OUR SOCIAL SECURITY
SYSTEM. WE NEED AN INCREASE IN BENEFITS TO BRIDGE THE
BIG"COST OF LIVING GAP" THAT WIDENED BROADLY IN 1966.
IT IS ALSO TIME THE AMERICAN PEOPLE FACED UP TO THE
FACT THAT SOCIAL SECURITY BENEFITS MUST BE PAID FOR.
ALD FORD LIBRARI
IT IS TIME FOR A SEARCHING EXAMINATION OF THE ORIGINAL
-20-
INTENT OF THE SOCIAL SECURITY ACT AND THE BASIC PURPOSES
OF THE SOCIAL SECURITY SYSTEM.
I MENTION THIS TODAY BECAUSE THE QUESTION OF FISCAL
RESPONSIBILITY HAS NOW BECOME CRITICAL IN OUR HANDLING
OF SOCIAL SECURITY PROBLEMS. THE POLITICAL IMPLICATIONS
some
OF THE EXTRAVAGANT SOCIAL SECURITY PROPOSALS NOW BEFORE
US ARE OBVIOUS.
IS THERE A POT OF GOLD AT THE END OF THE RAINBOW?
THE TRUTH IS THAT THE YOUNG WORKER HAS ALREADY BEEN LEFT
FAR BEHIND IN THE SOCIAL SECURITY SYSTEM.
OUR YOUNG PEOPLE ARE BEING ASKED TO SHOULDER AN
INCREASINGLY HEAVY PAYROLL TAX TO PAY FOR INCREASED
BERRILO FORD LIBRARY
SOCIAL SECURITY BENEFITS, KNOWING FULL WELL THAT THEY
-21-
WILL GET "THE SHORT END OF THE STICK." EVIDENCE OF THIS
IS A TAX FOUNDATION STUDY WHICH INDICATES THAT A 21-YEAR-
OLD AMERICAN PUTTING IN 44 YEARS OF WORK AND PAYING INTO
THE SOCIAL SECURITY FUND AT TODAY'S TAX LEVELS WOULD PAY
$32,496 IN TAXES AND INTEREST TO THE FUND. BASED ON A
LIFE EXPECTANCY OF 13 YEARS AFTER THAT WORKER REACHES
AGE 65, HE OR SHE WOULD COLLECT $19,704 IN BENEFITS.
IF PRESIDENT JOHNSON'S PROPOSAL IS ENACTED INTO LAW,
THE FEDERAL PAYROLL TAX WILL HAVE TO BE RAISED TO 11.6
PERCENT (COMBINED EMPLOYEE-EMPLOYER RATE) ON $10,800 OF
INCOME.
PROPOSALS FOR INCREASED FEDERAL PAYROLL AND INCOME
FORD & LIBRARY
TAXES ARE CONTRIBUTING TO WHAT I CALL THE DISINCENTIVE
SICKNESS IN AMERICA. THEY ALSO HELP CREATE AN IMBALANCE
-22-
IN OUR ECONOMY THAT RESULTS WHEN TAXATION TAKES FAR TOO
LARGE A PORTION OF OUR GROSS NATIONAL PRODUCT.
IN MY REPUBLICAN STATE OF THE UNION MESSAGE LAST
JANUARY 19, I CALLED FOR A "NEW DIRECTION" IN FEDERAL
POLICY-MAKING.
THIS "NEW DIRECTION" IS SYNONYMOUS WITH A NEW FEDERAL
PHILOSOPHY, A NEW APPROACH TO SOLVING MANY OF THIS NATION'S
DOMESTIC PROBLEMS. THE KEY IS SHARING OF FEDERAL INCOME
TAX REVENUE WITH THE STATES AND CITIES.
OTHER FACETS ARE TAX CREDITS TO INDUSTRY TO PROMOTE
MASSIVE ATTACKS ON AIR AND WATER POLLUTION AND STRUCTURAL
UNEMPLOYMENT, THE LATTER THROUGH LARGE-SCALE ON-THE-JOB
TRAINING.
GERALD FORD LIBRABY
-23-
STILL OTHER EMBRYO PROGRAMS INCLUDE THE POSSIBLE
HARNESSING OF INDUSTRIAL KNOW-HOW FOR AN ATTACK ON
ASSORTED URBAN ILLS, THE PROMOTION OF A KIND OF "CITIES
INDUSTRY" EMPLOYING PROBLEM-SOLVING TECHNIQUES SIMILAR
TO THOSE IN THE SPACE INDUSTRY. THE POSSIBILITIES ARE
ALMOST ENDLESS.
