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Associated Industries, Inc., Cleveland, OH, March 10, 1967
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Associated Industries, Inc., Cleveland, OH, March 10, 1967
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The original documents are located in Box D22, folder "Associated Industries, Inc.,
Cleveland, OH, March 10, 1967" of the Ford Congressional Papers: Press Secretary and
Speech File at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. The Council donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Hostony SPEECH Ungan
1.8
a.
TO THE ASSOCIATED INDUSTRIES, INC., CLEVELAND, 0.
Bur. Great, great of Int. man Rw.
new brad
1/2/126
adam
FRIDAY, MARCH 10, 1967
THERE IS GROWING ACCEPTANCE IN AMERICA TODAY OF A
DANGEROUS MYTH. THAT MYTH IS THAT THE AMERICAN BUSINESSMAN
TODAY NEED HAVE NO CARE FOR THE MORROW BECAUSE THE
PRESIDENT OF THE UNITED STATES JUST WON'T LET THE ECONOMY
GO SOUR.
THE TALK GOES THAT THE PRESIDENT HAS TOO BIG A STAKE
IN PROSPERITY AS A POLITICAL ISSUE TO ALLOW EVEN A MILD
RECESSION TO DEVELOP.
TO BUY THIS KIND OF THINKING, YOU FIRST HAVE TO
ACCEPT TWO BASIC PREMISES.
ONE IS THAT THE PRESIDENT HAS THE POWER TO AVERT
FORD i LIBRARY GERALD
Digitized from Box D22 of The Ford Congressional Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library
-2-
A RECESSION AND TO KEEP THE ECONOMY HEALTHY. ANOTHER IS
THAT THE PRESIDENT HAS THE WILL AND THE WISDOM REQUIRED
TO KEEP BOUNCE IN THE ECONOMY AND PREVENT IMBALANCE.
THE PRESIDENT DOES HAVE TREMENDOUS POWER, OF COURSE,
BUT HIS POWER IS NOT UNLIMITED, AND IT WOULD BE EXCEEDINGLY
DANGEROUS IF IT WERE.
EVEN IF YOU ACCEPT THE FIRST PREMISE - - THAT THE PRESIDENT
HAS THE POWER TO AVERT RECESSIONS, CONTROL INFLATION AND
MAINTAIN ECONOMIC GROWTH--EVENTS OF THE RECENT PAST POINT
UP A PERFORMANCE THAT HAS FALLEN FAR SHORT OF THE MARK.
FORD LIBRARY
THE PAST IS PROLOGUE IN ECONOMICS AS IN OTHER ASPECTS
OF OUR LIVES AND OUR HISTORY AS A NATION. WITH LIGHT FROM
THE PAST, LET US EXAMINE THE MYTH THAT AMERICAN BUSINESS
ask the question-based - on performance
The nation
-3-
20 Lite House at
CAN ENTRUST THE HEALTH OF THE ECONOMY TO THE MAN NOW The Time Present
HOLDING THE HIGHEST OFFICE IN THE LAND.
WE KNOW THAT THE MASSIVE TAX CUTS OF 1964 AND 1965
TRIGGERED ONE OF THE GREATEST BOOMS THIS COUNTRY HAS
EVER SEEN. REPUBLICANS AND DEMOCRATS ALIKE SUPPORTED
THESE TAX REDUCTIONS.
I ALSO SUBMIT--AND IN MY VIEW THERE IS NO ARGUING
THIS--THAT THE JOHNSON ADMINISTRATION DOOMED THE BOOM
BY FAILING TO SLOW DOWN THE ECONOMY SUFFICIENTLY WHEN
IT BECAME OVERHEATED IN LATE 1965 AND EARLY 1966.
LET'S REVIEW WHAT HAPPENED TO TAKE THE BLOOM FROM
THE BOOM AND TRANSFORM THE ECONOMY INTO A SHAKY CREATURE
CURRENTLY AFFLICTED WITH ASSORTED ACHES AND PAINS.
-4-
INFLATION BECAME A DEFINITE THREAT IN LATE 1965. THE
FEDERAL RESERVE BOARD, WHICH FORTUNATELY IS INDEPENDENT
OF WHITE HOUSE POLITICAL INFLUENCE, RAISED THE REDISCOUNT
RATE TO THROTTLE DOWN THE MONEY SUPPLY.
INSTEAD OF WELCOMING THIS BLOW AGAINST INFLATIONARY
PRESSURES, PRESIDENT JOHNSON COMPLAINED ABOUT THE RESERVE
BOARD'S ACTION AND THEN PROCEEDED TO ACT AS THOUGH THE
DANGER OF STABILITY-WRECKING PRICE INCREASES DIDN'T EXIST.
HE DID THIS BY SENDING THE CONGRESS A GUNS-AND-BUTTER
BUDGET WHICH CONTINUED AND ACCELERATED THE SHARPEST UPTREND
IN FEDERAL SPENDING SINCE WORLD WAR 11. APPARENTLY, THAT'S
WHAT HE MEANT WHEN HE SAID, "LET US CONTINUE."
THE PRESIDENT DID NOT PROPOSE AN INCOME TAX INCREASE. GERAL FORD
LIBRARY
-5-
In 1966
natually
HE SAID NOTHING ABOUT A FIGHT AGAINST INFLATION OR ABOUT
SETTING WARTIME PRIORITIES. HE SPURNED ALL REPUBLICAN
from Insuriors from Repoblicans & many others
PLEAS THAT MON-ESSENTIAL DOMESTIC SPENDING BE CUT BECAUSE
THERE WAS A WAR ON, ONE WHICH HE AND HIS ADVISORS WELL
KNEW WOULD UNDOUBTEDLY BE OF GROWING INTENSITY AND
INCREASING COST.
