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New York State Bankers Association Convention, Spring Lake, NJ, June 25, 1966
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New York State Bankers Association Convention, Spring Lake, NJ, June 25, 1966
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The original documents are located in Box D20, folder "New York State Bankers
Association Convention, Spring Lake, NJ, June 25, 1966" of the Ford Congressional
Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. The Council donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
(RE: BALANCE OF PAYMENTS)
Jem
SPEECH BEFORE NEW YORK BANKERS ASSN. CONVENTION--JUNE 25, 1966
GENTLEMEN:
An. Virgin Isles
Bur, of Int. Rw.
I AM VERY PLEASED TO BE HERE WITH YOU TODAY. I WILL BE
SPEAKING TO YOU ON A SPECIAL TOPIC BECAUSE THIS IS, AS I
UNDERSTAND IT, A SO-CALLED SPECIAL INTEREST GROUP. I HASTEN
TO ADD, HOWEVER, YOUR RECORD AS AN ORGANIZATION AND AS
INDIVIDUALS CLEARLY INDICATES A BROADER INTEREST IN THE
WELFARE OF OUR NATION. I COMMEND YOUR CONCERN FOR AND
DEDICATION TO THE FUTURE OF AMERICA.
UNLIKE MY GOOD FRIENDS, THE DEMOCRATS, I HAVE NEVER
FOUND THE TERM, SPECIAL INTEREST GROUP, ESPECIALLY USEFUL
EXCEPT IN A STORY I LIKE TO TELL.
BERALD FORD LIBRARY
AS YOU KNOW, THE PHRASE, SPECIAL INTEREST GROUP, DOES
Digitized from Box D20 of The Ford Congressional Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library
-2-
GET TOSSED AROUND A LOT IN WASHINGTON.
FOR INSTANCE, THE OTHER DAY, A COLLEAGUE OF MINE JUMPED
UP DURING A HOT DEBATE WITH A DEMOCRAT AND YELLED: "WHAT
ABOUT THE POWERFUL INTEREST THAT CONTROLS YOU?" AND THE
DEMOCRAT REPLIED: "YOU LEAVE MY WIFE OUT OF THIS!"
WHETHER WE LEAVE THE WOMEN OUT OF IT OR NOT, THIS COUNTRY
IS IN DEEP TROUBLE. AND ONE OF THE MOST SERIOUS TROUBLE
SPOTS IS THE CONTINUING FAILURE OF THE ADMINISTRATION TO
ACHIEVE A BALANCE IN OUR INTERNATIONAL PAYMENTS SITUATION.
THIS, I THINK, TRACES DIRECTLY TO THE JOHNSON ADMINISTRA-
TION'S HABIT OF ADOPTING POLICIES ON THE BASIS OF A PROMISE
AND A PRAYER INSTEAD OF LASTING RESULTS.
IN ITS APPROACH TO THE BALANCE OF PAYMENTS PROBLEM,
GERALD THE LIBRARY
-3-
JOHNSON ADMINISTRATION HAS PERFORMED LIKE A LITTLE BOY WHO
BANDAGES UP ONE INJURED FINGER ONLY TO BANG THE ONE NEXT TO
IT WITH A HAMMER.
OUR BALANCE OF PAYMENTS PROBLEM CURRENTLY SEEMS AS FAR
AWAY FROM SOLUTION AS EVER, DESPITE AN OCCASIONAL OPTIMISTIC
FORECAST BY THE ADMINISTRATION AND IMPROVED PERFORMANCE IN
1965.
THE IMPROVEMENT LAST YEAR RESULTED BECAUSE THE BANKING
COMMUNITY RESPONDED SO WHOLE-HEARTEDLY TO THE ADMINISTRATION'S
REQUEST FOR A LIMIT ON YOUR FOREIGN LENDING. I THE RESULT, AS
YOU KNOW, WAS A SMALL INFLOW OF FUNDS FOR THE YEAR 1965.
THIS MADE IT POSSIBLE FOR THE UNITED STATES TO SHOW THE
SMALLEST OVERALL DEFICIT--$1.3 BILLION--IN EIGHT YEARS.
BERALD FORD LIBRARY
-4-
BUT THIS WAS ONLY A STOP-GAP MEASURE AT BEST. AND OUR
CUTBACKS IN FOREIGN INVESTMENT, WHILE TEMPORARILY EASING
OUR BALANCE OF PAYMENTS PROBLEM, WILL HURT US IN YEARS TO
COME. SO THIS FORMULA IS NOT THE ANSWER.
A FEW WEEKS AGO, DURING HEARINGS BEFORE THE HOUSE BANKING
AND CURRENCY COMMITTEE, FIVE MEMBERS OF THE FEDERAL RESERVE
BOARD WERE ASKED TO COMMENT ON THE REPUBLICAN PREDICTION OF
A $2.5 BILLION DEFICIT IN OUR 1966 BALANCE OF PAYMENTS.
NOBODY TOOK SERIOUS ISSUE WITH THAT ESTIMATE.
I WAS VERY MUCH SURPRISED, BECAUSE LESS THAN FIVE MONTHS
AGO THE ADMINISTRATION WAS PREDICTING A DEFICIT ONE-TENTH
THAT SIZE.
LAST DECEMBER THE FEDERAL RESERVE BOARD TIGHTENED UP ON
-5-
DOMESTIC CREDIT WITH A HIKE IN THE REDISCOUNT RATE AND THE
RATE ON TIME DEPOSITS. YET THE BALANCE OF PAYMENTS SITUATION
CONTINUES TO WORSEN.
THIS MEANS THE THEORY THAT TIGHT MONEY ALONE PRODUCES
BENEFICIAL SHIFTS IN PAYMENT BALANCES JUST DOESN'T HOLD UP.
IT TURNS OUT THAT OTHER FACTORS HAVE MORE THAN CANCELLED
OUT THE BALANCE OF PAYMENTS BENEFITS THAT MIGHT HAVE RESULTED
FROM LAST DECEMBER'S CREDIT TIGHTENING.
FOR ONE THING, INTEREST RATES IN EUROPE HAVE CONTINUED
TO CLIMB, AND THIS HAS NEARLY ELIMINATED THE IMPACT OF THE
FEDERAL RESERVE BOARD ACTION.
GERALD R.FORD LIBRARY
TO CURB INFLATION, AUTHORITIES ON THE CONTINENT HAVE
LEANED HEAVILY ON MONETARY RESTRAINTS AS EVIDENCED IN THE
-6-
DUTCH AND GERMAN DISCOUNT RATE INCREASES LAST MONTH.
STRINGENT CONTROLS ON COMMERCIAL BANK CREDIT TO THE PRIVATE
SECTOR OF THE ECONOMY ARE THE RULE EVERYWHERE IN EUROPE.
AT THE SAME TIME, EXCEPT IN FRANCE AND GERMANY, GOVERNMENT
SPENDING HAS ADDED MATERIALLY TO INFLATIONARY STRESSES AND
STRAINS ON ALREADY OVERBURDENED ECONOMIES THROUGHOUT EUROPE.
HERE IN AMERICA WE ALSO HAVE BEEN PLAGUED BY INFLATION--
AND PRICE BOOSTS HAVE MADE U.S. EXPORTS LESS ATTRACTIVE WHILE
AMERICAN DEMAND FOR FOREIGN IMPORTS HAS CONTINUED HIGH.