THIS NEW PHILOSOPHY, THIS "NEW DIRECTION," IS PART
OF THE POLITICAL PICTURE TODAY. WE CURRENTLY ARE IN
TRANSITION. WE ARE MOVING TOWARD THIS REVOLUTIONARY
CHANGE - - AND THAT CHANGE HAS VAST RAMIFICATIONS FOR THE
TWO MAJOR POLITICAL PARTIES AND THE FEDERAL BUREAUCRACY.
EARLY IN MY REMARKS I SAID THERE IS A GOOD CHANCE
ERALD
AMERICAN VOTERS WILL ELECT A REPUBLICAN PRESIDENT IN 1968
-24-
AND WILL TURN CONTROL OF THE HOUSE OVER TO THE REPUBLICAN
PARTY.
MY OPTIMISM ABOUT A GOP WHITE HOUSE VICTORY IS BASED
NOT MERELY ON HOPE BUT ON HARD FACTS. IT EMANATES FROM
THE 1966 ELECTION RESULTS--THE FACT THAT THE GOP WON
EITHER GOVERNORSHIPS OR SENATE SEATS IN 29 STATES WITH
WELL OVER THE 270 ELECTORAL VOTES NEEDED TO WIN THE WHITE
HOUSE. AS A MATTER OF FACT, THE REPUBLICAN PARTY ELECTED
TOP CANDIDATES IN STATES WITH A TOTAL OF 326 ELECTORAL
VOTES.
WE ADDED EIGHT GOVERNORSHIPS, FOR A TOTAL OF 25. WE
a net gain 1
PICKED UP THREE SENATE SEATS AND, 47 HOUSE SEATS. OUR
HOUSE GAIN BROUGHT US TO 187, JUST 31 SHORT OF A MAJORITY.
WE NOW ARE WORKING TO ACHIEVE THAT MAJORITY IN 1968.
-25-
I SPOKE AT THE OUTSET ABOUT "A CRISIS OF CONFIDENCE"
WHICH IS BESETTING THE AMERICAN PEOPLE. IN THE FINAL
ANALYSIS, THIS CRISIS IS CAUSED BY A LACK OF CONFIDENCE
IN THE GOVERNMENT ITSELF, A LACK OF CONFIDENCE IN OUR
ACTIONS AND ACHIEVEMENTS AS A NATION.
I SUBMIT, THEREFORE, THAT THE AMERICAN PEOPLE ARE
SEARCHING FOR A NEW DIRECTION, A MOVEMENT AWAY FROM
GOVERNMENT BY FEDERAL GRANT, A CURE FOR THE DISINCENTIVE
SICKNESS, A REBIRTH OF THE SPIRIT THAT EARLY MARKED
AMERICA FOR GREATNESS.
END
FORD is LIBRARY
FOR RELEASE IN THURSDAY P.M.'s, MARCH 2, 1967
AN:ADDRESS BY REP. GERALD R. FORD, R-MICH.
AT THE SESQUICENTENNIAL ALUMNI CELEBRATION, THE UNIVERSITY OF MICHIGAN
A CRISIS OF CONFIDENCE
Any analysis of today's political picture in America of necessity revolves about
a single phrase--four words--"a crisis of confidence."
The American people are constantly engaged in a search for truth--for political
truth, for moral truth, for truth in government, for verities in our international
relations.
Today they are deeply troubled because the truth, always elusive in public
affairs, is hidden in a thicket of contradictions and misleading statements by govern-
ment spokesmen.
To use the everyday language of the politician, the American people have become
painfully aware of what has been called "the credibility gap." This was a large
factor in Republican successes in the 1966 elections. Unless there is a dramatic
change, it, will be important in 1968.
President Johnson considers the Credibility Gap to have been 80 damaging that he
is engaged in a concerted effort to bridge it, particularly as it applies to him
personally.
T
This first became obvious when the President on January 10 delivered a State of
the Union Message full of confessions that he had made mistakes and some of his pro-
grams weren't working very well. As we say in Michigan, it was model changeover time.