THE PRESIDENT GAVE A TOKEN NOD IN THE DIRECTION OF
AN INFLATION FIGHT, BUT IT WAS LIKE SPLASHING A CUP OF
WATER ON A BONFIRE. HE PROPOSED--AND CONGRESS APPROVED--
REIMPOSITION OF EXCISE TAX CUTS VOTED IN 1965. HE ALSO
PROPOSED--AND CONGRESS AGREED--THAT COLLECTION OF
CORPORATE INCOME TAXES BE ACCELERATED AND THAT RATES ON
INDIVIDUAL INCOME TAX WITHHOLDING BE INCREASED.
FORD & LIBRARY GERALD
BUT FOR THE MOST PART PRESIDENT JOHNSON'S FISCAL
-6-
POLICIES LAST YEAR STIMULATED AN ALREADY OVERHEATED
ECONOMY AND BROUGHT ON THE UPSURGE IN PRICES WHICH
CONTINUES TO PLAGUE ALL AMERICANS AND PROMISES A NEW
ROUND OF PRICE RISES--COST-PUSH INFLATION WHERE LAST
YEAR WE HAD THE DEMAND-PULL VARIETY.
AS WE MOVED THROUGH 1966, THE ADMINISTRATION FAILED
TO ACT DECISIVELY TO HALT INFLATION. SEEING NO HELP
FROM THE WHITE HOUSE, THE RESERVE BOARD CONTINUED TO
TURN UP THE SCREWS ON INTEREST RATES. THE RESULT: THE
HIGHEST INTEREST RATES IN 40 YEARS, DRYING UP OF MORTGAGE
MONEY, GREATLY INCREASED PUBLIC BORROWING COSTS WHICH
GERALD LIURAGE
WILL BE A BURDEN TO TAXPAYERS FOR MANY YEARS TO COME,
AND A VIRTUAL DEPRESSION IN THE HOMEBUILDING INDUSTRY.
DETERMINED TO PUSH HIS GREAT SOCIETY PROGRAMS,
Poverty
-7-
PRESIDENT JOHNSON PURSUED POLICIES THAT FED INFLATION
AND HELPED PUSH UP INTEREST RATES. THE ADMINISTRATION
STEPPED UP ITS DOMESTIC AS WELL AS MILITARY SPENDING
AND WENT INTO THE SHORT-TERM MONEY MARKET TO BORROW THE
MONEY TO DO IT. ADMINISTRATION OFFICIALS USED THE DEVICE
OF THE PARTICIPATION SALES CERTIFICATE, A NEW, HIGH-INTEREST
BORROWING GIMMICK, AND THUS CONTRIBUTED TO THE DEMAND FOR
SHORT-TERM MONEY AND THE UPWARD PUSH ON INTEREST RATES.
HAVING IGNORED REPUBLICAN nesponsible DEMANDS THAT HE ELIMINATE
NON-ESSENTIAL DOMESTIC SPENDING, PRESIDENT JOHNSON ALSO
REJECTED THE SUGGESTION OF MOST PROMINENT ECONOMISTS AND
HIS OWN ECONOMIC ADVISERS THAT HE SEEK AN INCOME TAX
INCREASE.
FORD i LIBRARY 09V839
TREASURY SECRETARY HENRY FOWLER RECENTLY COMPLAINED
-8-
ABOUT "MONDAY MORNING QUARTERBACKING" WHEN FACED WITH
CRITICISM FROM THE JOINT ECONOMIC COMMITTEE OF THE
CONGRESS ABOUT ADMINISTRATION FISCAL AND MONETARY
POLICIES IN 1966.
MR. FOWLER SEEMS TO BE SAYING THAT THIS ADMINISTRATION
CANNOT LEARN FROM ITS MISTAKES. THIS IS ALSO LIKE SAYING
THAT IT DOESN'T MAKE SENSE FOR A FOOTBALL COACH TO USE
MOVIES OF LAST SATURDAY'S GAME SO THE BOYS CAN DO A
BETTER JOB COME NEXT SATURDAY.
WE'VE COME A LONG WAY IN FOOTBALL SINCE MY DAYS AT
THE UNIVERSITY OF MICHIGAN, WHEN THE STRATEGY WAS A
PUNT, A PASS AND A PRAYER. AND I TRUST WE'VE COME A
LONG WAY IN ECONOMICS AND THE ART OF MANAGING THE
GERALD FORD LIBRARY
ECONOMY. BUT JUST AS THERE ARE GOOD COACHES AND BAD
-9-
COACHES, THERE ARE GOOD MANAGERS AND BAD MANAGERS.
I SAID AT THE OUTSET THAT YOU CAN ONLY TRUST THE
HEALTH OF THE ECONOMY TO A CHIEF EXECUTIVE WITH THE
WILL AND THE WISDOM TO KEEP ZIP IN IT AND AVOID SERIOUS
ECONOMIC DISLOCATIONS.
IT'S CRYSTAL CLEAR TO ME WHY MR. JOHNSON DID NOT
SEEK AN INCOME TAX INCREASE IN 1966. /IT JUST HAPPENED
TO BE AN ELECTION YEAR There was an election last year.
THE PRESIDENT MOVED LAST SEPTEMBER TO SUSPEND THE
7 PER CENT INVESTMENT TAX CREDIT AS AN ALLEGED BLOW
AGAINST INFLATION. THAT MADE NOBODY MAD BUT BUSINESS.
GERALD
AS THE PRESIDENT'S AIDES HAVE REVEALED, HE BELIEVES
THE BEST POLITICS IS THE BEST ECONOMICS. I BELIEVE JUST
AS FIRMLY THAT THE BEST ECONOMICS IS THE BEST POLITICS.
-10-
I SUGGEST THOSE WHO FEEL THE PRESIDENT JUST WONT
LET ANYTHING BAD HAPPEN TO THE ECONOMY BEFORE THE 1968
ELECTION TAKE ANOTHER READING IN THE LIGHT OF PAST
EXPERIENCE.
LET'S LOOK AT THE CURRENT ECONOMIC PICTURE.
THERE IS SAG AND DRAG IN THE ECONOMY.
WE ARE IN THE MIDST OF A NEW TREMENDOUS FEDERAL
SPENDING SPLURGE.
