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First Debate: Carter on Economic Issues
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First Debate: Carter on Economic Issues
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White House Special Files Unit Files
Ford - Carter Debates Files
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Antitrust law
Campaign debates
Economics
Federal budget
Foreign economic affairs
Inflation (Finance)
Manpower policy
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Presidential campaign, 1976
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Taxation
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The original documents are located in Box 1, folder "First Debate: Carter on Economic
Issues" of the White House Special Files Unit 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States of America his copyrights in all of his unpublished writings in National Archives collections.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 1 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
CARTER ON ECONOMIC ISSUES
THE PRESIDENT HAS SEEN
General Goals
GERALD
FORD LIBRARY &
CARTER'S GENERAL ECONOMIC GOALS
!. Carter's overall economic goals have fluctuated
somewhat, but he generally states them to be:
-- "Modest growth in GNP of 4-6% a year over the
next four years;
-- Unemployment rate of 4% to 4-1/2% by end of his
first term;
-- Annual inflation rate of 4% by the end of his
first term;
-- A balanced budget by 1980;
2. According to Carter's economic advisors, he originally
wanted much tougher targets for unemployment and inflation
(in the 2% range) but he has become more realistic.
3. In addition to his general goals, Carter has also
promised that in his first term he would:
-- Institute zero-based budgeting, issuing an executive
order "in my first week in the White House";
-- Reorganize the executive branch, cutting the number of
agencies and departments from 1900 to 200 (He has carefully
avoided saying how);
-- Have a sunshine law;
-- Restore harmony between the White House and Congress
-- Level off the proportion of GNP absorbed by the
Government. This is his latest kick. Business Week reports
on September 20 that in an upcoming speech, Carter may call
for a ceiling on federal expenditures at about the recent
historical average of 21% of GNP in order to emphasize his
fiscal conservatism.
4. Carter is clever at stating general goals while
avoiding attempts to pin him down on ways to achieve
them. Even his chief issues man, Stu Eizenstat, has said:
"We will continue to state goals. But we're not laying
out a legislative blueprint, and we're not going to be
forced into that. If Among the apparent reasons for this
approach:
-- Their belief that specific issues count less than
general attitudes the candidate conveys to voters. Thus,
Carter always stresses nonideological themes of trust and
confidence in government.
-- Specifics always tend to alienate special interest
groups, a point publicly acknowledged by Carter's press
secretary.
-- Specifics also reveal contradictions in a program.
5. Carter's gyrations on economic policy have been one
of the most notable aspects of his campaign. In the early
primaries, he consistently ran to the right of his Democratic
opponents. He refused, for instance, to embrace Humphrey-
Hawkins. But after his "ethnic purity" remark, feeling
pressure from the Black Caucus as well as George Meany, he
relented, giving lukewarm endorsement to H-H. He has since
tried to avoid the bill, and it is not mentioned in the
Democratic platform.
Carter moved more discernibly to the left on April 22,
just prior to the Pennsylvania primary, when he issued
his first economics position paper. It placed a heavy
emphasis on jobs as a number one economic priority. While
it stressed that most jobs should be created in the private
sector, it also gave a clear indication that many jobs were
also to be created in the public sector and through public
tax inducements -- and it said little about how Carter would
control inflation. Carter's perceptions as a liberal,
big-spending Democrat were greatly magnified by the
Democratic convention including the platform, the choice
of Mondale, and the acceptance address. His subsequent
endorsements of big labor added to the perception.
Then, on September 3rd in a news conference in Plains,
Carter swung back to the right, making it clear that
both inflation and jobs were twin evils that he intended
to fight simultaneously. The expensive social programs
that he embraced at the convention were still going to be
enacted, he said, but they would have to be phased
in, compatible with his goals of controlling inflation
and balanceing the budget by 1980. So, as of today,
Carter is straddled between fighting unemployment
and fighting inflation.
RALD GERALD ? 1898817 FORD
FORD
RALD
QUOTES FROM CARTER AND ADVISORS ON GENERAL ECONOMIC GOALS
Q. Republicans in Kansas City charged that five programs that
you've talked about would cost more than $100 billion and would
cause personal taxes to rise by 50%. How do you respond to
the charge that you're a big spender?
A. Well, I've never been a big spender. I've always been
careful with my own money and careful with whatever taxpayers'
money I had under my charge. They are trying to cover up their
mistakes. I intend as President to achieve a balanced budget
by 1980. With a modest growth in gross national product to
about $5 to 6% a year, and an unemployment rate of 4% to 4½
at the end of that time, with careful planning and meticulous
detail work, and phasing in the programs that we've evolved, we
would have a balanced budget by 1980.
Carter Interview
Business Week, Sept. 20, ]976
Q. This talk of savings reminds us of the Vietnam "peace
dividend. 11 Is there a chance that these savings will also
disappear?
A. The savings are there to be realized. I don't say that we're
going to cut that much out of total spending and give it back
to the taxpayers, but to help programs be more efficient. I
think we have now some 300 programs in health, administered by
about 76 agencies. There's no way now to decide in Washington
who's responsible for errors, who is in charge of the management
of government. A clear delineation of authority, a reduction.
in the number of agencies responsible for the same function, com-
bined with a reassessment of priorities on an annual basis under
zero-based budgeting would result in substantial savings. We
figure that over a four year period we'll have at least an
increased income for the federal government - not in savings,
but in dividends -- of about $60 billion cumulatively.
You know, I'm a businessman
and I'm very conscious always
of costs, projections, balanced budgets, and that will be part
of my consciousness as President.
Business Week
September 20, 1976
"There's no doubt in my mind that before I go out of office
the budget will be balanced and we will have zero-based budgeting
and the government organization will be proper and we'll have a
sunshine law and the harmony between the White House and Congress
will be restored.
New York Times
June 16, 1976
Carter said that he would strive for a balanced budget and
full employment if elected President. Blaming the Nixon-Ford
administration for the nation's economy ills, Carter said he
would try to cut inflation to 4% by the end of his adminis-
tration and seek a steady economic growth rate of 4-5%.
UPI
July 29, 1976
Carter reiterated his goals of cutting the unemployment rate
to between 4% and 4.5% and inflation to 4% or less within
four years. Telling reporters about his Tuesday meeting with
his economic advisers, Carter also said that as President he
would strengthen the Council on Wage and Price Stability and
make a greater effort to get labor and business to voluntarily
curb prices and wage boosts. While criticizing President Ford's
general economic policies, the Democratic presidential nominee
said he would continue the Ford policy of limiting wages
increases for federal employees.
Wall Street Journal
July 29, 1976
Carter outlined his own goals as "full employment" for all who
are able to work, an inflation rate of 4% by 1980, a balanced
budget, a steady economic growth rate of 4-6% and leveling
off of the proportion of the gross national product that is
absorbed by government.
Washington Post
July 29, 1976
Q. What should be the approximate balance between government
and private shares of the GNP?
A. Well, the government share has been steadily growing. My
inclination would be to attenuate the growth, at least. My
hope would be that we could hold down or reduce the government
proportion of the GNP compared to what it would have been if
I wasn't in the White House. I can't promise you that I'll stop
it or reverse it, but I'll do what I can to hold it down.
Fortune
5/76
Q. How far down do you think you can get inflation?
A. "I don't see any reason why the permanent level of
inflation can't be as low as 2 or 3 percent. If we get
down below 4 percent unemployment, you would have very
high inflationary pressures
"
Fortune
May, 1976
Lawrence Klein, Carter's chief economic adviser said of
Carter: "The man has a real feeling for the poor, he
wants to distribute America's income better, the pie
will be bigger and everyone will have a bigger piece of
it; there will be a shift to the smaller man. Jimmy's
a real friend of small business."
"Our main target is unemployment. Carter wants to cut it
to 4-1/2% from 7%; he'll do it by more government spending -
but with restraint - and more public service jobs, induce-
ments to private industry to extend hiring practices and
more expansionary fiscal and monetary policies. There might
be a budget deficit, if necessary, but not for long."
"We don't have all the answers to the 'inflation problem'
yet, but we're working on programs to step up productivity,
increase competitive pricing and introduce stand-by wages
and price controls if necessary.
Baltimore Sun
July 25, 1976
FORD
CARTER ON JOBS
1. General Approach: While Carter has recently shifted
his emphasis toward a greater concern for inflation, he
continues to impress upon audiences the need for much
more aggressive programs to create new jobs. He is a
constant critic of Ford Administration policies, and
his own approaches and programs -- a melange of orthodox
Democratic tools -- would be a sharp departure from
current policies. For analytical purposes, Carter's job
policies can be placed in three categories:
(1) Greater fiscal and monetary stimulation. Carter
would rely on more spending (he has not said how much but
his advisers have indicated support for a budget of $412-
420 billion for FY 1977), temporarily higher budget deficits
(also undefined), and more expansive monetary policy (he
has also failed to define monetary growth targets). Among
his immediate priorities for new spending are countercyclical
assistance to cities suffering from particularly high rates
of industry. unemployment, and greater assistance for the housing
(2) Federal inducements to private industry. Carter
frequently calls himself a businessman who believes in
the virtues of free enterprise, SO he says that many of
his programs are tailored to stimulate--not substitute
for--private employment. Among his concrete proposals:
-- More Federal money for on-the-job training;
-- Federal R&D assistance to develop promising
technologies such as solar energy;
-- A plan whereby a company that was going to lavoff
some of its employees, say 10%, would agree to put all
employees on a shorter work week--and the Government
would share the extra cost.
(3) Federal hiring on public service jobs. Carter
criticised the original version of Humphrey-Hawkins because,
he said, it made government the employer of first resort;
however, he does favor plans--such as the revised
Humphrey-Hawkins--which makes the government the employer
of last resort. He has made it clear that a first priority
- 2 -
FORD LIBRARY & 018300
should be more jobs for black teenagers. Among his other
proposals:
-Provide 800,000 summer youth jobs and "double
the CETA program from 300,000 to 600,000 jobs."
--Create "public needs jobs" as a supplement to
private sector for housing rehabilitation, repair of
railroad roadbeds.
Again, Carter flatly opposes the idea that Government
should guarantee everyone a job through hiring for
public service employment. And he knows that his
endorsement of Humphrey-Hawkins makes him highly vulnerable.
His chief economics adviser, Lawrence Klein, has even
been back-pedaling: "The bill could become an albatross.
But no bill goes through Congress without amendments, and
I can envision ten amendments that would make this a good
bill. " Late last week the Congress began revising
Humphrey-Hawkins once again--some thought at Carter's
request.
2. Cost of Carter's Jobs Program: He has never provided
any figures.
3. Carter's Latest Attack Line: "President Ford has
turned the economy around all right. When he came
into office, 5 million people were unemployed. Today
7½ million people are unemployed- a 50% increase in
two years. " As on inflation, Carter frequently harks back
to the unemployment numbers under Truman, JFK and LBJ.
QUOTES FROM CARTER ON JOBS
GERALD
GENERAL
"Jobs for Americans who want to work must be our
number one national priority. We will never have
a balanced budget, an end to the inflationary spiral,
or adequate services for our people as long as we
have 8.5 or 9 million people unemployed."
Indianaoplis News
March 9, 1976
"When you spend a million dollars on better health
care, education, day care center care for elderly,
you get almost a million dollars worth of jobs.
When you spend the same million on one more bomb,
you don't get very many jobs."
Caucus of Black Democrats
May 2, 1976
When other Democratic candidates were setting lower
targets for unemployment and inflation, Mr. Carter
said, "I can't outbid them; I'd put my emphasis on
employment and take my chances on inflation." He has
consistently kept to those priorities. He puts reducing
unemployment first, reducing inflation second, thereby
making this a sharp issue with the Republicans, who have
consistently designated inflation as the top problem.
The New York Times
July 14, 1976
"SPECIFIC 11 PROGRAM IDEAS ON JOBS
"I am committed to a dramatic reduction in unemployment,
without reviving double digit inflation, through the
following means:
(a) We must have an expansionary fiscal and monetary
policy for the coming fiscal year to stimulate demand
and production. This should mean spending simply for
the sake of spending without specific aims and goals, but
policy aimed at curbing both cyclical and structual
unemployment, creating useful jobs, and solving national
needs.
(b) Specific stimulation should be given to private
industry to hire the unemployed through
--encouragement by the Federal Government to
employers to retain workers during cyclical downturns
including reforming the unemployment compensation tax
paid by employers.
--public programs to train people for work in
private sector jobs.
--incentives specifically geared to encourage
employment, including incentives to employers who
employ young persons and persons with lengthy records
of unemployment, and to those employers who provide
felxible jobs, to aid access by women to the market
place.
(c) To supplement our effort to have private industry
play a greater role, the Federal Government has an
obligation to provide funds for useful and productive
public employment of those whom private business cannot
or will not hire. Therefore we should:
--create meaningful public jobs -- in cities and
neighborhoods of the unemployed adjusted to solving
our national needs in construction, repair, maintenance,
and rehabilitation of facilities such as railroads,
roadbeds, housing, and the environment.
--improve manpower training and vocational education
programs to increase the employability of the hard-core
unemployed.
--provide 800,000 summer youth jobs.
--pass an accelerated public works program targeted
to areas of specific national needs.
--double CETA (Comprehensive Educational Training Act)
program from 300,000 to 600,000 jobs, and provide counter-
cyclical aid to cities with high unemployment.
--develop more efficient employment services to
provide better job counseling and to match openings
to individuals, and consider establishment of special
Youth Employment Services especially geared to finding
jobs for our young people.
Carter Economic Position
Paper, 1976 Campaign
CARTER ON JOBS IN THE PRIVATE SECTOR
"We must recognize
that almost 85 percent of America's
workers depend on private industry for jobs. I would like
to maintain or improve this ratio.
Los Angeles Times
June 30, 1976
"I would explore the possibility of sharing with industry
the employment of perhaps all of their employees for
a shorter work week. The government and industry would
then share the extra costs involved. "
Business Week
May 3, 1976
"I believe that specific stimulation should be given to
private industry to hire the unemployed through an increased
commitment by the federal government to fund the cost of
on-the-job training by business. "
"
the federal government has an obligation to provide
funds for useful and productive public employment of those
whom private business cannot or will not hire."
The Economy: An
Economic position
paper for now and
tomorrow
"Pinpointed federal programs can ease the more acute pains
of recession, such as now exist in the contruction industry.
We should consider extension of unemployment compensation,
the stimulation of investments, public subsidizing
of unemployement and surtaxes on excess profits. "
National Press Club Speech
December 12, 1975
The former Georgia governor pointed out that there
are "millions of jobs that need to be filled. For
example, the design, manufacture, transportation
and installation of solar heating units is a new
industry which would provide employment, not for
scientists, because the technology is already known
-- but for plumbers, pipefitters, tin smiths, plastics
workers, carpenters, electricians and others.
"We need to repair out railroads, complete our rapid
transit systems, provide pollution control for cities,
preventive health care on a national level, care for
retarded children, alcoholics and drug addicts.
We need to provide individualized remedial instruction in
our schools, and we need better housing programs. These
kinds of jobs will provide employement primarily in
private industry. The cost of such an employment program
would not exceed present federal spending limits. "
Manchester Union-Leader
January 21, 1976
"I would also like to try some things of an innovative
nature that are working in other countries. One example
would be if you had an area of high unemployment, a geo-
graphical area, and a company that had 1,000 employees, and
they had to lay off 100 employees temporarily. I would like
to see the government and that industry, on a competitve
bid basis perhaps, for a short period of time, like six
months, employ all the people there for a shorter workweek,
and let the government and the industry share the extra
cost.
"
Fortune Interview
May, 1976
CARTER ON JOBS IN THE PUBLIC SECTOR
"I didn't approve of the it (Humphrey-Hawkins) the way it
was originally written. With a mandatory total unemployement
goal of 3 percent, taking in all age groups, most of my
economic advisers thought that would mean double-digit
inflation. And although in its original form the bill
professed to make the government the employer of last
resort, in effect it placed the government almost as an
employer of first resort
"
Business Week
May 3, 1976
"I support, and as President I would sign, the Humphrey-
Hawkins bill, as amended, given my current understanding
of the bill."
Washington Star
July 7, 1976, quoting
Carter on April 8, 1976
Answering charges by Jackson that he was ignoring the
jobs issue, Carter proposed a "massive WPA or CCC type
program to put Americans back to work," a reference
to the public works project of the Depression era.
"I would make jobs the number 1 priority of my
administration.'
Clay F. Richards (UPI)
April 2, 1976
"We now have about a 40 to 45 percent unemployement rate
among young people in the minority groups: Spanish speaking
and black. And I would consider this my number one priority
in the addition of government sponsored jobs."
Speech, Gary, Indiana
May 3, 1976
"As a last resort, public employment jobs need to be
created similar to the CCC and the WPA during the
depression years, particularly for young Americans
18-20 years old who have an extremely high unemploy-
ment rate -- in excess of 40 percent for black young
people.'
"The net cost will be about $20 per week for each young
person hired.'
Carter Campaign Issues
Reference Book
March 15, 1976
"Many workers in retardation, alcoholism and drug
programs will come from welfare or from the chronically
unemployed with little increase in overall cost. "
"It costs about $80 per week for an unemployed family for
expenses not including medical care, versus $92 per
week for a 40-hour work week" and the differences " will
be reduced by taxes paid, Social Security payments made and
the productivity of the hired person during the week."
AP
January 26, 1976
"I think I would favor that. If you mean the public
service jobs bill that is now just barely passed that
Ford is likely to veto. Yes, I would favor that."
WETA "Candidates on the Line"
February 16, 1976
Q: Would you provide public jobs for people, other than
those chronically unemployed, who weren't able to find
jobs in the private sector?
A: "I don't believe we can afford that, on a permanent
basis. This would create in our nation an inclination to
circumvent the private sector, to depend on the federal
government as a first supplier of jobs, and it would be
extremely expensive. It costs about $12,500 to supple a
job for a person in the public sector. But there are many
other things that could be helpful. For instance, a federal-
city guarantee of bond repayments for public-works
construction is the kind of thing that could stimulate
the construction industry. A guarantee by the federal
government of home mortgage repayments would help a
great deal. The construction of low-cost rental homes
would help a lot. The guarantee or payment of interest
subsidies above a certain level for home mortgages would
have a direct impact on the housing industry. But I would
not want to use massive public-jobs programs except in an
extreme case, and I believe that as President I could
avoid that circumstance."
Fortune Interview
May, 1976
CARTER QUOTE ON JOBS
"Some people say it costs too much to put our people
back to work. I think it costs too much not to put
our people back to work."
AFL-CIO Speech
August 31, 1976
Inflation
FORD
CARTER ON INFLATION
SERALD
1. Shifting Emphasis: Throughout the primaries, Carter
managed to stay slightly to the right of most of his opponents
by refusing to embrace many big spending programs near and
dear to liberal hearts. He always put jobs as his first
priority for the next four years, but he blended that with a
fairly strong emphasis upon "tough, competent" management and
the need for a balanced budget. At the convention and in the
early weeks thereafter, however, Carter moved perceptibly left
by coming out swinging for main-line Democratic economics.
Then on September 3rd, he tried to swing back to the right
with his press conference in Plains, making it clear that
inflation would share equal concern with jobs. The newest
emphasis upon inflation apparently stems from:
-- Caddell polls showing that inflation was a major
public concern (Business Week).
-- Lawyer Charles Kirbo and wife Rosalynn both fear the
"big spending" label that the GOP was successfully pinning on
him. They knew it might help to account for his slide in the
polls. Bristles Kirbo: "Jimmy has made it plain that these
(costly social programs) are goals that will have to be adjusted
to the capabilities of the economy."
-- Feedback from Mondale's travels.
2. The Carter Program: Specifics are lacking, but Carter and
his advisers generally offer a three-pronged attack on inflation:
-- Overall increase in supply. Carter and his advisers
believe the key to lowering inflation is economic growth,
generated in part by governmental stimulation. To them, by
cutting employment, you cut inflation; to the Administration,
using the wrong methods of cutting employment such as excessive
government spending only causes more inflation and in turn
generates more unemployment. Carter continually stresses that
too little attention has been paid to the supply side of the
equation. Among the measures he favors to increase productive
growth of the economy are:
-- Greater government spending;
-- More expansive monetary policy;
-- Creation of food reserves;
FORD
- 2 -
GERALD
-- Reform of governmental regulations, like the back-haul
rule, which add unnecessarily to consumer costs;
-- Stricter enforcement of anti-trust laws;
-- Stimulation of capital investment.