The 1967 model of the Presidency purports to be that of a humble chief executive
who is seeking the advice and help of others. Is this a change of substance? It
remains to be seen whether the people will buy the new LBJ model or whether they will
see it as the same vehicle with just new grillework. a new front.
I will simply add that all of the Presidential messages received by the Congress
this year indicate there has been no fundamental change in the Presidency or in the
way the office is being used. The thrust toward increased federal power continues:
The "Credibility Gap" separates. the Johnson regime from informed public opinion.
People who analyze public problems and information--people who dissect the statements
and actions of public officials--find themselves increasingly alienated from this
Administration.
The Credibility Gap continues; the Crisis of Confidence grows.
Witness the Administration's recent statements and actions in connection with
the controversy over CIA financing of student and other private organizations.
FORD
In, Palo Alto, California, on February 21, Vice-President Hubert Humphrey said
that CIA financing of student groups represented "one of the saddest times, in
LIBRARY
"2-
12%
HT K
reference to public policy, our government has had." Humphrey added he was "not at
all happy about what the CIA has been doing.' HEW Secretary John W. Gardner said on
the same date that it was "a mistake" for the CIA to have involved itself covertly
with educational groups.
Two days later--on February 23--President Johnson upheld the CIA's conduct in
secretly providing millions of dollars to private U.S. organizations that operate
abroad. The President endorsed a preliminary report by a three-man Administration
committee. That committee--which included Secretary Gardner--praised the CIA's
support of private groups and said the CIA had acted in line with "national policies
established by the National Security Council in 1952 through 1954." On February 27,
the Vice-President reversed himself and vigorously defended the CIA. He said it "has
done nothing but follow the policies of higher authority. "
What "higher authority" was Mr. Humphrey speaking about? The President has
refused to say whether he had personal knowledge of the CIA's financing of student
groups. But the committee he named to "investigate" the CIA controversy reported
that the program had the approval of the Truman, Eisenhower, Kennedy and Johnson
Administrations. And Sen. Robert F. Kennedy, speaking from his experience as attorney
general, said both Presidents Kennedy and Johnson knew about the student ties to the
CIA.
Is the Credibility Gap widening? I'll let you be the judge.
May I remind you that on January 30 the Administration admitted it has been con-
cealing roughly half of our aircraft losses in Vietnam--that actually they were twice
the number previously reported. The Administration employed the device of counting
only the planes destroyed in combat.
The Crisis of Confidence also extends to the Congress. In a sounding of public
opinion at the height of publicity over the Powell and Dodd cases, the Gallup Poll
indicated a majority of the American people believe that misuse of public funds is
common practice by members of Congress.
The public's lack of confidence in Congress underscores the need for immediate
establishment of a Select Committee on Ethics and Standards to see that the conduct
of House members is kept above reproach and reorganization of the Congress to make
it more efficient and effective.
The two major issues in all recent-year national elections in America have been
peace and prosperity.
Both of these issues figured in the 1966 results and can be expected to shape
the outcome of the 1968 election.
What is the political picture today?
I believe there is a good chance a Republican will be elected President in 1968
and that the Republican Party will capture control of the House of Representatives.
-3-,
I am not going to rate that chance as 50-50, or 60-40, or give any odds. But
Republican prospects definitely look good.
Much will depend on what happens to the economy in the next 18 to 20 months.
Many votes will swing on any significant development in Vietnam and the progress--or
lack of toward an honorable and meaningful peace there
Vietnam is an explosive and unpredictable issue, It is an issue in the sense
that the American people may decide only a new President can steer the war to the
conference table,
Vietnam gave rise to the Credibility Gap, Various Administration statements and
actions involving Vietnam initially established the Credibility Gap and then widened
it. This--and not the question of staying the course in Vietnam--has produced the
deep frustration felt by the American people, a crisis of confidence at a time of
international crisis for the Nation.
The Credibility Gap had its beginning when a top Administration spokesman who
had made frequent trips to Vietnam repeatedly underestimated the gravity, scope and
duration of what has become the third largest foreign war in American history.
Irrespective of the motives behind each move, the Administration has on at least
three other occasions kindled hopes for peace in the American people only to have
those hopes wither away in disappointment. To employ an appropriate cliche, the
American people have felt "let down.
The first such instance was the bombing pause in early 1966. The second was the
Honolulu Conference in February, 1966, and the impression among the American public
that increased military pressure on the Communist forces would bring negotiations.