THE RESULT HAS BEEN A DRAMATIC AND DANGEROUS DROP IN OUR
TRADE BALANCE--EXPORTS AS AGAINST IMPORTS.
WHILE OUR OVERALL BALANCE OF PAYMENTS DEFICIT IN 1965
WAS $1.3 BILLION--LESS THAN HALF THE $2.8 BILLION DEFICIT
-7-
IN 1964--OUR TRADE BALANCE SURPLUS DECLINED FROM $6.7 BILLION
IN 1964 TO $4.8 BILLION IN 1965.
FIRST QUARTER FIGURES FOR THIS YEAR INDICATE THAT OUR
TRADE BALANCE SURPLUS IN 1966 WILL FALL BELOW $4 BILLION.
THIS IS BECAUSE OUR IMPORTS HAVE BEEN RISING RAPIDLY WHILE
OUR EXPORTS ARE JUST BARELY HOLDING AT LAST YEAR'S LEVEL.
HAD WE MAINTAINED OUR TRADE BALANCE AT ITS 1964 LEVEL,
WE WOULD HAVE HAD AN OVERALL BALANCE OF PAYMENTS SURPLUS
LAST YEAR AND CLOSE TO A BALANCE THIS YEAR.
SAGGING EXPORTS AND RISING IMPORTS LIE AT THE HEART OF
OUR BALANCE OF PAYMENTS PROBLEM.
GERALD FORD LIBRARY
THERE ARE OTHER FACTORS, OF COURSE - TRAVEL ABROAD BY
AN INCREASING NUMBER OF AMERICANS, SPENDING ON THE VIETNAM WAR,
-8-
THE OUTFLOW OF FOREIGN AID DOLLARS.
BUT I REPEAT WHAT I SAID EARLIER--SAGGING EXPORTS AND
RISING IMPORTS ARE THE CORE OF OUR BALANCE OF PAYMENTS
PROBLEM. AND IT IS DOMESTIC INFLATION GENERATED BY
JOHNSON ADMINISTRATION POLICIES WHICH HAS PUT OUR TRADE
BALANCE ON A SKI SLIDE.
OUR PRICES MUST BE STABLE AND COMPETITIVE IF AMERICAN
BUSINESS IS TO RECOVER ITS FORMER POSITION IN THE WORLD
EXPORT MARKET.
LIBRARY
THE ADMINISTRATION SHOULD BE PROVIDING LEADERSHIP IN
THE FORMULATING OF DOMESTIC ECONOMIC POLICIES IF OUR BALANCE
OF PAYMENTS PROBLEM IS TO BE SOLVED. WE ARE NOT GETTING
LEADERSHIP. INSTEAD WE ARE GETTING EMERGENCY, FINGER-IN-
THE-DIKE DESPERATION MOVES.
-9-
THIS IS NOT THE KIND OF PROBLEM WHICH CAN AWAIT A
CONSENSUS. IT IS NOT THE KIND OF PROBLEM WHICH CAN BE
SOLVED WITH LUCK AND THE OLD POLITICAL FORMULA OF MAKING
THE FEWEST PEOPLE ANGRY.
THE ADMINISTRATION SHOULD NOT BE RELYING UPON LOPSIDED
MONETARY POLICY--MONETARY POLICY WHICH IN THE CASE OF LAST
DECEMBER'S "FED" ACTION PROBABLY CAME TOO LATE.
OF COURSE, MONETARY STRINGENCY IS ONE METHOD OF CURBING
A BOOM THAT IS GETTING OUT OF HAND. BUT WE MUST HAVE A
FLEXIBLE, BALANCED AND, ABOVE ALL, A COORDINATED MONETARY
AND FISCAL POLICY.
WHAT DO WE HAVE IN PLACE OF SUCH A SOLUTION? WE HAVE
AN ADMINISTRATION WHICH DID VIRTUALLY NOTHING TO SLOW GERAL A BOOM
-10-
THAT WAS GETTING OUT OF HAND AND THEN CRITICIZED THE FEDERAL
RESERVE BOARD FOR ACTING ON ITS OWN.
AND WE HAVE AN ADMINISTRATION WHICH HAS FAILED TO USE
THE FEDERAL BUDGET IN A CONSISTENT MANNER AS AN INSTRUMENT
OF ECONOMIC STABILIZATION.
THIS IS THE UNDERLYING CAUSE OF STEADILY RISING PRICES
AND WAGES AT HOME, AND THE FAILURE OF AMERICAN-MADE PRODUCTS
TO COMPETE STRONGLY ENOUGH IN THE WORLD MARKET. HENCE,
IT IS THE UNDERLYING CAUSE OF OUR WORSENED BALANCE OF PAYMENTS
SITUATION AND OUR CONTINUED HIGH GOLD OUTFLOW.
THE FEDERAL BUDGET NORMALLY SHOULD BE BALANCED. THERE
ARE EXCEPTIONS TO THIS POLICY, OF COURSE--TIMES OF MAJOR
MILITARY CONFLICT OR SERIOUS UNEMPLOYMENT. BUT, OVER THE
-11-
LONG HAUL, WE SHOULD ACHIEVE A RELATIVE BALANCE. WE SHOULD
ACHIEVE A SURPLUS IN BOOM TIMES AND EMPLOY FISCAL POLICY AS
A TOOL TO REVERSE SERIOUS ECONOMIC DOWNTURNS
UNFORTUNATELY.
THE JOHNSON ADMINISTRATION SHOWS NO CONCERN FOR BALANCING
THE FEDERAL BUDGET OR ACHIEVING A SURPLUS AT ANY TIME.
IF THE PRESENT ADMINISTRATION HAD NOT YIELDED TO DEMANDS
BY SOME THAT GREAT SOCIETY PROGRAMS BE EXPANDED BY BILLIONS
OF DOLLARS DESPITE OUR COSTLY INVOLVEMENT IN VIETNAM, PRICE
STABILITY WOULD BE MORE THAN JUST A MEMORY AND WE WOULD
HAVE AN IMPROVED BALANCE OF PAYMENTS SITUATION. WE WOULD
NOT SEE NON-ESSENTIAL GOVERNMENT SPENDING PUSHING UP THE
PRICE OF AMERICAN PRODUCTS, WITH A CONSEQUENT UNFAVORABLE
IMPACT ON OUR TRADE BALANCE SURPLUS.
GERALD FORD VIBRARY
TT.
THIS ADMINISTRATION CANNOT DO A GOOD JOB OF HANDLING
-12-
OUR BALANCE OF PAYMENTS PROBLEM BECAUSE ITS BASIC APPROACH
TO ECONOMICS HAS DEVELOPED THE DISEASE OF POLITICS-ITIS.
NOW THAT THE NEW ECONOMICS ESPOUSED BY JOHN MAYNARD
KEYNES HAS PRODUCED A DANGEROUSLY INFLATED BOOM, THE
ADMINISTRATION IS RELUCTANT TO APPLY THE OTHER HALF OF HIS
ADVICE. ADMINISTRATION OFFICIALS HAVE TURNED THEIR FACES
AWAY FROM THE KEYNES PRIMER, WHICH WARNS AGAINST THE DEBASING
OF A COUNTRY'S CURRENCY AND ADVISES QUICK REMEDIAL ACTION
TO COOL OFF AN OVERHEATED ECONOMY. IT'S OBVIOUS THAT THE
WHITE HOUSE USES THE NEW ECONOMICS WHEN IT IS EXPEDIENT TO
DO SO AND REJECTS IT WHEN IT PROVES POLITICALLY PAINFUL.