$2 billion increase in Great Sincerely
THE PRESIDENT HAS PROPOSED A 6 PER CENT SURTAX ON
INDIVIDUAL AND CORPORATE INCOME.
BUSINESS PROFITS ARE CAUGHT JN A COST-PRICE SQUEEZE
AND ARE SHOWING A GENERAL DECLINE.
FORD LIBRARY
THE PRESIDENT HAS PROPOSED AN AVERAGE 20 PER CENT
-11-
INCREASE IN SOCIAL SECURITY BENEFITS, INVOLVING PAYROLL
TAX INCREASES ULTIMATELY ADDING UP TO 11.6 PER CENT
(COMBINED EMPLOYEE-EMPLOYER RATE) ON $10,800 OF INCOME.
EVEN ADMINISTRATION OFFICIALS ADMIT THAT A SOCIAL SECURITY
INCREASE OF THAT SIZE WOULD ADD TO INFLATIONARY PRESSURES.
CONSUMERS ARE BUYING LESS AND SAVING MORE. AUTO-
MOBILE SALES HAVE SLUMPED TO THE POINT WHERE MORE THAN
25,000 WORKERS HAVE BEEN LAID OFF. MAY I REMIND YOU THAT
THE AUTOMOBILE INDUSTRY IS THE BELLWETHER OF THE ECONOMY.
CREDIT IS EASING. WHILE THIS HELPS "AT HOME," THE
"HOT MONEY" THAT FLOWED INTO THIS COUNTRY FROM ABROAD
LAST YEAR BECAUSE OF OUR HIGH INTEREST RATES PROBABLY
WILL BEGIN SHIFTING BACK AND THUS AGGRAVATE OUR BAD
BALANCE OF PAYMENTS SITUATION.
FORD is LIBRARY GERALD
-12-
THE SHARP RISE IN THE COST OF LIVING LAST YEAR HAS
LAID THE FOUNDATION FOR A BIG UNION PUSH FOR WAGE INCREASES
IN 1967. ALL INDICATIONS ARE THAT THESE WAGE BOOSTS WILL
RUN GENERALLY FROM 5 TO 8 PER CENT.
THE AFL-CIO RECENTLY ANNOUNCED THAT LABOR WILL TRY
TO KEEP WAGES RISING AT LEAST AS FAST AS LIVING COSTS.
THAT SHOULD COME AS NO SURPRISE TO ANYBODY. THIS IS A
NATURAL CONSEQUENCE OF THE JOHNSON ADMINISTRATION'S
FAILURE TO MAINTAIN PRICE STABILITY IN 1966.
IN HIS ECONOMIC REPORT IN JANUARY, THE PRESIDENT
PREDICTED THAT CONSUMER PRICES WOULD RISE ABOUT 2.5 PER CENT
IN 1967 AS COMPARED WITH 3.5 PER CENT LAST YEAR. MY
GUESS IS THERE WILL BE A FLAREUP OF COST-PUSH INFLATION
THAT WILL MAKE THE PRESIDENT'S FIGURE LOOK RIDICULOUS.
GERA FORD LIBRARY
-13-
IN THAT CONNECTION, IT SEEMS STRANGE THAT AFL-CIO
PRESIDENT GEORGE MEANY SHOULD ENDORSE PRESIDENT JOHNSON
MORE THAN 20 MONTHS BEFORE THE 1968 ELECTION.
MR. JOHNSON, YOU MAY REMEMBER, PROMISED IN JANUARY
1966 TO SEND CONGRESS RECOMMENDATIONS FOR BETTER HANDLING
OF NATIONAL EMERGENCY STRIKES. NOTHING HAPPENED. AND
LAST JANUARY, A YEAR LATER, THE PRESIDENT DIDN'T EVEN
MENTION THE SUBJECT IN HIS 1967 STATE OF THE UNION MESSAGE.
MR. JOHNSON WAS UNABLE TO DELIVER TO ORGANIZED LABOR
ON HIS PROMISE TO REPEAL SECTION 14B OF THE TAFT-HARTLEY
ACT, THE RIGHT-TO-WORK PROVISION. PERHAPS HE IS TRYING
TO BALANCE THE SCALES A BIT BY FORGETTING ABOUT NATIONAL
EMERGENCY STRIKE LEGISLATION.
GERALD FORD LIBRARY
-14-
REPUBLICANS DISLIKE COMPULSORY ARBITRATION JUST AS
MUCH AS MR. MEANY. BUT WE DO BELIEVE SOME IMPROVEMENTS
CAN BE MADE IN THE GOVERNMENTS MACHINERY FOR DEALING
WITH NATIONAL EMERGENCY STRIKES. WE DO NOT ENVISAGE
ANTI-LABOR LEGISLATION OF ANY KIND. WE HAVE PROPOSED
THAT A BIPARTISAN COMMITTEE OF BOTH HOUSES OF CONGRESS
MAKE AN IMMEDIATE STUDY OF THE PROBLEM IN THE HOPE OF
BETTER PROTECTING THE PUBLIC INTEREST AND THE INTEREST
OF ALL CONCERNED.
THIS MATTER IS PARTICULARLY URGENT AT THIS TIME BECAUSE
ORGANIZED LABOR'S PUSH FOR WAGE INCREASES TO OFFSET THE
SHARP RISE IN LIVING COSTS MAY MAKE 1967 A YEAR OF
ABNORMAL LABOR-MANAGEMENT STRIFE.
FORD is LIBRARY GERALD
THE FAITH MANY BUSINESSMEN HAVE IN THE JOHNSON
-15-
ADMINISTRATION ASTOUNDS ME IN VIEW OF THE ADMINISTRATION'S
HANDLING OF WAGE-PRICE GUIDELINES, NOW DECEASED AND
UNLAMENTED.
THESE GUIDELINES WERE, OF COURSE, SIMPLY INFORMAL WAGE
AND PRICE CONTROLS. THE RECORD SHOWS THAT THE CONTROLS
WERE APPLIED IN ARBITRARY AND DISCRIMINATORY FASHION.