The third was the Johnson trip last fall--just before the election--to Manila,
Australia and Vietnam.
Whether or not it was 80 intended, these actions aroused great expectations in
the American people. What happened? In effect, nothing. Result: Disillusionment
frustration and disenchantment. That is why 57 per cent of the American people
disapprove of Mr. Johnson's handling of the Vietnam situation, according to the latest
Louis Harris poll on the question.
Let's look at the prosperity issue.
There is no question that the massive tax cuts of 1964 and 1965 touched off a
boom. But there also is no question in my mind that the Johnson Administration doomed
the boom by failing to slow down the economy sufficiently when it became overheated
in late 1965 and early 1966.
There are several ways to apply restraints to the economy. One is to raise taxes
and take from the American citizen funds he might otherwise spend. Another is to cut
federal spending. A third is to raise the cost of borrowing, push up interest rates
to discourage expansion the economy
The Johnson Administration offered neither an income tax increase nor cuts in
domestic spending last year to cool off the overheated economy, Concerned about
strong inflationary pressures, the Federal Reserve Board in December, 1965, made its
first major move in a campaign to shrink the money supply. It increased the redis-
count rate, and the nation's. banks raised their, lending rates correspondingly.
As we moved. through 1966, the Administration failed to act decisively to halt
inflation. In consequence the Federal Reserve Board continued to turn up the screws
on interest rates. The result: The highest interest rates in 40 years, a dearth of
mortgage money, and a virtual depression in the homebuilding industry.
Pursuing policies, which fed inflation and helped to push up interest rates, the
Administration stimulated. the already overheated economy through heavily increased
domestic as well as military spending and went into the short-term money market to
borrow the money to do it. By competing with private borrowers, the Administration
added to the upward push on interest rates
Meantime the cost of living rose sharply, hurting all Americans but especially
those on fixed incomes like the aged and the pensioner.
The past is prologue when we consider the prosperity issue in the context of
today's political picture. The next line in our drama is: Where do we go from here?
Faced with huge deficits, do we cut domestic spending or do we raise income taxes?
We know that the 3.5 per cent increase in the consumer price index in 1966 has
laid the foundation for big wage increases in 1967 as the worker strives to catch up.
This in turn threatens cost-push. inflation and additional price increases probably
well. in excess of the 2.5. per cent predicted in the President's recent Economic
Message.
Business profits now are showing signs of decline.
Interest rates are easing. But while this is helpful "at home," it was the high
rates of 1966 that attracted hot money from abroad and that kept our balance of
payments situation from becoming more critical. Thus the gold outflow situation
promises to worsen rather than improve this year
There is softening in some areas of eonsumer demand, as shown by the latest
University of Michigan survey of consumer attitudes.
Industrial production has fallen to 0 two-year low. Automobile sales have
slumped. Layoffs have hit more than 25,000 auto industry workers. And may I remind
you that the automobile industry is the bellwether of the economy.
With sag and drag in the economy at the same time that bargaining talks loom in
the automobile and other major industries, this country is facing the prospect of
cost-push inflation accompanied by a possible recession. Some prominent economists
believe a recession may already have begun. There is a strong possibility, therefore,
that the Johnson Administration will withdraw its request for a 6 per cent income tax
-5-
surtax or simply let it fade away.
It is becoming increasingly apparent to the American people that the Johnson
Administration is doing a poor job of managing the Nation's economy. I think that
was reflected in the 1966 election results. It adds up to lack of confidence.
The President's current Economic Report minimizes the effects of 1966 inflation,
of course, but the truth appears if you study the tables in the appendix.
These figures show that average spendable weekly earnings of the American worker
fell from $88.06 in 1965 to $87.82 in 1966. In other words, his standard of living
actually declined somewhat.
Farmers suffered as the farm parity ratio--the relationship of farm income to
the prices farmers must pay--dropped from 83 in February, 1966, to 77 in December.
Net income per farm slid from $5,310 in the first quarter to $4,660 in the fourth.
And farm proprietors' income declined from $17 billion in the first quarter to $15.2
billion in the fourth.
The unemployment rate among non-white workers rose from 7 per cent in January,
1966, to 7.6 per cent in December.
Housing starts fell from 1,600,000 in January to the levels of 20 years ago.
Manufacturers' inventories climbed by $9 billion, almost three times the rate
of the preceding four years.