IT IS FOR POLICITCAL REASONS THAT THE ADMINISTRATION
HAS REFUSED TO APPLY THE RESTRAINTS NEEDED TO MAINTAIN
-13-
PRICE STABILITY AND TO CURB EXCESSES IN THE ECONOMY. CHIEF
AMONG THE RESTRAINTS FOUND WANTING IS RESTRAINT IN NON-
ESSENTIAL FEDERAL SPENDING.
MANY PEOPLE TEND TO DISCOUNT MUCH OF WHAT A PROFESSIONAL
POLITICIAN SAYS, SO LET ME CALL YOUR ATTENTION TO A RECENT
POLL OF UNIVERSITY AND BUSINESS ECONOMISTS BY THE CHASE
MANHATTAN BANK.
A MAJORITY OF THE 340 UNIVERSITY ECONOMISTS AND THE
220 BUSINESS ECONOMISTS WHO REPLIED TO THE QUESTIONNAIRE
DECLARED THAT INFLATION WAS THE MOST PRESSING ECONOMIC
PROBLEM FACING THIS NATION TODAY.
THESE ECONOMISTS RECOMMENDED A BROAD-BASED ATTACK ON
INFLATION, INCLUDING CUTBACKS IN GOVERNMENT SPENDING,
-14-
TIGHTENING OF MONEY AND AN INCREASE IN TAXES. THE BUSINESS
ECONOMISTS PUT MORE EMPHASIS ON CUTS IN GOVERNMENT SPENDING,
AND THE UNIVERSITY ECONOMISTS LEANED MORE TOWARD A TAX
INCREASE.
PRESIDENT
RESIDENT
SINCE THE JOHNSON ADMINISTRATION HAS REFUSED TO REVISE
HIS
FISCAL 1967 BUDGET DOWNWARD AND THE OVERWHELMING
DEMOCRATIC MAJORITIES IN CONGRESS ARE ADDING ROUGHLY
$3 BILLION TO HIS SPENDING REQUESTS, A TAX INCREASE MAY
PROVE INEVITABLE.
Budget 1 Johnson Eongress speed-mp
Differse
INDICATIONS ARE THE PRESIDENT IS STALLING ANY REQUEST
FOR A TAX INCREASE UNTIL AFTER THE NOVEMBER ELECTION.
HE ALSO APPEARS TO HAVE ABANDONED THE 3.2 PER CENT
WAGE-PRICE GUIDEPOSTS, AT LEAST AS FAR AS WAGES ARE CONCERNED
GERALD
ABRARY
-15-
IN THAT CONNECTION, I MIGHT NOTE THAT 60 PER CENT OF
THE BUSINESS ECONOMISTS RESPONDING TO THE CHASE MANHATTAN
POLL OPPOSED THE GUIDEPOSTS AS A TECHNIQUE FOR RESTRAINING
PRICES, AND HALF OF THE UNIVERSITY ECONOMISTS WERE AGAINST
THEM.
THE INFLATION WE NOW ARE FACED WITH HAD A RELATIVELY
SLOW START BECAUSE THE EISENHOWER ADMINISTRATION SUCCEEDED
IN BURYING WHAT MIGHT BE CALLED INFLATIONARY PSYCHOLOGY.
BUT NOW INFLATION IS HERE AS A RESULT OF JOHNSON ADMINISTRA-
TION POLICIES.
PRICES MUST BE STABILIZED, PARTICULARLY IF WE ARE TO
AVOID A SHARP RISE IN WAGE INCREASE DEMANDS, WAGE-PUSH
INFLATION, AND A CONTINUED WORSENING OF OUR BALANCE OF
GERALD FORD LIBRARY
PAYMENTS SITUATION.
-16-
FORMER TREASURY SECRETARY C. DOUGLAS DILLON, WHOSE
OPINIONS CERTAINLY DESERVE CONSIDERATION, TOLD CONGRESS JUST
A FEW DAYS AGO THAT "FIVE OR SIX BILLION DOLLARS OF FISCAL
ACTION" WAS NECESSARY TO HALT INFLATION.
MR. DILLON SAID FEDERAL SPENDING SHOULD BE REDUCED BELOW
THE LEVEL OF THE PRESIDENT'S BUDGET BUT THAT HE DESPAIRED
OF THIS HAPPENING. HE RECOMMENDED A "MODEST, ACROSS-THE-
BOARD INCREASE IN TAXES," AND SAID IT HAS BEEN "CLEARLY
CALLED FOR IN THE PAST FEW MONTHS."
AS I HAVE DONE EARLIER IN THIS TALK, MR. DILLON NOTED
THAT OUR TRADE BALANCE HAS BEEN WORSENING AND SO HAS OUR
OVERALL BALANCE OF PAYMENTS SITUATION.
GERALD FORD LIBRARY
THIS NATION DESPERATELY NEEDS AN ADMINISTRATION WHICH
WILL KEEP PRICES STABLE AND COMPETITIVE IF WE ARE TO HAVE
-17-
AN ECONOMY SUFFICIENTLY VIGOROUS AND EFFICIENT TO RESTORE
OUR TRADE SURPLUS TO ITS FORMER LEVELS.
WITH SUCH AN ADMINISTRATION, AMERICAN BUSINESSMEN WOULD
RECAPTURE THEIR OLD POSITION IN DOMESTIC AND FOREIGN MARKETS
AND WE COULD STOP WORRYING ABOUT OUR BALANCE OF PAYMENTS
POSITION AND OUTFLOW OF GOLD.
WITH SUCH AN ADMINISTRATION, WE COULD CONTINUE TO INVEST
IN OTHER COUNTRIES, AND OTHER COUNTRIES IN THE FULL FLUSH
OF CONFIDENCE IN THE AMERICAN DOLLAR AND AMERICAN BUSINESS
WOULD INVEST HERE.
THIS THEN WOULD BE A TRULY HEALTHY ECONOMY. THE
PRESIDENT, BE HE DEMOCRAT OR REPUBLICAN, HAS THE RESPONSIBILITY
TO PROMOTE THAT KIND OF AN ECONOMY.
LIDERAY
-18-
BUT AS THE SWING SET WOULD SAY, THAT'S NOT WHAT'S
HAPPENING.
WE SHOULD BE WORKING HARDER AND MORE EFFECTIVELY THAN
WE ARE TO REMOVE SPECIAL RESTRICTIONS ON SALE OF AMERICAN
GOODS ABROAD WHEREVER THOSE RESTRICTIONS EXIST. WE SHOULD
BE EXPLORING ALL POSSIBLE MEANS OF ENCOURAGING AMERICAN
EXPORTS WITHIN THE LIMITS OF THE OVERALL NATIONAL INTEREST.
WE SHOULD BE GETTING OUR FRIENDS IN EUROPE TO PAY THEIR
FAIR SHARE OF THE COST OF DEFENDING THE FREE WORLD AND OF
DEALING WITH THE EXPLOSIVE FORCES NOW ERUPTING IN THE
DEVELOPING NATIONS OF THE WORLD.