THE ADMINISTRATION USED A PICK-AND-CHOOSE TECHNIQUE,
SINGLING SOME PARTICULAR INDUSTRY FOR ATTACK, LETTING
OTHER PRICE INCREASES GO UNCENSORED AND GENERALLY IGNORING
WAGE INCREASES IN EXCESS OF THE GUIDELINES.
WHEN THE WAGE INCREASES WON BY THE AIRLINE MECHANICS
EXPLODED THE FICTION OF THE GUIDELINES, THE WHEELS WERE
REALLY OFF THE BUGGY.
GERALD FORD LIBRARY
-16-
IS THE PRESIDENT DOING A GOOD JOB OF MANAGING THE ECONOMY?
THE FEDERAL BUDGET IS SUNK DEEP IN DEFICIT AND HAS
BEEN FOR SIX FISCAL YEARS.
THE PRESIDENT HAS EXPRESSED A PREFERENCE FOR THE
NATIONAL INCOME ACCOUNTS BUDGET BECAUSE THIS MAKES HIS
PROJECTED FISCAL 1968 DEFICIT LOOK SMALLER. SO LET'S
LOOK AT IT.
ACCORDING TO THAT BUDGET, FEDERAL SPENDING TOTALLED
$118 BILLION IN FISCAL 1965 AND ROSE TO $132 BILLION IN
FISCAL 1966. THIS FISCAL YEAR FEDERAL SPENDING IS
PROJECTED AT $154 BILLION, AND FOR FISCAL 1968 IT'S
FIGURED AT $169 BILLION. THINK OF IT! THOSE ARE
FORD is LIBRARY GERALD
SUCCESSIVE ANNUAL SPENDING INCREASES OF $14 BILLION,
$21 BILLION AND $16 BILLION--A GRAND TOTAL OF $51 BILLION
-17-
MORE SPENDING IN JUST THREE YEARS.
IS ALL OF THIS INCREASED SPENDING DUE TO THE VIETNAM
WAR? OH, NO! LAY ASIDE THE VIETNAM EXPENDITURES AND
YOU STILL FIND AN INCREASE OF $29 BILLION IN FEDERAL
SPENDING BETWEEN FISCAL 1965 AND FISCAL 1968--AN ANNUAL
INCREASE OF ROUGHLY $10 BILLION. THIS IS TWO-AND-A-HALF
TIMES THE INCREASE IN THE ANNUAL RATE OF SPENDING IN THE
THREE YEARS FROM FISCAL 1962 TO FISCAL 1965.
REPUBLICANS HAVE CALLED FOR A NEW DIRECTION IN THE
NATION'S AFFAIRS. FEDERAL SPENDING IS GROWING IN EVERY
DIRECTION UNDER PRESIDENT JOHNSON.
THIS IS WHY THE CONGRESS MUST REEXAMINE EVERY FEDERAL
SPENDING PROGRAM. IF WE DON'T BRING FEDERAL SPENDING
GERALD FORD LIBRARY
-18-
UNDER CONTROL, THE VERY FOUNDATIONS OF OUR ECONOMIC
SYSTEM MAY BE WEAKENED.
THE PRESENT TREND IN WASHINGTON INFECTS PEOPLE WITH
THE DISINCENTIVE SICKNESS.
A PHILOSOPHY OF GIVEAWAY AND HIGH TAXES, A FORMULA
OF
SPEND AND SPEND.
TAX AND TAX
ELECT AND ELECT DISCOURAGES
THOSE OF OUR CITIZENS WHO WOULD LIKE TO KEEP A GOODLY
PORTION OF WHAT THEY MAKE.
WE ARE SPENDING BILLIONS TO FIGHT POVERTY. IT THEREFORE
SHOCKED THE HOUSE APPROPRIATIONS COMMITTEE LAST YEAR TO
DISCOVER THE DIRECT WELFARE COSTS ARE CONTINUING TO CLIMB.
FORD
THIRTY YEARS OF WELFARE HAVE ONLY SUSTAINED POVERTY.
LIBRARY
THERE MUST BE A BETTER ANSWER.
-19-
THERE IS GREAT NEED FOR INCENTIVE PROGRAMS IN THIS
COUNTRY IN PLACE OF GOVERNMENT GIVEAWAYS AND THE BIG STICK.
REPUBLICANS HAVE FASHIONED A PROGRAM WHICH WE BELIEVE
WOULD TRIGGER A MASSIVE ASSAULT ON URBAN ILLS AND ON
STRUCTURAL UNEMPLOYMENT, A TRUE PARTNERSHIP BETWEEN
GOVERNMENT AND INDUSTRY.
SHARING OF FEDERAL INCOME TAX REVENUE WITH THE CITIES
AND STATES IS THE KEY. THIS WOULD REVITALIZE STATE AND
LOCAL GOVERNMENT AND ALLOW LOCAL UNITS TO ATTACK THEIR
PROBLEMS IN PROPER PRIORITY AND WITHOUT THE DELAY AND
CRIPPLING CONTROLS BUILT INTO THE TRADITIONAL GRANT-IN-AID
PROGRAM.
GERALO FORD LIBRARY
WE PROPOSE, Too, TAX CREDITS TO PROMOTE A NATIONWIDE
-20-
ATTACK BY INDUSTRY ON THE PERILS OF AIR AND WATER POLLUTION
IN COOPERATION WITH LOCAL AND REGIONAL UNITS OF GOVERNMENT.
WE ALSO PROPOSE A TAX CREDIT TO TOUCH OFF LARGESCALE
ON-THE-JOB TRAINING BY THE BEST TRAINER OF THEM ALL--
INDUSTRY. THIS IS THE WAY TO ATTACK STRUCTURAL UNEMPLOYMENT
AND TO MOVE UP MEN ALREADY ON THE JOB. WE CALL IT OUR
HUMAN INVESTMENT ACT.
