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Board of Directors, National Petroleum Refiners Association, Mayflower Hotel, Washington, DC, September 19, 1967
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Board of Directors, National Petroleum Refiners Association, Mayflower Hotel, Washington, DC, September 19, 1967
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The original documents are located in Box D22, folder "Board of Directors, National
Petroleum Refiners Association, Mayflower Hotel, Washington, DC, September 19, 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States of America his copyrights in all of his unpublished writings in National Archives collections.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.
Digitized from Box D22 of The Ford Congressional Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library
A SPEECH BY REP. GERALD R. FORD, R-MICH., BEFORE THE BOARD OF DIRECTORS OF
THE NATIONAL PETROLEUM REFINERS ASSOCIATION, AT 8 A.M. TUESDAY, SEPT. 19, AT
THE MAYFLOWER HOTEL.
Is the Federal Government the repository of all the wisdom (m America?
It is pretty early in the morning to pose such a question but I ask you to
think about it because it is central to what has been happening in this country since
January, 1966.
My own answer is that we have in Washington an Administration which professes
to have all the answers despite the fact that all of the problems are continuing.
In fact, we now have many more problems than we did seven years age and they are
much bigger.
To put it in blunt, non-academic language, I believe there is a know-it-all
attitude on the part of the Administration which is directly responsible for many
of the ills of the Nation. I think it accounts for the fact that many of our prob-
lems are going unsolved.
It is this attitude which leads government to take a go-it-alone approach in
attacking slum conditions instead of enlisting the skills and resources of private
enterprise in the fight.
It is this attitude which promots Government to interfere--not assist, but
meddle--in the affairs of business and industry.
It is this attitude which leads Government to engage in unofficial price
fixing through various kinds of pressure, coercive action, dewnright blackmail.
This is what we have experienced since 1961. But you may have noticed that
recently the steam has gone out of the tactic. There is movement but no action,
smoke but no fire. The reason the air has gone out of the balloon is that this
Administration has so mismanaged the Nation's economy as to lack any real muscle
in its latest attempts at unofficial price-fixing.
I understand that some people in the Administration now look upon the famous
1962 confrontation between the steel industry and the White House over prices as
childish.
That's their word, not mine, so I am not being political. I suppose they are
\
using it to describe Bobby Kennedy's announcement that he had ordered a Gradd
Jury investigation of the steel price increases and his action in routing news
reporters out of bed in the middle of the night for questioning by the FBI. It
LIBRARY
could also describe the fanfare over Defense Secretary McNamara's order that all
Pentagon steel purchases be shifted to companies which had not raised their prices.
You could also say it was childish for the White House to threaten the dumping
of aluminum stockpiles onto the market if the aluminum producers did not rell
back their announced price increases in the fall of 1965.
And, I don't know, maybe you men feel it was childish for the Interior Depart-
ment to threaten you with a flood of imports last February when some refiners
râised the price of gasoline a penny a gallon.
Some may call these Government actions childish. I say they add up to black-
mail.
This Administration, in effect, is saying it is smarter than the men who run
the great industries of America. This Administration is saying you don't know how
to run your business and so they have to tell you what to do.
What has happened to the so-called free enterprise wystem in this country?
Who's running it? The Government or the leaders of industry? Whatever happened
to the forces of competition? Do we allow these forces to operate or do we take
this Administration's word on what the level of prices and wages should be?
In its latest price clash with the steel industry, the White House backed
off without any apparent attempts at coercion.
I don't think it was because this Administration had a change of heart in its
relations with business and industry. I don't think it was because Administration
officials have lost faith in themselves as fountains of wisdom. I think it was
because this Administration has made such a mess of managing the economy that it
could do nothing but make an empty gesture.
This Administration talks about fighting inflation. I and others have pointed
out that the fight against inflation should have been launched early in 1966 with
substantial cuts in domestic spending or a tax increase or both. The Administmation's
present push for An income tax increase comes almost two years too late.
Am I speaking in a partisan vein? Let me remind you that the International
Monetary Fund in an annual report issued earlier this month criticized the United
States for being too slow to fight inflation in 1966 and for depending too heavily
on tight money as the answer. The IMF report went on to say that these past mistakes
probably will prevent us from increasing our surplus of exports over imports, which
we must do if we are to reduce the U.S. balance of payments deficit.
The inflation we experiencedián 1966 was demand-pull inflation--too much money
chasing too few goods. Now we are plagued with cost-push inflation--price increases
prompted by the increased cost of doing business and/growing profit squeeze in some
industries.
In late 1965 and early 1966 the economy became over-heated. The Administration
refused to cut Federal non-defense spending to cool it off. In fact, the Adminis-
tration continued to stimulate the economy.
When the White House refused to act against inflation, the Federal Reserve
Board raised interest rates as a brake on the economy. Interest rates soared to
the highest level in more than four decades, but the consumer price index rang up
a 3.3 per cent ràse for the year.
When the Administration finally moved against inflation it was to suspend the
7 per cent investment tax credit. This was done against the advice of Republicans.