BUT, AGAIN, THAT'S NOT WHAT'S HAPPENING.
TODAY THE UNITED STATES STANDS VIRTUALLY ALONE IN
GERALD, LIBRARY
-19-
VIETNAM--CAUGHT UP IN A WAR WHICH IS COSTING US MORE THAN
A BILLION DOLLARS A MONTH.
WHERE CAREFUL FISCAL PLANNING IN A NATION TROUBLED BY
DOMESTIC INFLATION AND CONTINUING GOLD OUTFLOW IS CRITICALLY
IMPORTANT, THE JOHNSON ADMINISTRATION HAS REPEATEDLY UNDER-
ESTIMATED THE COST OF THE VIETNAM WAR AND PERHAPS
DELIBERATELY SO.
THE PRESIDENT'S BUDGET SUBMITTED TO THE CONGRESS IN 1965
UNDERFUNDED THE WAR BY SOME $15 BILLION FOR THIS FISCAL YEAR.
IN THE NEXT FISCAL YEAR, THAT WHICH BEGINS JULY 1, THE WAR
AGAIN WILL BE UNDERFUNDED IN A SUBSTANTIAL AMOUNT.
THE JOHNSON ADMINISTRATION'S ENTIRE FISCAL RECORD IS
LONG ON PROMISES AND SHORT ON PERFORMANCE - - ON THE DOMESTIC
LIBRARY
SCENE AND IN FOREIGN AFFAIRS.
-20-
THIS ADMINISTRATION HAS OVER-PROMISED AND UNDER-PERFORMED,
OVER-ATTEMPTED AND UNDER-SUCCEEDED, UNDER-ESTIMATED AND
OVER-EXCUSED THROUGHOUT ALL ITS DAYS IN OFFICE.
THIS IS PARTICULARLY PERILOUS IN THESE CRUCIAL TIMES--
A TIME OF SHOWDOWN IN THE CEASELESS STRUGGLE BETWEEN THE
COMMUNIST AND FREE WORLDS, A SHOWDOWN IN WHAT THE COMMUNIST
CHINESE CYNICALLY CALL A WAR OF LIBERATION.
NOW IS THE TIME TO SHOW THE REST OF THE WORLD THAT THE
CAPITALISTIC SYSTEM IS THE BEST SYSTEM EVER DEVISED TO
FURTHER THE GOALS AND DREAMS OF MAN.
NOW IS THE TIME TO RE-ENLIST OUR FRIENDS IN EUROPE IN
THAT CRUSADE.
I FIRMLY BELIEVE THAT WITH PROPER LEADERSHIP IN THE
GERALD FORD LIBRARY
-21-
WHITE HOUSE, INSPIRING LEADERSHIP, WE COULD WIN THE OTHER
NATIONS OF THE FREE WORLD TO OUR BANNER IN A PROGRESS MARCH
THAT WOULD CONFOUND OUR ENEMIES, FURTHER BLESS AMERICA AND
ENHANCE ALL OF MANKIND.
---THANK YOU---
--END--
GERALD AUTHOIT
CONGRESSMAN
NEWS
GERALD R. FORD
HOUSE REPUBLICAN LEADER
RELEASE
FOR RELEASE IN SATURDAY P.M.'s
JUNE 25, 1966
SPEECH EXCERPTS--NEW YORK STATE BANKERS ASSOCIATION CONVENTION AT SPRING LAKE, N.J.
This country is in deep trouble. And one of the most serious trouble spots
is the continuing failure of the Administration to achieve a balance in our
international payments situation.
This, I think, traces directly to the Johnson Administration's habit of
adopting policies on the basis of a promise and a prayer instead of lasting remedies.
In its approach to the balance of payments problem, the Johnson Administration
has performed like a little boy who bandages up one injured finger only to bang
the one next to it with a hammer.
Our balance of payments problem currently seems as far away from solution
as ever, despite an occasional optimistic forecast by the Administration and an
improved performance in 1965.
A few weeks ago, during hearings before the House Banking and Currency
Committee, five members of the Federal Reserve Board were asked to comment on the
Republican prediction of a $2.5 billion deficit in our 1966 balance of payments.
Nobody took serious issue with that estimate.
I was very much surprised, because less than five months ago the Administration
was predicting a deficit one-tenth that size.
Last December the Federal Reserve Board tightened up on domestic credit with
a hike in the rediscount rate and the rate on time deposits. Yet the balance of
payments situation continues to worsen.
This means the theory that tight money alone produces beneficial shifts in
payment balances just doesn't hold up.
It turns out that other factors have more than cancelled out the balance of
payments benefits that might have resulted from last December's credit tightening.
We have been plagued by inflation--and price boosts have made U.S. exports
less attractive while American demand for foreign imports has continued high.
The result has been a dramatic and dangerous drop in our trade balance--
exports as against imports.
While our overall balance of payments deficit in 1965 was $1.3 billion--less
than half the $2.8 billion deficit in 1964--our trade balance surplus declined
from $6.7 billion in 1964 to $4.8 billion in 1965.
(MORE)
-2-
SPEECH EXCERPTS
First quarter figures for this year indicate that our trade balance surplus
in 1966 will fall below $4 billion. This is because our imports have been rising
rapidly while our exports are just barely holding at last year's level.
Had we maintained our trade balance at its 1964 level, we would have had an
overall balance of payments surplus last year and close to a balance this year.
Sagging exports and rising imports lie at the heart of our balance of payments
problem.
***
It is domestic inflation generated by Johnson Administration policies which
has put our trade balance on a ski slide.
Our prices must be stable and competitive if American business is to recover
its former position in the world export market.
We must have a flexible, balanced and, above all, a coordinated monetary and
fiscal policy.
What do we have in place of such a solution? We have an Administration which
did virtually nothing to slow a boom that was getting out of hand and then criticized
the Federal Reserve Board for acting on its own.
We also have an Administration which has failed to use the federal budget in
a consistent manner as an instrument of economic stabilization.
This is the underlying cause of steadily rising prices and wages at home, and
the failure of American-made products to compete strongly enough in the world
market. Hence, it is the underlying cause of our worsened balance of payments
situation and our continued high gold outflow.
If the present Administration had not yielded to demands by some that Great
Society programs be expanded by billions of dollars despite our costly involvement
in Vietnam, price stability would be more than just a memory and we would have an
improved balance of payments situation. We would not see non-essential government
spending pushing up the price of American products, with a consequent unfavorable
impact on our trade balance surplus.
This Administration cannot do a good job of handling our balance of payments
problem because its basic approach to economics has developed the disease of
politics-itis.
Now that the New Economics espoused by John Maynard Keynes has produced a
dangerously inflated boom, the Administration is reluctant to apply the other half
of his advice. Administration officials have turned their faces away from the
Keynes primer, which warns against the debasing of a country's currency and advises
quick action to cool off an overheated economy. It's obvious that the Democrats
use the New Economics when it is expedient to do 80 and reject it when it proves
politically painful.
(MORE)
-3-
SPEECH EXCERPTS
* * *
The inflation we now are faced with had a relatively slow start because the
Eisenhower Administration succeeded in burying what might be called inflationary
psychology. But now inflation is here--as a result of Johnson Administration
policies.