Taxpayers were hurt as inflation and high interest rates forced governments to
pay steeply to borrow money for public improvements--and the interest on the national
debt ballooned toward $14 billion a year.
The fruits of inflation still are being felt politically. Ironically, some
political leaders are seeking political benefit from it. I refer to the President's
call for an average increase of 20 per cent in Social Security benefits and to Sen.
Robert Kennedy's proposal for a 50 per cent benefits boost.
There must be improvements in our Social Security system. We need an increase
in benefits to bridge the big cost of living gap that widened broadly in 1966.
It is also time the American people faced up to the fact that Social Security
benefits must be paid for.
It' is time for a searching examination of the original intent of the Social
Security Act and the basic purposes of the Social Security system.
I mention this today because the question of fiscal responsibility has now
become critical in our handling of Social Security problems. The political implica-
tions of the extravagant Social Security proposals now before us are obvious.
Is there a pot of gold at the end of the rainbow? The truth is that the young
worker has already been left far behind in the Social Security system.
Our young people are being asked to shoulder an increasingly heavy payroll tax
to pay for increased Social Security benefits, knowing full well that they will get
-6-
"the short end of the stick." Evidence of this is a Tax Foundation study which
indicates that a 21-year-old American putting in 44 years of work and paying into the
Social Security fund at today's tax levels would pay $32,496 in taxes and interest to
the fund. Based on a life expectancy of 13 years after that worker reaches age 65,
he or she would collect $19,704 in benefits.
If President Johnson's proposal is enacted into law, the federal payroll tax will
have to be raised to 11.6 per cent (combined employee-employer rate) on $10,800 of
income.
Proposals for increased federal payroll and income taxes are contributing to what
I call the disincentive sickness in America. They also help create an imbalance in
our economy that results when taxation takes far too large a portion of our gross
national product.
In my Republican State of the Union Message last January 19, I called for a
"New Direction" in federal policy-making.
This "New Direction" is synonymous with a new federal philosophy, a new approach
to solving many of this Nation's domestic problems. The key is sharing of federal
income tax revenue with the states and cities.
Other facets are tax credits to industry to promote massive attacks on air and
water pollution and structural unemployment, the latter through large-scale on-the-job
training.
Still other embryo programs include the possible harnessing of industrial know-
how for an attack on assorted urban ills, the promotion of a kind of "cities industry"
employing problem-solving techniques similar to those in the space industry. The
possibilities are almost endless.
This new philosophy, this "New Direction," is part of the political picture
today. We currently are in transition. We are moving toward this revolutionary
change--and that change has vast ramifications for the two major political parties and
the federal bureaucracy.
Early in my remarks I said there is a good chance American voters will elect a
Republican President in 1968 and will turn control of the House over to the Republican
Party.
My optimism about a GOP White House victory is based not merely on hope but on
hard facts. It emanates from the 1966 election results--the fact that the GOP won
either governorships or Senate seats in 29 states with well over the 270 electoral
votes needed to win the White House. As a matter of fact, the Republican Party
elected top candidates in states with a total of 326 electoral votes
We added eight governorships, for a total of 25. We picked up three Senate seats
and 47 House seats. Our House gain brought us to 187, just 31 short of a majority.
We now are working to achieve that majority in 1968.
-7-
I spoke at the outset about "a crisis of confidence" which is besetting the
American people. In the final analysis, this crisis is caused by a lack of confidence
in the government itself, a lack of confidence in our actions and achievements as a
Nation.
I submit, therefore, that the American people are searching for a New Direction,
a movement away from government by federal grant, a cure for the disincentive sickness,
a rebirth of the spirit that early marked America for greatness.
# # #
FORD is LIBRARY 97V839
FOR RELEASE IN THURSDAY P.M.'s, MARCH 2, 1967
AN ADDRESS BY REP. GERALD R. FORD, R-MICH.
AT THE SESQUICENTENNIAL ALUMNI CELEBRATION, THE UNIVERSITY OF MICHIGAN
A CRISIS OF CONFIDENCE
Any analysis of today's political picture in America of necessity revolves about
a single phrase--four words--"a crisis of confidence."
The American people are constantly engaged in a search for truth--for political
truth, for moral truth, for truth in government, for verities in our international
relations.