SUCH INCENTIVE PROGRAMS COUPLED WITH HEALTHY GROWTH
IN THE ECONOMY CAN DO MORE TO LICK POVERTY THAN ALL OF
THE GOVERNMENT'S ANTI-POVERTY PROGRAMS ROLLED TOGETHER.
WE WOULD SEEK TO PUT BUSINESS AND INDUSTRIAL TALENT
TO WORK ON ALL OF OUR SOCIAL PROBLEMS, CREATING A KIND
OF "CITIES INDUSTRY" WHICH WOULD APPLY THE PROBLEM-SOLVING
TECHNIQUES OF THE SPACE INDUSTRY.
BRARY
-21-
OUR NATION CAN ONLY BE AS STRONG AS ITS FREE-ENTERPRISE
ECONOMY. WE CANNOT SPEND OURSELVES RICH. THE NEW DEALERS
THREE DECADES AGO PROVED THE FALLACY OF THAT THEORY.
LET US, THEN, FOLLOW THE TRUE PATH TO PROGRESS FOR
AMERICA--PROGRESS THAT WILL BE REALIZED WHEN WE USE TO
THE FULLEST THE GOD-GIVEN TALENTS AND ABILITIES OF ALL
OUR CITIZENS AND LEAVE TO EACH AN ADEQUATE MEASURE OF HIS
REWARD.
---END---
ERALD FORD LIDREST
FOR RELEASE ON DELIVERY AT 12 NOON, FRIDAY, MARCH 10, 1967
AN ADDRESS BY HOUSE MINORITY LEADER GERALD R. FORD, R-MICH.
TO THE ASSOCIATED INDUSTRIES, INC., AT CLEVELAND, OHIO
There is growing acceptance in America today of a dangerous myth. That myth is
that the American businessman today need have no care for the morrow because the
President of the United States just won't let the economy go sour.
The talk goes that the President has too big a stake in prosperity as a politi-
cal issue to allow even a mild recession to develop.
To buy this kind of thinking, you first have to accept two basic premises.
One is that the President has the power to avert a recession and to keep the
economy healthy. Another is that the President has the will and the wisdom required
to keep bounce in the economy and prevent imbalance.
The President does have tremendous power, of course. But his power is not
unlimited, and it would be exceedingly dangerous if it were.
Even if you accept the first premise--that the President has the power to
avert recessions, control inflation and maintain economic growth-events of the
recent past point up a performance that has fallen far short of the mark.
The past is prologue in economics as in other aspects of our lives and our
history as a Nation. With light from the past, let us examine the myth that American
business can entrust the health of the economy to the man now holding the highest
office in the land.
We know that the massive tax cuts of 1964 and 1965 triggered one of the greatest
booms this country has ever seen. Republicans and Democrats alike supported these
tax reductions.
I also submit--and in my view there is no arguing this--that the Johnson
Administration doomed the boom by failing to slow down the economy sufficiently when
it became overheated in late 1965 and early 1966.
Let's review what happened to take the bloom from the boom and transform the
economy into a shaky creature currently afflicted with assorted aches and pains.
Inflation became a definite threat in late 1965. The Federal Reserve Board,
which fortunately is independent of White House political influence, raised the
rediscount rate to throttle down the money supply.
Instead of welcoming this blow against inflationary pressures, President
Johnson complained about the Reserve Board's action and then proceeded to act as
though the danger of stability-wrecking price increases didn't exist. He did this
by sending the Congress a guns-and-butter budget which continued and accelerated the
sharpest uptrend in federal spending since World War II. Apparently, that's what he
meant when he said, "Let us continue."
(MORE)
-2-
The President did not propose an income tax increase. He said nothing about a
fight against inflation or about setting wartime priorities. He spurned all
Republican pleas that non-essential domestic spending be cut because there was a war
on, one which he and his advisors well knew would undoubtedly be of growing intensity
and increasing cost.
The President gave a token nod in the direction of an inflation fight, but it
was like splashing a cup of water on a bonfire. He proposed--and Congress approved--
reimposition of excise tax cuts voted in 1965. He also proposed--and Congress agreed
--that collection of corporate income taxes be accelerated and that rates on indivi-
dual income tax withholding be increased.
But for the most part President Johnson's fiscal policies last year stimulated
an already overheated economy and brought on the upsurge in prices which continues to
plague all Americans and promises a new round of price rises--cost-push inflation
where last year we had the demand-pull variety.
As we moved through 1966, the Administration failed to act decisively to halt
inflation. Seeing no help from the White House, the Reserve Board continued to turn
up the screws on interest rates. The result: The highest interest rates in 40 years,
drying up of mortgage money, greatly increased public borrowing costs which will be
a burden to taxpayers for many years to come, and a virtual depression in the home-
building industry.
Determined to push his Great Society programs, President Johnson pursued
policies that fed inflation and helped push up interest rates. The Administration
stepped up its domestic as well as military spending and went into the short-term
money market to borrow the money to do it. Administration officials used the device
of the participation sales certificate, a new, high-interest borrowing gimmick, and
thus contributed to the demand for short-term money and the upward push on interest
rates.
Having ignored Republican demands that he eliminate non-essential domestic
spending, President Johnson also rejected the suggestion of most prominent economists
and his own economic advisers that he seek an income tax increase.
Treasury Secretary Henry Fowler recently complained about "Monday morning
quarterbacking" when faced with criticism from the Joint Economic Committee of the
Congress about Administration fiscal and monetary policies in 1966.
Mr. Fowler seems to be saying that this Administration cannot learn from its
mistakes. This is also like saying that it doesn't make sense for a football coach
to use movies of last Saturday's game so the boys can do a better job come next
Saturday.
(MORE)
-3-
We've come a long way in football since my days at the University of Michigan,
when the strategy was a punt, a pass and a prayer. And I trust we've come a long way
in economics and the art of managing the economy. But just as there are good coaches
and bad coaches, there are good managers and bad managers.
I said at the outset that you can only trust the health of the economy to a
Chief Executive with the will and the wisdom to keep zip in it and avoid serious
economic dislocations.
