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The original documents are located in Box 4, folder "Economic And Energy Proposals -
Spokesman's Briefing Book, Jan. 31, 1975 (1)" of the Richard B. Cheney 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States of America his copyrights in all of his unpublished writings in National Archives collections.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 4 of the Richard B. Cheney Files at the Gerald R. Ford Presidential Library
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
-- Scope of the Problem
-- Rationale For the Program
-- Need For Action
-- Questions Frequently Raised
FORD : LIBRAR 038830
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
TABLE OF CONTENTS
FOREWORD
THE PRESIDENT'S ECONOMIC AND ENERGY PROGRAM AT A GLANCE
FACTUAL SUMMARY OF THE PRESIDENT'S PROGRAM
NARRATIVE DESCRIPTIONS OF THE PRESIDENT'S PROGRAM
Turning the Nation in a New Direction
Understanding the Economics
A Summary for the Layman
KEY ISSUES
The Need for Action Now
Gasoline Rationing
Effect of the Program on the Northeast
Energy Taxes and Income Tax Refunds--
Why Both are Needed
Equalizing the Burden: No Direct Gasoline Tax
Tax Reductions Versus Higher Federal Spending
QUESTIONS FREQUENTLY RAISED
THE PRESIDENT'S STATE OF THE UNION MESSAGE
FACT SHEET ON THE STATE OF THE UNION
WHO TO CALL FOR DETAILS
and FORD ELBRASY
January 31, 1975
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
FORWARD
In response to numerous requests for additional less-
technical information and explanations of the President's
economic and energy proposals, this book has been prepared.
Because of the complexity of the program, and the technical
nature of many of the issues involved, an attempt has been
made to provide understandable, English-language answers to
technical questions. In addition the first sections of the
book include summaries of the program which are designed to
explain the program to people with varying levels of under-
standing of the issues -- and answers -- involved in moving
the Nation in a new direction away from recession and toward
energy independence.
The basic documents, which you have probably received
previously, are included because the President's State
of the Union Message remains the basis for the energy
and economic proposals, and because the Fact Sheet
covers, in 48 pages, every aspect of the program.
The final section, Who to Call, provides the names and
phone numbers of experts who are prepared to take your
questions or put you in touch with the appropriate
individual.
We hope this book will prove useful to you, both in your
understanding of the program and in your discussions with
others. If you have suggestions as to how this book might
be improved, please call 456-6623.
PROGRAM AT A GLANCE
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
THE PROGRAM AT A GLANCE
I. Major Objectives
Begin an early recovery from the recession.
Begin bringing Federal spending and budget
deficits under control.
Reduce sharply the growth in oil imports and
dependence on foreign energy sources.
Offset higher energy costs and restore purchasing
power and growth in jobs and production.
Achieve the capability for energy independence by
1985.
Maintain energy independence beyond 1985 and
develop capacity for energy supply and technology
export.
II. Major Presidential Actions and Proposals to the Congress
A. To begin an early recovery from the recession:
1. A $12 billion rebate in 1974 income taxes for
individuals.
2. A $4 billion tax cut for corporations through
increase in investment tax credit.
B. To begin bringing Federal spending and budget deficits
under control:
1. A moratorium on new Federal spending programs.
2. Selected Federal budget reductions.
C. To reduce sharply the growth in oil imports and
U.S. vulnerability to another embargo (1975-1977) :
1. Encourage energy conservation, through:
a. Increased oil import fees.
b. Excise tax and import fee on oil.
C. Excise tax on natural gas.
d. Public education.
LIBRARY STUNT
2. Encourage domestic energy production, through:
a. New natural gas deregulation.
b. Crude oil price decontrol.
C. Elk Hills Naval Petroleum Reserve production.
d. Conversion to the use of domestic coal.
2
3. Recapture windfall profits from oil companies.
D. To offset the impact of higher energy costs and
restore purchasing power and growth in jobs and
production:
1. Individual tax cuts of $16.5 billion beginning
in 1975.
2. Payments to non-taxpayers of $2 billion.
3. Home energy conservation tax incentive of $.5 billion.
4. Corporate tax cuts of $6 billion.
5. Payments of $2 billion to State and local governments.
6. $3 billion Federal energy cost offset.
E. To achieve the capacity for energy independence by 1985:
1. Increase domestic energy production:
a. Naval Petroleum Reserve No. 4 (Alaska)
production.
b. Outer Continental Shelf (OCS) leasing
for oil and gas.
C. Reducing domestic energy price uncertainty.
d. Clean Air Act amendments.
e. Surface mining legislation.
f. Coal leasing on Federal lands.
g. Assist electrical utilities.
h. Expediting nuclear power.
i. Expediting energy facilities siting.
2. Encourage energy conservation:
a. Auto gasoline mileage increases.
b. Building thermal standards.
C. Low-income home energy conservation program.
d. Appliance energy efficiency standards.
e. Appliance and auto energy efficiency labelling.
3. Emergency preparedness:
a. Strategic Petroleum Reserves.
b. Energy emergency standby and planning
authorities.
F. To maintain energy independence beyond 1985 and
FORD
permit export of energy supplies and technology:
1. Synthetic Fuels Program.
974439
2. Energy Research and Development Program.
3. Energy Research and Development Administration
(ERDA).
# # #
PROGRAM SUMMARY
LIBRARY
0803
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
A FACTUAL SUMMARY
On January 15, 1975, in his first State of the Union
Message, President Ford outlined the Nation's economic and
energy situation and described the actions he was taking and
his proposals to the Congress to deal with current problems
and set the new directions necessary to avoid similar problems
in the future.
This paper summarizes briefly the current situation and
the developments that have led to it. The paper also out-
lines the major features of the President's program to solve
our economic and energy problems.
The Current Situation
The U.S. economy is faced with the closely linked problems
of inflation and recession. During 1974, the economy experi-
enced the highest rate of inflation since World War II. In
1974, when a recession set in, unemployment rose sharply to
over 7 percent, the highest level in 13 years. The economy
is now in a full-fledged recession and unemployment will
rise further before corrective actions take hold.
With respect to energy, the U.S. remains vulnerable to
the economic and social impact of an oil embargo. Domestic
oil production continues to decline and other domestic energy
sources are not increasing fast enough. Overall, energy
consumption is beginning to rise again. Oil imports are also
rising to fill the gap between domestic energy demand and
supply. As a result of a four-fold increase in world oil
prices, the U.S. paid foreign oil producing nations $25
billion in 1974 (compared to about $3 billion in 1973) --
representing an outflow of both U.S. dollars and jobs. Thus,
our energy problems are contributing to our economic problems.
The Causes of Current Problems
A number of policies of the past and the recent develop-
ments -- some beyond the control of Government -- have
contributed to the current situation. Accelerated inflation
resulted from:
Excessive Federal spending and lending for over a
decade and too much money and credit growth.
Unusually poor harvest years, which contributed to
world-wide food shortages and escalating food prices.
FORD
LIBRARY
2
World petroleum price increases due to the Arab
nations' oil embargo, the quadrupling of the price
of crude oil by the OPEC nations and their sharp
reductions in crude oil production to maintain
higher prices.
An economic boom occurring simultaneously in the
industrialized nations of the world.
Two international devaluations of the dollar.
Distortions caused by wage and price controls.
Inflation contributed to the forces of recession:
The real purchasing power of workers' paychecks
was reduced.