Today they are deeply troubled because the truth, always elusive in public
affairs, is hidden in a thicket of contradictions and misleading statements by govern-
ment spokesmen.
To use the everyday language of the politician, the American people have become
painfully aware of what has been called "the credibility gap." This was a large
factor in Republican successes in the 1966 elections. Unless there is a dramatic
change, it will be important in 1968.
President Johnson considers the Credibility Gap to have been so damaging that he
is engaged in a concerted effort to bridge it, particularly as it applies to him
personally.
This first became obvious when the President on January 10 delivered a State of
the Union Message full of confessions that he had made mistakes and some of his pro-
grams weren't working very well. As we say in Michigan, it was model changeover time.
The 1967 model of the Presidency purports to be that of a humble chief executive
who is seeking the advice and help of others. Is this a change of substance? It
remains to be seen whether the people will buy the new LBJ model or whether they will
see it as the same vehicle with just new grillework... a new front.
I will simply add that all of the Presidential messages received by the Congress
this year indicate there has been no fundamental change in the Presidency or in the
way the office is being used. The thrust toward increased federal power continues.
The "Credibility Gap" separates the Johnson regime from informed public opinion.
People who analyze public problems and information--people who dissect the statements
and actions of public officials--find themselves increasingly alienated from this
Administration.
The Credibility Gap continues; the Crisis of Confidence grows.
Witness the Administration's recent statements and actions in connection with
the controversy over CIA financing of student and other private organizations.
FORD
In Palo Alto, California, on February 21, Vice-President Hubert Humphrey said
LIBRARY
that CIA financing of student groups represented "one of the saddest times, in
-2-
reference to public policy, our government has had." Humphrey added he was "not at
all happy about what the CIA has been doing." HEW Secretary John W. Gardner said on
the same date that it was "a mistake" for the CIA to have involved itself covertly
with educational groups.
Two days later--on February 23--President Johnson upheld the CIA's conduct in
secretly providing millions of dollars to private U.S. organizations that operate
abroad. The President endorsed a preliminary report by a three-man Administration
committee. That committee--which included Secretary Gardner--praised the CIA's
support of private groups and said the CIA had acted in line with "national policies
established by the National Security Council in 1952 through 1954." On February 27,
the Vice-President reversed himself and vigorously defended the CIA. He said it "has
done nothing but follow the policies of higher authority."
What "higher authority" was Mr. Humphrey speaking about? The President has
refused to say whether he had personal knowledge of the CIA's financing of student
groups. But the committee he named to "investigate" the CIA controversy reported
that the program had the approval of the Truman, Eisenhower, Kennedy and Johnson
Administrations. And Sen. Robert F. Kennedy, speaking from his experience as attorney
general, said both Presidents Kennedy and Johnson knew about the student ties to the
CIA.
Is the Credibility Gap widening? I'll let you be the judge.
May I remind you that on January 30 the Administration admitted it has been con-
cealing roughly half of our aircraft losses in Vietnam--that actually they were twice
the number previously reported. The Administration employed the device of counting
only the planes destroyed in combat.
The Crisis of Confidence also extends to the Congress. In a sounding of public
opinion at the height of publicity over the Powell and Dodd cases, the Gallup Poll
indicated a majority of the American people believe that misuse of public funds is
common practice by members of Congress.
The public's lack of confidence in Congress underscores the need for immediate
establishment of a Select Committee on Ethics and Standards to see that the conduct
of House members is kept above reproach and reorganization of the Congress to make
it more efficient and effective.
The two major issues in all recent-year national elections in America have been
peace and prosperity.
Both of these issues figured in the 1966 results and can be expected to shape
the outcome of the 1968 election.
What is the political picture today?
I believe there is a good chance a Republican will be elected President in 1968
and that the Republican Party will capture control of the House of Representatives.
-3-
I am not going to rate that chance as 50-50, or 60-40, or give any odds. But
Republican prospects definitely look good.
Much will depend on what happens to the economy in the next 18 to 20 months.
Many votes will swing on any significant development in Vietnam and the progress--or
lack of it--toward an honorable and meaningful peace there.
Vietnam is an explosive and unpredictable issue. It is an issue in the sense
that the American people may decide only a new President can steer the war to the
conference table.
Vietnam gave rise to the Credibility Gap. Various Administration statements and
actions involving Vietnam initially established the Credibility Gap and then widened
it. This--and not the question of staying the course in Vietnam--has produced the
deep frustration felt by the American people, a crisis of confidence at a time of
international crisis for the Nation.