-- Removal of bottlenecks in economy. Carter recognizes
that some of the inflationary pressures in the economy during
the early 1970s resulted from bottlenecks in key industries. He
hasn't proposed specific solutions but has indicated a concern for
clearing them up through better planning and targeted programs.
-- An incomes policy. Carter has continually talked about
his desire for standby wage and price control authority, but he
always adds that he would only use that authority as a last
resort. Lately he has even shown some signs that he might not
seek wage and price control authority. He has been talking with
increasing frequency about voluntary approaches to restrain wage
and price increases. Business Week says that his desire for
voluntary cooperation between labor and business "bears a family
resemblance to the 'social consensus' that West Germany uses to
keep inflation in check." Others see more resemblance to the
jawboning of the Kennedy-Johnson years. There is a dispute within
the Carter economic camp on controls: George Meany hates them,
but one of Carter's most influential advisers, Jasinowski, is a
principal author of Humphrey-Hawkins and thinks that controls may
be the only way to carry out the original intent of the Humphrey-
Hawkins approach.
3. Inflation and Unemployment: A key disagreement between Ford
and Carter is how much stimulation the economy can take without
creating a new round of inflation. Carter frequently says now:
"My advisers and I agree that until you get the unemployment
rate down below 5 percent, there's no real danger of escalating
inflationary pressures." Before his latest conversion to inflation,
Carter was also quoted as saying: "I would put my emphasis on
employment and take my chances on inflation."
4. Carter's Attack: His most frequent attack line is to compare
the lower inflation and unemployment rates of the Truman, Kennedy
and Johnson administrations with those of Nixon and Ford. Then
he tries to tie "Nixon-Ford" back to Hoover. Says pollster
Caddell: "I don't want him to attack Ford personally. But he
can attack Republican policies, and to the extent the campaign
is a referendum on the last eight years, we win."
# # #
QUOTES FROM CARTER ON INFLATION
Q. Recently, we've detected from some of your staff that
they are equating the fight against unemployment with
the fight against inflation. How do you think that
you can carry out these two apparently contradictory
efforts?
A. "I don't believe that they are contradictory as far as
inherent characteristics are concerned. When President
Truman went out of office, after enormous drains on our
economy, with the Marshall Plan, with the Korean War,
aid to Turkey and Greece, and so forth, we had an inflation
rate of less than 1%. We had an unemployment rate less
than 3%. Interest on a home loan was 4%. The budget,
over his six or seven years in office, was balanced.
There was an average surplus of about $2.4 billion. Now
we have had an average inflation rate of almost 7% under
Nixon and Ford, and the highest unemployment rate we've
ever had since the Great Depression. This shows that
they're not necessarily countervailing forces. When
inflation goes up, under Nixon and Ford, unemployment
has gone up along with it, and there's such an enormous
drain on our economy just to finance the cost of people
not being at work. Presidents Nixon and Ford have tried
to fight the evils of inflation with the evils of
unemployment. This has brought the highest combination
of inflation and unemployment in this century. So I don't
think there's an inherent economic law that says when
inflation goes up, employment goes down, or vice versa.
Business Week
September 20, 1976
Q. HOW would you deal with inflation then?
A. "We need measures to increase the productive capabilities
of our economy. We've been virtually ignoring the
supply side of our economy. Increase productivity,
and we can grow without inflation.
"I'd like to see a reform of Government regulations that
tend to drive up costs--for example, the rule prohibiting
- 2 -
a truck from carrying goods on its return haul. We
ought to have stricter enforcement of antitrust laws
and of consumer protection laws. And we need a monetary
policy that encourages lower interest rates, SO invest-
ment capital will be available at reasonable costs. "
U.S. News & World Report
May 24, 1976
Excerpts from Latest Carter Position Paper
There are far more humane and economically sound solutions
to curbing inflation than enforced recession, unemployment,
monetary restrictions and high interest rates. Much of
the inflation we have experienced was not caused by
excessive demand, but rather by dollar devaluations,
external factors such as the increasing oil prices, and
by world-wide increases in food and basic material prices.
Furthermore, high interest costs, and the final dismantling
of the controls program in 1974 contributed to high inflation
rates.
A consistent effort to battle inflation must accompany our
drive for full employment. This requires measures to:
--increase the productive capabilities of our economy,
with increased attention to the supply side of our economy,
now virtually ignored.
--insure a better relationship between the availability
of goods and the demand for them. In the agricultural area,
the Federal Government should assume the primary respon-
sibility for establishing reserves of key foodstuffs in
the United States.
--reform those governmental regulations, such as
the rule prohibiting a truck from carrying goods on its
return haul, which unnecessarily add to prices.
--strictly enforce anti-trust and consumer protection
legislation and increase free-market competition.
--adopt a monetary policy which encourages lower
interest rates and the availability of investment capital
at reasonable costs.
- 3 -
--effectively monitor excessive price and wage
increases in specific sectors of the economy.
While I oppose across-the-board permanent wage and price
controls, I favor standby controls which the President can
apply selectively. I do not presently see the need for
the use of such standby authority.
Carter Economic Position
Paper
1976 Campaign
View of Chief Adviser (Lawrence Klein)
Carter's chief economic adviser told Congress today
that he favored an "easier" monetary policy by the
Federal Reserve and budgetary stimulus for the economy,
effective in 1978, amounting to $10-$15 billion.
First, a strongly expanding economy is the best cure for
unemployment and also the most promising way of achieving
a balanced Federal budget in "1979 or 1980."
Second, while the inflation rate might rise a bit next
year to around 7%, there is little danger of its accelerat-
ing, and by the 1980s, inflation should be less than the
rate of 5-6% that prevails now.
"A strong net export position for the American economy
that comes about naturally through world trade expansion
will be employment-creating, and there will not have to
be added public spending, reduced taxation or any Federally
sponsored initiatives to create this added demand."
Under questioning he disclosed his view that additional
fiscal stimulus of $10 billion to $15 billion would
probably be the right policy "for 1978."
New York Times
July 29, 1976
- 4 -
General Inflation Quotes From Carter
As President, Carter says he would focus his economic
policy on cutting unemployment "and take my chances with
inflation, if I had to." He believes that "until we get
down to the neighborhood of 4% to 4.5% in the unemployment
rate, we won't have to worry about inflation."
He dismisses the liberals' campaign centerpiece, the
Humphrey-Hawkins full-employment bill as too "rigid"
and likely to revive "double-digit inflation."
Wall Street Journal
April 2, 1976
"In order to reduce inflation and strive for a more
controllable budget the single domestic economic
thrust should be toward employment."
Associated Press
January 26, 1976
"My economic advisers and I agree that until you get
the unemployment rate down below 5 percent, there's
no real danger of escalating inflationary pressures.
I would also favor additional money supply. I don't
see any reason why the permanent level of inflation
can't be as low as 2 or 3 percent."
Fortune
May 1976
"Most of my economic advisers--and I've got some darn
good ones--tell me that you can come down to 4 percent
unemployment or 4½ percent and not have a tremendous
adverse effect on the inflation rate. Almost invariably,
though, they will tell me that if you try to go down to
a 3 percent unemployment rate the way we measure it in
this country, that you will inevitably have double digit
inflation--above 10 percent."
Capital Times (Wisconsin)
March 29, 1976
- 5 -
Carter on Wage and Price Controls
Q.
Would you resort to wage and price controls under any
circumstances?
A.
"I would like to have standby wage and price control
authority that could be used for a limited period of
time, but I doubt that I would ever use it. I know
that Arthur Burns has advocated that this authority
be permitted for a period of forty-five days. This would
permit the President, or his surrogates, to try to reach
an accommodation with management and labor to hold down
peremptory increases in wages or prices. But I would
not favor mandatory or permanent wage and price controls.
My philosophic commitment is to a freer economy.
"
Fortune Interview
May 1976
Q. You have said that you thought that wage and price
increases should be announced 30 or 60 or 90 days in
advance and that labor and management should set
voluntary price goals. What kind of mechanism do you
have in mind to make this work?
A. " I would like to keep the present Council on Wage and
Price Stability intact. I would like to meet with busi-
ness and labor leaders and ask them to exercise voluntary
restraint. If they could communicate with each other on a
regular basis, maybe through me, and just lay down some
general voluntary guidelines that they would pursue, let
the council be informed 30 days or 45 days ahead of time
for projected, substantive price or wage demands, and
let the pressure of public opinion be focused to see
whether or not the need is justified--that in itself
would have a greatly beneficial effect."
Business Week Interview
September 20, 1976
- 6 -
Carter requested Nixon to reimpose wage and price
controls to slow "unprecedented inflation."
Atlanta Journal
April 19, 1973
"I would like standby wage-price controls. My guess is
that I would never use them. But I would like them as
a lever. I wouldn't hesitate to use them if I had to. "
Business Week
May 3, 1976
If elected, he said he would ask Congress to restore
the power of wage and price controls to the presidency.
"I don't intend to impose wage and price controls,"
he said, but added he wanted the power as leverage in
bargaining.
Cincinnati Enquirer
January 10, 1976
Latest Carter View on Controls
"On wage and price controls, Carter said he would adopt
them only as 'a last resort' and that early in his
administration he would not even seek standby authority
to impose them. Such standby authority was allowed to
lapse in the last days of the Nixon Administration."
Los Angeles Times Interview
August 24, 1976
Monetary Policy
CARTER ON MONETARY POLICY
FORD
GERALD
1. Supports more expansive policy: Carter's key point
on monetary policy is that it has been too restrictive
in recent years, driving up interest rates and contrib-
uting to economic malaise. He would support more
expansive policy on the theory that interest rates
would drop, economy would expand, and as economy grows,
inflation would abate.
2. Seeks greater coordination with Federal Reserve:
While insisting that he wants to maintain independence of
the Federal Reserve, Carter has also called for better
coordination of monetary and fiscal policies. This is
a pet theory of Henry Reuss and is thought to have been
adopted from him. Under this approach, the Chairman of
the Fed would be appointed by the President with the
advice and consent of the Senate but his term would be
co-terminus with that of the President. Carter has never
said whether the President would have the right to fire
the chairman
There is disagreement within the Administration on the
proposal regarding the term of the Fed Chairman.
Arthur Burns has testified twice that he has no objection
to the proposal and as a follow-up to that, Jim Lynn sent
guidance to the Hill that we had no objection. However,
Bill Simon feels strongly the other way and has recently
blasted Carter on it, saying that Carter's proposal would
politicize the Federal Reserve. "God help us, he has said,
"if the politicians ever get their hands on the monetary
controls." Simon also thinks Burns may be having second
thoughts.
QUOTES FROM
CARTER ON MONETARY POLICY
"The monetary restrictions of the last few years
did nothing but slow down the economy. It wasn't a
sensible way to counteract the price rises that were
occurring. For instance, there was an absolutely
unnecessary pressure placed on the housing market
through the disappearance of mortgage money. The
consumer became frightened and it mushroomed and
became a general setback to the formation of industrial
capital -- and, of course, the availability of jobs.
New York Times Magazine
June 6, 1976
He said he favored retaining "the stabilization" of
interest rates. He said he favored retaining" the
independence" of the Federal Reserve Board and would
not seek major statutory changes involving the board
except to ask Congress to make the term of the chairman
of the board "coterminus" with the term of the President.
New York Times
July 29, 1976
"The difference between Republicans and Democrats concerning
interest rates" Carter stated, "is that the Republicans
are in favor of high interest rates, because they are rich
and have the money to lend, while under Democratic administ-
rations you always get low interest rates.'
National Review
March 19, 1976
Federal Reserve
Mr. Carter's earlier populism had led him to favor reducing
the independence of the Federal Reserve System. His advisers
have argued that there was much to be said for "separation of
powers," not only of Congress, the Presidency and the Supreme
Court, but also of the Federal Reserve and the Treasury.
Mr. Carter has satisfied himself, according to Dr. Klein,
by accepting the "mildest and least troublesome of
reforms of the Federal Reserve" proposed by Representative
Henry S. Reuss, Democrat of Wisconsin, the Chairman of the
House Banking Committee. These are making the Fed chairman's
four-year term coterminous with that of the newly elected
President, with the President free to pick his chairman
subject to confirmation by the Senate.
The New York Times
July 14, 1976
"Better coordination between fiscal and monetary policy
should be assured by:
(a) giving the President the power to appointe
the Chairman of the Federal Reserve for a term
coterminous with the President's;
(b) requiring the Open Market Committee of the
Federal Reserve Board to state its objectives more
clearly and publicly;
(c) requiring the Federal Reserve Board to submit
a credit market report on past and expected monetary
conditions, to be included with the Economic Report
of the President;
(d) requiring the Secretary of the Treasury, the
Director of the Office of Management and Budget and
the Chairman of the Federal Reserve Board to show
in a consolidated report that their policies are
mutually consistent or explain the reasons they are
not consistent."
Carter economic position paper
FORD
CARTER ON THE FEDERAL BUDGET
GERALD
1. Can the Carter Budget Be Balanced? One of the most
persistent questions put to Carter is how he can ever ful-
fill his promise to balance the budget by 1980 and also
fulfill his commitments to full employment, national health
insurance, welfare reform, and the like. His most recent
answer, given at the now famous press conference in Plains
on September 3rd (when he came out strongly for control of
inflation), boils down to:
-- Quick phasing out of programs that are no longer
useful;
-- Gradual phasing out of new programs, delaying those
that are most costly;
-- Tough, zero-based management;
-- And finally, he quotes his economic advisers to the
effect that if unemployment and inflation were cut to 4%,
annually and economic growth would increase to about 4%,
this would increase Federal revenues SO that by 1980, about
$60 billion would be available for new spending programs.
Carter says he will "work back" from that year in planning
the implementation of new programs.
-- Carter never mentions the idea that taxes might
have to be raised considerably to balance the budget and
hold down inflation. In a recent interview with the
LA Times, Carter implied that the only program for which
he would raise income texes was national health insurance.
2. Immediate New Spending: Carter has indicated that he
wants higher spending in the immediate future but has not
been pinned down to a figure. This spring, his economic
advisers indicated their support for a budget of $412-420
billion for FY 1977.
3. Balanced Budgets Over the Business Cycle. While Carter
believes in need for immediate stimulation, he has consis-
tently said that he wants the budget balanced over the busi-
ness cycle. He usually selects 1930 as the target date for
balancing; sometimes he says 1979.
- 2 -
4. Three-Year Budget Planning: Another Carter theme
is the need for greater long-range planning so that the
business community can know what to expect. He wants
to budget on a three-year cycle, with the first year
just the same as today and the next two being "first
approximation.
"
5. Zero-Based Budgeting: Carter regards his practice
of zero-based budgeting in Georgia as the single most
important innovation in State government in the past
decade. Many others disagree--especially in the Georgia
government and there is a volume of scholarly testimony
saying it won't work at the Federal level. Carter says
he would institute zero-based budgeting in his first
week at the White House.
6. Ceiling on Federal Expenditures: As noted earlier,
there have been recent signals from the Carter camp that
he would call for a legislated ceiling on Federal expendi-
tures, keeping government spending close to its historical
average of 2]% of total GNP except in time of recession.
MATERIALS FROM CARTER ON SPENDING
The Newest Carter Position on Spending
(Plains Press Conference, Sept. 3, 1976)
To balance the budget by 1980, there must be "strict
control over spending There will be no new programs
implemented under my administration unless we can be sure
that the cost of those programs is compatible with my
goal of having a balanced budget by the end of that term.
And this will require delay of the implementation of costly
programs if they are proposed, the quick phasing out of
those that have already served their useful purpose,
the phasing (in) of programs to make the present programs
work before new programs that are costly are implemented
and tough, zero-based management of the budget. A
"sunset" law would also be helpful.
Does this mean that new programs would be "keyed" to
revenue, he was asked. He said that they would.
Does this mean the poor must wait a long time for redress?
"No, as I said earlier, we'll carry out the promises I've
made as aggressively and quickly as possible, but it
doesn't help to give people a little more payment for
Social Security or welfare or veterans benefits and then
rob them with inflation. "
New York Times
September 4, 1976
By the time he presents his hoped-for balanced budget
in January, 1980, Carter said he believes the GNP will
be increasing at about 4% a year; unemployment will
be down to 4.5% with only 3% for adults, and the infla-
tion rate will have dropped to about 4%.
That, he said, would mean a $60 billion increase in
Federal revenues--enough to improve health care and
reform the welfare system.
Los Angeles Times
September 4, 1976
- 2 -
Mr. Carter is running away from the "big spending
liberal" label that Republicans are trying to attach
to him. Switching his position from a few months ago
'The Republicans only hope is to picture Jimmy as a big-
spending, McGovern-type liberal, a Democratic strategist
says. "We aren't going to let them get away with that. "
Wall Street Journal
September 6, 1976
A campaign official said that the change (toward
greater emphasis on inflation) "reflected a political
decision.' Says Jerry L. Jasinowski, the campaign's
economic coordinator, "As far as goals go, he regards
inflation and unemployment as twin eveils that have to
be attacked simultaneously. "
Carter will be focusing attention on his anti-inflation
policies in a speech later this month (September).
And he will take other steps to underscore his conservatism
by emphasizing his desire to balance the Federal budget
by 1980 and to place a ceiling on Federal expenditures
at about the recent historical average of 21% of GNP.
His adoption of the spending lid is relatively new.
While Carter points out that the 21% goal is flexible--
and could be exceeded in a recession--he wants to show
that his new programs will be phased in only if stimulative
economic policies generate enough of a 'fiscal dividend'
to fund them. "If revenues don't grow, expenditures
don't grow, says Carter issues director Stu Eisenstat
"I'm concerned about the public perception of our
campaign," says a Kirbo associate in Atlanta. "There
are endorsements by the ADAers, the labor people, and these
are the most organized and vocal groups in the Democratic
party. But in many cases their positions are not Jimmy's
positions. We're going to emphasize the more conservative
element of the campaign.'
Strategists like Caddell feel that Carter will be on
firm ground attacking the Republicans as "the people
that first brought double-digit inflation and unemployment
together." But Carter must first defuse the GOPs big-
spender attack.
- 3 -
Carter sets the tone himself. "I would be fairly
conservative on eocnomic matters. The tough manage-
ment approach--striving toward balanced budgets, full-
employment goals but heavy emphasis on controlling
inflation, expanding overseas sales--these kinds of
principles have been imbedded in my consciousness as
a businessman all my life."
Business Week
September 20, 1976
Past Statements by Carter on Spending
"There might be some increase on government expenditures.
I don't see any massive spending increases that would
derive from my promises to the American people. My
projection, which has been confirmed by quite a number
of competent economists, is that we can have a balanced
budget by the end of my administration."
Free Press
August 8, 1976
"Any new programs put forward by myself, with the
Congress, I would estimate as accurately as possible the
cost for at least a five year period and provide
financing when the program was put forward."
Boston Advertiser
July 25, 1976
He (Carter) bristled even more when I observed that his
critics already were saying that if all the proposals
that he had endorsed during the primary campaign were
enacted--Humphrey-Hawkins employment bill, national
health insurance, welfare reform, and the like--it would
amount to $300 or $400 billion in additional spending.
- 4 -
"That's not true," he asserted, and said his programs
essentially would rearrange the priorities of spending
within the existing budget framework. "And I believe,
according to my projections, that we will have a balanced
budget at the end of four years of my administration, in
contrast to the Nixon-Ford deficit accumulation of $170
billion, the most red ink in peacetime.'
Column by Jerry terHorst
Chicago Tribune
August 11, 1976
Several of Atlanta's top business executives said Carter
was a difficult, aloof man to work with, but--on balance--
an effective governor. In particular, they admire his
budgeting techniques.
"I'd call him a fiscal conservative, but in terms of social
needs I think he is a liberal," said W. T. Beeve, chairman
of Delta Airlines.
Chicago Daily News
August 5, 1976
Carter's economic advisors (have) proposed a budget for
the coming fiscal year between $412 billion and $420
billion.
New York Times
April 24, 1976
New Taxes
From a recent interview with the LA Times;
"Except in the area of medical care where he envisioned
some transfer of expenditures from the private to the public
sector, Carter stressed that he would increase government
expenditures only by the amount of additional tax revenues
generated by economic growth -- an implicit stand against
general tax increases.'