Inflation reduced consumer confidence and thus
led to the most severe slump in consumer purchasing
since World War II.
Inflation forced interest rates to very high levels,
draining funds out of financial institutions that
supply most mortgage loans and thus sharply reducing
construction of homes.
Federal Government spending and lending programs,
accounting for over half the funds raised in capital
markets, reduced the amount of money available for
capital investments needed to raise productivity and
increase living standards.
In energy, the Nation has long followed, without serious
thought, the practice of satisfying all energy demands at the
lowest possible prices. Generally low prices for all energy
sources in the U.S. have contributed to high demand, ineffi-
cient uses and reduced incentives for new production. A
prime example is the artificially low natural gas prices that
have resulted from Federal price regulation -- the direct
cause of declining U.S. natural gas exploration and production
and growing shortages.
The President's Energy and Economic Program
I. Major Objectives of the President's Program
The most important objectives of the President's program
outlined in the State of the Union Message are to:
FORD
3
Begin an early recovery from the recession.
Begin bringing Federal spending and budget deficits
under control.
Reduce sharply the growth in oil imports and our
dependence on foreign energy sources through steps
to conserve energy and to increase domestic energy
production.
Offset the impact of higher energy costs and restore
purchasing power and growth in jobs and production.
Achieve the capabilities for energy independence by
1985 by increasing domestic energy production,
reducing demand and preparing for any further embargo.
Maintain energy independence beyond 1985 and make it
possible for the U.S. to export energy supply and
technology to others of the free world.
II. Major Presidential Actions and Proposals to the Congress
A. To begin an early recovery from the recession, the
President has asked the Congress to approve a one-
time tax cut of $16 billion consisting of:
1. $12 billion returned to individuals, accomplished
by a 12% rebate on 1974 taxes up to a $1,000
maximum per return. If Congress approves the plan
quickly, rebates would be computed by the IRS and
paid in two installments; the first in May or
June and second in September, 1975. (No changes
are necessary in the way individuals prepare their
1974 tax returns.)
2. $4 billion cut for corporations, accomplished by
a temporary increase in the investment tax credit
from 7% to 12% on 1975 investments. For utilities,
1975 investment tax credits would be increased from
4% to 12%. (The 12% increase would remain through
1976 and 1977 for electrical utility projects other
than those fired by oil or natural gas.)
B. To begin bringing Federal spending and budget deficits
under control, the President:
1. Announced a moratorium on new spending programs
other than for energy and said that he would not
hesitate to veto new spending programs adopted by
the Congress.
4
2. Proposed to the Congress selected budget reductions
and a 5% ceiling on Federal employee pay increases
for 1975 as well as on automatic cost of living
increases for Government and military retirement
pay and Social Security. Total savings from these
budget proposals would amount to $17 billion in
FY 1976.
C. To reduce sharply the growth in U.S. vulnerability to
another foreign oil embargo and halt the growth in
outflow of U.S. dollars (and jobs), the President
established goals of reducing oil imports by 1 million
barrels per day by the end of 1975 and 2 million
barrels of oil by 1977. He announced actions and
proposals to:
1. Encourage energy conservation, including:
a. Import Fees. By Presidential order, import
fees on crude oil and petroleum products will
be increased over current levels by $1 per
barrel effective February 1, 1975; an additional
$1 effective March 1; and another $1 effective
April 1, for a total increase of $3 per barrel.
To ease the impact on regions heavily dependent
on imported petroleum products, such as New
England and other Northeast States, the
President's program provides for a rebate on
these products, so that the effective increase
in import fees on petroleum products will be
60¢ on March 1, 1975, and $1.20 on April 1,
with no increase scheduled for February.
b. Excise Tax and Import Fee on Oil. Congress is
asked to establish an excise tax of $2 per
barrel on domestic crude oil and an import
fee on crude oil and petroleum products. (When
this becomes effective, it would replace the
new Presidentially established import fees.)
C. Excise Tax on Natural Gas. Congress is asked
to establish an excise tax of 37¢ per thousand
cubic feet on natural gas -- which is compar-
able to the $2 per barrel tax on petroleum.
d. Public Education. Information for the public
on energy conservation methods and benefits
will be increased.
FORD
LIBRARY
5
2. Encourage domestic energy production, including:
a. New natural gas deregulation: Congress is
asked to remove Federal price regulation from
new natural gas supplies to provide the incentive
for increased production and more efficient uses.
b. Crude oil price decontrol. Steps will be taken
to remove price controls on domestic crude oil
by April 1, 1975 (action is subject to Congres-
sional disapproval).
C. Elk Hills Naval Petroleum Reserve. Congress is
asked to authorize production of oil from the
Elk Hills Naval Petroleum Reserve (NPR #1) in
California, expected to reach 160,000 barrels per
day early in 1975, increasing to 300,000 barrels
per day by 1977.
d. Conversion to the use of domestic coal. Congress
is asked to amend the Clean Air Act to permit a
vigorous program to convert power plants and
other major users from oil to coal, reducing the
need for oil by 100,000 barrels per day in 1975
and 300,000 in 1977.
3. Recapture windfall profits. Congress is again asked
to place a windfall profits tax on oil companies.
D. To offset the impact of higher energy costs, particularly
for low and middle income people, and to restore pur-
chasing power and growth in jobs and production. The
President asked the Congress to approve permanent tax
reductions beginning in 1975. New energy conservation
taxes and import fees would raise $30 billion annually
in Federal revenues:
Oil excise taxes
- $6.0 billion
Natural gas excise tax
- $8.5 billion
Import fee increases
- $3.5 billion
Windfall profits tax
- $12.0 billion
This $30 billion will be returned immediately to the
economy as follows:
1. Individual income tax cuts of $16.5 billion
beginning with 1975. Congress is asked to
approve a cut in income tax for individuals
of $16.5 billion annually, beginning with
6
1975 tax rates. This is in addition to the one time
$12 billion rebate in 1974 taxes for individuals.
Reductions in taxes will occur for all
Americans but with primary emphasis on low-
and middle-income taxpayers. Changes in
withholding would go into effect on June 1,
1975, and 1975 adjustments would be made
so that a full 12 month reduction would be
accomplished in 7 months from June through
December. Tax rate reductions for 1975 and
future years would be accomplished through
an increase in the low income allowance and
reduced tax rates at all income levels.
2. Payments of $2 billion to non-taxpayers. Congress
is asked to approve a distribution of $2 billion
to non-taxpayers in the form of $80 payments each
year for each adult (over 18 years of age) starting
in the summer of 1975. Otherwise, such individuals
would not receive any compensation for higher energy
costs.
3. Tax incentive of $0.5 billion for energy conservation.
Congress is asked to approve an energy conservation
tax incentive of $0.5 billion in the form of a 15%
tax credit applied to the first $1,000 of expendi-
tures ($150 maximum over 3 years) for certain energy
conservation improvements in homes, such as storm
windows and insulation.
4. Corporate tax cut of $6 billion. Congress is asked
to approve a $6 billion tax reduction for corporations
by cutting 1975 and future year tax rates from 48%
to 42%.
5. Payments of $2 billion to State and local govern-
ments. Congress is asked to approve a $2 billion
increase in general revenue sharing payments to
State and local governments to offset their higher
energy costs.