The Credibility Gap had its beginning when a top Administration spokesman who
had made frequent trips to Vietnam repeatedly underestimated the gravity, scope and
duration of what has become the third largest foreign war in American history.
Irrespective of the motives behind each move, the Administration has on at least
three other occasions kindled hopes for peace in the American people only to have
those hopes wither away in disappointment. To employ an appropriate cliche, the
American people have felt "let down."
The first such instance was the bombing pause in early 1966. The second was the
Honolulu Conference in February, 1966, and the impression among the American public
that increased military pressure on the Communist forces would bring negotiations.
The third was the Johnson trip last fall--just before the election--to Manila,
Australia and Vietnam.
Whether or not it was so intended, these actions aroused great expectations in
the American people. What happened? In effect, nothing. Result: Disillusionment,
frustration and disenchantment. That is why 57 per cent of the American people
disapprove of Mr. Johnson's handling of the Vietnam situation, according to the latest
Louis Harris poll on the question.
Let's look at the prosperity issue.
There is no question that the massive tax cuts of 1964 and 1965 touched off a
boom. But there also is no question in my mind that the Johnson Administration doomed
the boom by failing to slow down the economy sufficiently when it became overheated
in late 1965 and early 1966.
There are several ways to apply restraints to the economy. One is to raise taxes
and take from the American citizen funds he might otherwise spend. Another is to cut
federal spending. A third is to raise the cost of borrowing, push up interest rates
to discourage expansion in the economy.
-4-
The Johnson Administration offered neither an income tax increase nor cuts in
domestic spending last year to cool off the overheated economy. Concerned about
strong inflationary pressures, the Federal Reserve Board in December, 1965, made its
first major move in a campaign to shrink the money supply. It increased the redis-
count rate, and the nation's banks raised their lending rates correspondingly.
As we moved through 1966, the Administration failed to act decisively to halt
inflation. In consequence, the Federal Reserve Board continued to turn up the screws
on interest rates. The result: The highest interest rates in 40 years, a dearth of
mortgage money, and a virtual depression in the homebuilding industry.
Pursuing policies which fed inflation and helped to push up interest rates, the
Administration stimulated the already overheated economy through heavily increased
domestic as well as military spending and went into the short-term money market to
borrow the money to do it. By competing with private borrowers, the Administration
added to the upward push on interest rates.
Meantime the cost of living rose sharply, hurting all Americans but especially
those on fixed incomes like the aged and the pensioner.
The past is prologue when we consider the prosperity issue in the context of
today's political picture. The next line in our drama is: Where do we go from here?
Faced with huge deficits, do we cut domestic spending or do we raise income taxes?
We know that the 3.5 per cent increase in the consumer price index in 1966 has
laid the foundation for big wage increases in 1967 as the worker strives to catch up.
This in turn threatens cost-push inflation and additional price increases--probably
well in excess of the 2.5 per cent predicted in the President's recent Economic
Message.
Business profits now are showing signs of decline.
Interest rates are easing. But while this is helpful "at home," it was the high
rates of 1966 that attracted hot money from abroad and that kept our balance of
payments situation from becoming more critical. Thus the gold outflow situation
promises to worsen rather than improve this year.
There is softening in some areas of consumer demand, as shown by the latest
University of Michigan survey of consumer attitudes.
Industrial production has fallen to a two-year low. Automobile sales have
slumped. Layoffs have hit more than 25,000 auto industry workers. And may I remind
you that the automobile industry is the bellwether of the economy.
With sag and drag in the economy at the same time that bargaining talks loom in
the automobile and other major industries, this country is facing the prospect of
cost-push inflation accompanied by a possible recession. Some prominent economists
believe a recession may already have begun. There is a strong possibility, therefore,
that the Johnson Administration will withdraw its request for a 6 per cent income tax
-5-
surtax or simply let it fade away.
It is becoming increasingly apparent to the American people that the Johnson
Administration is doing a poor job of managing the Nation's economy. I think that
was reflected in the 1966 election results. It adds up to lack of confidence.
The President's current Economic Report minimizes the effects of 1966 inflation,
of course, but the truth appears if you study the tables in the appendix.