LA Times
August 27, 1976
- 5 -
Zero-Based Budgeting
"I am going to institute zero base budgeting the first
week I am in the White House as an executive decision.
This does not require action by the Congress
...
Congress
has to face that we cannot continue to spend money in
new programs without providing new mechanism for payment.
We have got to have some inevitable increase in revenues
built in, that occur on an annual basis, and those
imcreases in revenues would be allotted by me to areas
where I thought the need was greatest."
Boston Advertiser
July 25, 1976
The one concrete proposal he's endorsed is "zero-
base budgeting" (ZBB), a money-tracking and decision-
making method he brought to Georgia in 1972. The idea
was developed originally for Texas Instruments by
business consultant Peter Phyrr. In simple terms,
it requires that an organization's functions be broken
down into neat "decision packages," and that each
package justify its value to the organization at
regular budget intervals or get the ax.
How well does ZBB work in Georgia? That is a matter of
continuing dispute. The former state auditor, Ernest
Davis, said recently that ZBB was "an excellent exercise
in a way": it taught the new governor how the state
government works -- something he didn't understand the
day he was inaugurated. But Davis didn't think it had
reduced costs much.
The present state auditor, Bill Nixon, is less critical
of ZBB, but he concedes that it's impossible to make any
comparison between the efficiency of the present system
and the one in effect before Carter's time.
There was another problem with ZBB. Although it worked
smoothly enough at Texas Instruments, it proved a bit
unwieldy when applied to an entire state budget like
Georgia's, which is more complex than a corporate budget
- 6 -
and more diffuse in the purposes it serves. Former
auditor Davis explained that when Texas Instruments'
budget was carved into ABB chunks, only 200 or SO
"decision packages" were created. But when ZBB was
applied to the state of Georgia, it produced thousands
of packages. A single large agency grinds out hundreds
of them each year.
It's not at all clear that carving up state functions
to fit the ZBB scheme made the budget any easier to
understand or control, or whether it slowed the waste
of state funds. Carter has said that if he's elected
president, he will issue an executive order requiring
all federal agencies, bureaus and commissions to adopt
the ZBB system. Imagine the paperwork.
Washington Star
Eliot Marshall
August 15, 1976
Allen Schnick, Library of Congress expert noted that
"the few studies of ZBB in operation have suggested that
it does not significantly affect the efficient allocation
of a government's financial resources, that the content
of the budget is not necessarily different after ZBB
than before."
Paul O'Neill, Deputy Director of OMB, said ZBB and
the "sunset legislation" establishing it "may lead to
a paperwork process that is mind-boggling even by
Washington standards."
Phil Hughes, Asst. Comptroller General in GAO, cautioned
that experience with "sunset laws" and ZBB is "very
limited" and warned of the "danger
...
that it be regarded
as some magical black box. A good many more people are
writing books telling you how to do it than are actually
doing it effectively.
William Gorham, President of Urban Institute, said that
the review schedule envisaged in the Muskie bill would
vastly overstrain "the capacities or potential capacities"
of the executive branch and Congress and inevitably
"undermine the credibility of the act."
Similar warnings cameduring Senate hearings from Roy
Ash, Nixon administration budget chief; James Lynn,
OMB Director; Alive Rivlin, Congressional Budget Office
and a dozen others who would not be considered soft on
wasteful government spending by anyone.
- 7 -
As Peter Pyhrr, inventor of ZBB, said, "Some of Sen.
GLRRAL FORD
Muskie's words at the time of the introduction of this
legislation are most appropriate to such a "massive
change as I think zero-base budgeting would produce."
What Muskie said was: "In too many cases, we in Congress
have satisfied ourselves with the rhetoric of legis-
lation, leaving the hard work of implementation
to
the executive branch."
Washington Post Commentary
August 8, 1976
Jody Powell: "It's our belief that if you can zero-
base a political campaign budget, then doing it for
HEW and the Pentagon will be duck soup."
LA Times
July 26, 1976
Drs. Minmier and Hermanson conducted a survey of a
number of state financial analysts and officials and
questioned them about zero-based budgeting as applied
in Georgia's 1972-73 fiscal year.
Carter, in an interview early in 1974, fully supported
zero-base budgeting. "I think (it) is great for manage-
ment's decision-making
(it) has given me an extremely
valuable method by which I can understand what happens
deep in a department. Because of zero-base budgeting
we were able to determine that seven different agencies
had the responsibility for the education of deaf children."
But, of 13 department heads interviewed in the study,
11 indicated there had been no apparent reallocation
of financial resources in their department as a result
of implementing zero-base budgeting.
Atlanta Constitution
August 16, 1976
"The first piece of legislation I will send to Congress
will initiate a complete overhaul of our Federal bureau-
racy and budgeting systems. By Executive Order, I will
require zero-based budgeting for all Federal departments,
bureaus, and boards.
-8-
"The second part
would initiate the reorganization
of our Federal bureaucratic structure."
Carter Campaign Issues
Reference Book
March 15, 1976
Carter calls the "zero based" budget system he insti-
tuted in Georgia "the most remarkable thing that's
been done in State government in the last decade."
He promises, if elected President, to use zero based
budgeting to "strip open" sprawling department like
Defense and Agriculture and combine 1900 Federal
agencies into "200 at most. "
Los Angeles Times
February 3, 1976
-9-
Carter on the General Budget Process
"The budget of the Federal Government should serve
as an instrument of both economic and general govern-
mental policy. It is a statement of the influence
of governmental expenditures on the allocation of
resources, and instrument for carrying out economic
stabilization policy, and a demonstrative of our
Nation's priorities. It should serve as a guide to
a means of encouraging efficient and economical
functioning of Government.
"For the current fiscal year, an expansionary fiscal
and monetary policy is necessary. Social needs and
the need for economic stabilization may require from
time to time unbalancing of the budget. But, we
should strive for budget blaance, without an environment
of full employment, over the long term. The surplus
years should balance the deficits. I therefore call for
balanced budgets over the business cycle. This can be
achieved by 1979. At the present time, there is a clear
need for stimulation in order to return the economy to full
employment.
"A vigorous employment policy will enlarge the revenue
base and will likewise reduce recession-related expenditures
and will therefore do much to reduce the present deficit.
My commitment is to achieve and maintain a high level of
real growth in the economy, which will permit us to have
a balanced budget without reductions in important social
programs and within the context of full employerment.
"Budget planning within the Federal Government is
presently on a yearly basis. This does not allow sufficient
long-range planning. Therefore, we should budget on a
three year cycle, rolling forward three years at a time
when the budget prepared each year. The first year ahead
in a three year cycle should be the usual budget, the
next two would be only first approximations, in an initial
attempt to smooth out the budget process. The budget for
the two latter years will normally be revised in the next
year when a new third year is added for an initial approx-
imation. The long range budgeting practice will roll forward
from year to year.
"The three year rolling budget technique will permit business-
men and public officials to do a much better job in laying
out their own plans, relying less on the need for more
-10-
elaborate proposals of comprehensive planning. Moreover,
as we did while I was Governor of Georgia, we should
predict the costs of programs over a long period of time
SO that proper long-term budgeting can be done. Also,
we should attempt to implement new approaches to Government
budgeting, such as zero-base budgeting, which insure that
there is quality control over Government programs and
that these programs accomplish their intended end. "
Carter Economic Position Paper
1976 Campaign
"There is no predictability about the degree of participation
on the part of the federal government in education, social
problems, health, transportation law enforcement, pollution
control, and this would help a great deal.
as I prepare
my (federal) budget, it would extend 18 months in the future.
I would ike to freeze or approximately maintain the partic-
ipation of the state and local governments. in the costs of
health care and welfare, then substantially reduce the contri-
tion of local governments, and, over a period of time,
reduce also the contribution of state governments on a
percentage basis, maybe by holding their present dollar level
constant. I personally believe that revenue sharing money
should go directly to the cities, for programs that would
apply to matched federal funds.
Boston Advertiser
July 25, 1976
Tax Reform
FOND
&
CARTER ON TAX REFORM
GERAED
1. Promises Sweeping Reforms: Carter has reserved some of
his strongest language for the tax system, calling it "a dis-
grace to the human race". He is pledged to a total overhaul,
but he has also carefully said that he won't come forward with
the specifics until at least a year after taking office. Why?
"It would be an act of political stupidity beyond belief" to
propose specifics in tax reform and government organization,
his press secretary has reportedly said. Specifics would
only serve to make special interest groups angry. (Wall
Street Journal, 6/10/76)
2. Wants to Close Loopholes, Shift Burden to Wealthier Tax-
payers: Carter attacks the tax system in very populist terms,
arguing that it discriminates against the poor and the working
people while favoring big business, the wealthy, etc. It is
clear that the major thrust of his program would be shift the
burdens away from the lower brackets to the higher ones and if
he follows the Democratic platform, it might well include a
heavier rate for business. But as usual, Carter stresses
different aspects of tax reform with different groups. At
the 21 Club in New York City, he told assembled business that
he would be very careful not to hurt business with his reforms
and he didn't mention loopholes; outside at a news conference,
he blasted the loopholes.
3. General Principles: In place of specifics, Carter says
he has adopted 4 basic principles on taxes:
-- To treat all income the same;
-- To tax income only once;
-- A progressive tax rate;
-- To greatly amplify the whole system.
4. The Specifics, Such as They Are: Among the specific ideas
that Carter has set forth:
-- He would eliminate the double taxation of corporate
income so that the tax system would no longer tax both
corporate profits and dividends; the Administration has already
submitted a specific program to achieve this goal.
-- He advocates treating capital gains the same way as
wages and salaries; this was a proposal that got McGovern in
hot water in 1972.
- 2 -
-- He would reduce the tax on savings interest in order
to stimulate capital formation.
-- He would leave the tax exemption on municpal bonds
but would eliminate other tax preferences that "favor the
rich".
-- Sylvia Porter reports, based on an interview, that he
would leave the Social Security tax rate the same but would
increase the amount of income subject to Social Security taxa-
tion from the first $15,300 of income to the first $20-22,000.
-- He would favorably consider tax incentives to encourage
industry to locate in the center cities.
-- He has told businessmen that he would keep the foreign
tax credit for multinational companies.
-- But he has been unclear about tax deferrals on over-
seas profits -- he told businessmen he would "have to address
it" and he told a news conference later the same day that his
"inclination would be to remove those deferrals".
5. Tax Policies on Housing: One of Carter's most contro-
versial campaign mistakes was his statement in February that
he would like to eliminate the tax deduction for home mortgage
interest payments. The flak was very heavy, and he has been
backpedaling ever since. He now says that he would never do
anything to hurt the middle American wage earner. His point,
he says, is that deductible mortgage interest and property
taxes present the upper and middle-income homeowners with a
Federal subsidy of about $11 billion a year, while total
Federal expenditures for subsidized housing amount to some
$2 billion. He would like to keep the general housing subsidy
level around $10-11 billion total, but would shift the benefit
SO that less of the subsidy goes to the wealthier homeowners
and more would go to lower income taxpayers. No specifics
have been forthcoming.
Carter has also begun speaking in recent weeks about an
interest subsidy program for homeowners. Under this plan,
the government would select a mortgage interest level -- say
7 percent. Says Carter: "On a long-term mortgage for 25
years, or more or less, any excessive interest charges that
would accrue from government policies or woldwide economic
circumstances would be absorbed by the Federal government."
He has not spelled out more specifics.
R. FORD
- 3 -
7. Advisers: Carter's tax plans are being worked on by
Joseph Pechman of Brookings and Stanley Surrey of the
Harvard Law School, two leaders in the field. For years, both
have been calling for lowered rates and enlargement of the
Federal tax base by eliminating deductions and special treat-
ment of various forms of income.
QUOTES FROM CARTER
AND DEMOCRATIC PLATFORM
ON TAX REFORM
The Democratic Platform
We pledge the Democratic Party to a complete overhaul of
the present tax system, which will review all special tax
provisions to ensure that they are justified and distributed
equitably among our citizens. A responsible Democratic tax
reform program could save over $5 billion the first year
with largers savings in the future.
We will strengthen the internal revenue tax code SO that
high-income citizens pay a reasonable tax on all economic
income.
We will reduce the use of unjustified tax shelters in
such areas as oil and gas, tax loos farming, real estate,
and movies.
We will eliminate unnecessary and ineffective tax pro-
visions to business and substituting effective incentives to
encourage small business and capital formation in all businesses.
We will end abuse in the tax treatment of income from
foreign sources; such as special tax treatment and incentives
for multinational corporations that drain jobs and capital
from the American economy.
We will overhaul Federal estate and gift taxes to provide
an effective and equitable structure to promote tax justice
and alleviate some of the legitimate problems faced by
farmers, small businessmen and women and others who would
otherwise be forced to liquidate assets in order to pay the
tax.
We will seek and eliminate provisions that encourage
uneconomic corporate mergers and acquisitions.
We will eliminate tax inequities that adversely affect
individuals on the basis of sex or marital status.
We will curb expense account deductions.
The Democratic Party should make a reappraisal of the
appropriate sources of Federal revenues. The historical
distribution of the tax burden between corporations and indi-
viduals, and among the various types of Federal taxes, has
changed dramatically in recent years. For example, the
corporate tax share of Federal revenue has declined from
30 percent in 1954 to 14 percent in 1975.
- 2 -
Carter's General Views on Tax Reform
"It is time for a complete overhaul of our income tax
system. I still tell you it is a disgrace to the human
race. "
Standard Speech Line
Carter has said the nation's tax system is "grossly
unfair" and has a promise from Georgia Senator Herman
Talmadge, ranking Democrat on the Senate Finance Committee,
for movement on tax reform legislation. He also has said
it would take "a full 12 months" to assess the specifics
of what such legislation would entail.
UPI
July 15, 1976
Last year Carter promised to reveal specific tax pro-
vision plans by the end of theyear. Earlier this year, he
pledged to do the same during the general election campaign.
Now he insists it won't be possible until a year after he
takes office.
Wall Street Journal
May 13, 1976
"I think the nation is ready for comprehensive, total
tax reform. This has been advocated by people from a wide
spectrum of basic political philosophies -- all the way
from the Brookings Institution to William Simon. There are
four basic principles that I've adopted. First, to treat
all income the same. Second, to tax income only once. Third,
a progressive tax rate. And fourth, to greatly simply the
whole system."
Fortune Magazine
May, 1976
He plans to resist demands that he get more specific on
his proposals to reorganize the Federal government and over-
haul the tax system. "It would be an act of political
stupidity beyond belief" to propose specifics in these areas,
Powell argues. The reason: It only would serve to make
special interest groups angry.
Wall Street Journal
June 10, 1976
- 3 -
GERALD
"Another thing we need to do is to shift the tax burdens
away from the low and middle income families on to the special
interest groups that have been avoiding the tax burden for so
long. This is a very good stimulus for the sharing of the
wealth and also the creation of jobs."
Speech, Carter Campaign
May 2, 1976
"The tax laws have ridiculous programs built in. The
anti-grandmother clause, for instance, makes it illegal to
take a tax deduction on the employment of a grandmohter to
take care of the children while the parents work. You can
hire a stranger to do it. You can't pay the expenses of
a grandmother."
Los Angeles Times
August 4, 1976
"
in social programs, Johnson did an excellent job;
but we still have a long way to go with national health care,
reform of the welfare system, reform of the tax system. Those
kinds of things would be my direct resonsibility."
New York Times
June 16, 1976
"I don't know how to be specific yet I am just not
qualified yet." He even talks of postponing a "tax reform
package" for two years or more after he has entered the
White House.
Washington Star
July 15, 1976
(Sylvia Porter)
"I do not favor a tax cut for 1976. I believe most
American people would much rather see some control over
excessive spending than to have a tax cut at this time
with deficits in the neighborhood of $70 billion."
Carter Campaign Issues
Reference Book
March 16, 1976
- 4 -
Specifics, Such As They Are
Carter favors taxation of capital income and earned
income in the same way, simplification of the tax system by
removing many of the incentives that have been added over
the past 70 years to cover transient circumstances, and
having direct grants reconsidered annually. Carter also
favors taxing income only once and wants to reconstitute
a progressive tax rate.
Business Week
May 3, 1976
Carter advocates taxing capital gains, such as profits
on the sale of stock or real estate, as heavily as income
from wages and salaries.
He believes it is unfair to tax corporate profits and
then tax the dividends paid out of those profits -- SO he
would knock out all taxes on dividend income or stop taxing
the portion of corporate profits that is paid out in dividends
to shareholders.
Time
June 28, 1976
Carter thinks all tax preferences that "favor the rich"
should be eliminated, except tax exemption on municipal
bonds and capital gains tax. The tax on interest on savings
should be reduced to help provide more capital.
U.S. News and World Report
September 22, 1975
"I would tax that income at the corporate income point or
dividends -- I would like to keep that option open. I don't
favor taxing the same income twice."
He would attack the Social Security system's financial
problems by taxing your income at a higher level. Today,
SS taxes are levied on only the first $15,300 of your
income, he would tax the first $20-22,000.
Washington Star
July 15, 1976
(Sylvia Porter)
- 5 -
"I think we can learn a great deal from the cities
like Savannah, Georgia, which had reconstituted the down-
town areas of their own communities when they were destined
for destruction 15 or 20 years ago or more.
"Another thing that can be done that would help would
be to try to encourage, through tax incentives or otherwise,
investments in the downtown areas. Now we have got a problem
of trying to move the central city unemployed people out in
the suburbs to work. I think with the persuasion of the
White House, and possibly some tax incentives, industry would
be encouraged to stay in the downtown area. Transporation
allocation would help a great deal also."
Boston Advertiser
July 25, 1976
Promises at the 21 Club Luncheon
At a luncheon, the Democratic presidential nominee
strongly suggested that, as President, he would keep the
foreign tax credit that his valuable to multinational
companies and pledged that he wouldn't attempt any hasty
changes in the tax laws in general.
"I think it's a very serious mistake when the President
or other leaders of our country permit, through incorrect
knowledge or misapprehension or because of political expediency
the turning of our peoples' opinions against the business
community, or multinational corporations, or oil companies
just as a scapegoat." Mr. Carter declared.
Wall Street Journal
July 23, 1976
While he backed the present credit on United States
taxes given to American corporations that pay foreign taxes,
Mr. Carter said that he opposed tax deferrals on profits
of American companies earned overseas until the money is
brought into the United States. "At this point, my inclination
would be to eliminate these tax deferrals," he said.
In response to a question about his attitude toward
multinational corporations
Mr. Carter responded: "I would
continue, and strengthen if possible, American involvement
in foreign countries and vice versa,' adding, "I would not
do anything to minimize this."
New York Times
July 23, 1976
- 6 -
"At this point, my inclination would be to remove those
tax deferrals,' Carter said after telling business leaders
a slightly different story -- that he merely will "have to
address" the deferral question.
He assured the business leaders that he would not make
"substantive changes" in tax laws for at least one year
after assuming office -- to study how those changes might
affect international trade.
Los Angeles Times
July 23, 1976
Deductions for Home Owners
Carter said that the income tax deduction for home
mortgage interest payments "would be among those I would
like to do away with.'
Boston Globe
February 26, 1976
Carter was asked about his position on three tax loop-
holes, including investment credits on construction machinery,
partment projects and the home mortgage interest deduction.
Carter replied, "I would say, along with elimination of other
tax incentives, those would be among those that I would like
to do away with."
Charlotte Observer
February 27, 1976
Elimination of exemption for interest paid on home
mortgages would have to be tied with other changes to insure
that middle-income home owners would be more than compensated.
"I would never, never do anything that would hurt the middle
American wage earner."
Atlanta Constitution
March 7, 1976
Carter promises through tax reform, eliminating many
deductions and incentives for special purposes, such as home
ownership and business investment, in return for an across-
the-board reduction in rates. However he said that he
cannot give specifics until he has been in the White House
and studied the matter for a year.
Philadelphia Inquirer
April 25, 1976
- 7 -
A reporter noted the candidate had advocated doing away
with the tax deduction for home mortage interest, and Mr.
Carter testily interrupted to insist: "I did not." He added
that he had said this was one "incentive I would consider
modifying," and then without elaboration, asserted, "If I
change the deduction it would be increased and not decreased."