6. $3 billion Federal cost offset. $3 billion of the
energy conservation tax revenue would offset higher
costs of energy purchased directly by the Federal
Government for its use.
E. To achieve the capability for energy independence by
1985, the President announced the following actions
and proposals to increase domestic energy production
FORD
LIBRARY
7
(including measures to cope with constraints and
strike a balance between environmental and energy
objectives), reduce energy demand, and prepare
for any future embargo; specifically to:
1. Increase domestic energy production:
a. Naval Petroleum Reserve No. 4 (Alaska).
Congress is asked to authorize exploration,
development and production of NPR No. 4 to
provide petroleum for the domestic economy,
with 20% or such other amount determined by
the President earmarked for military needs
and strategic storage.
b. OCS leasing. The President reaffirmed his
intention to countinue an aggressive policy
of leasing Outer Continental Shelf areas
where oil and natural gas development can
be accomplished that is safe and environ-
mentally acceptable.
C. Reducing domestic energy price uncertainty.
Congress is asked to authorize the President
to use tariffs, import or price floors, or
other measures to achieve domestic energy
price levels necessary to cope with large-
scale fluctuations in world oil prices and
thus help reach energy independence goals.
d. Clean Air Act Amendments. Congress is asked
to amend the Clean Air Act to deal with
significant air quality deterioration, extend
dates for complying with certain requirements
for power plants, and hold auto emission re-
quirements stable for 5 years (1977-1981 model
years)
e. Surface mining. Congress is asked to pass
legislation which strikes a balance between
environmental protection and reclamation
requirements and the need to double domestic
coal production over the next ten years.
f. Coal leasing on Federal lands. The President
directed the Secretary of the Interior to adopt
legal development and production diligence re-
quirements for existing Federal coal leases,
meet with Western Governors on related problems,
and design a new program for accelerated leasing
of Federal coal.
8
g. Electric utilities. Congress is asked to
pass legislation to assist electric utilities
(many of which have had to delay new additions
to capacity) through: higher investment tax
credits (increased from 4% to 12%, with the
higher rate remaining in effect for 1976 and
1977 for all except oil and gas fired power
plants) ; mandated reforms in State Utility
Commission practices; and other measures.
h. Nuclear power. Congress is asked to pass
legislation to expedite siting and licensing
of nuclear power plants and to approve a 1976
budget increase for nuclear safety, safeguards
and waste management.
i. Energy facilities siting. Congress is asked to
pass legislation to encourage expeditious
review and approval at the Federal and State
levels of all types of major energy facilities
and sites.
2. Encourage energy conservation:
a. Auto gasoline mileage increases. The President
announced an agreement with major domestic
automakers to improve gasoline mileage by 40%
on the average by 1980, compared to 1974 model
year cars, provided that Clean Air Act auto
emission requirements are stabilized for 5
years. The agreement will be monitored
regularly by the Government.
b. Building thermal standards. Congress is asked
to authorize establishment of mandatory thermal
efficiency standards for new homes and com-
mercial buildings.
C. Low-income energy conservation program. Congress
is asked to authorize direct subsidies to low-
income and elderly homeowners for energy saving
actions such as home insulation.
d. Appliance efficiency standards. The Energy
Resources Council will develop energy efficiency
goals for major appliances and seek agreements
with manufacturers to achieve an average of 20%
improvement by 1980.
e. Appliance and auto efficiency labelling.
Congress is asked to pass legislation re-
quiring labels on automobiles and major
appliances to show energy use and efficiency.
9
3. Emergency preparedness:
a. Stretegic petroleum reserves. Congress is
asked to authorize the developemnt of an
expanded strategic storage system of up to
1 billion barrels of petroleum for domestic
uses and 300 million barrels for military
use.
b. Standby and planning authorities. To deal
with future energy emergencies, Congress is
asked to provide a set of energy emergency
standby authorities including emergency energy
conservation, fuel allocation, price controls
for allocated products, rationing of fuels
among end users, allocation of material needed
for energy production, and regulation of
petroleum inventories. These authorities would
also enable implementation of the International
Energy Program agreements among the U.S. and
other nations signed on November 18, 1974.
F. To maintain energy independence beyond 1985 and make it
possible for the U.S. to export energy supplies and
technology to others in the free world:
1. Synthetic fuels program. The President announced
a program of Federal incentives to ensure at least
one million barrels per day equivalent of synthetic
fuels capacity by 1985, using technologies now
nearing commercial application, such as those to
obtain synthetic crude from oil shale and a wide
range of clean solid, liquid and gaseous fuels from
coal. Federal incentives might include price
guarantees, purchase agreements, capital subsidies
and leasing programs.
2. Energy research and development programs. The
President's 1976 budget will continue to emphasize
accelerated programs of research and development
FORD
of technology for energy conservation and on all
forms of energy including fossil fuels, nuclear
LIBRARY
fission and fusion, solar and geothermal.
Energy Research and Development Administration.
The President announced the activation, effective
January 19, 1975, of the newly created Energy
Research and Development Administration. ERDA
brings together in a single agency all major
Federal energy R&D programs. It will work with
industry and others as a part of a national R&D
effort to develop technology to assure that the
U.S. will have an ample and secure supply of
energy at reasonable prices.
#
#
#
DAILY AVERAGE TOTAL OF U.S. IMPORTS
OF PETROLEUM BY COUNTRY OF ORIGIN
NOVEMBER 1974
In Thousands
of Barrels
Percent
TOTAL IMPORTS
6,000
100
OPEC
(3,760)
(63)
Arab Countries
(960)
(16)
Middle East
(750)
Iraq
0
Kuwait
0
Qatar
37
1
Saudi Arabia
577
10
United Arab
136
2
Mediterranean
(210)
Algeria
210
3
Libya
0
Non Arab Countries
(2,808)
(47)
Indonesia
322
5
Iran
372
6
Nigeria
876
15
Venezuela
1,200
20
Ecuador
38
1
NON OPEC
(2,240)
(37)
Canada
853
14
Bahama
142
2
Trinidad
324
5
Other
921
16
FORD
Source: Bureau of Census
PETROLEUM TRENDS
20
15
DOMESTIC CONSUMPTION
MMB/D
10
DOMESTIC PRODUCTION
5
1950
1955
1960
1965
1970
1974
GERALD
f.
FORD
IMPACT OF THE PRESIDENT'S PROGRAMS
ON PETROLEUM IMPORTS
40% AUTO STD.
25
APPLIANCE GOAL
BLDG. TAX CREDIT
THERMAL STD.
$2 TARIFF
20
COAL CONVERSION
IMPORTS
IMPORTS
[MMB/D]
15
IMPORTS
NPR-4
OCS
SYN. FUEL PROG.
ALASKA
10
NORTH SLOPE
DECONTROL
DOMESTIC
PRODUCTION
DOMESTIC
DOMESTIC
PRODUCTION
PRODUCTION
5
1974
1985
1985
GERALD
*
NO NEW
PRESIDENT'S
FORD LIBRARY
ACTIONS
PROGRAM
PROGRAM DESCRIPTIONS
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
TURNING THE NATION IN A NEW DIRECTION
As Gerald Ford enters the first full year of his
Presidency, America is a troubled land:
-- Millions of men and women are out of work, and
the economy appears to be sliding into the worst recession
since World War II.
-- The country has just completed its worst year of
peacetime inflation, and rising prices are still eating
away at personal incomes and at hopes for the future.