Prices must be stabilized if we are to avoid a sharp rise in wage increase
demands, wage-push inflation, and a continued worsening of our balance of payments
situation.
*
This nation desperately needs an administration which will keep prices stable
and competitive. Only then can we have an economy sufficiently vigorous and
efficient to restore our trade surplus to its former levels.
With such an administration, American businessmen would recapture their old
position in domestic and foreign markets and we could stop worrying about our
balance of payments position and outflow of gold.
With such an administration, we could continue to invest in other countries,
and other countries in the full flush of confidence in the American dollar and
American business would invest here.
This then could be a truly healthy economy. The President, be he Democrat
or Republican, has the responsibility to promote that kind of an economy.
But as the swing set would say, that's not what's happening.
The Johnson Administration's entire fiscal record is long on promises and
short on performance--on the domestic scene and in foreign affairs.
This Administration has over-promised and under-performed, over-attempted and
under-succeeded, under-estimated and over-excused throughout all its days in office.
This is particularly perilous in these crucial times--a time of showdown in
the ceaseless struggle between the Communist and Free worlds, a showdown in what
the Communist Chinese cynically call a war of liberation.
Now is the time to show the rest of the world that the capitalistic system
is the best system ever devised to further the goals and dreams of man.
Now is the time to re-enlist our friends in Europe in that crusade.
I firmly believe that with proper leadership in the White House, inspiring
leadership, we could win the other nations of the Free World to our banner in a
progress march that would confound our enemies, further bless America, and enhance
all of mankind.
# # #
CONGRESSMAN
NEWS
GERALD R. FORD
HOUSE REPUBLICAN LEADER
RELEASE
FOR RELEASE IN SATURDAY P.M.'s
JUNE 25, 1966
SPEECH EXCERPTS--NEW YORK STATE BANKERS ASSOCIATION CONVENTION AT SPRING LAKE, N.J.
This country is in deep trouble. And one of the most serious trouble spots
is the continuing failure of the Administration to achieve a balance in our
international payments situation.
This, I think, traces directly to the Johnson Administration's habit of
adopting policies on the basis of a promise and a prayer instead of lasting remedies.
In its approach to the balance of payments problem, the Johnson Administration
has performed like a little boy who bandages up one injured finger only to bang
the one next to it with a hammer.
Our balance of payments problem currently seems as far away from solution
as ever, despite an occasional optimistic forecast by the Administration and an
improved performance in 1965.
A few weeks ago, during hearings before the House Banking and Currency
Committee, five members of the Federal Reserve Board were asked to comment on the
Republican prediction of a $2.5 billion deficit in our 1966 balance of payments.
Nobody took serious issue with that estimate.
I was very much surprised, because less than five months ago the Administration
was predicting a deficit one-tenth that size.
Last December the Federal Reserve Board tightened up on domestic credit with
a hike in the rediscount rate and the rate on time deposits. Yet the balance of
payments situation continues to worsen.
This means the theory that tight money alone produces beneficial shifts in
payment balances just doesn't hold up.
It turns out that other factors have more than cancelled out the balance of
payments benefits that might have resulted from last December's credit tightening.
* * *
We have been plagued by inflation--and price boosts have made U.S. exports
less attractive while American demand for foreign imports has continued high.
The result has been a dramatic and dangerous drop in our trade balance--
exports as against imports.
While our overall balance of payments deficit in 1965 was $1.3 billion--less
than half the $2.8 billion deficit in 1964--our trade balance surplus declined
from $6.7 billion in 1964 to $4.8 billion in 1965.
(MORE)
-2-
SPEECH EXCERPTS
First quarter figures for this year indicate that our trade balance surplus
in 1966 will fall below $4 billion. This is because our imports have been rising
rapidly while our exports are just barely holding at last year's level.
Had we maintained our trade balance at its 1964 level, we would have had an
overall balance of payments surplus last year and close to a balance this year.
Sagging exports and rising imports lie at the heart of our balance of payments
problem.
***
It is domestic inflation generated by Johnson Administration policies which
has put our trade balance on a ski slide.
Our prices must be stable and competitive if American business is to recover
its former position in the world export market.
We must have a flexible, balanced and, above all, a coordinated monetary and
fiscal policy.
What do we have in place of such a solution? We have an Administration which
did virtually nothing to slow a boom that was getting out of hand and then criticized
the Federal Reserve Board for acting on its own.
We also have an Administration which has failed to use the federal budget in
a consistent manner as an instrument of economic stabilization.
This is the underlying cause of steadily rising prices and wages at home, and
the failure of American-made products to compete strongly enough in the world
market. Hence, it is the underlying cause of our worsened balance of payments
situation and our continued high gold outflow.
If the present Administration had not yielded to demands by some that Great
Society programs be expanded by billions of dollars despite our costly involvement
in Vietnam, price stability would be more than just a memory and we would have an
improved balance of payments situation. We would not see non-essential government
spending pushing up the price of American products, with a consequent unfavorable
impact on our trade balance surplus.
This Administration cannot do a good job of handling our balance of payments
problem because its basic approach to economics has developed the disease of
politics-itis.
Now that the New Economics espoused by John Maynard Keynes has produced a
dangerously inflated boom, the Administration is reluctant to apply the other half
of his advice. Administration officials have turned their faces away from the
Keynes primer, which warns against the debasing of a country's currency and advises
quick action to cool off an overheated economy. It's obvious that the Democrats
use the New Economics when it is expedient to do so and reject it when it proves
politically painful.
(MORE)
-3-
SPEECH EXCERPTS
***
The inflation we now are faced with had a relatively slow start because the
Eisenhower Administration succeeded in burying what might be called inflationary
psychology. But now inflation is here--as a result of Johnson Administration
policies.
Prices must be stabilized if we are to avoid a sharp rise in wage increase
demands, wage-push inflation, and a continued worsening of our balance of payments
situation.
* * *
This nation desperately needs an administration which will keep prices stable
and competitive. Only then can we have an economy sufficiently vigorous and
efficient to restore our trade surplus to its former levels.
With such an administration, American businessmen would recapture their old
position in domestic and foreign markets and we could stop worrying about our
balance of payments position and outflow of gold.
With such an administration, we could continue to invest in other countries,
and other countries in the full flush of confidence in the American dollar and
American business would invest here.
This then could be a truly healthy economy. The President, be he Democrat
or Republican, has the responsibility to promote that kind of an economy.
But as the swing set would say, that's not what's happening.
The Johnson Administration's entire fiscal record is long on promises and
short on performance--on the domestic scene and in foreign affairs.
This Administration has over-promised and under-performed, over-attempted and
under-succeeded, under-estimated and over-excused throughout all its days in office.
This is particularly perilous in these crucial times--a time of showdown in
the ceaseless struggle between the Communist and Free worlds, a showdown in what
the Communist Chinese cynically call a war of liberation.
Now is the time to show the rest of the world that the capitalistic system
is the best system ever devised to further the goals and dreams of man.
Now is the time to re-enlist our friends in Europe in that crusade.
I firmly believe that with proper leadership in the White House, inspiring
leadership, we could win the other nations of the Free World to our banner in a
progress march that would confound our enemies, further bless America, and enhance
all of mankind.