Wall Street Journal
April 26, 1976
"We must undertake a comprehensive review of the hidden
ways in which our tax laws influence housing policy. Deduc-
tible mortgage interest and property taxes benefit upper and
middle income homeowners in the amount of $11 billion, while
Federal expenditures for subsidized housing amount to
approximately $2 billion.'
Cater Campaign Issues
Reference Book
March 15, 1976
"I would favor some sort of interest subsidy. We could
set a level, I don't know exactly what level. I would say
seven percent as an arbitrary figure. On a long-term mortgage
for 25 years, or more or less, any excessive interest charges
that would accrue from government policies or worldwide
economic circumstances would be absorbed by the Federal
government."
Boston Advertiser
July 25, 1976
Q. What about the deduction for interest on mortgages that
favors homeowners?
A. I haven't ever said I would keep it as an income-tax
deduction. I've said I would keep the same amount of incentive
for homeownership, or more. I think the $10 billion figure
to encourage private homeownership is a very good thing --
whether it would be done through the income tax structure or
another mechanism, I don't know yet. If I make any change
in it, it would be to increase the figure, or if I make any
change in who gets the benefits, it would be to give low
income and middle income families more benefits than they
get now."
- 8 -
"I'm not qualified yet to say what specific aspect of a
tax reform package I will maintain maybe two years in the
future after I've had a chance to go into the concept."
Fortune Magazine
May 1976
An Early Proposal: Cut Tax Rate in Half
The Tampa Tribune of July 28, 1975, reporting on a visit
by candidate Carter to Plant City, carried the following
on its front page:
"Presidential candidate Jimmy Carter said yesterday that,
if he's elected next year, he will push a tax reform program
to include the cutting in half of the Federal income tax
rate "
He said the tax for the average working person has
increased 60 percent in the past three years, while taxes
for the wealthy have decreased through lobbying efforts.
"Carter said he did not want to discuss then the specifics
of his program to overhaul the Federal tax structure. 'But
we would have a simple structure that would permit cutting
the rate 50 percent. "
Tampa Tribune
July 28, 1975
When Will His Tax Plan Be Ready?
On March 27, 1976, the Baltimore Sun reported that Carter
had decided to put off his tax proposals until spending a
year in the White House, thus altering a promise that he made
earlier in 1976. "On February 23 in Mashua, N.H., for example,
he said he would put forth a detailed plan in the interval
between the convention and the election, so the country's
voters could have a clear 'choice' between him and the Repub-
lican nominee."
Baltimore Sun
March 27, 1976
Regulatory Reform
CARTER ON REGULATORY REFORM AND CONSUMERISM
1. Views very sketchy on regulatory reform: His views
have been unusually vague -- even for Carter -- on
regulatory reform. When he addresses the subject, he
usually speaks in populist terms and he almost invariably
sides with consumer interests (he tells consumer groups that
he equates populism with consumerism).
2. A distinction: Carter draws a distinction between
health and safety regulations versus economic regulations.
In the health and safety area, he believes that the consumer
is at a disadvantage SO that regulations need to be
strengthened. In the field of economic regulation, on the
other hand, he thinks regulatory agencies have too often
become the captives of industry so that economic competition
has been reduced. In those cases -- especially the trans-
portation and airlines industries -- he favors less regula-
tion as a means of increasing competition. He cites the back-
haul rules for truckers as a prime example of regulatory
stupidity.
Consistent with his free enterprise rhetoric, Carter also
stresses that he wants "minimal intrusion of government in
our free economic system.'
3. Sweetheart arrangements: Attacking sweetheart arrange-
ments between industry and regulatory agencies -- a revolving
door, he says -- Carter says he would ensure that his
appointees are not SO tainted and he advocates a law
preventing any personnel transfers between agency and
industry for four full years (he has also advocated a one-
year block).
4. Champion of Consumers: Carter has said more than once that
his appointments would satisfy Ralph Nader and that "I hope
to challenge him in the future for the role of top citizen
advocate in the country. " Among Carter's specific proposals:
-- He would create a strong Consumer Protection Agency;
-- He would make class action suits for consumers more
easily available;
-- Strengthening and vigorous enforcement of anti-trust
laws;
-2-
-- Program of nationwide consumer education;
-- More vigorous enforcement of regulations
protecting consumers.
CARTER QUOTES ON REGULATORY REFORM AND CONSUMERISM
"We must stop the inbreeding which has grown to link
regulatory agencies with industries being regulated."
Undated fund-solicitation letter
from Jimmy Carter
"As an engineer, a planner and a businessman, I see clearly
the value of a strong system of free enterprise based on
increased productivity and adequate wages. We Democrats
believe that competition is preferable to regulation, and
we intend to combine strong safeguards for consumers with
minimal intrusion of government in our free economic system."
Acceptance Speech
Washington Post
July 16, 1976
He praised pending legislation to create a consumer protection
agency, said that he would work for its creation if
President Ford vetoed the law and promised to work closely
with its members.
New York Times
August 10, 1976
Q: Do you feel that there's too much federal grovernment
regulation in the economy at the present time? In the
transportation industry, for instance?
A: "I certainly do. I think that in the transportation
industry some of the rulings of the regulatory agencies
are counterproductive to what's best for the consumers.
And my primary interest, almost exclusive interest, would
be what's best for the consumers of this country. I think
competition among the carriers is not adequate. Also in my
appointments to regulatory boards, I would lean quite heavily
toward appointments that would favor the consumers. And I
would try to minimize to whatever extent possible, the
sweetheart arrangements that exist between regulatory agencies
-2-
and the industries being regulated. I think there's
kind of a revolving-door concept where people move freely
back and forth between the regulatory agencies and the
industries being regulated.
Fortune Interview
May, 1976
Regulatory agencies, he says, need reform. "The sweet-
heart arrangement between regulatory agencies and the
regulated industries must be broken up, and the revolving
door between them should be closed. Federal legislation
should restrict the employment of any member of a
regulatory agency by the industry being regulated." In a
National Press Club speech, Carter said that no "personal
transfers between agency and industry should be made within
a period of four full years.'
Capitol Hill News Service
Summer, 1976
In a speech to consumer advocate Ralph Nader's Public
Citizens Forum at the International Inn, the Democratic
presidential nominee said he would seek by statute or
executive order to bar members of regulatory agencies from
returning to jobs they left when they joined government
service.
By this, he said later, he meant a ban on regulators taking
any job in the industry they had been regulating. He said
he favors a ban of at least one year, probably longer.
But he opposed Nader-backed legislation authorizing
government agencies to reimburse citizens who contribute
to their decision-making, saying he preferred creation of
a single consumer agency within government. He also said
he would not endorse national no-fault auto insurance
legislation until he assesses the 21 state programs now
in effect.
On the issue of regulation in general, Carter said he
favored strengthening controls governing "things which the
consumer cannot adequately assess for himself,' such as
environmental quality and food purity.
FORC
-3-
Controls that impede competition and raise prices should
be "drastically minimized," he said, citing interstate
air travel fares and other examples used by President Ford
in seeking deregulation of transporation and other heavily
regulated fields. But he said a total lifting of controls
would be too "drastic."
Carter said administration-opposed legislation now pending
in a conference committee on Capitol Hill to create a
consumer protection agency would "more than pay for" its
estimated $11 million to $12 million cost by improving
delivery of services and helping to weed out unnecessary
agencies in government.
Washington Post
August 9, 1976
CONSUMER PROTECTION
1. We must institutionalize the consumer's role
through the creation of a Consumer Protection
Agency.
2. We should establish a strong nationwide program of
consumer education to give the consumer the
knowledge to protect himself in the market place.
3. We should make class actions by consumers more
easily available.
4. We must vigourously enforce the anti-trust laws.
5. We must guarantee quality standards, where feasible
for food and manufactured items;
Warranty standards to guarantee that consumers are
not cheated by shoddy or defective merchandise;
Full product labeling of relevant information affect-
ing price and quality and price-per-unit labelling;
and strict truth-in advertising measures to require
that manufacturers are able to substantiate product
performance claims.
6. Consumers must achieve greater protection against
dangerous products. I recommend: strong enforcement
of existing laws, enforcement of stringent flammibility
-4-
standards for clothing; adequate research programs
to anticipate potential hazards; additional automobile
safety research; expanded pre-market testing for all new
chemicals to elicit their general characteristics and
environmental and health effects.
The Democratic Platform
"I would like to see all the major consumer protection
agencies concentrate as one agency with a lot of power,
a lot of authority, a lot of visibility, and absolute
total backing from the White House. "
Speech, Consumer Federation
of America
January 23, 1976
He reiterated his pledge, made early in the campaign,
to make appointments that would satisfy Nader and
said, "I hope to challenge him in the future for the
role of top citizen advocate in the country."
Carter said administration opposed legislation now
pending in a conference committee on Capitol Hill to
create a consumer protection agency would "more than
pay for" its estimated $11 million to $12 million cost
by improving delivery of services and helping to weed
out unnecessary agencies in government.
Washington Post
August 10, 1976
"I want to be sure, he said, " we have a minimum of
interference of government in the affairs of business."
But he qualified this by adding "provided we can assure
that consumers are adequately protected from a violation
of the competitive commitment that's got to be part of
all our lives."
New York Times
July 2, 1976
FORD
CARTER ON NATIONAL ECONOMIC PLANNING
1. Need for Planning: Referring to himself as an engineer
and businessman, Carter often says he knows how important
it is to plan ahead. He says that in place of the roller-
coaster approach to economics of recent years, the government
ought to create an atmosphere in which there is reliability
and predictability. To him, that means national economic
planning -- not of the rigid type incorporated in the Humphrey-
Javits bill -- but through better coordination of governmental
policies on a comprehensive scale.
2. Expanded Role for the CEA: To achieve this goal, Carter
says he would not create a new bureaucracy but would give the
CEA expanded responsibilities. They would help to set general
economic goals.
3. Not to Dominate Private Enterprise: Because planning sends
shivers up the spines of the business community, Carter always
hastens to add that his planning would not be coercive for
private enterprise. Conservatives still have plenty of fears
about the Carter approach.
4. Part of Broader Effort: Carter's call for economic
planning is consistent with a broader policy approach. He
also calls for 3-year budget planning and for closer coordi-
nation of fiscal and monetary policy by making the Federal
Reserve chairman more subject to Presidential direction.
CARTER QUOTES ON
NATIONAL ECONOMIC PLANNING
"I am a firm advocate of the private enterprise system.
I am a businessman myself. I oppose the type of rigid
bureaucratic centralized planning characteristic of
communist countries.
"But better general economic planning by Government
is essential to ensure a sensible, fair, humane,
economic policy, without the roller-coaster dips and
curves we have faced in the last eight years. Govern-
ment must plan ahead just like any business. Planning
is widely practiced in the private sector of the American
economy.
"I favor coordinated Government planning to attack
problems of structural unemployment, inflation, environ-
mental deterioration, exaggeration of economic inequalities,
natural resource limitations, and obstructions to the
operation of the free market system.
"I believe that this type of planning can be carried out
without the creation of a new bureaucracy, but rather
through well defined extensions of existing bodies and
techniques. I propose that the role of the present
Council of Economic Advisers established under the Full
Employment Act of 1946, be expanded to include this type
of coordinated planning and to deal with long range
problems of individual sectors fitted into an overall
economic plan for the economy as a whole, as well as to
deal with considerations of supply, distribution, and
performance in individual industries.
"Many of the economic shocks of the past eight years
have come on the supply side of the economy. It is
imperative that we study ways to anticipate problems
rather than await their arrival and once again react
with ill-conceived solutions in a crisis environment.
Such detailed studies will be an important new task for
the Council of Economic Advisers.
"We have no discernible economic goals. Goals must be
established and clearly enunciated, so that our programs
can be developed within a planned, orderly context.
- 2 -
GERACD
"The techniques I have outlined can and will be carried
out within the framework of our present private enter-
prise system, free market institutions and administrative
structures.
"It will be my responsibility as President to ensure that
this Nation has a coherent, coordinated, short and long-
term economic policy, geared to achieve full employment,
low rates of inflation, and cyclically balanced budgets.
To these I am committed. These goals will be achieved."
Carter Economic Position
Paper
1976 Campaign
"I don't like the prospect of government planning that
would be binding on private industry, but my own experience
in government is that planning ought to initiate at the
executive level, with the President and his office, or
with the governor of a state. Secondly, the goals and
policies established ought to be publicly divulged. And
they ought to be constantly amended as goals are reached
or priorities are changed so that the private sector--
business, industry, agriculture, and so forth--can cooperate
with the government in the evolution of their own long-
range plans. I don't favor government domination of
private industry with government plans."
Fortune Interview
May 1976
"I believe in long-range planning so that government,
business, labor, and other entities in our society can work
together if they agree with the goals established. But
at least it would be predictable. I don't favor the
federal government making plans for the private sector
mandatory."
Business Week
May 3, 1976
CARTER ON ANTITRUST AND DIVESTITURES
GERALD
1. Pledges more vigorous antitrust policy: Carter argues
that he will do more for economic growth and more for
economic competition than the Ford Administration by
stepping up antitrust enforcement. Among his specific ideas:
-- Insulate the Attorney General from politics
so that he will have a free hand in antitrust enforcement
(at an early stage in the campaign, Carter suggested that
the Attorney General might be made independent of the
President);
-- Shortcut the antitrust enforcement proceeding so
that major cases don't drag on for years;
-- Give State AGs the right to bring class action suits
for antitrust violations (parens patriae);
-- Strengthen powers of the Justice Department to
block corporate mergers thru injunctions until the legality
of such mergers is determined.
Note that Carter has said he would not try to break up
companies just because they are large -- only when they
restrain trade.
2. Oil Company Divestitures: A closely related matter --
and one of considerable controversy -- is the question of
breaking up the oil companies. Carter says he is not in
favor of breaking them up and has stopped short of endorsing
the Bayh bill; he says he was the only Democratic candidate
not in favor of divestitures. But he has gone much further
than the companies would like:
-- He does not favor vertical divestiture in the areas
of exploration, extraction, refining, "maybe even the pipeline
distribution areas. It is not always in the consumer's
interest to limit a company to one phase of production, he
explains.
-- But at the wholesale and retail end, he "would
probably favor divestiture requirements to ensure
eompetition, which I don't think exists now."
- 2 -
-- He also favors getting oil companies out of
ownership of other energy areas (horizontal integration) .
He worries that such integration reduces competition and
also may discourage oil companies from producing more
coal in order to keep oil prices high.
Quotes from Carter on
ANTITRUST
He said an effort would be to do "everything we can do to
increase competition within the business sector by the
rigid enforcement of antitrust laws" and by placing more
emphasis on government regulation that protects consumers
while removing "unwarranted regulation that protects industry.' "
New York Times
July 29, 1976
Mr. Carter endorsed the principles behind two major
pieces of antitrust legislation pending on Congress that
have been vigorously opposed by President Ford.
One bill would give state attorneys general the right to
bring lawsuits on the behalf of all the citizens of a state
for damages caused by antitrust violations such as price
fixing. Large corporations fear this could bring very
large damages assessments.
The other bill would strengthen the powers of the Justice
Department to block corporate mergers through injunctions
until the legality of such proposed mergers was litigated.
He said he believed that government regulation of industry
that tended to elevate or prop up rates charged to customers,
as in the case of transportation and freight charges, should
be "drastically minimized." He criticized what he termed
"sweetheart" relationships between industries and the govern-
ment agencies meant to regulate them.
New York Times
August 10, 1976
-3-
FORD LIBRARY & GERALD
Q. How would you go about applying that emphasis?
A. "Well, one way would be through enthusiastic enforce-
ment of the present antitrust laws. I would like to get
the Attorney General out of politics, and not have any
constraint on the Attorney General about which antitrust
laws are enforced. I would also like to abbreviate the
procedures through which the antitrust laws are administered.
It takes too long now for the courts to reach a final deter-
mination. There are some areas of antitrust laws that I
think are inadequate -- both in the procedural approach
and also in the exact measurements of a lack of competition.
The food-processing industry is one that concerns me very
much."
Fortune Interview
May 1976
Mr. Carter said he favors giving the Attorney General a
chance to obtain injunctions to halt proposed corporate
mergers before they're completed in cases where the Justice
Department suspects the combinations might violate antitrust
laws. He also backed new powers for state attorneys general
that would let them file class action suits on behalf of a
state's residents.
Mr. Carter also:
--Urged legislation that would override Supreme Court
rulings of recent years that have made it difficult for
individuals to file class action suits.
--Declined to back Mr. Nader's proposal to require
federal chartering of big corporations, but said he'd like
to see shareholders have greater control over corporate actions
than they currently have.
--Reiterated his concern about oil industry control of
coal, uranium and geothermal energy sources and said he would
favor antitrust action if some alternative way to provide
adequate competition couldn't be found. He said he didn't
favor a sweeping break-up of big oil companies, but again said
he might back divestiture of wholesale and retail distribution
by the producing companies.
Wall Street Journal
August 9, 1976, page 5
Agreeing with a questioner that previous Democratic
administrations had often been lax in moving against corporate
mergers, he endorsed a bill to give the attorney general power
to seek injunctions to prevent mergers before they occur,
which is now beyond his authority.
Washington Post
August 9, 1976, page A-3
- 4 -
Q. Several months ago you told us that breaking up General
Motors would not be one of your goals. Does that still
represent your thinking?
A. Yes, it does. There are a lot of other things that I would
devote my time to doing rather than trying to break up a
company just because it's large. I might discover as a
candidate, or as President, that General Motors was con-
straining trade or was monopolistic in its attitude, in which
case I would publicly demand that antitrust be enforced in
that particular area. Or if I thought that antitrust laws
were inadequate, I would do all I could to get new laws
passed.
Fortune Interview
May 1976
OIL COMPANY DIVESTITURE
"I support restriction on the right of a single
company to own all phases of production and distribution
of oil," Carter said in a campaign statement. "However, it
may not always be in the consumer's interest to limit a
company to one single phase of production."
The statement stops short of endorsement of the controversial
bill (S. 2387) sponsored by Sen. Birch Bayh (D. Ind.),
currently before the Senate. The Bayh measure would require
the nation's 18 largest oil companies engaged in production,
marketing, refining and transportation to divest themselves
of all but one phase of the business.
On the related question of "horizontal integration" in the
oil companies' holdings, where oil companies seek to diversify
into other energy areas, Carter said: "I support legal pro-
hibitions against ownership of competing types of energy,
oil and coal for example."
He noted possible exceptions, however. "Fuel oil and some
propane, for example, are produced from crude oil. Their
production clearly cannot be separated
Mondale. The Minnesota Democrat voted October 22, 1975, to
require major oil producers to divest themselves within five
years oftheir petroleum refining, transporation and marketing
interests. He also voted that day to require major oil
companies to divest themselves within three years of their
interests in alternative energy sources. Both votes came on
unsuccessful amendments to S. 2310, an emergency natural gas
bill.
Congressional Quarterly
July 24, 1976, Page 1980
- 5 -
Reiterating his opposition to the breakup of vertically
integrated oil companies, Carter tentatively embraced
an idea advanced by Oklahoma Gov. David Boren -- to force
oil companies to disclose their profits at every stage of
business, from extraction to retail sales.
Boren, describing what he called "vertical accountability"
as an alternative to the vertical disvestiture bitterly
opposed by the oil companies, has said it would force
companies to be accountable to public opinion and open them
up to antitrust action at every level of production.
Washington Post
August 18, 1976
(More on divestiture policy in energy section).
CARTER ON FOREIGN TRADE
GERALD FORD LIBRARY
1. Mixed Approach: Carter has established a decidedly
mixed record on foreign trade policy. During the primaries
he frequently critized the loss of U.S. jobs resulting when
U.S. companies locate abroad. But in his lunch with business-
men at the 21 Club in New York City, he said he thought
foreign investment by U.S. companies was "very healthy" and
he pledged he would not do anything to subvert or minimize
the inclination of U.S. foreign investments.
Carter is specifically on the record on the following:
-- He supports aggressive promotion of U.S. goods
overseas;
-- He would keep foreign tax credits;
-- He is inclined to eliminate the tax deferral on
income earned by U.S. multinationals abroad;
-- He favors more long-term commodity agreements,
especially with developing nations;
-- He is opposed to indexing in such agreements;
-- He is "leery" of multinational commodity agreements;
-- He is highly critical of the Ford Administration's
new anti-bribery proposals, asserting that "confidential
disclosure" and corporate "permissive criminality" are
"contradictions in terms".