-- And the Nation has become increasingly vulnerable
to the presures of OPEC, an international oil cartel that
gathered in $25 billion from American consumers during 1974
and promises to drain even more Western resources in 1975.
The challenges are complex and tough; they require
strong leadership both at home and abroad.
President Ford has accepted those challenges. He
has given the country the unvarnished truth -- "the State
of our Union is not good" -- and he has come up with a
program that will finally set the Nation in "new directions":
-- a direction that will restore jobs and personal
security;
-- a direction that will protect pocketbooks from
the ravages of inflation; and,
-- a direction that will eventually free the country
from the yoke of the foreign oil producers.
But how did we get into this mess? And how will
the President's program get us out?
How We Got Here
While economists vary in their interpretations, there
can be no doubt that America began taking the wrong economic
road as early as the mid- 1960s. We geared up for a war on
foreign shores and for a Great Society here at home, but our
political leaders refused to raise the money to pay for it.
It was easier and more popular to create a false prosperity
FORD
2
and leave the bills for later -- for today's generation.
The result was that we have had almost a decade of economic
practices in Washington -- excessive Federal spending and
easy money policies -- that have created strong underlying
forces of inflation within the economy. The unpaid bill
has come due.
As inflationary forces were building up in Washington,
we also had a series of largely unforeseen and uncontrollable
events in the early 1970s that doubled the pressures on
prices, quickly sending them through the roof. There were
crop shortages here and abroad in 1971, 1972 and 1973, driving
up food prices. Most of the major industrialized nations,
marching more closely together as their economies have be-
come more interdependent, experienced a simultaneous boom
in the early '70s putting further demand pressures on the
prices of many commodities. Because the dollar was over-
valued, the United States had to devalue it twice, increasing
foreign demands for our goods. And the oil cartel quadrupled
the price of international oil.
Prices in the United States began shooting upwards past
the double digit mark, and -- little noticed at the time --
the inflation then had a secondary effect: it started the
economy on a downward spiral into a recession. As prices
went up, consumer confidence went down, bringing the biggest
drop in consumer purchases since World War II. As inflation
helped to drive up interest rates, the housing market also
went down, and housing -- the Nation's largest industry --
fell into a horrible slump. Inflation was thus a major
factor in creating the recession and remains a fundamental
long-term problem.
When the Nation embarked upon excessive fiscal and
monetary policies in the mid-1960s, we also allowed our
strength as an energy exporter to deteriorate rapidly.
Our own demands for energy were rising quickly, but we
were unwilling to offer the energy industry here at home
sufficient incentive to increase production. In natural
gas, for instance, Government regulators held prices so
low in order to please consumers that industry discovery
and production went into a serious decline.
The result is that today America can no longer meet
its own energy needs. We are dependent upon foreign
nations for 38% of our oil. Other Western nations are
even more dependent. It was probably only a matter of
time before the oil cartel exercised the option that we
virtually surrendered to them.
FORD
LIGRARY
3
How the President Plans to Meet the Challenges
President Ford has devised a three-pronged attack on
all three of these challenges: recession, inflation, and
energy dependence. It is complex in its details, but
simple in concept. It is bold, but not reckless. It will
require strong Government action, but it will preserve the
free enterprise system. And it will work.
In essence, here is what the President proposes:
-- To strengthen the recovery from the recession,
the President proposes an immediate, across-the-board tax
cut of $16 billion. Of that, $12 billion would be in the
form of rebates on 1974 taxes for individual taxpayers,
returning to them up to 12 percent of their taxes. The
rest of the tax cut would be in the form of a one-year
increase to 12% in the investment tax credit, thus spurring
industrial expansion and creating new jobs. The intent of
the tax refund is to give the economy a sharp, one-time
stimulus that would lift us out of the depths without creating
more inflation.
-- To curb inflation, the President proposes a
moratorium on new Federal spending programs outside the
energy field and a temporary cap on increases in Social
Security benefits, Federal salaries, military retirement
pay and the like. Inflation is already showing some signs
of abating, but the President believes it is critical to
restore long-term discipline to our fiscal and monetary
policies in order to eliminate this continuing threat.
-- To free us from dependence on foreign energy sources,
the President proposes a stiff conservation program and a
strong new program to encourage domestic production. Con-
servation would be achieved through a series of import fees,
taxes and tariffs that would raise the prices of most pet-
roleum products. Gasoline at the pump, for instance, would
cost from 10 to 15 cents more a gallon. At the same time,
however, the President's program would preserve the purchas-
ing power of average families by returning the additional
fees to them through general tax reductions. The program
is carefully designed to ensure that lower and middle income
families are not hurt -- and indeed, some will come out ahead.
At the same time, by allowing some increases in the prices of
petroleum products, the President would provide incentives to
the energy industry to increase production but he would prevent
the industry from taking unfair advantage by imposing a wind-
fall profits tax.
FORD
48
4
Need for Action
The President has thus put forward a tough, comprehensive,
and integrated program. It would stimulate the economy through
tax cuts to get us out of the recession. It would keep a lid
on Federal spending to prevent a new round of inflation. And
it would raise petroleum prices in order to encourage conser-
vation and further domestic production, but it would deal
fairly and equitably with consumers and producers alike.
As the President has said, "we have diddled and dawdled
long enough. The time for action is now. " America cannot
wait. The crises are upon us, and it will take united action --
joining the President, the Congress, and the people -- to meet
them successfully.
# # #
FORD LISTED
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
UNDERSTANDING THE ECONOMICS
This Nation now faces the challenge of regaining
control of its economic destiny. The President's program
is designed to turn the economy in a new direction away
from recession and unemployment and toward vital progress
in creating energy independence. His message properly
recognizes that inflation pressures must be further
reduced to support these economic and energy goals.
Three basic points should be emphasized in evaluating
his comprehensive package of recommendations:
1. Our economic and energy goals are interdependent.
The success of the energy proposals will depend upon
the creativity and growth of the U.S. economy. In
turn, the economy will initially be affected by the
new costs and taxes and necessary adjustments in the
use of energy.
2.
The individual policies recommended must be
considered as a single, integrated package. Contro-
versy about specific suggestions will occur but
critics must recognize the role of each recommenda-
tion in the total program. If specific recommendations
are rejected, suitable replacements must be provided.
3.
The President's program will require real
sacrifices and widespread cooperation. Easy solutions
are not available. Nor will the wanted results occur
quickly. But failing to act now will only make the
problems worse as the procrastination of the last
few years has clearly demonstrated. The important
thing is to act decisively to correct existing
economic distortions and to prove our real commit-
ment to energy conservation and resource development.
The President's program provides the necessary frame-
work for such action.
The Economic Program
By mid-1973 it was clear that the U.S. economy, while
still strong and growing, was slowing down. The unexpected
oil embargo in late 1973 and widespread materials shortages
caused further problems at the same time as inflation moved
FORD
LIBERRY
2
to unacceptable double-digit levels. In recent months
the unexpectedly rapid weakening of demand for housing
and new automobiles has hurt the entire economy, causing
unemployment to jump upwards. Personal spending and
business investment have also dropped. Most analysts
now expect inflation to continue to moderate and a
gradual economic recovery to occur later in 1975 but the
current pains of recession cannot be ignored, particularly
the sharp increases in unemployment. The difficult chal-
lenge is to expand economic activity, and thus employment,
without triggering a new round of inflationary pressures.