# # #
Ford
SPEECH BEFORE NEW YORK BANKERS ASSOCIATION CONVENTION
AT SPRING LAKE ON SATURDAY, JUNE 25, 1966
BY HOUSE MINORITY LEADER GERALD R. FORD
Gentlemen:
I am very pleased to be here with you today. I will be speaking to you on a
special topic because this is, as I understand it, a so-called special interest group.
I hasten to add, however, your record as an organization and as individuals clearly
indicates a broader interest in the welfare of our nation. I commend your concern
for and dedication to the future of America.
Unlike my good friends, the Democrats, I have never found the term, special
interest group, especially useful except in a story I like to tell.
As you know, the phrase, special interest group, does get tossed around a lot in
Washington.
For instance, the other day, a colleague of mine jumped up during a hot debate
with a Democrat and yelled: "What about the powerful interest that controls you?"
And the Democrat replied: "You leave my wife out of this!"
Whether we leave the women out of it or not, this country is in deep trouble.
And one of the most serious trouble spots is the continuing failure of the Administra-
tion to achieve a balance in our international payments situation.
This, I think, traces directly to the Johnson Administration's habit of adopting
policies on the basis of a promise and a prayer instead of lasting results.
In its approach to the balance of payments problem, the Johnson Administration
has performed like a little boy who bandages up one injured finger only to bang the
one next to it with a hammer.
Our balance of payments problem currently seems as far away from solution as
ever, despite an occasional optimistic forecast by the Administration and improved
performance in 1965.
The improvement last year resulted because the banking community responded so
whole-heartedly to the Administration's request for a limit on your foreign lending.
The result, as you know, was a small inflow of funds for the year 1965. This made
it possible for the United States to show the smallest overall deficit--$1.3 billion--
in eight years.
But this was only a stop-gap measure at best. And our cutbacks in foreign
investment, while temporarily easing our balance of payments problem, will hurt us
in years to come. So this formula is not the answer.
A few weeks ago, during hearings before the House Banking and Currency Committee,
five members of the Federal Reserve Board were asked to comment on the Republican
prediction of a $2.5 billion deficit in our 1966 balance of payments. Nobody took
LIBRARY
serious issue with that estimate.
(MORE)
-2-
I was very much surprised, because less than five months ago the Administration
was predicting a deficit one-tenth that size.
Last December the Federal Reserve Board tightened up on domestic credit with a
hike in the rediscount rate and the rate on time deposits. Yet the balance of
payments situation continues to worsen.
This means the theory that tight money alone produces beneficial shifts in
payment balances just doesn't hold up.
It turns out that other factors have more than cancelled out the balance of
payments benefits that might have resulted from last December's credit tightening.
For one thing, interest rates in Europe have continued to climb, and this has
nearly eliminated the impact of the Federal Reserve Board action.
To curb inflation, authorities on the Continent have leaned heavily on monetary
restraints as evidenced in the Dutch and German discount rate increases last month.
Stringent controls on commercial bank credit to the private sector of the economy are
the rule everywhere in Europe.
At the same time, except in France and Germany, government spending has added
materially to inflationary stresses and strains on already overburdened economies
throughout Europe.
Here in America we also have been plagued by inflation--and price boosts have
made U.S. exports less attractive while American demand for foreign imports has
continued high.
The result has been a dramatic and dangerous drop in our trade balance--exports
as against imports.
While our overall balance of payments deficit in 1965 was $1.3 billion--less
than half the $2.8 billion deficit in 1964--our trade balance surplus declined from
$6.7 billion in 1964 to $4.8 billion in 1965.
First quarter figures for this year indicate that our trade balance surplus in
1966 will fall below $4 billion. This is because our imports have been rising rapidly
while our exports are just barely holding at last year's level.
Had we maintained our trade balance at its 1964 level, we would have had an
overall balance of payments surplus last year and close to a balance this year.
Sagging exports and rising imports lie at the heart of our balance of payments
problem.
There are other factors, of course--travel abroad by an increasing number of
Americans, spending on the Vietnam War, the outflow of foreign aid dollars.
But I repeat what I said earlier--sagging exports and rising imports are the
core of our balance of payments problem. And it is domestic inflation generated by
Johnson Administration policies which has put our trade balance on a ski slide.
(MORE)
-3-
Our prices must be stable and competitive if American business is to recover its
former position in the world export market.
The Administration should be providing leadership in the formulating of domestic
economic policies if our balance of payments problem is to be solved. We are not
getting leadership. Instead we are getting emergency, finger-in-the-dike desperation
moves.
This is not the kind of problem which can await a consensus. It is not the kind
of problem which can be solved with luck and the old political formula of making the
fewest people angry.
The Administration should not be relying upon lopsided monetary policy--monetary
policy which in the case of last December's "Fed" action probably came too late.
Of course, monetary stringency is one method of curbing a boom that is getting
out of hand. But we must have a flexible, balanced and, above all, a coordinated
monetary and fiscal policy.
What do we have in place of such a solution? We have an Administration which
did virtually nothing to slow a boom that was getting out of hand and then criticized
the Federal Reserve Board for acting on its own.
And we have an Administration which has failed to use the federal budget in a
consistent manner as an instrument of economic stabilization.
This is the underlying cause of steadily rising prices and wages at home, and
the failure of American-made products to compete strongly enough in the world market.
Hence, it is the underlying cause of our worsened balance of payments situation and
our continued high gold outflow.
The federal budget normally should be balanced. There are exceptions to this
policy, of course-times of major military conflict or serious unemployment. But,
over the long haul, we should achieve a relative balance. We should achieve a
surplus in boom times and employ fiscal policy as a tool to reverse serious economic
downturns. Unfortunately, the Johnson Administration shows no concern for balancing
the federal budget or achieving a surplus at any time.
If the present Administration had not yielded to demands by some that Great
Society programs be expanded by billions of dollars despite our costly involvement in
Vietnam, price stability would be more than just a memory and we would have an
improved balance of payments situation. We would not see non-essential government
spending pushing up the price of American products, with a consequent unfavorable
impact on our trade balance surplus.
This Administration cannot do a good job of handling our balance of payments
problem because its basic approach to economics has developed the disease of
politics-itis.
(MORE)
-4-
Now that the New Economics espoused by John Maynard Keynes has produced a
dangerously inflated boom, the Administration is reluctant to apply the other half
of his advice. Administration officials have turned their faces away from the Keynes
primer, which warns against the debasing of a country's currency and advises quick
remedial action to cool off an overheated economy. It's obvious that the White House
uses the New Economics when it is expedient to do so and rejects it when it proves
politically painful.
It is for political reasons that the Administration has refused to apply the
restraints needed to maintain price stability and to curb excesses in the economy.
Chief among the restraints found wanting is restraint in non-essential federal spending
Many people tend to discount much of what a professional politician says, so let
me call your attention to a recent poll of university and business economists by the
Chase Manhattan Bank.
A majority of the 340 university economists and the 220 business economists who
replied to the questionnaire declared that inflation was the most pressing economic
problem facing this nation today.
These economists recommended a broad-based attack on inflation, including
cutbacks in government spending, tightening of money and an increase in taxes. The
business economists put more emphasis on cuts in government spending, and the
university economists leaned more toward a tax increase.