It's crystal clear to me why Mr. Johnson did not seek an income tax increase
in 1966. It just happened to be an election year.
The President moved last September to suspend the 7 per cent investment tax
credit as an alleged blow against inflation. That made nobody mad but business.
As the President's aides have revealed, he believes the best politics is the
best economics. I believe just as firmly that the best economics is the best politics.
I suggest those who feel the President just won't let anything bad happen to
the economy before the 1968 election take another reading in the light of past
experience.
Let's look at the current economic picture.
There is sag and drag in the economy.
We are in the midst of a new tremendous federal spending splurge.
The President has proposed a 6 per cent surtax on individual and corporate
income.
Business profits are caught in a cost-price squeeze and are showing a general
decline.
The President has proposed an average 20 per cent increase in Social Security
benefits, involving payroll tax increases ultimately adding up to 11.6 per cent
(combined employee-employer rate) on $10,800 of income. Even Administration
officials admit that a Social Security increase of that size would add to inflationary
pressures.
Consumers are buying less and saving more. Automobile sales have slumped to
the point where more than 25,000 workers have been laid off. May I remind you that
the automobile industry is the bellwether of the economy.
Credit is easing. While this helps "at home," the "hot money" that flowed into
this country from abroad last year because of our high interest rates probably will
begin shifting back and thus aggravate our bad balance of payments situation.
The sharp rise in the cost of living last year has laid the foundation for a
big union push for wage increases in 1967. All indications are that these wage
boosts will run generally from 5 to 8 per cent.
(MORE)
-4-
The AFL-CIO recently announced that labor will try to keep wages rising at
least as fast as living costs. That should come as no surprise to anybody. This
is a natural consequence of the Johnson Administration's failure to maintain price
stability in 1966.
In his Economic Report in January, the President predicted that consumer prices
would rise about 2.5 per cent in 1967 as compared with 3.5 per cent last year. My
guess is there will be a flareup of cost-push inflation that will make the President's
figure look ridiculous.
In that connection, it seems strange that AFL-CIO President George Meany should
endorse President Johnson more than 20 months before the 1968 election.
Mr. Johnson, you may remember, promised in January 1966 to send Congress
recommendations for better handling of national emergency strikes. Nothing happened.
And last January, a year later, the President didn't even mention the subject in his
1967 State of the Union Message.
Mr. Johnson was unable to deliver to organized labor on his promise to repeal
Section 14B of the Taft-Hartley Act, the Right-To-Work provision. Perhaps he is
trying to balance the scales a bit by forgetting about national emergency strike
legislation.
Republicans dislike compulsory arbitration just as much as Mr. Meany. But we
do believe some improvements can be made in the government's machinery for dealing
with national emergency strikes. We do not envisage anti-labor legislation of any
kind. We have proposed that a bipartisan committee of both Houses of Congress make
an immediate study of the problem in the hope of better protecting the public
interest and the interest of all concerned.
This matter is particularly urgent at this time because organized labor's push
for wage increases to offset the sharp rise in living costs may make 1967 a year of
abnormal labor-management strife.
The faith many businessmen have in the Johnson Administration astounds me in
view of the Administration's handling of wage-price guidelines, now deceased and
unlamented.
These guidelines were, of course, simply informal wage and price controls. The
record shows that the controls were applied in arbitrary and discriminatory fashion.
The Administration used a pick-and-choose technique, singling some particular industry
for attack, letting other price increases go uncensored and generally ignoring wage
increases in excess of the guidelines.
When the wage increases won by the airline mechanics exploded the fiction of
the guidelines, the wheels were really off the buggy.
(MORE)
-5-
Is the President doing a good job of managing the economy?
The federal budget is sunk deep in deficit and has been for six fiscal years.
The President has expressed a preference for the National Income Accounts
Budget because this makes his projected fiscal 1968 deficit look smaller. So let's
look at it.
According to that budget, federal spending totalled $118 billion in fiscal 1965
and rose to $132 billion in fiscal 1966. This fiscal year federal spending is pro-
jected at $154 billion, and for fiscal 1968 it's figured at $169 billion. Think of
it! Those are successive annual spending increases of $14 billion, $21 billion and
$16 billion--a grand total of $51 billion more spending in just three years.
Is all of this increased spending due to the Vietnam War? Oh, no! Lay aside
the Vietnam expenditures and you still find an increase of $29 billion in federal
spending between fiscal 1965 and fiscal 1968--an annual increase of roughly $10
billion. This is two-and-a-half times the increase in the annual rate of spending
in the three years from fiscal 1962 to fiscal 1965.
Republicans have called for a New Direction in the Nation's affairs. Federal
spending is growing in every direction under President Johnson.
This is why the Congress must reexamine every federal spending program. If we
don't bring federal spending under control, the very foundations of our economic
system may be weakened.
The present trend in Washington infects people with the Disincentive Sickness.
A philosophy of giveaway and high taxes, a formula of spend and spend, tax and
tax, elect and elect discourages those of our citizens who would like to keep a
goodly portion of what they make.
We are spending billions to fight poverty. It therefore shocked the House
Appropriations Committee last year to discover the direct welfare costs are con-
tinuing to climb.
Thirty years of welfare have only sustained poverty. There must be a better
answer.
There is great need for incentive programs in this country in place of govern-
ment giveaways and the big stick.
Republicans have fashioned a program which we believe would trigger a massive
assault on urban ills and on structural unemployment, a true partnership between
government and industry.
Sharing of federal income tax revenue with the cities and states is the key.
This would revitalize state and local government and allow local units to attack
their problems in proper priority and without the delay and crippling controls built
into the traditional grant-in-aid program.
(MORE)
-6-
We propose, too, tax credits to promote a nationwide attack by industry on the
perils of air and water pollution in cooperation with local and regional units of
government.
We also propose a tax credit to touch off largescale on-the-job training by
the best trainer of them all, industry. This is the way to attack structural
unemployment and to move up men already on the job. We call it our Human Investment
Act.