The basic economic responsibility of the Federal Govern-
ment is to follow policies that will enable our economic
system to grow and provide jobs with reasonable stability
of the price level. These Federal responsibilities are
exercised through the Government's spending and taxation
policies and through the monetary policies by which the
Federal Reserve System controls the supply of money.
Perhaps the best indication of what actions the
Administration plans in fighting recession and unemploy-
ment is contained in the new budget for Fiscal Year 1976.
Total outlays are expected to rise to $349 billion, a jump
of over $80 billion from the level of $268 billion in
Fiscal Year 1974. Government programs for unemployment
assistance, health, housing, defense, education, public
works, and thousands of other activities which influence
the economy are part of the budget the President has sub-
mitted to Congress. The sharp increases in spending
suggest that the President has been responsive to the
economic slowdown. Similarly, Federal Reserve officials
have repeatedly emphasized the point that they will not
permit the economy to falter through a shortage of needed
money and credit.
Tax Proposals
Nevertheless, the President has decided that we cannot
wait until later in the year for the private sector to
recover or for the increased levels of Government spending
to trickle down through the economy to help ease the
serious unemployment problem. To meet our immediate needs,
he has proposed three important Federal tax actions: (1) a
temporary tax rebate of $16 billion; (2) a permanent tax
reduction and other actions to return to the economy the
$30 billion to be collected by the energy conservation
excise taxes and fees; and (3) general tax reform later in
1975.
FORD
3
The temporary tax rebate of $16 billion is a stimulus
intended to create more jobs by increasing personal spending
and business investment. The $12 billion returned to
individuals will be an important boost to consumer purchasing
power which will also be improved in coming months by rising
personal incomes and continued moderation in the rate of
price increases. Once the rate of inflation drops below the
growth pace of personal incomes, the consumer will once again
have real purchasing power gains plus the temporary tax
refunds. The $4 billion returned to businesses and farmers
in the form of an investment tax credit of 12 percent will
provide immediate stimulus to spending in 1975 which will
create additional jobs.
*
*
*
*
TAX REBATE PROPOSAL
Temporary Tax Rebate Based on 1974 Tax Obligations
For a Family of Four
Adjusted
Present
Proposed
Percent
Gross Income
Tax
Refund
Saving
$ 5,000
$
98
$
12
-12.0%
7,000
402
48
-12.0%
10,000
867
104
-12.0%
12,500
1,261
151
-12.0%
15,000
1,699
204
-12.0%
20,000
2,660
319
-12.0%
40,000
7,958
955
-12.0%
50,000
11,465
1,000
- 8.7%
60,000
15,460
1,000
- 6.5%
100,000
33,340
1,000
- 3.0%
200,000
85,620
1,000
- 1.2%
The second step involves a return of the $30 billion
that will be raised by new energy conservation excise taxes
and import fees and the windfall profits tax. The imposition
of these taxes is a crucial part of the energy program
designed to encourage conservation, but the new funds
collected must be returned to the economy in order to pre-
vent a worsening of the recession. Therefore, the revenues
collected will be used to adjust the basic tax structure.
This restructuring is necessary to correct distortions
caused by inflation, which have artificially increased tax
burdens by pushing individuals into higher tax brackets
FORD
4
and forcing businesses to pay taxes on inflated profits
which do not properly reflect current costs or the
replacement value of existing plant and equipment.
To return the $30 billion to the economy, the
President has proposed that $16.5 billion be used to
increase the low income allowance and to adjust the
withholding rates so as to reduce personal income taxes,
particularly for low- and middle-income families; $2 billion
will be committed to people who do not pay income taxes
because of low incomes; $500 million will be set aside to
cover tax credits to homeowners who add insulation or storm
windows to conserve energy; $6 billion will be returned to
businesses by reducing the corporate income tax rate from 48
to 42 percent; $2 billion will be returned to State and
local governments through General Revenue Sharing payments;
and the Federal Government will keep $3 billion which
represents its share of higher energy taxes. This system
will accomplish some needed tax reform and should neutralize
most of the effects of increasing taxes and import fees by
$30 billion. Most families will receive a larger rebate
than the estimated energy taxes paid. Low- and middle-
income families in particular will benefit.
*
*
*
*
PERMANENT TAX CUT PROPOSAL
Structural Tax Reductions Combining Increase In
The Low Income Allowance And Reduced Tax Rates For A
Family of Four
Adjusted
Present
New
Tax
Percent
Gross Income
Tax 1/
Tax
Saving
Saving
$ 5,600
$ 185
$
0
$ 185
100.0%
7,000
402
110
292
72.6%
10,000
867
518
349
40.3%
12,500
1,261
961
300
23.8%
15,000
1,699
1,478
221
13.0%
20,000
2,660
2,450
210
7.9%
30,000
4,988
4,837
151
3.0%
40,000
7,958
7,828
130
1.6%
1/
Calculated assuming Low Income Allowance or itemized
deductions equal to 17 percent of income, whichever
is greater.
*
*
*
*
FORD
5
Further tax reforms will be proposed later after the
temporary stimulus package and the energy tax rebate
issues are resolved.
Federal Spending
The President has also reaffirmed his great concern
about fiscal responsibility in restraining the upward
momentum of Government spending. He has called for a one-
year moratorium on new spending programs -- other than the
new energy proposals. He has also emphasized the need to
have a tough position against increased spending by sub-
mitting budget rescissions and deferrals to Congress last
fall and in the proposed Fiscal Year 1976 budget. He has
also called for the Federal Government to set a national
example by placing a limit of five percent on increases
in Federal salaries and on cost-of-living adjustments for
Government and military retirement pay and Social Security
benefits.
Despite these efforts the Federal deficit in Fiscal
Year 1975 will be more than $30 billion and the Fiscal Year
1976 shortfall is now projected to be about $50 billion.
These massive deficit projections should not prevent moving
ahead on the temporary $16 billion stimulus package or the
structural tax adjustments proposed, but they do emphasize
the extreme importance of holding down Federal spending to
reduce the deficits and to provide greater fiscal flexibility
in responding to changing economic conditions.
Summary
The President's economic proposals build on the vast
array of programs included in the cumulative Federal budget
system. They include many of his specific recommendations
for improving the efficiency of the economy which he
presented to Congress last October 8th. The new initiatives
highlight the three-step tax program, beginning with the
temporary income tax stimulus, and a strong Presidential
appeal to hold down Federal spending to moderate the
record-level deficits expected. These programs properly
focus on improving the employment outlook in the private
sector where most of the jobs are located. But there is
continued emphasis on fiscal and monetary responsibility
in avoiding some of the excesses of the past which
unfortunately contributed to the boom-to-bust sequence of
economic activity.
FORD
6
The country needs a strong and balanced economic
program from the Federal Government to create the necessary
environment for private sector response. The President's
economic proposals are carefully integrated with his energy
initiatives. They are designed to stimulate economic
recovery without generating excessive inflationary expansion
pressures.
# # #
FORD LIBRARY is 079339
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
A SUMMARY FOR THE LAYMAN
In his first State of the Union Address to the Congress
and the Nation on January 15, President Ford said the
State of the Union "is not good.' In response to the
problems of inflation, recession and dependence on foreign
oil sources, the President announced administrative actions
and legislative proposals in a comprehensive program designed
to provide short-term relief and long-term solutions "to
move America in a new direction."