CARTER QUOTES ON FOREIGN ECONOMIC POLICY
GERALD FORD
He criticized legislation proposed by the Ford
Administration to seek corporate reporting to the govern-
ment of bribes made abroad, asserting that "confidential
disclosure" and corporate "permissive criminality" are
"contradictions in terms."
Washington Post
August 10, 1976
during the primaries he frequently critized the
loss of U.S. jobs resulting when American companies locate
abroad. But yesterday, he said he thought that foreign
investment by U.S. companies was "very healthy" and that
it was "sort of a toss-up" between the jobs lost from U.S.
investment abroad and the jobs gained from more foreign
companies located in the U.S. and he pledged that he
wouldn't do anything to subvert or minimize the inclination
of (U.S.) investment in foreign countries."
The foreign tax credit, which permits multinational
corporations to subtract directly from their U.S. tax
liability any foreign taxes paid, is one tax preference,
"I'll probably decide to retain,' he said. During the
primary campaigns, Mr. Carter has everely critized tax laws
that "encourage companies to locate abroad."
Mr. Carter did tell the business leaders that another
provision in the laws that permits multinationals to defer
U.S. taxes on a portion of their foreign earnings until
that income is directly brought back to this country is some-
thing "I will have to address.
when questioned about
possible inconsistencies between the speech and his campaign
rhetoric, he toughened his stance and said that his
"inclination would be to remove tax deferral."
Wall Street Journal
July 23, 1976
You said you favor joining certain international com-
modity agreements -- why? "I favor long-term agreements
with other nations, particularly those in the developing
world, to stabilize their markets and the amount they ship.
I don't favor indexing, and I would be much more leery of
multinational commodities agreements."
- 2 -
"If you establish price supports for domestic crops
equivalent to production costs, I don't consider that
inflationary. The inflationary aspect comes in when you
have wild fluctuations in price. Whether you could call
price supports equivalent to production costs a domestic
carter, I don't know. I'm not talking about international
price supports. I'm talking about a multiyear trade agree-
ment that would involve a relatively fixed price, with some
flexibility, and a guaranteed purchase of a certain quantity
of commodity, again subject to fluctuations. If demand
were greater than the amount for which we had contracted,
then the price for the increased commodity might be higher
or lower."
Business Week
May 3, 1976
I would alos promote the aggressive sale of American
products overseas. We don't do this nearly so much as other
countries do. I spent a lot of my time as governor traveling
around in foreign countries trying to see Georgia products.
When I've been on these trade trips, I've seen small countries,
like France or Germany of Russia, with delegations comprised
of government, industry, labor and agriculture, saying,
this is what we have to offer you, what can we do to make
you our customer. Right on the spot, they can trade with
those protential buyers for delivery schedules, the quality
of merchandise, the price, interest rates, and repayment
terms. As governor, I was never able to get any sort of
answer from Washington on those same questions. It really
incapacitates our ability to sell American products overseas.
Fortune Interview
May 1976
GENERAL CARTER CRITICISMS OF THE FORD ADMINISTRATION
Excerpts from Carter's Address to AFL-CIO on August 31, 1976
We have a great vision for our country, but in recent years that vision
has been dimmed. It's been dimmed because we have seen our factories standing
innate, natural productivity given to us by God going to waste.
idle, and it has been dimmed because we have seen individual human lives with great
We've had a government in recent years of limited ability. We've had a
government with timid leadership. We've had a government that has been afraid
of the future. We've seen a government try to fight the evil of inflation with
the evil of unemployment and which has brought on our nation the worst combination
of inflation and unemployment at the same time that we've had in the 20th Century.
That's what we face, and that's what we've had to accommodate in our
great country. We've had an Administration that talks about fiscal responsibility;
we've had the lowest rate of growth in over 30 years. We've had budget deficits
greater than any in the 200-year history of our country.
I watched the convention in Kansas City and I heard the President say
that he was proud of his economic record. Well, no one can deny that this Ad-
ministration has put new entries in the economic record books of our country.
The unemployment rate is 7.8 percent, higher than that under Harry Truman,
Eisenhower, John Kennedy, Lyndon Johnson, even Richard Nixon. The unemployment
rate under this Administration set a new record. In the last two months, we've
had 500,000 more people out of jobs now than two months ago.
We've had an average over these last eight years of a 6 percent inflation
rate; a steady quiet, insidious, all-pervasive robbing of the American family;
an inflation rate greater than that under Eisenhower or Kennedy or Lyndon Johnson.
President Nixon and President Ford have to share that entry in the record bocks.
Because of low productivity and high unemployment, we now see our own
national economy losing $150 billion in the production of goods and services for
the American people each year. That's a $2,500 loss for every family in this
country. That is another record. Under President Ford and the budgets that
have been prepared under his Administration, we've had an increase in our national
debt of $210 billion, which equals one-third of the total in the history of our
country. That's another economic record.
When he went into office in August of 1974, the unemployment rate was
5.5%. In nine months it was 8.9%, the fastest rate of growth in unemployment
in our history. Layoffs in this country have affected one-third of all the fmil
in the United States. And the rate of inflation has tripled for food and for
medical care and for fuel.
So I can tell you that the economic record of this Administration is
indeed, but we're going to change that record beginning next January with
your help ( Applause).
-2-
Now this record is bad enough, but perhaps even worse is the loss of
spirit and loss of direction in our country. We've been convinced that there
are so many things that we cannot do. It's time that we start reminding the
American people of all the great things that we can and must do. We need to
have unity in our country and not division. Unity between the White House ,and
the Congress, that has almost been completely eliminated. Unity between our
people and the government.
I don't believe any other human being in the last two years has traveled
more than I have, met with more groups, talked to more people, answered more
questions, listened more, shaken more hands. And there is a sense that this wall
that has been built around our own government and that the people have been
excluded from the decision-making process. So we need to provide an opportunity
for new unity between people and our own government leaders. And, of course, as
you well know, we need also to have strong unity between business, labor, industry,
agriculture, education, science and government.
Another point that I want to make is this: we must reject the dogma that
has been put forward by the Republican Party that events are out of control, that
the government of free human beings can't correct mistakes, can't answer difficult
questions, cannot deal with human needs and cannot be effective.
We Democrats know that government can provide for our needs. But we
insist that we control the government and not the other way around. (Applause)
And, of course, we also reject the dogma that government can do everything
and knows all the answers. And we know that the repository of power and
intelligence and commitment and idealism and patriotism and compassion and
competence and unity exists among the people themselves.
Now, there are four basic ingredients that must go into the correction
of our economic woes: One is balanced and sustained growth. The second one
is full employment. The third is stable prices. And the fourth is a well-
managed government that's efficient, economical, purposeful, working toward
balanced budgets in normal economic times.
I've already noticed, in Kansas City and since then, there is going to be
a lot of tough talk during the campaign about inflation from the Republicans.
But tough campaign talk cannot hide the fact that there has been a 70 percent
increase since 1968 in food costs - 70 percent. In health costs, since 1968
there has been a 60 percent increase; in the cost of a home there has been a
70 percent increase; in mortgage interest rates 30 percent.
Our housing industry is now suffering in the depths of a depression.
We have 17 percent unemployment or more among construction workers, and last
month alone we had a 9 percent drop in housing starts, and in multi-family the units
worst inflation rate in more than 50 years: three times under Nixon and Ford
the drop was almost 35 percent in one month. We are now experiencing
what it was under Johnson and Kennedy. The 1968 dollar is worth 60 cents,
has and not can been see very well received by the American people. (Laughter and Applause)
I why the Republicans have had to turn to the $2 bill, which
-3-
In the last 8 years, the deficits and the debt that has been accumulated
are almost equal to all other Administrations combined in the 200-year history
of America. And the interest on the increased debt that's come in this
Administration is $350 per family in the United States -- perpetually.
That kind of mismanagement has got to be changed. There's no incom-
patibility between meeting the legitimate needs of our people, being compassionate,
concerned, sensitive on the one hand, and having a tough, well-managed government
on the other.
But we must have a President who will lead this country. One who is
not timid. One who treats Congress with the respect. One who deals with the
sensitive and important needs of our people. Who doesn't let this nation
drift and who restores the spirit and the hope and the dreams and aspirations
and confidence of the people of this country. There's only one place for that
leadership to come, and that's from the White House. And the absence of that
leadership is no leadership, and the country's drifting. And next year we are
going to turn that around and change that too (Applause).
AFL-CIO Speech (as delivered)
Washington, D. C.
August 31, 1976
Carter charged the Nixon-Ford administrations with having
tried to control inflation by "small recessions" that
"eventually degenerated into a very large recession."
New York Times
July 29, 1976
Striking what may be a key theme for his campaign, Carter
said Republican economic policies had led to the highest
unemployment level in 24 years, record peacetime budget
deficits, increased reliance on foreign energy sources,
soaring interest rates and a shrinking trade balance.
Only the Democratic controlled Congress, said Carter, kept
the situation from being even worse.
New York Times
July 29, 1976
"Our nation now has no understandable national purpose, no
clearly-defined goals, and no organizational mechanism to
develop or achieve such purposes or goals. We move from one
crisis to the next as if they were fads, even though the
previous one hasn't been solved."
Carter campaign brochure
- -4-
"In reference to regulatory agency appointments, Carter
charged that in the past eight years of Republican adminis-
trations half the appointments to nine major regulatory
agencies came from the industries being regulated. Many
(
appointees have not served out their terms 'because of
the free movement back into the industry, " he said.
"I'd like to stop that if I'm elected President, ' he
said. 'I would like to see Congress pass a law to make
it illegal for the movement of members of regulatory
agencies back into the industry from which they've come
under the present administration. "
Washington Post
August 10, 1976
THE NEW YORK TIMES
7/14/76
GERALD FORD
The llaw York Times/Con Hogen Charles
Prof. Lawrence R. Klein of the University of Pennsyl-
vania with Jimmy Carter during an April news confer-
ence: Dr. Klein is Mr. Carter's chief economist.
Carter's Economics
Advisers Say Georgian Will Aim
For Wide 'Achievable' Social Goals
By LEONARD SILK
What are the economics of Jimmy Carter? The ques-
tion has become a hot one, with critics of the virtually
certain Democratic Presidential. nominee charging that he
is vague or contradictory on the major economic issues.
Mr. Carter's advisers-led by Prof. Lawrence R. Klein
of the University of Pennsylvania-concede that he has
not been particularly concrete about his economic plans
or programs. Even when his advisers have
Economic
suggested specific numbers-as Dr. Klein
and Charles L. Schultze of the Brookings
Analysis
Institution have done. on changed priori-
ties for the Federal budget- Mr. Carter
has deleted the numbers from his on-the-record responses
to questions.
Yet his advisers insist that, far from being vague, the
former Georgia Governor is "professional and pragmatic,"
seeking the best technical advice he can get to help him
realize his broad social goals. Dr. Klein characterizes
those as being "to give the common man a better break,
to make this a better society." He adds that Mr. Carter
has an engineer's approach and an analytical mind-
that he listens to his advisers before deciding.
Original Aim Rejected
Within a political philosophy closely in line with New
Deal Democratic Party thinking. Mr. Carter intends to
aim for what his advisers call "achievable goals." It was
on that basis that Governor Carter rejected the original
goal of the Humphrey-Hawkins Bill of cutting unemploy-
ment to 3 percent within four years.
Mr. Carter accepted the judgment of his advisers that
3 percent unemployment for the labor force as a whole
would be inconsistent with an acceptable rate of infla-
tion (3 to t percent).
When other Democratic candidates were setting lower
targets for unemployment and inflation, Mr. Carter said,
"I can't outbid them: I'd put my emphasis on employ-
ment and take my chances on inflation." He has con-
sistently kept to those priorities. He puts reducing
unemployment first, reducing inflation second, thereby
THE NEW YORK TIMES
-1-
7/14/76
Yet he says that a greater:
degree of Government plan-
ning, which he would do
through an augmented Council
of Economic Advisers, is neces-
sary to attack problems of
structural unemployment, infla-
However, Mr. Carter's earners
tion, environmental decay, ex-
Continued From Page 51
populism had- led him to favor
aggeration of economic in-
reducing. the independence of
equalities, natural resource
making this a sharp issue with:
the Federal Reserve System.
limits and "obstructions to the
the Republicans, who have con-
His advisers have argued that
operation of the free market
sistently designated inflation as
there was much to be said for
system."
the top problem.
Mr. Carter has learned much
"separation of powers," not
Thus, he combines his sup-
only of Congress, the Presi-
port of planning with a promise
of his economics during the
dency and the Supreme Court,
of stricter application of the an-
Presidential campaign. Dr. Klein
but also of the Federal Reserve
titrust laws to increase compe-
says Mr? Carter's original goals
and the Treasury.
tition.
were 2 percent: unemployment,
Mr. Carter has satisfied him-
Mr. Carter leans toward both
2 percent inflation and a 2 per-
vertical and horizontal devesti-
cent rate or interest.
self, according to Dr. Klein, by
accepting the "mildest and least
ture of major oil companies. He
Realistic Target
thinks the problem in the oil
troublesome of reforms of the
Mr. Carter subsequently de-
Federal Reserve" proposed by:
industry is at the wholesale and
retail end. He has said he would
cided that those were not com-
Representative Henry S. Reuss.
not favor devestiture of explo-
patible numbers and designated
Democrat of Wisconsin, the
ration, extraction. refining or
4.5 percent unemployment as a
chairman of the House Banking
even pipeline distribucion.
realtistic target for economic
Committee. These are making
Similarly, he has- expressed
policy.
the Fed chairman's four-year
his belief that the present
That 4.5 percent overall un-
term coterminous with that of
movement of oil companies into
employment figure now is
the newly elected President.
ownership of coal mines is "not
considered consistent with the
with the President free to pick
good for the country." He has
modified Humphrey Hawkins
his chairman subject to con-
said he would favor devestiture
target of 3 percent "adult un-
firmation by the Senate.
to the extent that he felt it was
employment."
Neither Mr. Carter nor his
The Carter logic is that there
advisers are monetarists- be-
necessary to provide for "con-
tinuing and very enthusiastic
is enough slack in the eco-
lievers in the doctrine espoused
competition" and would en-
nomic system to permit con-
by Prof. Milton Friedman of the
courage more coal production.
siderably stronger fiscal and
University or Chicago that calls
Professor Klein says that in
monetary stimulus than that
for emphasizing slow and con-
followed by President Ford or
tinuous growth of the money
the Federal Reserve under its
supply. Mr. Carter and his econ-
a Houston meeting with oilmen
chairman, Arthur F. Burns.
omists view fiscal policy at
Mr. Carter "did not give in on
But Mr. Carter's advisers have
least as important as monetary
divestiture."
warned him that with unem-
policy and ravor as much atten-
Counterbalancing such a
ployment at 4.5 percent the
tion to interest rates as to the
tough but not unqualified
economy is likely to bump up
money supply.
against capacity ceilings. It
Mr. Carter favors more "sun-
stand, Mr. Carter has empha-
would then be a good idea, they
shine" upon the wrokings of
sized his respect for the private
say, to have standby wage-and-
the Fed. He would also seek to
sector of the economy. He has
price controls in place, for use
insure better planning by both
been lukewarm on creating
if needed.
the Federal Government and
more public jobs as the main
Both Are Represented
private industry through a re-i
means of attacking unemploy-
quirement that the Fed state
Mr. Carter's instincts seem to
ment and stresses that there
its objectives more clearly and
be to seek reassurance from
would be a greater "magnifica-
publicly
conservative as well as liberal
tion" of benefits from public
economists. Both are repre-
Freedom for Business
monies going to the private sec-
sented on his committee of eco.
Mr. Carter has stressed the
tor for job creation than by in
nomic advisers. Dr. Klein says
importance of longer-ter
creasing Federal employment.
that Mr. Carter was impressed
planning, but has sought to
with the desirability of an "in-
combine this with freedom for
Long List of Measures
comes policy"- program to
private business. He wants the
But he has proposed a long
keep the rate of growth of
Government. to budget on a
list of measures the Federal
wages and other incomes in
three-year cycle, "rowing for-
Government should take to re-
line with the growth of na-
ward three years at a time
duce unemployment, including
tional productivity-and by the
when the budget is prepared
more money for financing on-
support given the concept by
each year."
the-job training by business.
Dr. Burns,: the conservative
This rowing budget tech-
better employment services to
chairman of the Federal Re-
nique, he thinks, would permit
match people to jobs, improved
serve.
businessmen and public offi-
manpower training programs,
cials to do a better job in laying
and as needed, more public
out their own plans.
jobs, such as housing rehabili-
Mr. Carter does not want to
tacion and repairing railbeds.
rely on "elaborate proposals of
He has attacked President
comprehensive planning" and
Ford's veto of the $6 billion
appears to be rejecting detailed
public works employment bill.
models that would give exces-
and his subsequent veto of 3
sive control to the Federal. Gov-
scaled-down S4 billion public
ernment.
jobs bill.
THE NEW YORK TIMES
7/14/76
On international economic
policy, Mr. Carter initially
worried about the employment
impact, as on shoe or textile
workers, of liberal trade and
investment policies. His eco-
nomic advisers have urged him
to regard both trade and invest-
Few Welfare Details
ment as two-way streets, and
they have said the best way
Mr. Carter has disclosed few
to help workers to be sure of
of the details of his plan for
keeping their jobs is not protec-
reforming the welfare system.
tionism but making sure the
In brief, he speaks of getting
United States has "a good
welfare recipients into jobs-at
strong domestic economy."
least those who are capable of
On international monetary
working - but not penalizing
reform, Mr. Carter appears to
those who cannot work.
have accepted the advice of
He wants to be able to permit
Prof. Richard N. Cooper of Yale
those on welfare who can sup-
University, who has counseled
plement their income by work-
against any effort to return to
ing to do so. However, he is
fixed exchange rates, Mr. Coop-
against anything resembling
er-and presumably Mr. Carter
Senator McGovern's $1,000
-are not dissatisfied with the
"demogrant" program that hurt
present quasi-floating interna-
the South Dakota Democrat SO
tional monetary system.
badly in the 1972 campaign.
Pieces of the Package
Mr. Carter comes on as a
Mr. Carter has sometimes
strong friend of the cities. He
disregarded the advice of his
would use funds to strengthen
tax advisers-principally Jo-
the inner city by creating more
seph A. Pechman or the Brook-
jobs for black teen agers,
ings Institution-not to take
whose unemployment rates
pieces of the package out for
range up to 40 percent. He pro-
display, lest he be attacked by
poses creating urban "C.C.C.'s"
adversely affected groups. He
(Civilian Conservation Corps,
has indicated that he favors
such as those that existed dur-
eliminating the tax deductibility
ing the New Deal) as well as
of mortgage interest-rate pay-
federalizing much of the wel-
ments, taxing capital gains in
fare bill, building more public
the same way as ordinary in-
housing, increasing counter-
come and eliminating the dou-
cyciical revenue sharing, build-
ble taxation of corporate
ing better urban transportation
profits and dividends.
systems, and other measures.
As his advisers predicted, Mr.
Without overall budget de-
Carter has been attacked for
tails, it is impossible to say
these specific proposais by dif-
how much President Carter's
ferent tax-paying groups and
programs would cost if he
political opgonents. He has
were elected or how he would
gone back to emphasizing that
achieve his promise to balance
there must be 3 "sweeping" tax
the course of the business
reform but that this will be a
cycle,
highly complex job.
He is promising more et-
Mr. Carter says it will take
ficient government. not small-
at least a year before a com-
er government. This appears
plete tax program can be de-
to be his basic reconciliation of
veloped. There is apparently no
his "common man" social phil-
secret plan for that sweeping
osophy with his pledge to
tax reform. It appears likely.
clean up the Federal bureauc-
however, to seek to eliminate
racy.
as many special deductions as
possible and at the same time
to scale down income tax rates.
It will also lean toward
greater progressivity in the tax
system. with rates rising
proportionately with higher in-
comes.
7/11/76
THE NEW YORK TIMES
The Contradictions in
Carter's Budget Policy
By EDWIN L. DALE Jr.