Since the Johnson Administration has refused to revise its fiscal 1967 budget
downward and the overwhelming Democratic majorities in Congress are adding roughly
$3 billion to his spending requests, a tax increase may prove inevitable.
Indications are the President is stalling any request for a tax increase until
after the November election.
He also appears to have abandoned the 3.2 per cent wage-price guideposts, at
least as far as wages are concerned.
In that connection, I might note that 60 per cent of the business economists
responding to the Chase Manhattan poll opposed the guideposts as a technique for
restraining prices, and half of the university economists were against them.
The inflation we now are faced with had a relatively slow start because the
Eisenhower Administration succeeded in burying what might be called inflationary
psychology. But now inflation is here as a result of Johnson Administration policies.
Prices must be stabilized, particularly if we are to avoid a sharp rise in wage
increase demands, wage-push inflation, and a continued worsening of our balance of
payments situation.
Former Treasury Secretary C. Douglas Dillon, whose opinions certainly deserve
consideration, told Congress just a few days ago that "five or six billion dollars
(MORE)
-5-
of fiscal action" was necessary to halt inflation.
Mr. Dillon said federal spending should be reduced below the level of the
President's budget but that he despaired of this happening. He recommended a "modest,
across-the-board increase in taxes," and said it has been "clearly called for in the
past few months."
As I have done earlier in this talk, Mr. Dillon noted that our trade balance has
been worsening and so has our overall balance of payments situation.
This nation desperately needs an administration which will keep prices stable
and competitive if we are to have an economy sufficiently vigorous and efficient to
restore our trade surplus to its former levels.
With such an administration, American businessmen would recapture their old
position in domestic and foreign markets and we could stop worrying about our
balance of payments position and outflow of gold.
With such an administration, we could continue to invest in other countries,
and other countries in the full flush of confidence in the American dollar and
American business would invest here.
This then would be a truly healthy economy. The President, be he Democrat or
Republican, has the responsiblity to promote that kind of an economy.
But as the swing set would say, that's not what's happening.
We should be working harder and more effectively than we are to remove special
restrictions on sale of American goods abroad wherever those restrictions exist. We
should be exploring all possible means of encouraging American exports within the
limits of the overall national interest.
We should be getting our friends in Europe to pay their fair share of the cost
of defending the free world and of dealing with the explosive forces now erupting in
the developing nations of the world.
But, again, that's not what's happening.
Today the United States stands virtually alone in Vietnam--caught up in a war
which is costing us more than a billion dollars a month.
Where careful fiscal planning in a nation troubled by domestic inflation and
continuing gold outflow is critically important, the Johnson Administration has
repeatedly underestimated the cost of the Vietnam War and perhaps deliberately so.
The President's budget submitted to the Congress in 1965 underfunded the war by
some $15 billion for this fiscal year. In the next fiscal year, that which begins
July 1, the war again will be underfunded in a substantial amount.
The Johnson Administration's entire fiscal record is long on promises and short
on performance--on the domestic scene and in foreign affairs.
(MORE)
-6-
This Administration has over-promised and under-performed, over-attempted and
under-succeeded, under-estimated and over-excused throughout all its days in office.
This is particularly perilous in these crucial times a time of showdown in the
ceaseless struggle between the Communist and Free Worlds, a showdown in what the
Communist Chinese cynically call a war of liberation.
Now is the time to show the rest of the world that the capitalistic system is
the best system ever devised to further the goals and dreams of man.
Now is the time to re-enlist our friends in Europe in that crusade.
I firmly believe that with proper leadership in the White House, inspiring
leadership, we could win the other nations of the Free World to our banner in a
progress march that would confound our enemies, further bless America and enhance
all of mankind.
Thank you
###
RE: BAL OF PYMTS.
SPEECH BEFORE NEW YORK BANKERS ASSOCIATION CONVENTION
AT SPRING LAKE ON SATURDAY, JUNE 25, 1966
BY HOUSE MINORITY LEADER GERALD R. FORD
Gentlemen:
I am very pleased to be here with you today. I will be speaking to you on a
special topic because this is, as I understand it, a so-called special interest group.
I hasten to add, however, your record as an organization and as individuals clearly
indicates a broader interest in the welfare of our nation. I commend your concern
for and dedication to the future of America.
Unlike my good friends, the Democrats, I have never found the term, special
interest group, especially useful except in a story I like to tell.
As you know, the phrase, special interest group, does get tossed around a lot in
Washington.
For instance, the other day, a colleague of mine jumped up during a hot debate
with a Democrat and yelled: "What about the powerful interest that controls you?"
And the Democrat replied: "You leave my wife out of this!"
Whether we leave the women out of it_or not, this country is in deep trouble.
And one of the most serious arouble spots is the continuing failure of the Administra-
tion to achieve a balance in our international payments situation.
This, I think, traces directly to the Johnson Auministration's habit of adopting
policies on the basis of a promise and a prayer instead of lasting results.
In its approach to the balance of payments problem, the Johnson Administration
has performed like a little boy who bandages up one injured finger only to bang the
one next to it with a hammer.
Our balance of payments problem currently seems as far away from solution as
ever, despite an occasional optimistic forecast by the Administration and improved
performance in 1965.
The improvement last year resulted because the banking community responded so
whole-heartedly to the Administration's request for a limit on your foreign lending.
The result, as you know, was a small inflow of funds for the year 1965. This made
it possible for the United States to show the smallest overall deficit--$1.3 billion--
in eight years.
But this was only a stop-gap measure at best. And our cutbacks in foreign
investment, while temporarily easing our balance of payments problem, will hurt us
in years to come. So this formula is not the answer.
A few weeks ago, during hearings before the House Banking and Currency Committee,
five members of the Federal Reserve Board were asked to comment on the Republican
prediction of a $2.5 billion deficit in our 1966 balance of payments. Nobody took
serious issue with that estimate.
GERAL
LIBRARY
(MORE)
-2-
I was very much surprised, because less than five months ago the Administration
was predicting a deficit one-tenth that size.
Last December the Federal Reserve Board tightened up on domestic credit with a
hike in the rediscount rate and the rate on time deposits. Yet the balance of
payments situation continues to worsen.
This means the theory that tight money alone produces beneficial shifts in
payment balances just doesn't hold up.
It turns out that other factors have more than cancelled out the balance of
payments benefits that might have resulted from last December's credit tightening.
For one thing, interest rates in Europe have continued to climb, and this has
nearly eliminated the impact of the Federal Reserve Board action.
To curb inflation, authorities on the Continent have leaned heavily on monetary
restraints as evidenced in the Dutch and German discount rate increases last month.
Stringent controls on commercial bank credit to the private sector of the economy are
the rule everywhere in Europe.
At the same time, except in France and Germany, government spending has added
materially to inflationary stresses and strains on already overburdened economies
throughout Europe.
Here in America we also have been plagued by inflation-and price boosts have
made U.S. exports less attractive while American demand for foreign imports has
continued high.
The result has been a dramatic and dangerous drop in our trade balance--exports
as against imports.
While our overall balance of payments deficit in 1965 was $1.3 billion--less
than half the $2.8 billion deficit in 1964--our trade balance surplus declined from
$6.7 billion in 1964 to $4.8 billion in 1965.
First quarter figures for this year indicate that our trade balance surplus in
1966 will fall below $4 billion. This is because our imports have been rising rapidly
while our exports are just barely holding at last year's level.