The President's economic and energy program will
provide: tax cuts for businesses and individuals to put
more money into the hands of people and to provide more
jobs; a commitment to no new Government spending programs
this year outside the energy field; a five percent cap on
automatic increases in Federal benefit programs and pay
increases; and an energy program including higher energy prices
to assure conservation and to spur development of other
sources of energy so that energy independence can be achieved
by 1985.
The President spoke to a Nation in which millions are
unemployed -- and the rate is rising; recession and infla-
tion are eroding the purchasing power of others; unreliable
foreign energy supplies cost more than ever before.
Because of the widespread dislocations in the economy, the
President announced to the Congress and the Nation a program
to turn America in a new direction. The program, while
maintaining and strengthening the free market economy, would
put the unemployed back to work; increase real income and
production; restrain growth of Government spending, and
achieve energy independence.
First, the President proposed a temporary tax reduc-
tion of $16 billion. Three-quarters would go to individuals
and one-quarter would be to promote business investment.
This cash rebate to individuals amounts to 12% of 1974 tax
payments -- a total cut of $12 billion, with a maximum of
$1,000 per return -- and he called on Congress to act by
April 1. He made it clear that cutting taxes now is essential
if we are to turn the economy around and that a tax cut offers
the best hope of creating more jobs. "Unfortunately," the
President said, "it will increase the size of the budget
deficit. Therefore, it is more important than ever that we
take steps to control the growth of Federal expenditures."
FORD
2
To keep Government spending in check, the President
announced his intent to propose legislation to restrain
the growth of a number of existing programs; his conclusion
that no new spending programs can be initiated this year,
except for energy, and, a recommendation for a five percent
limit on Federal pay increases this year. This kind of
limitation is necessary, in the President's view, because
only a reduction in spending growth can keep Federal
borrowing down and reduce the damage to the private sector
from high interest rates.
The President placed special emphasis on restoring
our country's surplus capacity in total energy so that we
will be able to assure ourselves reliable and adequate
energy and help foster a new world energy stability for
other consuming nations. Accordingly, he recommended a
plan for national energy goals to protect us against the
disruptions caused by cut-offs in foreign oil. "It will
require sacrifices," he said, "but it will work."
President Ford requested the Congress to act within
90 days on a more comprehensive energy tax program, in-
cluding excise taxes and import fees on crude oil, enact-
ment of a natural gas excise tax and a windfall profits
tax on oil by April 1 to ensure that oil producers do not
profit unduly. At the same time, he stated that he plans
to take administrative steps to decontrol the price of
domestic crude oil on April 1; he has also proposed de-
regulation of new natural gas.
The President also called for a massive program to
increase energy supply, cut demand and provide new standby
emergency programs to achieve the independence we want by
1985. He stated the intention of his Administration to
move ahead with oil exploration, leasing and production
on those frontier areas of the Outer Continental Shelf
where the environmental risks are acceptable. Zeroing in
on our most abundant natural resource -- coal -- the
President called for a reasonable compromise on environ-
mental concerns and proposed Clean Air Act amendments which
will allow greater coal use without sacrificing our clean
air goals. Recognizing the growing importance of nuclear
power, he will also submit legislation to expedite nuclear
licensing and the rapid selection of sites.
FORD
3
The growing need to cut energy waste in this country
received special emphasis in the President's address. He
proposed legislation to make thermal efficiency standards
mandatory for all new buildings in the United States, a
new tax credit of up to $150 for homeowners who install
insulation, the establishment of an energy conservation
program to help low income families winterize their homes,
and legislation to modify and defer automotive pollution
standards for 5 years to encourage improvement of new
automobile gas mileage 40% by 1980.
The President emphasized that these proposals and
actions can reduce our imports of foreign oil to 3-5 million
barrels per day by 1985. He also proposed standby emergency
legislation and a strategic storage program of 1 billion
barrels of oil for civilian needs and 300 million barrels
for defense purposes. Voicing a strong belief in America's
capabilities, the President called for hundreds of new
energy producing plants, coal mines and oil refineries and
millions of newly insulated homes and fuel-efficient vehicles
within the next 10 years.
On the international side, the President emphasized
the need for worldwide cooperation and vigorous leadership.
He made a special point of stating that a resurgent American
economy would do more to restore the confidence of the world
in its own future than anything else we do. The President
said that affirmative action on this program by the Congress
will show the world beyond a shadow of a doubt that we have
started to put our own house in order. "At stake," said the
President, "is the future of the industrialized democracies."
# # #
KEY ISSUES
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
THE NEED FOR ACTION NOW
The President has proposed to Congress and the American
people the first comprehensive, integrated approach to our
economic and energy problems ever assembled in this country.
The program has been thoroughly planned and analyzed,
and it reflects the consensus of a broad spectrum of the most
respected economic and energy experts in the Nation --
Government, industry, citizens groups and others -- all of
whose views have been considered at length in reaching the
details of the complete program.
The program is complex, since it must deal with and solve
a wide range of energy and economic problems confronting this
Nation. The President has explained the program as fully as
possible to the members of Congress and to the Nation's
citizens, in a broadcast address to the Nation on January 13,
in his State of the Union message on January 15, and in public
statements since then. He submitted a package of 13 legislative
proposals to Congress on January 30 and his officials have been
working with Congressional committees on his tax proposals.
No reasonable comprehensive proposals have been forth-
coming from Congress or from other sources. The President's
plan is the only one which deals with all aspects of the
problems involved, and action on his proposals is vital now.
Each day that passes without strong action on the
President's program leaves this country more dependent on
foreign oil for its energy needs. Each day the economy
becomes more and more vulnerable to the disruption which
could result from actions by foreign suppliers.
It is the clear responsibility of the members of Congress
to act quickly in the public interest. The President has
requested specific actions from Congress, specific actions
designed to work in combinations with each other to have the
overall effect of solving our economic and energy problems.
This interrelationship of elements of the program means that
if Congress chooses not to enact any one facet of the total
program, it must then provide an alternative program which
achieves the same result.
Action now on the President's program is imperative if
the United States is to maintain its international leadership.
This country has traditionally been known for its ability to
BERALD FORD VIBRARY
2
get things done, particularly in times of crisis.
Failure on the part of Congress to act swiftly to
approve the President's proposed legislation could well
be interpreted as indecision and weakness, and as an
unwillingness to take the unpleasant but absolutely
necessary steps to cure our energy and economic problems.
The crucial point of President Ford's energy plan
is that it moves the Nation in the right direction, and
that we must begin moving in that direction now. The
President has expressed both a willingness and a desire
to work with Congress on revising and restructuring
various details of the complete program, once the basic
thrust has been made in the direction of the energy
independence desired by all Americans.
The President's program is a place to start, and a
place to start without further delay.
Bold and imaginative solutions are required to meet
the extensive problems which face the Nation. The
President has taken the initiative in assessing the
problems and proposing wide-ranging solutions. It is
now up to Congress and the people to press for immediate
actions to support the President's proposals.
# # #
i
FORD
CERALD
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
GASOLINE RATIONING
What is gasoline rationing?
Some members of Congress and other public spokesmen
have proposed that the Government institute mandatory
rationing to deliberately reduce the amount of gasoline
available to consumers, to force Americans to drive less
and use less gasoline.