These figures show that average spendable weekly earnings of the American worker
fell from $88.06 in 1965 to $87.82 in 1966. In other words, his standard of living
actually declined somewhat.
Farmers suffered as the farm parity ratio--the relationship of farm income to
the prices farmers must pay--dropped from 83 in February, 1966, to 77 in December.
Net income per farm slid from $5,310 in the first quarter to $4,660 in the fourth.
And farm proprietors' income declined from $17 billion in the first quarter to $15.2
billion in the fourth.
The unemployment rate among non-white workers rose from 7 per cent in January,
1966, to 7.6 per cent in December.
Housing starts fell from 1,600,000 in January to the levels of 20 years ago.
Manufacturers' inventories climbed by $9 billion, almost three times the rate
of the preceding four years.
Taxpayers were hurt as inflation and high interest rates forced governments to
pay steeply to borrow money for public improvements-and the interest on the national
debt ballooned toward $14 billion a year.
The fruits of inflation still are being felt politically. Ironically, some
political leaders are seeking political benefit from it. I refer to the President's
call for an average increase of 20 per cent in Social Security benefits and to Sen.
Robert Kennedy's proposal for a 50 per cent benefits boost.
There must be improvements in our Social Security system. We need an increase
in benefits to bridge the big cost of living gap that widened broadly in 1966.
It is also time the American people faced up to the fact that Social Security
benefits must be paid for.
It is time for a searching examination of the original intent of the Social
Security Act and the basic purposes of the Social Security system.
I mention this today because the question of fiscal responsibility has now
become critical in our handling of Social Security problems. The political implica~
tions of the extravagant Social Security proposals now before us are obvious.
Is there a pot of gold at the end of the rainbow? The truth is that the young
worker has already been left far behind in the Social Security system.
Our young people are being asked to shoulder an increasingly heavy payroll tax
to pay for increased Social Security benefits, knowing full well that they will get
-6-
"the short end of the stick." Evidence of this is a Tax Foundation study which
indicates that a 21-year-old American putting in 44 years of work and paying into the
Social Security fund at today's tax levels would pay $32,496 in taxes and interest to
the fund. Based on a life expectancy of 13 years after that worker reaches age 65,
he or she would collect $19,704 in benefits.
If President Johnson's proposal is enacted into law, the federal payroll tax will
have to be raised to 11.6 per cent (combined employee-employer rate) on $10,800 of
income.
Proposals for increased federal payroll and income taxes are contributing to what
I call the disincentive sickness in America. They also help create an imbalance in
our economy that results when taxation takes far too large a portion of our gross
national product.
In my Republican State of the Union Message last January 19, I called for a
"New Direction" in federal policy-making.
This "New Direction" is synonymous with a new federal philosophy, a new approach
to solving many of this Nation's domestic problems. The key is sharing of federal
income tax revenue with the states and cities.
Other facets are tax credits to industry to promote massive attacks on air and
water pollution and structural unemployment, the latter through large-scale on-the-job
training.
Still other embryo programs include the possible harnessing of industrial know-
how for an attack on assorted urban ills, the promotion of a kind of "cities industry"
employing problem-solving techniques similar to those in the space industry. The
possibilities are almost endless.
This new philosophy, this "New Direction," is part of the political picture
today. We currently are in transition. We are moving toward this revolutionary
change--and that change has vast ramifications for the two major political parties and
the federal bureaucracy.
Early in my remarks I said there is a good chance American voters will elect a
Republican President in 1968 and will turn control of the House over to the Republican
Party.
My optimism about a GOP White House victory is based not merely on hope but on
hard facts. It emanates from the 1966 election results--the fact that the GOP won
either governorships or Senate seats in 29 states with well over the 270 electoral
votes needed to win the White House. As a matter of fact, the Republican Party
elected top candidates in states with a total of 326 electoral votes.
We added eight governorships, for a total of 25. We picked up three Senate seats
and 47 House seats. Our House gain brought us to 187, just 31 short of a majority.
We now are working to achieve that majority in 1968.
-7-
I spoke at the outset about "a crisis of confidence" which is besetting the
American people. In the final analysis, this crisis is caused by a lack of confidence
in the government itself, a lack of confidence in our actions and achievements as a
Nation.
I submit, therefore, that the American people are searching for a New Direction,
a movement away from government by federal grant, a cure for the disincentive sickness,
a rebirth of the spirit that early marked America for greatness.
###