Democratic platform committee (and
WASHINGTON-Is Jimmy Carter a
the platform about to be adopted is
big spender?
very close to the Carter prescrip-
tions).
This is the most relevant question
There are no dollar figures for the
about his philosophy on economic
GERALD FORD
various proposals But the Carter
matters. The prospective candidate
of this week's Democratic convention
list is much longer than generally
realized. Here is a brief rundown:
has spoken in some detail on such
EDUCATION: The Federal share of
questions as sweeping tax simplifica
tion and reform, standby powers to
financing of public education, which
control or delay major price and
was 10 percent in 1974, "must be
increased."
wage increases, and devices to induce
private employers to hire more work-
TRANSPORTATION: "The task of
ers or to retain them during reces-
rebuilding the existing transportation
sions. All of these are important as
system is SQ massive, so important
parts of economic policy.
and so urgent that private investment
But the underlying state of the
will have to be supplemented with
economy four or five years from
substantial direct public investment"
now-how much inflation, how high
including "entirely new programs". in
the rate of interest, the sufficiency
some areas such as the railroads and
of capital formation for new invest-
"increased investment levels" by
ment--is likely to depend more than
government in local transit.
anything else on the magnitude of
THE CITIES: There should be
the Federal budget. Here Mr. Carter's
"countercyclical assistance" at times
various positions may be seen as
of substantial unemployment, an in
contradictory.
crease in general revenue sharing to
On several occasions, including his
allow for inflation and a new "publio
economic policy paper Issued in
needs employment program funded
Pennsylvania in late April, Mr. Carter
by the Federal Government
stated his aim of a balanced budget
WELFARE: Although Mr. Carter
by 1979 "within the context of full
opposes complete Federalization of
employment."
welfare, he favors "one fairly uni-
In an interview with Fortune mag-
form, nationwide payment". to be
azine he cited as a goal complete
"funded in substantial part by the
reorganization of the structure of
Federal Government." The (cities
government, the institution of zero-
would be absolved of all welfare
based budgeting which would screen
costs, with the entire burden to be
out old and obsolescent programs,
borne by the state and Federal Gov-
and a heavy emphasis toward a bal-
emments.
ancing of the budget."
There is no reason to doubt the
HEALTH: He supports a "national
health insurance program" which
sincerity of these goals. The ques-
would be "financed by general tax
tions arise from other positions of
revenues and employer employee
Mr. Carter on specific areas of Fed-
shared payroll taxes."
eral Government programs and
spending. The most comprehensive
HOUSING! There should be direct
statement of his positions has come
Federal subsidies and low interest
in his presentation last month to the
loans. to encourage the construction
of lower and middle class housing"
plus: expansion of the present sub-
sidized program of housing for the
elderly
THE NEW YORK TIMES
7/11/76
SOCIAL SECURITY: Here there is
an unspecific proposal for "an in-
crease in benefits in proportion to
earnings before retirement," which
could be enormously expensive.
JOBS: Here there is a fairly long
shopping list, including incentives
for private sector jobs, funding the
cost of on-the-job training by private
business, doubling the public service
jobs program from 300,000 to 600,
000, and the new program of "public
needs jobs" in such areas as housing
rehabilitation and railroad repairs.
In addition to all of this, Mr. Car-
ter supports, at least nominally, the
Humphrey-Hawkins Full Employment
Act, of. 1976 whose cost would be
large although impossible to precisely
calculate. Support for the bill-whose
aim is a 3 percent adult unemploy
ment rate in four years-is prominent
In the draft Democratic platform.
The prospective candidate, it is
Important to note, has explicitly
opposed perhaps the key feature of
the bill: making the Government, if
necessary, the employer of last re-
sort in order to make good the guar-
antee of a job for everyone,
Whatever finally emerges with res
spect to Humphrey-Hawkins, how-
ever, it is evident that Mr. Carter's
commitments in all the other areas
add up to a very expensive list.
What is to be made of this?
Ronald Reagan took one view last
week. He warned the voters in a
television address: You don't disci-
pline, an irresponsible and wasteful
Congress by putting an indulgent
friend in the White House.
Another view is that campaign
promises are not to be taken too
seriously and that Mr. Carter's stated
aim, of "attenuating the growth" of
Federal spending as a proportion of
the gross national product is prob-
ably a clearer expression of his
philosophy
Still another possibility is that Mr.
Carter's much-touted revamping of
the tax system could turn out to be
a means of raising & good deal more
money, which might make possible
his many spending programs in a
budget, in balance or near balance.
The difficulty with this proposition
is that Congress has shown no will-
ingness whatever to raise taxes,
except in wartime. For the last 30
years every peacetimo tax change
has been a net reduction,
As things now stand, the Carter
positions taken together lead to a
question mark, not an answer to the
question of whether he is at bottom
a big spender.
LIEVIEW VUILUUA
Vagueness and All That
Our national tax system is a
but not at all. The Democratic Con-
disgrace. The income most cer-
gress has not let the Humphrey-
ThE WALL
tain to be taxed is that which is
Hawkins nonsense take it by storm.
STREET
derived from manual Labor.
We are probably right, though. in
JOURNAL
Carefully contrived loopholes
not taking these positions too seri-
have created -a regressive sys-
ously. For along with these stan-
tem which Lets the total tax bur-
dard Democratic-liberal themes Mr.
7/13/76
den shift more and more toward
Carter also has a lot of rhetoric
the average wage earner. Some
about free enterprise. Along with
of our largest. corporations with
his complaints about low business
extremely high profits pay vir-
taxes and the need for making the
tually no tax at all When a
tax system more progressive, he
business executive can charge
has talked of ending double taxation
off a $50 luncheon on a tax re-
of dividends. Along with talk of na-
turn and a truck driver cannot
tional health insurance, new count-
deduct his $1.50 sandwich -
er-cyclical aid to the cities and more
when oil companies pay less
spending on education, welfare,
than 5% on their earnings while
housing and mass transportation, he
employes of the company pay, at
offers a pledge to balance the fed-
least three times this rate
eral budget by 1979
when many pay- no taxes on in-
From all of these there emerges
comes of more than $100,000-
no identifiable direction in which a
then we need basic tax reform.
President Carter would take the na-
A piecemeal approach to
tion. The vagueness does not result
change will not work. Basi
so much from a lack of specifics, as
cally 1 favor- a simplified tax
from a lack of rhetorical emphasis
system which treats all income
suggesting how Mr. Carter would
the same, taxes all income only
resolve the seeming conflicts among
once, and makes our system of
the specifics he has already offered.
taration more progressive
Thus in trying to discern what he
would do as President, people fall
George McGovern: vintage 1972
back. on psychoanalysis. Would be
right? Wrong. Jimmy Carter, in his
harken- to his- experience: in the
1976 presentation to the Democratic
South, in the Navy; in a successful
Platform. Committee. Fascinating
business career Or would he start
because: if George: McGovern had
running for President-of-the-century
uttered this rhetoric no one would
with a burst of bold new activism?
have the least. doubt- about what
Who can trust any such guess?
kind of policies he would propose as
President. Coming from Jimmy
Representative Barbara Jordan,
convention Reynote speaker
Carter, the same rhetoric only adds
confesses that she doesn know
to the mystery of what be would do
if elected. It is another item in the
enought about Governor Carter to
develop any impression about this
vagueness that has marked his
man. She was reduced to attesting
campaign. The difference is that
"I believe that Governor Carter is
when George lcGovern spoke, peo-
ple- believed
tellings there truth when be says he-
can run- on the Democratic plat
A great deal of the Carter cam-
form: that he wilk do: the things the
paign has a similar tenor. Above all
platform calls for to be done IF
it is evident in his appeal 83 & cent-
the- keynote, speakers doesn know
rist Democrat. He is moderate we
the presidentials candidates and isn't
are invited to believe, because he
quite sure about his platform prom-
would not smash the oil companies
ises, what are: the American- people
up as completely as Fred Harris
to believe?
would. Because he would not slash
Mr. Carter's calculated vague-
the defense budget as much as
ness has served him well so far, but
George McGovern would. Because
it seems to us that as the campaign
he is telling us a lie when he says he
goes on he will have to come down
supports the Humphrey-Hawkins
somewhere, to stand for something,
bill
to give us some notion of the depth
If we are entitled to take- Mr
of his convictions, to give us some
Carter's positions seriously, there is
clear idea of where he would take
nothing centrist about them, even
the nation. We: do not. see- how he
by the standards of his own party.
cane succeed-as a. candidate talking
The Democratic Congress is not
constantly: about honesty, integrity
really going to smash: up the oil
and openness in government; but at
companies, even moderately Thism
the same time. refusings to let the
year ithe Democratic Congress cut
American people? knowniwha Expoli-
the defense budget not by Mr. Cart
cies they are voting for if they
(Scripps-Howard/United Features)
July 13, 1976
# XXVII
THE ECONOMY TODAY by Herbert Stein
Mr. James Earl Carter, Jr.
Plains, Georgia 31780
Dear Jimmy:
I hope you don't mind my calling you Jimmy. Everyone does it.
I suppose it is a sign of friendship. Isn't it amazing how many new
friends you get when it seems you might become President of the United
States?
Anyway, I write to you as a friend. I think there may be a fatal
flaw in your campaign, and I want to warn you about it.
I have read many of your campaign documents, including your state-
ment on the economy and your long submission to the Democratic plat-
form committee. I have watched you on more television talk shows
than I can count. I have read hundreds of thousands of words of reporting
and analysis of your positions in several newspapers. In all of this
I find admirable the care with which you touch all the bases. There
seems to be something for everyone, or at least for every segment of
the American population, in your proposals and promises.
I suppose that all candidates have always tried to adapt their
programs so that they were attractive to as large a fraction of the
voting population as possible. But I can't believe that many, if any,
can have been as successful as you have been at it.
I can see in your statements something for the unemployed, for the
welfare recipients, for the producers of food and for the consumers
of food, for the sellers of housing and for the purchasers of housing,
for the ill and the healthy, for the cities and the country, and so on-
Sometimes it might seem that these promises are inconsistent, but
always you find a means to reconcile them. For example, there are to
be both higher food prices for farmers and lower food prices for con-
sumers. The way both of these objectives are to be achieved at the same
time is by reducing the take of the "middlemen." But most of the costs
of the middlemen between the farmer and the consumers are the wages
of teamsters, and railroad workers, and butchers and retail clerks, and
so on. But it is obvious from other things you say that you don't in-
tend to squeeze down these labor costs. So we are left with doing some-
thing about "speculators", which can't cost many votes since hardly any-
one thinks of himself as a speculator.
But I have had an uneasy feeling for several weeks that you have
overlooked someone. I have finally decided who it is. You have over-
looked the Great American Taxpayer. They are the millions of people
who pay the bills for the things the government does and the additional
things you want it to do. You do not promise them anything.
You have described as one of the three main themes of this election,
"The need to restore a compassionate government in Washington, which
cares about people and deals with their problems". For a vast number
of Americans, their most acute and most problem-ridden relation with
the government in Washington comes when they pay their taxes. Many
of them get quite a shock each April 15 when they discover how much
tax they have paid and how much tax they still have to pay.
Even with the tax cuts enacted in 1969, and the temporary cuts
enacted in 1975, Federal personal income taxes now are as high as they
were ten years ago, relative to the incomes people earn. That is
mainly because inflation has raised the tax burden. You haven't said
- 3 -
whether you want to continue the temporary tax cuts enacted last year.
You haven't suggested whether anything should be done to keep future
inflation from raising the tax burden further.
Some of your proposals involve increasing taxes. You have suggested
that wage earners should pay social security taxes on their earnings
up to a higher limit. And you have suggested new taxes to pay for
health insurance.
It is true that you have suggested tax reform. However, as far
as I can see the reform proposals all consist of ways to make somebody
pay more; they don't provide for anybody to pay less.
So I think this is the big hole in your program. There are lots
of taxpayers out there, and an awful lot of them vote. You ought
to hold out some hope for them, and the thing they would like most
is to get their taxes down.
I know it won't be easy to promise tax reduction, along with all
the other things you have promised. And I realize that you must be
very busy. Maybe you could get some of your experts to work on it.
I'm sure it would help a lot.
Sincerely yours,
GOVERNMENT
AGENDA
FOR THE CAMPAIGN
The economic debate begins
The coming election is likely to be the
This fundamental dilemma of the
curb inflation. "The key to our pro-
first in 16 years in which no Americans
mixed economies of the West forces poli-
gram," he says, "is growth, which will
are at war, and that almost automati-
ticians to choose and pray. While Jimmy
increase the supply of goods and services
cally pushes economic issues to the fore.
Carter is no longer saying that jobs are
and increase productivity. We should use
But there is nothing particularly sur-
his No. 1 goal, it is nevertheless true that
the current period of slack to give every
prising about the way in which the
the Democratic candidate has chosen to
possible stimulus to capital spending,
parties are framing their ideas. The
try to get employment up, and to pray
and that may mean boosting the invest-
elephant and donkey are moving toward
that he can design a program to prevent
ment tax credit and speeding the accel-
their Nov. 2 collision along traditional
inflation from getting out of hand as a
eration of depreciation."
party lines.
consequence. Similarly, the Republicans
Klein argues that an overall increase
The Democrats tend to favor a more
have chosen to make price stability their
in supply must be supplemented with
stimulative, more interventionist gov-
No. 1 campaign issue and to pray that
policies to prevent inflationary bottle-
ernment policy, believing as they do that
unemployment will not get out of hand.
necks from appearing in specific indus-
economic growth is the great solvent of
U.S. strength. For their parts, President
tries. "We want to generate a view of the
economic problems and government can
Ford and his economic advisers will go
economy that will enable us to trace the
foster rapid growth. The Republicans, by
to the public with a remarkably simple
flow of goods and services on an inter-
contrast, traditionally prefer a world in
program to contain inflation, one that is
mediate level. This will enable us to spot
which government does less SO that the
singularly free of gimmicks and also
bottlenecks in advance in order to take
private sector can do more. To them, the
singularly free of the promise of quick
the appropriate action." Klein would do
social cement is found in fiscal and
results. "Our anti-inflation policies ba-
this by relying on an input and output
mc
ary prudence.
sically view the problem in the longer
analysis to track the flow of goods
The way in which the parties relate
term," says Alan Greenspan, chairman
through the economy. "We want to make
these principles to specific issues is, of
of the Council of Economic Advisers.
business more farsighted," he says.
course, shaped by the circumstances that
"Inflation is something caused by excess
Conflicting policy. Finally, a Carter
prevail at election time, as a comparison
liquidity, and excess liquidity is in turn a
Administration would rely on some form
of their stands on the six key issues of
function of excess federal borrowing.
of incomes policy to contain the price
the campaign-inflation, unemploy-
Our program is gradually to reduce the
pressures that could crop up in an
ment, tax reform, energy policy, urban
amount of liquidity in the economy. But
economy that is on a relentless march
problems and foreign economic policy-
our goal is to do this while not depriving
toward full employment.
shows.
business of the liquidity necessary to
Democratic pronouncements on the
finance expansion," he says.
nature of that incomes policy do not yet
And that's it. Greenspan and other
point clearly in a specific direction. The
INFLATION:
Republican economists have a strong
Democratic platform is not averse to
belief in the internal dynamism of the
direct controls on prices and wages, at
A big headache
U.S. economy, believing that it has the
least as a last resort. One plank calls for
strength to move back to full employ-
"a strong domestic council on price and
for both parties
ment provided that it is not subject to
wage stability
with particular
any sudden shocks from erratic changes
attention to restraining price increases
in federal economic policies. A strong
in those sectors of our economy where
Stubborn, persistent inflation is the wild
element of what President Nixon's CEA
prices are 'administered' and where
card in the election as it is in the U.S.
chairman, Herbert Stein, called the
price competition does not exist."
economy. Compared with 2% in the
"old-time religion" is still to be found in
In more recent statements, however,
1950s and 2.3% in the 1960s, the U.S.
President Ford's White House.
Carter has talked little about using
inflation rate has been running at 6.6%
Candidate Carter and his advisers, by
controls as a last resort, and much about
in this decade.
contrast, offer what appears to be a
a voluntary approach to restrain price
It is unreasonable to expect either
three-pronged attack on inflation.
increases. The policy outlined in his most
party to have come up with a totally
They begin with the belief that
recent interview with BUSINESS WEEK
credible program to bring the rate of
economic growth generates an overall
(page 94)-voluntary cooperation be-
price increases back to an acceptable
increase in supply that itself imposes a
tween labor and business-bears a fam-
leve' For while modern industrial de-
limit on price pressures. The Democrats
ily resemblance to the "social consensus"
mc
ies know how to reduce un-
have set a 4% unemployment target for
that West Germany uses to keep infla-
employment-they simply run bigger
1980. University of Pennsylvania econo-
tion in check.
deficits and print more money-they do
mist Lawrence R. Klein, Carter's chief
President Ford's White House ob-
not know how to keep people at work
economic adviser for the campaign,
viously believes that this complicated
while at the same time keeping prices
believes that those policies needed to get
Democratic program to prevent inflation
from rising.
the economy to this level will also help
and to move unemployment down to 4%
Alan Henderson
Propelling Jimmy Carter to his Nov. 2 collision are his principal economic advisers: Michael L Watcher, Jerry J. Jasinowski, and
Lawrence R. Klein. Powering President Ford's elephant are L. William Seidman, William E. Simon, and Alan Greenspan.
folly. The President himself has
job health and safety rules-that "in-
frequently said that inflation is itself the
duce" unemployment by hindering busi-
cause of unemployment. And more for-
Will recovery alone
ness expansion.
mally, Greenspan has argued that the
Carter believes that a speedier recov-
double-digit inflation of 1973 and 1974
supply the solution?
ery than Ford proposed is necessary. He
has built large inflation premiums into
also feels that greater government inter-
wages, interest rates, and the cost of
vention in labor markets can bring down
capital.
On no issue is the difference between
unemployment while actually reducing
An irony. Until these premiums are
Carter and Ford more clearly defined
the pace of inflation. He has set a target
sweated out of the economy, or at least
than on how to reduce unemployment.
of 4% unemployment by the end of his
people are persuaded that they will be
The differences between the two candi-
first term.
sweated out of the system, says Green-
dates cut to the heart of their philoso-
Broad efforts. To reach his goal, Carter
span, there is simply no way that the
phies of government and the role of
favors the use of a broad range of labor-
private sector will undertake the invest-
government in the economy.
market efforts targeted to reduce un-
ment needed to move back to full em-
The problem is obvious enough. Since
employment in key sectors. This, he
ployment. Since investment is critical to
the trough of the recession, total
says, could lower the rate a full percent-
the economic growth that provides jobs,
employment has increased by 3.5 million
age point below the level that can safely
Republicans think that reducing infla-
to a new record level. But that improve-
be achieved through macroeconomic
tion will also cut unemployment.
ment has been barely enough to absorb
monetary and fiscal stimulus alone.