Government officials would then determine how much
gasoline each individual or business could use.
To achieve our energy goals through gasoline rationing,
individuals would have to make do with nearly 30 percent
less gasoline than is now used. In other words, most of us
would receive nine gallons a week, or an average of one and
two-tenths gallons per day.
Businesses would receive 10 percent less gasoline than
they now use.
Each licensed driver would have to pick up coupon books
four times a year at local post offices. Drivers who did
not need, or chose not to use, all their coupons would be
permitted to sell them in a "white market." Those who
needed extra coupons, and could afford to purchase them
from other individuals could buy extra gasoline at an
estimated average cost per gallon of $1.75 -- a projected
free-market price of $1.20 for the coupon itself, plus
55 cents for the gallon of gasoline.
Will gasoline rationing work?
A gasoline rationing program can indeed limit gasoline
consumption. If our national energy problem were merely
a gasoline shortage, a rationing program might make sense.
Unfortunately, the country's energy problem has many
facets, and gasoline rationing treats only one symptom of
a broad, interrelated problem.
The Nation is becoming increasingly dependent on foreign
sources for petroleum energy, and a repeat of last year's
disruption of this foreign energy supply would seriously
damage our economy.
RALD FORD VIBRARY
2
The Nation is paying foreign oil suppliers more than
$25 billion a year for needed energy. This means we are
rapidly losing our national wealth, and with it the ability
of our economy to provide more jobs for our citizens.
The President's comprehensive energy proposals are
aimed at limiting consumption of all forms of energy
now -- to enable us to reduce oil imports by one million
barrels a day this year and by two million barrels daily
by 1977 -- and at providing the economic incentives and
Government support necessary to encourage greatly expanded
exploration for and production of new energy from secure
domestic sources -- to provide for our future energy needs.
Rationing does nothing to solve our basic energy
problems and creates several more in the process. While
it would provide a short-term reduction in consumption of
gasoline, it would not encourage domestic energy exploration
and production, since no new incentives would be provided
for energy producers.
Any attempt to achieve all energy conservation through
one product such as gasoline is certain to cause severe
inequities and economic dislocations. It is far better to
spread price increases and demand reductions over all the
energy products that are in short supply domestically; for
example, all petroleum products and natural gas, and
electricity that is generated by the use of oil or natural
gas.
Why is gasoline rationing undesirable?
No conceivable rationing system can possibly take into
account the many special requirements of the millions of
American gasoline consumers, so a rationing program is
inherently unfair to some individuals and some groups.
Individuals who must use their cars and who cannot
afford to pay $1.75 for those "extra" gallons, would often
be unable to make necessary trips, such as to work or to
school.
Rural areas of the country, where automobiles are
often used twice as much as in urban areas, would be unfairly
penalized. This disparity would impact most severely on
the West and Midwest States. In many rural areas, there is
no public transportation alternative to the automobile.
3
Under rationing, the Government would be making most
of the key decisions for both individuals and businesses
over the next five or ten years. Rationing officials rather
than private citizens would be controlling the key decisions
involving energy.
Decisions on job changes, long distance moves, new
purchases, starting new businesses, expanding existing
businesses, and other decisions traditionally are better
left in the hands of individual citizens rather than in the
hands of rationing boards.
The costs of a gasoline rationing system are huge and
would constitute an unnecessary drain on our economy. Some
15-25,000 full-time Government bureaucrats would be required,
and administrative costs alone -- printing coupons, estab-
lishing local rationing boards, and recruiting enforcement
officials -- would mean at least $2 billion bill each year
for taxpayers.
Rationing would result in an estimated $13 billion
drop in our Gross National Product, and a resulting loss
of 200,000 to 300,000 jobs, since many businesses would be
forced to close or curtail operations.
Rationing gasoline alone would provide no incentive
for non-drivers to conserve energy in other equally
important areas of energy consumption.
And, finally, gasoline prices would rise even under
rationing proposals, since a distortion of current oil
refining procedures would lessen efficiency of operation,
raising costs of all fuels.
What the Nation needs is a total program to approach
all of the many sides of the energy problem, and it is this
comprehensive plan which the President has proposed to the
Congress and to the public.
# # #
FORD
LIBRARY
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
EFFECT OF THE PRESIDENT'S ENERGY PROGRAM ON THE NORTHEAST
The President's program to bring about effective energy
conservation now and over the next several years through a
system of oil import fees will result in an increase in energy
costs for consumers throughout the country. The effective
increase for New England residents will be about the same as
that for the rest of the country, or even slightly less than
the effect felt by other regions.
The overall program is designed to avoid regional im-
balances in costs that might have resulted from the fact that
some areas -- particularly New England and the Northeast
States -- import a great deal of refined petroleum products
to meet their energy needs, while other areas are dependent
on imported crude refined in domestic facilities. Several
facets of the overall program work to reduce uneven regional
impacts.
First, the President's import fee plan provides for
much lower import fee impact on petroleum products, to
balance the costs of areas importing products with those
sections of the country using cheaper, price-controlled
crude oil.
The import fee on all crude oil and petroleum products
would rise by $1 per barrel on February 1, by an additional
$1 per barrel on March 1, and by another $1 per barrel on
April 1, for a total increase of $3 per barrel.
However, a system of rebates would lessen the effective
fee on imports of petroleum products. The end result will
be an effective fee on product imports of 60¢ per barrel on
March 1, and $1.20 per barrel on April 1, with no increase
in fees for products in February.
This would give a temporary price break to New England
consumers, and the full effect of the product import fees
would not begin to take hold until near the end of the
winter season (mid-April or later) during which the North-
east states use much of their imported heating oil.
Second, as long as the import fee program lasts, the
Federal Energy Administration will continue to use its "old
oil entitlement program" to spread price increases on crude
oil among all refiners, to minimize regional cost differences
resulting from different ratios of dependence on imported
crude oil.
FORD
LIBRARY
2
This program allows all refiners equal access to
available supplies of both (1) "old" oil where the
price is being held artificially low by Federal price
controls and (2) "new" oil which sells at higher prices
comparable to the world market. The effect of the
entitlements program is to make all refiners' crude
oil costs as nearly equal as possible, maintaining
competition and minimizing regional price variations.
Third, the combined effect of the President's plan
to remove price controls on "old" domestic crude oil
production and legislation establishing a uniform $2
per barrel fee on all imported crude oil and products
would be to help equalize petroleum product prices
throughout the country.
Fourth, the addition of the planned 37¢ per thousand
cubic feet tax on natural gas would help keep energy
cost increases in balance -- minimizing regional impacts
of the program.
More permanent solutions to the energy problems of the
Northeast have been proposed by the President. Of primary
importance is the leasing of Federally-controlled areas on
the Outer Continental Shelf off the East Coast, to allow oil
and gas producers to conduct the necessary exploration work
to find out if significant oil and gas reserves do in fact
exist under the Atlantic Ocean.
If they do, production can begin within the mid-term
time frame of the President's program -- 1975-1985 -- and
supplies discovered off the East Coast will be far closer to
Eastern markets and far less costly to transport to consumers
than the imports and production from traditional Southwestern
fields upon which the Northeast must now depend.
The President has proposed a comprehensive energy and
economic plan to cope with our energy supply problems in the
short run and solve them in the long run, while maintaining
the health of our economy. The time for action on these
proposals is clearly now, and delay only aggravates the prob-
lems confronting the country.