Such incentive programs coupled with healthy growth in the economy can do more
to lick poverty than all of the government's anti-poverty programs rolled together.
We would seek to put business and industrial talent to work on all of our
social problems, creating a kind of "cities industry" which would apply the problem-
solving techniques of the space industry.
Our Nation can only be as strong as its free-enterprise economy. We cannot
spend ourselves rich. The New Dealers three decades ago proved the fallacy of that
theory.
Let us, then, follow the true path to progress for America--progress that will
be realized when we use to the fullest the God-given talents and abilities of all
our citizens and leave to each an adequate measure of his reward.
###
FOR RELEASE ON DELIVERY AT 12 NOON, FRIDAY, MARCH 10, 1967
AN ADDRESS BY HOUSE MINORITY LEADER GERALD R. FORD, R-MICH.
TO THE ASSOCIATED INDUSTRIES, INC,, AT CLEVELAND, OHIO
There is growing acceptance in America today of a dangerous myth. That myth is
that the American businessman today need have no care for the morrow because the
President of the United States just won't let the economy go sour.
The talk goes that the President has too big a stake in prosperity as a politi-
cal issue to allow even a mild recession to develop.
To buy this kind of thinking, you first have to accept two basic premises.
One is that the President has the power to avert a recession and to keep the
economy healthy. Another is that the President has the will and the wisdom required
to keep bounce in the economy and prevent imbalance.
The President does have tremendous power, of course. But his power is not
unlimited, and it would be exceedingly dangerous if it were.
Even if you accept the first premise that the President has the power to
avert recessions, control inflation and maintain economic growth-events of the
recent past point up a performance that has fallen far short OF the mark.
The past is prologuè in economics as in other aspects of our lives and our
history as a Nation With light from the past, let us examine the myth that American
business can entrust the health of the economy to the man now holding the highest
office in the land.
We know that the massive tax cuts of 1964 and 1965 triggered one of the greatest
booms this country has ever seen. Republicans and Democrats alike supported these
tax reductions.
I also submit--and in my view there is no arguing this--that the Johnson
Administration doomed the boom by failing to slow down the economy sufficiently when
it became overheated in late 1965 and early 1966.
Let's review what happened to take the bloom from the boom and transform the
economy into a shaky creature currently afflicted with assorted aches and pains.
Inflation became a definite threat in late 1965. The Federal Reserve Board,
which fortunately is independent of White House political influence, raised the
rediscount rate to throttle down the money supply.
Instead of welcoming this blow against inflationary pressures, President
Johnson complained about the Reserve Board's action and then proceeded to act as
though the danger of stability-wrecking price increases didn't exist. He did this
by sending the Congress a guns-and-butter budget which continued and accelerated the
sharpest uptrend in federal spending since World War II. Apparently, that's what he
LIBRARY
meant when he said, "Let us continue."
(MORE)
-2-
The President did not propose an income tax increase. He said nothing about a
fight against inflation or about setting wartime priorities. He spurned all
Republican pleas that non-essential domestic spending be cut because there was a war
on, one which he and his advisors well knew would undoubtedly be of growing intensity
and increasing cost.
The President gave a token nod in the direction of an inflation fight, but it
was like splashing a cup of water on a bonfire. He proposed--and Congress approved--
reimposition of excise tax cuts voted in 1965. He also proposed--and Congress agreed
--that collection of corporate income taxes be accelerated and that rates on indivi-
dual income tax withholding be increased.
But for the most part President Johnson's fiscal policies last year stimulated
an already overheated economy and brought on the upsurge in prices which continues to
plague all Americans and promises a new round of price rises--cost-push inflation
where last year we had the demand-pull variety.
As we moved through 1966, the Administration failed to act decisively to halt
inflation. Seeing no help from the White House, the Reserve Board continued to turn
up the screws on interest rates. The result: The highest interest rates in 40 years,
drying up of mortgage money, greatly increased public borrowing costs which will be
a burden to taxpayers for many years to come, and a virtual depression in the home-
building industry.
Determined to push his Great Society programs, President Johnson pursued
policies that fed inflation and helped push up interest rates. The Administration
stepped up its domestic as well as military spending and went into the short-term
money market to borrow the money to do it. Administration officials used the device
of the participation sales certificate, a new, high-interest borrowing gimmick, and
thus contributed to the demand for short-term money and the upward push on interest
rates.
Having ignored Republican demands that he eliminate non-essential domestic
spending, President Johnson also rejected the suggestion of most prominent economists
and his own economic advisers that he seek an income tax increase.
Treasury Secretary Henry Fowler recently complained about "Monday morning
quarterbacking" when faced with criticism from the Joint Economic Committee of the
Congress about Administration fiscal and monetary policies in 1966.
Mr. Fowler seems to be saying that this Administration cannot learn from its
mistakes. This is also like saying that it doesn't make sense for a football coach
to use movies of last Saturday's game so the boys can do a better job come next
Saturday.
(MORE)
-3-
We've come a long way in football since my days at the University of Michigan,
when the strategy was a punt, a pass and a prayer. And I trust we've come a long way
in economics and the art of managing the economy. But just as there are good coaches
and bad coaches, there are good managers and bad managers.
I aaid at the outset that you can only trust the health of the economy to a
Chief Executive with the will and the wisdom to keep zip in it and avoid serious
economic dislocations.
It's crystal clear to me why Mr. Johnson did not seek an income tax increase
in 1966. It just happened to be an election year.
The President moved last September to suspend the 7 per cent investment tax
credit as an alleged blow against inflation. That made nobody mad but business.
As the President's aides have revealed, he believes the best politics is the
best economics. I believe just as firmly that the best economics is the best politics.
I suggest those who feel the President just won't let anything bad happen to
the economy before the 1968 election take another reading in the light of past
experience.
Let's look at the current economic picture.
There is sag and drag in the economy.
We are in the midst of a new tremendous federal spending splurge.