There is something of a historic irony
the addition of 2.9 million workers to the
Carter says that the overwhelming
at work on the Republican side. Two of
labor force in the same period. As a
majority of new jobs must be created in
the best Republican economists-Arthur
result, 7.5 million workers are still
the private sector, although he is more
F. Burns and Henry C. Wallich-are
unemployed, and the unemployment rate
willing than Ford to make last-resort
now on the Federal Reserve Board,
has fallen only from 8.9% to 7.9%.
use of public jobs.
which strictly circumscribes their role as
Ford's position is that inflation limits
The Ford Administration takes the
political advisers. Both men have been
the rate at which new jobs can be
position that high unemployment rates
strong advocates of some form of
created. By the Administration's projec-
will simply have to be tolerated for
incomes policy to contain inflation. This
tions, unemployment will remain above
several years. Burton Malkiel, a member
inevitably raises speculation on what
6% through 1977 and will average 4.8%
of the Council of Economic Advisers,
"-esident Ford would now be saying if
in 1980. Beyond its emphasis on steady
says that demographic and social
allich and Burns were in the White
economic recovery, the Administration's
changes have increased the number of
House and Greenspan and Treasury
only other campaign initiative on em-
young and female job seekers. "It stands
Secretary William E. Simon were on the
ployinent is likely to be an attack on
to reason that the greater the number of
Federal Reserve Board.
government regulations-such as some
new entrants and re-entrants you have,
GOVERNMENT
BUSINESS WEEK: September 20. 1976
77
The economic record: Democratic VS. Republican Administrations
+11
+10
Democrats
+9
Republicans
+8
+7
Wages and
Corporate
+6
salaries
profits
Unemployment
Inflation
Real growth
Federal
nondefense
+5
spending
+3
+2
+1
0
1
Annual rate of increase,
Annual rata of Increase,
Unemployment rate,
Annual
Annual growth of gross
Annual rate of increase,
adjusted for inflation
adjusted for inflation
adjusted for changes
inflation rate
national product,
adjusted for inflation
in labor force
adjusted for inflation
Percent
Average of 1944.52 and 1960-68 for Democrats, 1952-60 and 1968-76 for Republicans
Data: Commerce Dept., Data Resources Inc., BW estimates
On the evidence of the past 32 years, which split evenly
Kennedy and Johnson, averaging 7.7% growth annually,
between Republican and Democratic Administrations, the
than under Eisenhower, Nixon, and Ford (7.3%), and it
parties are also close in terms of how their policies affected
rose much more rapidly during the Truman years (13.2%).
the performance of the economy. According to many broad
Democrats will argue that this activism produced faster
indicators, though, what slight edge there is goes to the
growth and all its benefits, including the surprise that
Democrats (chart). Their inflation rate is lower, on the
profits, as well as wages (adjusted for inflation), have
average, and their real growth rate higher. Unemployment
performed better during Democratic than Republican
+ends to be higher under GOP Presidents-very rapid
Administrations, both before and after taxes.
rowth of the labor force has put the Nixon-Ford Adminis-
But the GOP can argue quite plausibly that this activism,
trations at a disadvantage in this regard But the Demo
which has been accompanied by extensive global military
cratics record still looks better even if each year's
commitments, has too often been overdone. Republican
unemployment rate is adjusted by subtracting the labor
Presidents, who have almost always inherited Democratic
force's growth rate:
majorities in Congress, have also inherited wars in Korea
Nonetheless, such distinctions provide a basis for endless
and Vietnam, and wartime spending generates inflationary
disputation. At the policy level, government tends to be
pressures that can be massive. So the GOP will contend that
somewhat more activist under Democratic Presidents than
Democratic excesses have forced the last four Republican
Robert McAuley
under Republicans. Real nondefense spending at the
Administrations to devote much of their time to deliberate
federal. level; for instance, rose slightly faster under
programs of restraint; often leading to recession.
the higher unemployment has to be,"
programs to deal with any resulting
straight fiscal stimulus," says Wachter.
says Malkiel. "This is consistent with
inflationary pressure.
In Wachter's view, public-service jobs
free labor markets, and it may not be too
Likely elements. Carter has not yet
should be provided only as temporary
great a social problem."
outlined a comprehensive manpower
training positions, designed to qualify
Carter and his advisers unequivocally
program. But Michael Wachter, Whar-
the most disadvantaged workers for
reject that conclusion. The 20% un-
ton School of Business economist, a
private-sector jobs.
employment rate for teenagers-40%
member of Carter's economic task force,
Concentration of manpower training
for nonwhite youths-means "our teen-
and a rising economic star in the Carter
efforts on preparing unemployed youths
agers start adult life believing they are
camp, gives an indication of some likely
for semiskilled entry-level jobs, with
not worthy," Carter says.
elements:
heavy participation by business in the
The major Democratic vehicle for
5 A formal acknowledgment that the
training effort.
reducing unemployment is the proposed
traditional 4% "full employment" un-
Encouragement of flexible work
Humphrey-Hawkins Balanced Growth
employment target is unattainable at an
schedules to promote job opportunities
& Fuil Employment Act. Its goal is to
acceptable rate of inflation without "a
for women with families.
reduce adult unemployment to 3%.
heavy emphasis on structural problems
Payment of temporary subsidies to
While Carter has reservations about
in labor markets." Wachter says it is
employers who hire and train low-skilled
Sr
specifics of the bill, he supports its
necessary to deal directly with the
workers to make up the loss of produc-
n.
r thrust: increased government eco-
quality of the labor supply to bring
tivity such hiring would cause.
nomic planning, increased coordination
joblessness below 5½. Other Carter
a Geographical concentration of em-
of monetary and fiscal policy, targeted
advisers put the level at 5%.
ployment programs in areas of greatest
programs to create private-sector jobs
a
Minimal use of the government as an
need, such as the older cities.
for the hard-to-employ, and as yet vague
employer of last resort. "I view that as
An attack on the Carter program is
78
BUSINESS
WEEK.
1076
likely to be a centerpiece of the Ford
radical change in tax policy with his plan
years, Congress has been grappling with
campaign. "I am obviously against the
to end double taxation on business by
the question of tax reform. But the
Humphrey-Hawkins bill and all of the
integrating corporate and shareholder
promise of major reform from congres-
other schemes to give Washington more
taxes. The Ford plan, which he first
sional Democrats has all but evaporated
and more control over our lives," the
proposed more than a year ago, calls for
under the intense lobbying of a broad
President says.
a combination of dividend deductions
cross-section of special-interest groups.
Ford's own positions are minimalist.
and stockholder credits that would ulti-
In the Senate, which just recently
He favors tax law changes designed to
mately cost the federal government
completed action on the reform measure,
increase the flow of investment funds
more than $13 billion a year in tax
the special-interest groups were so
because, as Malkiel puts it, "if we want
revenues. The proposal, which is also at
successful in turning what started as a
to get to full employment, we have to
the heart of the President's jobs
reform proposal into a political Christ-
increase the amount of capital invest-
program, is designed to spur long-term
mas tree that tax reformers called on
ment in place." The Administration's
investment and is seen by the White
the Senate to reject the entire tax bill.
capital formation proposal includes spe-
House as a step toward eliminating the
The Senate voted overwhelmingly for
cial incentives for investment in areas of
corporation as a taxable entity. The
the Christmas tree package.
high unemployment. Ford also favors
Ford program has basically been re-
Carter has indicated his awareness of
continuation of the current manpower
jected by congressional Democrats as too
the special-interest pressures on tax
programs under the comprehensive Em-
costly and too pro-business.
reform, but at the same time there are
ployment & Training Act.
Ford tax-cut package. The integration
indications that he has already suc-
Regulatory reforms. Administration econ-
plan was part of a broader tax-cut
cumbed to at least some of these pres-
omists are also studying a variety of
package outlined by Ford in his State of
sures himself. In his policy statement on
regulatory reforms that would reduce
the Union message last January, calling
tax reform, Carter warns that "The only
unemployment through elimination of
for overall tax cuts of $28 billion
people who have anything to fear from
constraints on business. One possibility
accompanied by $28 billion in spending
any Carter tax reform plan are the
is the provision of a lowered minimum
cuts. The overall Ford program also has
special interests who do not pay their
wage for youths, which is called for in
basically been ignored by Congress.
fair share of taxes and who are respon-
the Republican platform.
Carter, for his part, has no tax reform
sible for the disgracefully unfair tax
But the main Ford weapon against
program at all. Instead, Carter has
system we now have."
unemployment will continue to be steady
pledged to spend a year studying the tax
Carter himself demonstrated how the
economic growth and constant vigilance
system before coming up with any
political pressures build from these
against inflation. "The major stress is in
specific recommendations for reform. "I
groups. Last February, Carter listed the
getting a good recovery," says Malkiel.
would not make any substantive changes
tax deduction for home mortgage inter-
in our tax law, or propose any as Presi-
est payments among the tax incentives
dent, until at least a full year of very
he would like to abolish. Just a week
TAX REFORM:
careful analysis," Carter told a group of
later, however, Carter had already
businessmen in New York last July. And
begun to back away. Clarifying his
olitics favors
that, according to his aides, will proba-
earlier statement, he said that elimina-
bly remain the foundation of Carter's
tion of the interest deductions would
loopholes as usual
stand on tax reform at least through the
have to be tied to other changes designed
campaign.
to help the homeowner. "I would never
But while Carter has been extremely
do anything that would hurt the middle
Judging from the rhetoric, there seems
light on specifics, he has indicated some
American wage earner," he said. A
to be a broad consensus developing in
general themes on the question of tax
month and a half later, Carter said that
American politics today over the need
reform. Calling the nation's tax system a
he did not advocate elimination of the
for basic tax reform. Both Ford and
"disgrace," Carter says he is considering
deduction for mortgage interest.
Carter have pledged major reforms, and
a "drastic simplification of the income
New political dimension. In addition to
their respective party platforms, in some
tax system that would lower taxes on the
the pressures from special-interest
areas, have carried that pledge even
middle- and low-income families"
groups, a new political dimension has
further. But the rhetoric of this year's
through elimination of tax breaks for
been added to problems of tax reform:
election campaign, like that of past
individuals. This, he claims, would
the new congressional budget process.
campaigns, is deceiving.
enable the federal government to reduce
Republicans take note of this in their
For nearly two decades now, Presiden-
the tax rate by as much as 40%.
party platform, with the statement that
tial candidates have been promising tax
In the business area, Carter has indi-
"tax policies and spending policies are
reform. Their basic thrust has been that,
cated at least some possible support for
inseparable." Under the new budget
if elected, they would simplify and make
the idea of integrating corporate and
control process, Congress is required to
equitable a federal tax code that has
shareholder taxes with a pledge to tax
instruct the tax-writing committee ex-
swollen to nearly 40,000 pages. This
capital and earned income the same way.
actly how much revenue to raise in any
year's candidates are no different.
Carter also indicates his support for
given fiscal year to help cover the cost of
"A major objective [of tax reform],"
continuation of the system of foreign tax
government spending. Although tax re-
Ford said recently, "should be to sim-
credits for U.S. corporations operating
formers lost this summer when they
plify the tax system as well as make it
overseas but says he leans toward elimi-
tried to use the budget process to force
more equitable." Carter, in a position
nation of the tax rules that allow these
the Senate Finance Committee to raise
paper issued on the eve of his nomina-
corporations to defer taxation of over-
revenues through reforms, the new
tion, said, "Basically, I favor a simplified
seas profits until the money is actually
budget process is beginning to gain the
tax system which treats all income the
brought back to the U.S.
type of support that may force future
ne way, taxes all income only once,
Political pressures. Any consideration of
tax-writing committees into compliance.
makes our system of taxation more
the chances of meaningful tax reform
The outlook for major tax reform is
progressive." The similarity between
next year, regardless of who is elected,
not bright. If Ford is elected, he will still
Ford and Carter on tax reform ends with
must take into account Congress and the
be faced with a hostile Democratic
their basic pledge for simplification and
political pressures that are brought to
Congress. Even his most ardent support-
equity, however.
bear-pressures that often blur party
ers make no claim that the Republicans
Ford, for his part, has proposed a
and ideological lines. For more than two
will gain control of Congress in the
November elections. For Carter, the
as loan guarantees, for developing
dilemma is basically time. By waiting a
THE CITIES:
alternate fuels.
year before he presents his tax reform
So does Carter. Though he has
proposal, Carter risks ending any honey-
dismissed Project Independence as "a
Where the economy's
moon period he might have with
farce," he nonetheless seems willing to
Conmiss. Carter will be asking Congress
ills are magnified
embrace the principle of federal support
to
major reforms just as it is
for new energy development to aid in the
gearing up for the mid-term elections.
transition to "a coal-based economy."
The crisis of the cities, shoved into the
And Congress has never voted a major
Carter has attacked Ford plans to spur
background for a few years by the envi-
tax reform bill in an election year.
synthetic fuels development in the West,
ronmental and energy crises, leaped
but it is mainly the location, not the
back into the spotlight last year, cour-
concept, that he opposes. He argues that
tesy of New York City's financial mess.
ENERGY:
the West has neither the water nor the
The political fight over whether the
markets to make a major development
federal government should or should not
A consensus may
program feasible.
help the Big Apple insured that the
The most substantial differences be-
problems of the cities would be promi-
finally be forming
tween the two candidates are in the area
nent elements of both President Ford's
of nuclear power. Ford flatly favors
and Jimmy Carter's campaign agenda.
nuclear power; Carter is queasy about it.
Says Carter: "If our cities fail, SO will
Three years of divisive and often confus-
Despite his nuclear background, Carter
our country." Acknowledges Ford: "The
ing debate over energy policy have had
has vowed to pull back from the White
cities of this nation and the neighbor-
one surprising impact on the Presiden-
House's long-standing commitment to
hoods which are their backbone face
tial race: The candidates seem to be
the breeder reactor, which represents
increasingly difficult problems of decay
arriving at a consensus. Although they
the single biggest energy research pro-
and decline."
differ on many specifics, Jimmy Carter
gram under way in the U.S. today. And
Yet it is clear that the politics of less
and Gerald Ford share a remarkable
he favors "minimum necessary" de-
is more has taken hold of both candi-
number of goals, among them increased
pendence on nuclear power.
dates. Bold, sweeping programs for
reliance on coal, more conservation, and
Oil price controls. On oil pricing policy,
redeveloping and revitalizing declining
greater protection against another oil
the most divisive issue of the past three
cities, for rationalizing and redirecting
embargo by stockpiling crude.
years, Carter is somewhat at odds with
urban growth-what has been termed a
In part, the similarities of their views
both Ford and the current Congress. His
national urban growth policy-are out of
reflect the gradual convergence of opin-
views are still a bit cloudy, but he has
fashion this year. Carter's proposals for
ions between the Ford Administration
argued that old-oil prices should remain
more jobs and more housing in the cities
and the Democratic Congress over such
controlled and that all U.S. oil should
are more specific, at least on paper, than
key issues as natural gas price controls.
sell for less than the world price. Ford
are Ford's. The President stresses curb-
Dr
cratic moderates have steadily
originally sought to decontrol oil com-
ing inflation and stimulating the econo-
edg. closer to the Administration's
pletely, then later accepted congres-
my as the best way to help cities, along
position that controls should be lifted on
sional proposals to phase out controls on
with consolidating more federal grant
"new" gas. Carter stops only slightly
new oil by 1979 and to lift controls on so-
programs into block grants that give
short of that, favoring new gas decontrol
called stripper wells immediately.
local officials greater authority over how
for five years to see if higher prices do,
But lower prices for oil products would
money is to be spent.
in fact, bring forth new supplies.
not be guaranteed if Carter became
But in the light of how the experts
But the underlying reasons for the
President. He strongly favors standby
understand the basic urban ills and what
emerging consensus are rooted in some
authority to impose excise taxes on
needs to be done to cure them, neither
inescapable realities. After a brief pause
petroleum products and is apparently
Ford nor Carter is offering much SO far
caused by the dramatic jump in oil
ready to use such authority.
that is new, innovative, or likely to stir
prices and the recession, U.S. energy
The President's energy policies have
fundamental changes in the patterns of
consumption is again on the increase
been notably weighted on the supply side
growth and decline of the nation's cities
and, with it, dependence on imported oil.
through most of his two years in office.
and metropolitan areas.
With both sides now disabused of the
Under congressional prodding, however,
The programs. To hammer out specific
notion that the oil cartel will unaccount-
the Administration has gradually
proposals, both Ford and Carter have
ably collapse or that new sources of
stepped up research in energy conserva-
urban policy task forces at work. Ford's
cheap domestic supplies will magically
tion, and Ford has now endorsed many
committee, headed by Housing & Urban
appear, the limits of the energy debate
of the conservation measures supported
Development Secretary Carla A. Hills,
have been severely circumscribed.
by Carter. Even so, Carter would proba-
will recommend expanding block grant
Government aid. Originally, the founda-
bly be tougher on the conservation side
programs initiated in the Nixon Admin-
tion of the Ford program was the
than Ford.
istration, mostly through consolidating
potpourri of proposals collectively known
A choice. Finally, on the controversial
categorical grants, which require federal
as Project Independence. Chief among
issue of oil divestiture, the two candi-
approval of how local officials spend
these were plans for a $100 billion
dates more and more seem to be offering
federal money, into block grants that
Energy Independence Authority that
voters a choice. Ford remains convinced
carry far fewer federal strings.
would provide massive government as-
that breaking up the oil companies,
Hills says there are some 103 grant
sistance to industry. The money would
either vertically or horizontally, would
programs, totaling about $50 billion,
be used for developing new energy
not solve any problems. Carter, on the
that have impact on cities. Of these, 59
sources, such as solar and geothermal,
other hand, has given tentative support
are categorical grants, only four are
a
updating old energy sources, by
to spinning off. marketing operations,
block grants, and the rest direct services
Guraging coal gasification and lique-
although he remains opposed to splitting
and loan guarantees. She wants to find
faction, for example. Congressional
production, refining, and transportation.
ways to lump as many as possible to-
leaders quickly dismissed the EIA as
He has also indicated that he might
gether. Ford has already asked Congress
impractical, however, and Ford has
favor horizontal divestiture, supporting
for consolidation of this sort. And he will
quietly let the proposal die. But he still
restrictions on oil companies owning
be looking for ways to lump together
favors some government subsidies, such
competing energy sources.
HUD's $3 billion block grant program
with two others in the Labor and Justice
notable exception of New York City "the
FOREIGN
departments.
bulk of welfare expenditures have al-
Ford's task force may also recommend
ready been transferred to either the
ECONOMIC POLICY:
altering the benefit formulas of block
state or federal level."
grant programs to put more weight on
The Republican platform opposes
Living with an
poverty and other social problems. This
"federalizing" welfare. But if elected,
ould give older, needier cities a better
Ford will offer a welfare reform plan to
aggressive.Third World
eak than at present.
consolidate some existing welfare pay-
Carter's task force on urban policy is
ments and institute new work require-
headed by Julius Edelstein, dean for
ments to cut welfare eligibility.
In international economic affairs, Ford
urban policy and programs at City
REVENUE SHARING. Carter wants a five-
and Carter differ more in style and
University of New York, and one on land
year extension of the present program,
emphasis than in the specifics of their
use, housing, and community develop-
which is funded at something above $6
policies. Both favor liberal trade and the
ment by Charles M. Haar, a former
billion a year, with an escalator clause
system of floating currencies-with ade-
assistant secretary for metropolitan de-
for inflation, and changes to permit
quate safeguards against cheating. Both
velopment at HUD. These task forces, as
cities to use the funds for health, educa-
see a potential need for arrangements to
well as other experts, are hammering
tion, and social services. Payments
bail industrial countries out of financial
out a dozen or so papers on a wide range
would go directly to localities rather
crises such as those that hit Italy and
of urban issues, everything from land
than to states for pass-through. He
Britain, although Carter has not com-
use to urban-suburban relationships to
plans to "study" the program to see if
mented on the Ford-Kissinger scheme
reorganizing HUD. These papers, of
benefit formulas should be changed to
for a $25 billion financial "safety net"
course, could generate new Carter posi-
give needier areas more money. Carter
that is currently hung up in Congress.
tions. But a Carter aide says bluntly,
also will consider creating a new agency
The contrasts between the two men
"We've had a lot of 1960 suggestions
to help localities sell their securities.
show up most clearly in their approach
coming in, and we're not going to go that
Ford favors extending revenue shar-
to economic relations with the Third
way. There is no Hubert Humphrey
ing, plus annual increments for inflation,
World. The Ford and Nixon Administra-
Marshall Plan for the cities in the cards
and would consider formula changes to
tions, according to Carter, have concen-
at the moment." What Carter wants,
provide more help to needier localities.
trated too much on big-power diplomacy
says this aide, are program options with
MASS TRANSIT. Carter intends to make
while neglecting potentially explosive
political and economic costs clearly
more money from the Highway Trust
"North-South" confrontations. Carter is
spelled out.