Had we maintained our trade balance at its 1964 level, we would have had an
overall balance of payments surplus last year and close to a balance this year.
Sagging exports and rising imports lie at the heart of our balance of payments
problem.
There are other factors, of course--travel abroad by an increasing number of
Americans, spending on the Vietnam War, the outflow of foreign aid dollars.
But I repeat what I said earlier--sagging exports and rising imports are the
core of our balance of payments problem. And it is domestic inflation generated by
Johnson Administration policies which has put our trade balance on a ski slide.
(MORE)
-3-
Our prices must be stable and competitive if American business is to recover its
former position in the world export market.
The Administration should be providing leadership in the formulating of domestic
economic policies if our balance of payments problem is to be solved. We are not
getting leadership. Instead we are getting emergency, finger-in-the-dike desperation
moves.
This is not the kind of problem which can await a consensus. It is not the kind
of problem which can be solved with luck and the old political formula of making the
fewest people angry.
The Administration should not be relying upon lopsided monetary policy--monetary
policy which in the case of last December's "Fed" action probably came too late.
Of course, monetary stringency is one method of curbing a boom that is getting
out of hand. But we must have a flexible, balanced and, above all, a coordinated
monetary and fiscal policy.
What do we have in place of such a solution? We have an Administration which
did virtually nothing to slow a boom that was getting out of hand and then criticized
the Federal Reserve Board for acting on its own.
And we have an Administration which has failed to use the federal budget in a
consistent manner as an instrument of economic stabilization.
This is the underlying cause of steadily rising prices and wages at home, and
the failure of American-made products to compete strongly enough in the world market.
Hence, it is the underlying cause of our worsened balance of payments situation and
our continued high gold outflow.
The federal budget normally should be balanced. There are exceptions to this
policy, of course-times of major military conflict or serious unemployment. But,
over the long haul, we should achieve a relative balance. We should achieve a
surplus in boom times and employ fiscal policy as a tool to reverse serious economic
downturns. Unfortunately, the Johnson Administration shows no concern for balancing
the federal budget or achieving a surplus at any time.
If the present Administration had not yielded to demands by some that Great
Society programs be expanded by billions of dollars despite our costly involvement in
Vietnam, price stability would be more than just a memory and we would have an
improved balance of payments situation. We would not see non-essential government
spending pushing up the price of American products, with a consequent unfavorable
impact on our trade balance surplus,
This Administration cannot do a good job of handling our balance of payments
problem because its basic approach to economics has developed the disease of
LIBRARY
politics-itis.
(MORE)
-4-
Now that the New Economics espoused by John Maynard Keynes has produced a
dangerously inflated boom, the Administration is reluctant to apply the other half
of his advice. Administration officials have turned their faces away from the Keynes
primer, which warns against the debasing of a country's currency and advises quick
remedial action to cool off an overheated economy. It's obvious that the White House
uses the New Economics when it is expedient to do so and rejects it when it proves
politically painful.
It is for political reasons that the Administration has refused to apply the
restraints needed to maintain price stability and to curb excesses in the economy.
Chief among the restraints found wanting is restraint in non-essential federal spending
Many people tend to discount much of what a professional politician says, so let
me call your attention to a recent poll of university and business economists by the
Chase Manhattan Bank.
A majority of the 340 university economists and the 220 business economists who
replied to the questionnaire declared that inflation was the most pressing economic
problem facing this nation today.
These economists recommended a broad-based attack on inflation, including
cutbacks in government spending, tightening of money and an increase in taxes. The
business economists put more emphasis on cuts in government spending, and the
university economists leaned more toward a tax increase.
Since the Johnson Administration has refused to revise its fiscal 1967 budget
downward and the overwhelming Democratic majorities in Congress are adding roughly
$3 billion to his spending requests, a tax increase may prove inevitable.
Indications are the President is stalling any request for a tax increase until
after the November election.
He also appears to have abandoned the 3.2 per cent wage-price guideposts, at
least as far as wages are concerned.
In that connection, I might note that 60 per cent of the business economists
responding to the Chase Manhattan poll opposed the guideposts as a technique for
restraining prices, and half of the university economists were against them.
The inflation we now are faced with had a relatively slow start because the
Eisenhower Administration succeeded in burying what might be called inflationary
psychology. But now inflation is here as a result of Johnson Administration policies.
Prices must be stabilized, particularly if we are to avoid a sharp rise in wage
increase demands, wage-push inflation, and a continued worsening of our balance of
payments situation.
Former Treasury Secretary C. Douglas Dillon, whose opinions certainly deserve
consideration, told Congress just a few days ago that "five or six billion dollars
(MORE)
-5-
of fiscal action" was necessary to halt inflation.
Mr. Dillon said federal spending should be reduced below the level of the
President's budget but that he despaired of this happening. He recommended a "modest,
across-the-board increase in taxes," and said it has been "clearly called for in the
past few months."
As I have done earlier in this talk, Mr. Dillon noted that our trade balance has
been worsening and so has our overall balance of payments situation.
This nation desperately needs an administration which will keep prices stable
and competitive if we are to have an economy sufficiently vigorous and efficient to
restore our trade surplus to its former levels.
With such an administration, American businessmen would recapture their old
position in domestic and foreign markets and we could stop worrying about our
balance of payments position and outflow of gold.
With such an administration, we could continue to invest in other countries,
and other countries in the full flush of confidence in the American dollar and
American business would invest here.
This then would be a truly healthy economy. The President, be he Democrat or
Republican, has the responsiblity to promote that kind of an economy.
But as the swing set would say, that's not what's happening.
We should be working harder and more effectively than we are to remove special
restrictions on sale of American goods abroad wherever those restrictions exist. We
should be exploring all possible means of encouraging American exports within the
limits of the overall national interest.
We should be getting our friends in Europe to pay their fair share of the cost
of defending the free world and of dealing with the explosive forces now erupting in
the developing nations of the world.
But, again, that's not what's happening.
Today the United States stands virtually alone in Vietnam--caught up in a war
which is costing us more than a billion dollars a month.
Where careful fiscal planning in a nation troubled by domestic inflation and
continuing gold outflow is critically important, the Johnson Administration has
repeatedly underestimated the cost of the Vietnam War and perhaps deliberately so.
The President's budget submitted to the Congress in 1965 underfunded the war by
some $15 billion for this fiscal year. In the next fiscal year, that which begins
July 1, the war again will be underfunded in a substantial amount.
The Johnson Administration's entire fiscal record is long on promises and short
on performance--on the domestic scene and in foreign affairs.
(MORE)
-6-
This Administration has over-promised and under-performed, over-attempted and
under-succeeded, under-estimated and over-excused throughout all its days in office.
This is particularly perilous in these crucial times--a time of showdown in the
ceaseless struggle between the Communist and Free Worlds, a showdown in what the
Communist Chinese cynically call a war of liberation.
Now is the time to show the rest of the world that the capitalistic system is
the best system ever devised to further the goals and dreams of man.
Now is the time to re-enlist our friends in Europe in that crusade.
I firmly believe that with proper leadership in the White House, inspiring
leadership, we could win the other nations of the Free World to our banner in a
progress march that would confound our enemies, further bless America and enhance
all of mankind.
Thank you
# # #