Eight Northeastern states have undertaken court action
to block the President's proposals for import fees on crude
oil and petroleum products, but the fact remains that no
rational, effective, alternative program has been proposed
to deal with our energy problems. The President's overall
program is the result of detailed analysis of the country's
FORD
017
3
energy problems and prospects, and it represents the only
total energy policy program ever put forth for this country.
The program is a carefully balanced combination of
actions to encourage energy conservation now -- the only
way to limit our oil imports over the next few years, and
to encourage the maximum possible development of domestic
energy resources to meet our future energy needs from
secure sources within our own control.
Now is the time for action, not delay, and in the
absence of any alternative program to approach all our
energy and economic problems, the President's proposals
remain the only comprehensive ones made so far.
The President has requested urgent action from Congress
on his energy and economic package. He has stated clearly
that the quickest possible approval of the entire overall
objectives is imperative to the economic viability of the
country. He has further indicated that whatever "fine-
tuning" is necessary to meet the requirements and special
problems of various regions or groups of citizens can be
done later, once the basic actions are started, and as the
Nation progresses toward energy solutions.
# # #
FORD LIBRAR
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
WHY THE PROGRAM ISN'T JUST TAKING MONEY FROM THE LEFT HAND
AND GIVING IT TO THE RIGHT
There are clear and important reasons why imposing new
energy taxes and then refunding that money to consumers in
the form of income tax rebates and permanent tax reform is
not simply a "shuffling" of money from one pocket to another.
One principal objective of the President's energy and
economic program is to reduce consumption of energy and thus
reduce sharply the growth in oil imports. Oil imports mean
U.S. dollar and job outflows and continued vulnerability to
another oil embargo.
The quickest, most effective and fairest way to encourage
energy conservation is to raise the price consumers must pay
for those sources of energy that are now in short supply
domestically -- oil and natural gas. There is no completely
painless way to reduce energy demand, but raising prices and
letting the marketplace and free choice determine demand is
far preferable to the principal alternatives of rationing or
Federal allocation of scarce energy supplies. Increasing
energy taxes is the most feasible way to increase energy
prices, and in turn dampen demand.
But, to avoid undue economic burdens on consumers as a
result of the increased energy taxes, the President has pro-
posed a plan which will equitably redistribute funds collected
from energy taxes to consumers.
Higher costs for energy will affect low-income citizens
most severely, and the income tax reform provisions would
benefit low-income and middle-income families and individuals
most.
The net result of both the higher energy taxes and the
income tax proposals would be to give the lowest-income
levels an actual increase in spendable income, while middle-
income taxpayers would come out about even, and those at the
highest income levels would pay more, but still not an
unbearably large additional burden.
All income levels will have increased incentives to
conserve energy, and the additional income from revised
income tax schedules, especially to low-income and middle-
income taxpayers, will restore at least part of the erosion
in purchasing power resulting from inflation.
# # #
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
EQUALIZING THE BURDEN: NO DIRECT GASOLINE TAX
The President opposes direct taxes on gasoline for
many of the same reasons that he is against gas rationing.
Taxes would be inequitable and they would be of no signi-
ficant help in reaching the President's ultimate
objective -- energy independence.
Not many weeks ago, the idea of direct taxes on
gasoline was being hailed by many as the immediate and
major answer to our energy problems. Even among those
most opposed to President Ford's energy program, the
direct tax idea has now faded from popularity.
The reason why the direct tax plan is being abandoned
by many of those who were supporting it a month or more
ago is that they have studied its real implications. It
is, inherently, a short-term and shortsighted solution
filled with inequities and offers no ultimate solutions to
our energy problems. It is also inflationary -- very much
so in some proposals.
There is no agreement on the amount of direct taxes
that would have to be levied. Proposals range from 20
cents to 50 cents in taxes on each gallon. The larger the
taxes, it is contended, the greater the pressure on the
public to consume less gasoline. Thus, the argument goes,
we could expect immediate and drastic reduction in gasoline
use -- greater than that which would occur under the
President's program.
But, such a program would have other immediate drastic
effects.
Recreation, tourism, travel -- all would be hard hit.
So would hotels, restaurants, and similar businesses. The
auto industry has been severely hurt already, with several
hundred thousand of its employees laid off or on indefinite
leaves, so it would be further damaged if gasoline taxes
are increased sharply. There undoubtedly will be changes
in the auto industry -- smaller, lighter cars; better effi-
ciency, and other innovations -- but we cannot do this
overnight without serious dislocations to workers and the
national economy.
FORD
2
The long list of those affected in an inequitable
manner under rationing would be repeated for the most
part under direct gasoline taxation.
Rural Americans, even those in suburbs, who need to
drive longer distances would be hard hit. The cost of
farm operations would rise significantly. Low income
persons who needed to drive long distances to work could
not afford to pay 30
40
50 cents more for each gallon
of gasoline without extreme sacrifice at home. Innumberable
examples of such hardship would be found.
Any attempt to achieve all energy conservation through
one product such as gasoline is certain to cause severe
inequities and economic dislocations. It is far better to
spread price increases and demand reductions over all the
energy products that are in short supply domestically; for
example, all petroleum products and natural gas, and elec-
tricity that is generated by the use of oil or natural gas.
Partial answers such as a gasoline tax will not advance
us significantly toward our national energy goals. The
President alone has proposed a total national energy and
economic program -- including assistance to low income
families facing higher energy costs.
# # #
FORD
LIURARY
THE PRESIDENT'S ECONOMIC AND ENERGY PROPOSALS
TAX REDUCTIONS VERSUS HIGHER FEDERAL SPENDING
The President proposed tax reductions combined with
restraints on new Federal spending programs, rather than
no tax action and higher Federal spending, for several
reasons.
The basic aim of the President's program is to restore
a healthy economy for the country, and the proposals for tax
rebates and income tax reductions are designed to do this
in the most efficient way.
Tax reductions are intended to provide consumers with
greater disposable income, and corporations with investment
incentives, to provide the quickest possible recovery from
the economy's recession.
But, unless Federal spending programs are brought under
control, balance in the Federal budget cannot be restored
as the economy recovers. Continued large Federal deficits
after the economy recovers from the recession would fuel
inflation.
Temporary tax reduction now will provide prompt
stimulants to fight the recession by giving more purchasing
power to individuals, creating more jobs through corporate
investment tax credits, and increasing production and supply
to guard against future inflation.
The open marketplace has traditionally been the most
efficient way of channeling additional spending power into
the economy, rather than having the Government make greater
spending decisions.
The large Federal deficits currently being experienced
and projected for the short-range future are caused partly
by reduced tax revenues resulting from the recession, partly
by temporary higher outlays for unemployment compensation,
again resulting from the recession.
The deficits caused by all these factors will be
minimized with the recovery of the economy stimulated
FORD
2
by temporary tax reductions. And a healthier economy will
enable private industry to fund a greater share of energy
projects without Federal assistance.
New Federal spending projects now would require higher
taxes later to restore balance in the budget. To encourage
higher output and employment, and a greater supply of goods
and services, it is imperative to avoid taxes any higher
than those already caused by inflation.
Lower taxes are necessary now to spur economic recovery,
and the President has proposed a responsible program of
restricted Government expenditures to allow recovery from
the recession without jeopardizing future economic health.
# # #
8 FORD