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1534454
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1975/03/19 - Al Otten
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1534454
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1975/03/19 - Al Otten
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James M. Cannon Files (Ford Administration)
James Cannon's Meetings Files
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Taxation
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1975-03-31
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1975
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1975-03-01
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The original documents are located in Box 43, folder "1975/03/19 - Al Otten" of the James
M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
Digitized from Box 43 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
4PM meeting Al Otten
wednesday. march 19
1975
J Ms give
March 1975
before I
MEMO
TO: Jim Cannon
FM: Dick Allison
me tall wl er other,
RE: OMB VIEW OF FIGURES SUBSTANTIATING WALL STREET JOURNAL
---
EDITORIAL CLAIM
1. Re the Feb. 24 Journal claim "that there are now so many taxes
on individual and corporate saving that to get an increase of
1% in return on investment takes a 20% increase in prices,"
you asked me to discover OMB's view of this statistic.
2. I have learned that, in OMB's informal view, this statistic
reflects the bias of the economist who prepared it; that bias
is that capital is probably taxed too heavily. The people whom
I talked to said they would be more comfortable with this ratio:
To get a 1% increased return on investment,
Takes, at the most, a 10% increase in prices;
Enclosure - Basic memo and enclosure
FORD & LIBRARY GERALD
March 3, 1975
Jeny Killey 18nuu Dovie
+ 4656
MEMO
TO: Jim Cannon
FM: Dick Allison
Elot
RE: FIGURES SUBSTANTIAING WALL STREET JOURNAL EDITORIAL CLAIM
1. In the Feb 24 Journal, enclosed, an editorial claimed
that "there are now so many taxes on individual and corporate
saving that to get an increase of 1% in return on investment
takes a 20% increase in prices." You asked me to verify these
figures. 10%
2. The figures were based on "rough calculations" made
by Art Laffer, former Chief Economist at O.M.B. and now believed
to be a Professor at the University of Chicago Business School,
The Wall Street Journal has asked another agency, private,
to work out the figures more carefully; and the results
should be known in two to three weeks.
3. FYI I have discovered an excellent research service
for the White House: it is the OMB Library in the New EOB;
phone 395 - 3654; my contact, Susan Geiger.
Encl - Clipping
outs
what about baes
meflect that
my This state.,
caping
loved
You
healy
too
beigh
395-3000
Dick
me find out
10
if This in true?
THE W
REVIEW & OUTLOOK
President Ford and Congress
The rosy glow that attended The biggest slice of wisdom re-
President Ford's early relationship
vealed during the past few months is
with the Democratic Congress has
that the U.S. economy has both a de-
been fading in a bickering over pol-
mand problem and a supply prob-
icy in these nervous times. But there
lem. Unless Congress acts in a way
is really no reason why the politi-
that gets at both, it's more than
cians on both ends of Pennsylvania
likely that intolerable unemploy-
Man:
Avenue should be losing patience
ment and inflation will persist.
WAS
with each other, and any talk of bi-
The economists have looked al-
Reserve
partisan commitment to compro-
most soley at the demand problem:
early in
mise and action is most welcome.
the ens
How do you work off enough of the
Yes, the economy is in sad shape.
tion on
$300 billion in inventories so that
Patmar
Yes, it probably will get worse. But
business will be able to put people
sionally
neither the economists who closely
back to work? The supply problem
its "tig
advise the President nor the econo-
has been ignored: Once inventories
large th
nists who have the ears of the Dem-
have been liquidated, largely
peace.
ocratic leadership foresaw the rapid
through forced sales at a loss, what
The
deterioration of the economy that
incentive is there for business to
William
has taken place since last autumn's
want to put people back to work?
the ban!
economic summit. So far, the politi-
that the
Unless business can see a return on
cians have been doing better than
entirely
investment instead of further capi-
the economists.
Congress
tal losses, there is no incentive.
So he\
Mr. Ford, for example, is fortun-
The mistake Congress seems
has distu
ate that Congress did not enact the
headed toward making is to concen-
ficials of
program that derived from the sum-
trate the tax cuts in the lower in-
When
mit, with its emphasis on tax in-
come brackets. This partly reflects
tion, how
creases. Surely the economy would
stand wh
the desire by liberals to use this cri-
have deteriorated even more rap-
The first
sis period to redistribute incomes.
idly if Congress had been more ex-
"take ap
But it also flows from the idea that
1975 to in
peditious in pushing through the sur-
lower-income people have a "higher
substanti
tax.
marginal propensity to spend."
ence and
The President is also lucky that
Congress did not rubber-stamb the
It was this single-mindedness
economic
program he announced in his State-
that helped keep the Great Depres-
There
to stretch
of-the-Union Message. Even Mr.
sion going for a decade. First Presi-
worries th
Ford's own people now privately
dent Hoover, in 1932, then President
though, is
admit that the tax "rebate" idea
Roosevelt, in 1936, pushed the mar-
rency and
was a blunder. In pushing much of
ginal tax rate on corporate and per-
grown hard
the rebate money to 1975 incomes,
sonal incomes so high that they ef-
Democratic Ways and Means Chair-
fectively crippled investment. Just
Whether
man Ullman has corrected a good
as lower incomes have a higher pro-
Keynesian
portion of this mistake, and we still
pensity to spend, higher incomes
agree that
have hopes that the rest of this
have a higher propensity to save.
actly the be
meaningless transfer payment to
And saving, after all, is what invest-
promote ed
last year's workers will be moved to
mentis all about. There are now so
Fed has be
1975 incomes on the floor of the Sen
many taxes on individual and corpo
money expa
There ml
ate and House. The White House is
rate saving that to get an increase of
The Univer
even talking about extending the re-
1% in return on investment takes a
man and ot)
ductions into 1976; a little more
20% increase in prices.
Fed makes 1
compromise and perhaps they can
The only nod Congress seems
too much a)
willing to give savings by way of tax
the Proxmir
be made permanent.
reduction is an increase in the in-
tate tactics:
Similarly, the ensuing debate on
discretion of
the Ford energy proposals has been
estiment tax credit, which rewards
So the firs
a plus. Mr. Ford can take personal
business for buying new machines
FORD
urges the sy
credit for resisting a gasoline tax
but provides no incentive to get unu-
what it alrea:
last fall when most of his advisers
tilized resources back to work. As
The secor
and economists of every stripe were
distasteful as the idea may seem to
rects the Fe
inveighing him to propose one.
liberals, a cut in the corporate tax
long-run grow
Hardly anyone takes the idea seri-
rate is the most effective way to put
mensurate wi
ously now. Congress, though, gets
the unemployed back to work.
tential to incr
credit for insisting on taking a
We are not saying that the tax
fectively achie
employment ,
longer look at Mr. Ford's oil-tariff
cuts should be concentrated on sav-
Surcly they