Fund available for public mass transpor-
basically more sympathetic than Ford to
Against this background, the salient
tation, and he will study whether it is
poor countries' clamor for a "new inter-
proposals from Ford and Carter on
feasible to create a total transportation
national economic order." But even in
issues that affect the cities are these:
fund for all modes of transportation.
this area, differences between the candi-
HOUSING. Carter wants to return to the
Ford's position is similar. Transporta-
dates lie more in the strength of their
production subsidies that Nixon and
tion Secretary William T. Coleman Jr.
commitment to specific objectives than
rd discarded. His aim is "to fulfill our
recently increased aid to city mass
in their overall approach.
national commitment to build 25 million
transit, though the Ford Administration
Commodity agreements. A case in point
housing units a year." He plans direct
has spent little from the highway fund
is U.S. participation in international
federal subsidies and low-interest loans
on such transit. In using mass transit
commodity agreements. Carter says the
for low- and middle-income housing.
funds, Ford wants to retain the 50-50
U.S. should join schemes for such
Further, he proposes expansion of hous-
balance between operating subsidies and
products as tin, coffee, and sugar. He
ing programs for the elderly; "greatly
capital projects; Carter favors spending
implies that Ford, by contrast, is cool
increased emphasis" on rehabilitation of
"greater amounts" on operations.
toward commodity agreements. But, in
existing housing, using it as a way to
Carter also calls his jobs program
fact, Ford has already won Senate
create jobs in the cities; "greater effort"
(page 77) a vital element of his urban
approval for U.S. participation in coffee
to direct more mortgage money into
policy. Both he and Ford say they will
and wheat accords, and he seems
private housing, "more attention" to the
deal strongly with urban crime.
assured of favorable Senate action on
role of local communities; and outlawing
The two candidates offer some help to
tin.
redlining.
the poor living in cities and to hard-
The difference, Carter aides maintain,
Ford, far from proposing production
pressed city officials. But measured
is that the Democratic candidate would
subsidies, is seeking ways to shift the
against broader urban problems, neither
push harder for progress on such
housing assistance programs into block
goes very far.
accords. Ford, they claim, has allowed
grants consolidated with community
The root problem of cities today is
Treasury Secretary William E. Simon
renewal grants.
that they are losing their attractiveness
and Alan Greenspan, chairman of the
WELFARE. Carter labels welfare reform
to that part of society that can support
Council of Economic Advisers, to sabo-
"the single most important action we
them: the middle class and business.
tage Secretary of State Henry Kissin-
could take" toward helping the urban
Restoring the cities to self-sufficiency
ger's initiatives on commodities.
poor. He wants a uniform national
means enabling them to compete with
A similar picture emerges on the issue
program of benefits, with strong work
the suburbs for those groups and their
of foreign aid. Carter blames Ford for a
incentives for the employable poor and
resources. Nobody knows just how to do
$500 million shortfall in appropriations
income supplements for the working
this, except that it would require federal,
for U.S. contributions, under interna-
poor, who would not be penalized for
state, and local efforts, as well as large
tional agreements, to agencies such as
working by having benefits reduced.
investment, the kind of investment that
the Inter-American Development Bank.
Except for mothers with preschool chil-
has reproduced pieces of the city, includ-
The fact of the matter, however, is that
dren, anyone able to work who refused a
ing whole business districts, in the
the Democratic Congress balked at
or training would be denied benefits.
suburbs over the past several decades.
Ford's requests for funds. Still, Carter
Cities would be relieved gradually of all
Neither Carter nor Ford is talking about
aides charge, with some justice, that the
welfare payments. City officials would
such investment. Anything less is not
Ford Administration made only languid
applaud this, of course, but a recent
likely to make much difference to cities
efforts to defend its aid requests.
study by the Urban Institute in Wash-
as centers of business, social, and
An even more basic difference with
ington, D.C., points out that with the
cultural life.
Ford shows up in Carter's populist and
moralistic attitude toward aid. "Bilat-
eral aid ought to be destined to reach
people who may need it, not to buy
another Cadillac for tinhorn dictators,"
Carter said recently. He insists that
"our people will expect recipient nations
to undertake needed reforms." Such
language harks back to President Ken-
nedy's Alliance for Progress, observes a
Ford official. "Carter will quickly find, if
he becomes President, that you can't buy
democracy or economic justice," the offi-
cial says.
Two emotional issues. Issues such as
these are unlikely to stir much emotion
among the voters. But two issues that
generate strong feelings are restrictions
on farm exports and on trade between
the U.S. and the Soviet Union. Midwest
farmers are still seething over tempo-
rary Administration curbs on wheat
sales to the Soviet Union. And American
Jews oppose steps to expand trade with
the Soviet Union as long as the Russians
continue to restrict emigration of Soviet
Jews.
On both issues, the candidates are
carefully trimming their policies to suit
the special-interest groups. Carter and
Ford both promise not to limit exports
except in an emergency. Carter proposes
to use U.S. economic leverage to obtain
political concessions from Moscow. But
he is cautious SO far about repealing the
1974 U.S. trade act's Jackson-Vanik
amendment, which bans trade con-
cessions to Moscow unless Jews are
allowed to emigrate freely. Ford Admin-
istration officials maintain, by contrast,
that the amendment, in fact, robs the
U.S. of economic leverage on the
Soviets.
Multinationals. A more significant Demo-
cratic vs. Republican ideological cleavage
appears in policies toward multinational
corporations. Carter would go farther
than Ford, though not beyond the
present Congress, in slapping legal sanc-
tions on U.S. companies that pay
foreign bribes and comply with the Arab
boycott against Israel.
Like Ford, Carter would continue to
give U.S. companies a credit against
U.S. corporate tax liabilities for the
taxes they pay to foreign governments
on their overseas operations. But Carter
has doubts about the deferral of U.S.
taxes on foreign profits. At present, the
U.S. does not tax such earnings until
they are actually brought back to the
U.S. from overseas. The reason for
Carter's stand, says economic advisor
Robert Ginsburg, is that "tax deferral is
not fiscally neutral; it encourages com-
panies to reinvest foreign profits abroad
rather than in the U.S." That argument,
of course, is pleasing to the AFL-CIO,
which wants U.S. companies to invest
less overseas and more at home to create
more jobs for American workers.
For more on Curter, turn to page 90.
Interview with
Jimmy Carter
COMBATING
THE
BIG SPENDER
LABEL
Republicans in Kansas City charged that five programs that
you've talked about would cost more than $100 billion and would
cause personal taxes to rise by 50%. How do you respond to the
charge that you're a big spender?
Well, I've never been a big spender. I've always been careful
with my own money and careful with whatever taxpayers'
Grant Compton-BW
money I had under my charge. They are trying to cover up
their mistakes. I intend as President to achieve a balanced
budget by 1980. With a modest growth in gross national
year period we'll have at least an increased income for the
product to about 4% to 6% a year, and an unemployment rate
federal government-not in savings, but in dividends-of
of 4% to 4½ at the end of that time, with careful planning
about $60 billion cumulatively.
and meticulous detail work, and phasing in the programs that
You know, I'm a businessman
and I'm very conscious
we've evolved, we would have a balanced budget by 1980.
always of costs, projections, balanced budgets, and that will
As to welfare reform cost, I think our total net cost would
be part of my consciousness as President.
be much less than the roughly $17 billion that we're spending
this year on welfare payments and unemployment compensa-
Recently, we've detected from some of your staff that they are
tion. Health programs? I don't think the net cost to our
equating the fight against unemployment with the fight against
country would be any substantially greater figure.
inflation. How do you think that you can carry out these two
I would be very careful in phasing in programs in
apparently contradictory efforts?
accordance with available income. I think eliminating gross
I don't believe that they are contradictory as far as inherent
waste in government, duplicative programs, excessive
characteristics are concerned. When President Truman went
numbers of agencies, would save a great deal. So there would
out of office, after enormous drains on our economy, with the
be no disturbance to our national economy, no need for an
Marshall Plan, with the Korean War, aid to Turkey and
increase in taxes to carry out the promises that I've made.
Greece, and SO forth, we had an inflation rate of less than 1%.
We had an unemployment rate less than 3%. Interest on a
We've heard that you are considering holding government
home loan was 4%. The budget, over his six or seven years in
spending to around 21% of GNP, near the current level. How
office, was balanced. There was an average surplus of about
would you impose this restriction and still fund the programs
$2.4 billion. Now we have had an average inflation rate of
you've talked about?
almost 7% under Nixon and Ford, and the highest unemploy-
Well, that's a goal for me, and I'm not sure about the 21%
ment rate we've ever had since the Great Depression. This
figure. The existing percentage of federal government
shows that they're not necessarily countervailing forces.
spending compared to GNP has been fairly stable over the last
When inflation goes up, under Nixon and Ford, unemploy-
couple of decades, and that would be a goal that I would set
ment has gone up along with it, and there's such an enormous
for myself. There will be very careful pacing of initiation of
drain on our economy just to finance the cost of people not
new programs as old ones are phased out.
being at work. Presidents Nixon and Ford have tried to fight
the evils of inflation with the evils of unemployment. This has
This talk of savings reminds us of the Vietnam "peace divi-
brought the highest combination of inflation and unemploy-
dend." is there a chance that these savings will also disappear?
ment in this century. So I don't think there's an inherent
The savings are there to be realized. I don't say that we're
economic law that says when inflation goes up, employment
going to cut that much out of total spending and give it back
goes down, or vice versa.
to the taxpayers, but to help programs be more efficient. I
think we have now some 300 programs in health, adminis-
To fight inflation, you said that you would like to attack the
tered by about 76 agencies. There's no way now to decide in
supply side. How do you get the private sector to go along and
Washington who's responsible for errors, who is in charge of
get involved in the supply side, to prevent capacity bottie-
the management of government. A clear delineation of
necks?
authority, a reduction in the number of agencies responsible
It's hard for me to answer that question. There are supplies
for the same function, combined with a reassessment of
of different types. One would be automobiles. Another would
priorities on an annual basis under zero-based budgeting,
be food, another would be recreation, and so on. Some of those
would result in substantial savings. We figure that over a four
are determined directly by the government at all levels; others
BUSINESS WEEK: September 20. 1976
GOVERNMENT
are almost exclusively the prerogative of business. I don't see
grain exporters, to be responsible for the quality of wheat that
how the federal government could tell the business sector to
we ship overseas. Butz and Ford are blocking the shift away
pr ce more autos, or more motor scooters, or more bikes,
from private grain inspection for export. This is the kind of
bu think at the same time a more predictable government
thing that really disturbs the farm community.
policy on taxation, transportation, regulatory agencies,
energy, exports, imports would have a greatly beneficial effect
In your acceptance speech, you said: "It's time for a nation-
on the confidence of the business community as it made plans
wide, comprehensive health program for all our people." What
for the future
As a matter of general philosophy, my own
kind of program do you have in mind, and how much will that
belief is that the best way to control inflation is not to make
cost?
money scarce, not to try to drive interest rates up, and not to
As I said earlier, the net cost probably won't be
try and keep people out of work and depend on welfare and
substantially greater. My own inclination is to have a package
unemployment compensation benefits to meet those hard-
of basic health care that's available to all Americans.
ships, but rather to put our people back to work, to hold
Whether it's financed by large groups in a major corporation
interest rates down, and keep our economy growing, at a
like Kaiser or U.S. Steel or through private insurers, or
reasonably high rate.
through general revenues, that's not very important to me.
Coverage to indigents would be furnished by the government.
You have said that you thought that wage and price increases
But there would be an emphasis on preventive health care,
should be announced 30 or 60 or 90 days in advance and that
which we don't have now. There would be a tight control over
labor and management should set voluntary price goals. What
kind of mechanism do you have in mind to make this work?
I would like to keep the present Council on Wage & Price
Stability intact. I would like to meet with business and labor
I would like to keep the
leaders and ask them to exercise voluntary-restraint. If they
present Council on Wage
could communicate with each other on a regular basis, maybe
& Price Stability intact
through me, and just lay down some general voluntary
guidelines that they would pursue, let the council be informed
30 days or 45 days ahead of time for projected, substantive
price or wage demands, and let the pressure of public opinion
any sort of charges for hospital care or doctor's care under
be focused to see whether or not the need is justified-that in
reasonable levels of cost. But to participate in the program,
itself would have a greatly beneficial effect.
doctors would have to adhere to peer review, doctors checking
on doctors' prices.
Do you foresee then, in addition to this prenotification proce-
Another thing that we need to do is to use more medical
d
voluntary price or wage guidsposts.?
personnel in addition to medical doctors, and have a broader
-3, what I would like to do, and what we are doing now in
distribution of medical care for people that don't get it now.
an embryonic way, is to talk to business and labor leaders to
Along with the initiation over a period of time, three or four
find out what sort of guidelines they would self-impose. I
years, of the kind of health programs that I've described to
think the President can induce business and labor leaders to
you, with the private sector doing as much as possible, I think
say publicly: "We'll try to hold down our price increases, our
that we could have no substantial increase in overall health
wage increases, to this level."
care cost. There might be some additional cost to the federal
Now, I can't tell you what the figure would be. I want them
government, maybe $10 billion.
to be involved in the initial decision about what their volun-
tary restraints might be.
In the fow countries that have comprehènsive health insur-
ance, the usage of the health services has gone up. Have you
In a recent speech you promised to maintain farmers' income
thought about what that would do to costs?
while insuring stable prices for consumers. How do you do this
I have, a great deal. There have been studies made by the
and how much would it cost?
Rand Corp., the Brookings Institution, by governmental agen-
It wouldn't cost any more than it costs now. All of the
cies, that show that this is not necessarily the case. We now
target prices, all of the loan prices that prevail now in the
have tremendous pressure on the part of doctors, hospitals,
agricultural industry are substantially less than prevailing
insurance companies, to put people in long-term care. I read
prices for farm products. The thing that we have suffered
some statistics the other day that show that a person who
under with Agriculture Secretary [Earl L.] Butz and lack of
goes to the hospital in Brooklyn, the average stay is 13 days.
leadership in the White House is unpredictability-the
The person who goes to a hospital in San Diego with the same
farmers don't have any idea what we're going to do next.
medical problems has an average length of stay of four days.
We oversold wheat in '73 because Butz didn't know how
You have twice as much chance of being operated on if you go
much the Russians were buying, and he didn't realize that our
into the hospital in. Brooklyn as you do if you go into the
own reserves were so low. This was a major infiationary
hospital, say, in Michigan. Many insurance policies won't pay
factor. But the farmers want to produce, they want to sell.
off if you get outpatient care. You've got to be an inpatient,
The average American thinks that if we sell a bushel of wheat
with tremendous additional cost, before you can get cover-
to Russia, you're taking bread out of their kids' mouths. But
age.
we are now exporting 60% of our total wheat production. We
export 50% of all our soybeans, 50% of all our rice, 25% of all
Many of the suggestions you have made concerning U.S.
our corn. And if this were predictable, if the markets were
relations with the Third World have been tried by the Ford
a
ed, if our customers knew they could buy good quality
Administration. Do you believe that commodity price deals can
go
.18 from us, it would help a great deal.
be negotiated with the less developed countries?
The other point I make is this. We've had disgraceful
Yes. I can't guarantee that I've got the answer to every
performance in grain quality inspection because Secretary
question. But I do think that the best approach is to have a
Butz and President Ford have blocked the professionalized
better bilateral relationship toward developing nations, and
inspection service. They still permit private inspectors, repre-
not treat them as a homogeneous group, which they aren't.
senting companies whose directors serve on the boards of the
Let them know that we understand their problems and send
top diplomatic officials to represent us in their nations. Treat
fair competitive chance to get those kinds of industries.
them with respect, jointly search the trade items that might
be exchanged more readily. Lower the barriers to their
You told the AFL-CIO that housing is in a slump, and you talked
finished goods, keeping in mind all the time that we have to
at great length about the high cost of construction. How would
keep our people employed, and have long-range trade agree-
your program of guaranteeing mortgages and subsidizing a
ments with them, arranged through the private sector.
portion of mortgage interest rates cope with the problem of high
I strongly believe that the best approach to the developing
housing costs?
countries is in increased trade, building up their own econo-
One of the reasons that houses cost SO much is that there
mies, long-range mutual agreements, and some increase in
are so few of them being built. In multifamily home units in
our stockpiles of basic commodities, which will tend to level
July alone, there was a 30% decrease in housing starts.
out the wild fluctuations in price.
Overall, there was a 9% decrease in that month alone. Or-
dinarily, we've been producing about 2 million houses per
One of the first problems you may face if you're elected is a
year. Last year we only produced about 1 million new home
15% hike in oil prices by the OPEC countries. How would you
units. We've got about an 18% unemployment rate in con-
handle that?
struction. We don't have any government programs that are
Well, we can't go to war over it. The one thing that we can
predictable except the Section 208 program, which subsidizes
do is to reduce our consumption of oil. Hopefully, by next year
rent. Inevitably, we're going to have to shift toward more
we'll have the oil pipeline from Alaska in operation, which
condominium dwellings, multifamily dwellings, a tighter
will help. [So will a] shift toward coal and a shift of
our
concentration of home locations, closer correlation between
oil purchases as much as possible to more stable suppliers.
job location and where people live to minimize use of trans-
portation. I would also concentrate on reducing interest rates.
You have spoken of the need to stabilize or reduce the present
I think there needs to be a better long-range commitment to
worldwide consumption of oil. How can this be done without
housing programs, with some last-resort government pay-
interfering with economic growth?
ment of interest rates if they exceed a certain level.
Lots of ways. We now use about 70 or 71 quads of energy [1
But the main thing about the housing industry is predicta-
quad = 1 quadrillion Btu] in this country. It's estimated by
bility-similar to farming. You have to know three years, four
several independent groups that the total consumption will be
years, five years ahead of time what the government is going
in the neighborhood of 100 quads by the end of this century.
to be doing, and the hit-or-miss approach to better housing
So the growth is going to be fairly modest compared with
construction is one of the things that exacerbates inflation.
what we've experienced in the past.
We can [also] shift toward coal. At the present rate of
Have you done any refining on the specific programs that you
proposed earlier to solve the structural unemployment problem
among young people, women, and minorities?
In general, when unemployment goes up in this country, the
There needs to be a
people most severely affected are minors, minority groups,
better long-range
women. I believe the present unemployment rate among
commitment to housing
young black Americans is about 40%. The first step would be
to have a general emphasis on employment through business
incentives and [incentives] for better housing construction,
[with] public-service jobs as a last resort. I would favor a CCC-
consumption, we've got about 300 years of coal in this country
type of program, similar to what we had during the Depres-
alone. [But] we don't have any strict conservation measures
sion years, for young people, and I think it should be oriented
yet. Conservation has got to be implemented regardless of
toward urban areas, instead of rural, as much as possible.
what else we do about energy.
So to summarize, I think we need to shift from oil to coal,
Will organized labor go along with this?
have strict conservation measures, have an additional em-
Yes, but it would have to be designed as much as possible to
phasis on solar power. The Oak Ridge people, who primarily
be noncompetitive with regular jobs. I'm talking now about
are into atomic power, say anywhere from 2 to 8 quads can
additional employment, and as you know we now have a
come from solar power by the end of this century. The Federal
substantial amount of federal budget revenues going for this
Energy Administration says as much as 20 quads-I think
purpose. The federal share of the narrowly defined welfare
that's probably too optimistic. And then whatever energy
budget is about $5 billion, and I think the total amount of
needs we can't make up with those methods, we'll have to
money now spent in CETA [Comprehensive Employment &
make it up with atomic power.
Training Act] programs, job training, is around $14 billion.
You appear to oppose the deregulation of natural gas prices
Some of the businessmen who had lunch with you at the '21' in
immediately. How would you stimulate the exploration for natural
New York the week after the Democratic convention believed
gas in the U. S.?
that what you told them about business' role in the economy is
I have advocated the deregulation of new natural gas for a
not compatible with the tone of the speech you made before the
limited period of time-four to five years-and [said that] at
Ralph Nader meeting in Washington shortly theresfter. How do
the end of that time we should reassess to see if the deregula-
you reconcile this difference?
tion should be extended. This would involve continuing the
The audiences were different, but I don't think what I said
present contract prices and commitments for the delivery of
was different. I responded in both instances to questions, and
natural gas and the renewal of those contracts as they expired
when the businessmen asked me a question about interna-
at the existing price. This deregulation of newly discovered
tional trade, [said I'm] for international trade. When the
natural gas would be an incentive to explore. We are wasting
consumers ask what I think about a certain emphasis on
too much natural gas because of the extremely high intrastate
appointing members to regulatory agencies that would be
prices and the very low interstate prices. I favor the increased
oriented toward consumers, I said that's what I favor. And in
price of natural gas in the interstate market.
both instances my statements were accurate and reflect my
One other adverse factor is the unwarranted shift of
long-standing positions. It would be suicidal for me, politically
industry that uses natural gas as a heat source or as a basic
speaking, to make a different kind of answer to the same
raw material toward those few states that produce natural
question. But the tone might very well be shaped by the origin
gas. This robs New England, it robs all the other states of a
of the audience or the type of questions I get.