The President has proposed a 6 per cent surtax on individual and corporate
income.
Business profits are caught in a cost-price squeeze and are showing a general
decline.
The President has proposed an average 20 per cent increase in Social Security
benefits, involving payroll tax increases ultimately adding up to 11.6 per cent
(combined employee-employer rate) on $10,800 of income. Even Administration
officials admit that a Social Security increase of that size would add to inflationary
pressures.
Consumers are buying less and saving more. Automobile sales have slumped to
the point where more than 25,000 workers have been laid off. May I remind you that
the automobile industry is the bellwether of the economy.
Credit is easing. While this helps "at home," the "hot money" that flowed into
this country from abroad last year because of our high interest rates probably will
begin shifting back and thus aggravate our bad balance of payments situation.
The sharp rise in the cost of living last year has laid the foundation for a
big union push for wage increases in 1967. All indications are that these wage
boosts will run generally from 5 to 8 per cent.
(MORE)
-4-
The AFL-CIO recently announced that labor will try to keep wages rising at
least as fast as living costs. That should come as no surprise to anybody. This
is a natural consequence of the Johnson Administration's failure to maintain price
stability in 1966.
In his Economic Report in January, the President predicted that consumer prices
would rise about 2.5 per cent in 1967 as compared with 3.5 per cent last year. My
guess is there will be a flareup of cost-push inflation that will make the President's
figure look ridiculous.
In that connection, it seems strange that AFL-CIO President George Meany should
endorse President Johnson more than 20 months before the 1968 election.
Mr. Johnson, you may remember, promised in January 1966 to send Congress
recommendations for better handling of national emergency strikes. Nothing happened.
And last January, a year later, the President didn't even mention the subject in his
1967 State of the Union Message.
Mr. Johnson was unable to deliver to organized labor on his promise to repeal
Section 14B of the Taft-Hartley Act, the Right-To-Work provision. Perhaps he is
trying to balance the scales a bit by forgetting about national emergency strike
legislation.
Republicans dislike compulsory arbitration just as much as Mr. Meany. But we
do believe some improvements can be made in the government's machinery for dealing
with national emergency strikes. We do not envisage anti-labor legislation of any
kind. We have proposed that a bipartisan committee of both Houses of Congress make
an immediate study of the problem in the hope of better protecting the public
interest and the interest of all concerned.
This matter is particularly urgent at this time because organized labor's push
for wage increases to offset the sharp rise in living costs may make 1967 a year of
abnormal labor-management strife.
The faith many businessmen have in the Johnson Administration astounds me in
view of the Administration's handling of wage-price guidelines, now deceased and
unlamented.
These guidelines were, of course, simply informal wage and price controls. The
record shows that the controls were applied in arbitrary and discriminatory fashion.
The Administration used a pick-and-choose technique, singling some particular industry
for attack, letting other price increases go uncensored and generally ignoring wage
increases in excess of the guidelines.
When the wage increases won by the airline mechanics exploded the fiction of
the guidelines, the wheels were really off the buggy.
(MORE)
-5-
Is the President doing a good job of managing the economy?
The federal budget is sunk deep in deficit and has been for six fiscal years.
The President has expressed a preference for the National Income Accounts
Budget because this makes his projected fiscal 1968 deficit look smaller. So let's
look at it.
According to that budget, federal spending totalled $118 billion in fiscal 1965
and rose to $132 billion in fiscal 1966. This fiscal year federal spending is pro-
jected at $154 billion, and for fiscal 1968 it's figured at $169 billion. Think of
it! Those are successive annual spending increases of $14 billion, $21 billion and
$16 billion--a grand total of $51 billion more spending in just three years.
Is all of this increased spending due to the Vietnam War? Oh, no! Lay aside
the Vietnam expenditures and you still find an increase of $29 billion in federal
spending between fiscal 1965 and fiscal 1968--an annual increase of roughly $10
billion. This is two-and-a-half times the increase in the annual rate of spending
in the three years from fiscal 1962 to fiscal 1965.
Republicans have called for a New Direction in the Nation's affairs. Federal
spending is growing in every direction under President Johnson.
This is why the Congress must reexamine every federal spending program. If we
don't bring federal spending under control, the very foundations of our economic
system may be weakened.
The present trend in Washington infects people with the Disincentive Sickness.
A philosophy of giveaway and high taxes, a formula of spend and spend, tax and
tax, elect and elect discourages those of our citizens who would like to keep a
goodly portion of what they make.
We are spending billions to fight poverty. It therefore shocked the House
Appropriations Committee last year to discover the direct welfare costs are con-
tinuing to climb.
Thirty years of welfare have only sustained poverty. There must be a better
answer.
There is great need for incentive programs in this country in place of govern-
ment giveaways and the big stick.
Republicans have fashioned a program which we believe would trigger a massive
assault on urban ills and on structural unemployment, a true partnership between
government and industry.
Sharing of federal income tax revenue with the cities and states is the key.
This would revitalize state and local government and allow local units to attack
their problems in proper priority and without the delay and crippling controls built
into the traditional grant-in-aid program.
(MORE)
-6-
We propose, too, tax credits to promote a nationwide attack by industry on the
perils of air and water pollution in cooperation with local and regional units of
government.
We also propose a tax credit to touch off largescale on-the-job training by
the best trainer of them all, industry. This is the way to attack structural
unemployment and to move up men already on the job. We call it our Human Investment
Act.
Such incentive programs coupled with healthy growth in the economy can do more
to lick poverty than all of the government's anti-poverty programs rolled together.
We would seek to put business and industrial talent to work on all of our
social problems, creating a kind of "cities industry" which would apply the problem-
solving techniques of the space industry.
Our Nation can only be as strong as its free-enterprise economy. We cannot
spend ourselves rich. The New Dealers three decades ago proved the fallacy of that
theory.
Let us, then, follow the true path to progress for America--progress that will
be realized when we use to the fullest the God-given talents and abilities of all
our citizens and leave to each an adequate measure of his reward.
# # #