Last January, the Republican Leadership in the Congress urged immediate restor-
ation of the investment tax credit. The Administration initially ignored our pleas
despite the obvious effeening of the economy in late 1966. It was only after the
damage was done that the Administration moved to have the investment tax credit
restored.
The Republican Leadership has also urged repeatedly that a system of priorities
be set up so that this Nation could work in organized fashion toward a set of
national goals.
Instead we have had business as ssual and butter along with guns while fighting
a war that is draining this country of men and wealth. It's time the Administration
recognised that the war in Vietnam is this country's No. 1 priority, that we must
end it quickly and honorably before we can tedd in proper measure to the rest of
the Nation's business.
After a period of damaging demand-pull inflation and a slump in the economy,
Congress now is being asked to impose . 10 per cent surtax on individual and corporate
income. This tax on a tax looms at a time of great uncertainty in the economy--a
time when a majority of the economic indicators are pointing downward.
The Administration cites national employment figures as an argument for the
10 per cent surtax. They say little about the fact that businessea again have
scaled down their capital spending for this year and that it will be a tiny fraction
compared with the 16.7 per cent rise in 1966.
The proposed tax increase is supposed to be a weapon against inflation. But
the facts are that the kind of inflation we now are experiencing is primarily the
cost-push type--increases in the cost of doing business being passed along to the
consumer. The increased tax on corporate income would, of course, be an added
BRARY
cost of doing business. Yet the Administration is actively engaged in obtaining
business endorsements for the proposed tax increase.
-4-
I said at the outset that this Administration operates on the premise that
it is the repository of all wisdom. If you are inclined to accept this philosophy,
look again. As a famous Democrat, Alfred E. Smith, was fond of saying, "Let's
look at the record."
The Administration calls the proposed 10 per cent tax surcharge a war tax.
What are the facts?
It was in fiscal 1966 that Vietnam spending began to spurt tremendously. But
if we lay aside the spending attributable to Vietnam, we still find a $29 billion
increase in federal spending between fiscal 1965 and fiscal 1968--or an annual
increase of about $10 billion.
The record shows that this is two-and-a-helf times as large as the annual rate
of increase in total Federal spending during the three preceding fiscal years--from
fiscal 1962 to fiscal 1965.
That's the record, gentlemen. Meither the Vietnam War nor even total defense
expenditures explains the tremendous surge in Federal spending that began in 1965.
Federal spending is now growing in every direction, and yet the President is
asking his friends in the United States Senate to restore all of the cuts the House
has made in his spending requests for fáscal 1968.
The record shows that since 1960 our population has grown by 10 per cent. In
that same period, the Federal Government's civilian bureaucracy has swelled by
25 per cent; the cost of government payrolls, including the military, has grown by
75 per cent; the total of all government spending has risen 83 per cent; Federal
non-defense spending is up 97 per cent.
In 1965 the Administration was pushing its Great Society programs. Officials
knew that Vietnam costs would run $10 billion higher than the official estimate but
they denied this in testimony before committees of the Congress. Had they owned up
to it, there would have been a public outery for non-defense spending restraints
and demands for a hold-down on Great Society programming.
Now we are facing an estimated fiscal 1968 deficit of $25 to $30 billion.
We were told about this red ink deluge only recently by Administration officials--
long after the Republican National Coordinating Committee had predicted a deficit
of exactly those proportions.
In pursuing its request for a 10 per cent surtax, the Administration offers a
vague promise to cut roughly $2 billion in non-defense spending--after Congress has
completed work on the appropriation bills. At the same time, the President is
pressuring the Congress to give him every dime he asked for last January. And at
the same time, the Administration tells us there is no escape from a tax increase.
I submit that if the Administration would cooperate fully with the Congress,
Federal spending not connected with the Vietnam War could be reduced or deferred
sufficiently to avoid a tax increase.
At this time--with softness in the economy and the disruption caused by the
auto strike--I cannot support a tax increase.
In view of this Administration's record on spending, I do not think the tax
increase would be temporary. It would be a vehicle for a continued surge in
Federal non-defense spending--a trend that must be brought under control.
We have reviewed the record of this Administration which seeks to substitute
its economics for that of private business, an Administration which believes that
Big Daddy always knows best.
Everyone agrees that price stability should be one of our top objectives.
But relative price stability will come only through sound economic growth--growth
which is fostered by the proper mix of fiscal and monetary policy in Washington and
courage at the top to take the actions needed at the time they are needed.
Obviously three still are people in this country who haven't learned that
lasting assurance of price stability can only come from the discipline of a free
market and from responsible actions by business and labor leaders.
I might add that sound and impartial government generates the kind of stmos-
phere which helpp business and labor leaders to act responsibly.
It is sound and impartial government which is the key to price stability, not
Big Daddy government which substitutes its wisdom for that of the private sector.
The American people can have sound government again if only they will choose
their elective leaders carefully and intelligently. Thank you.
####
FOR RELEASE IN AM's OF TUESDAY, SEPTEMBER 19, 1967
A SPEECH BY REP. GERALD R. FORD, R-MICH.
BEFORE THE BOARD OF DIRECTORS OF
THE NATIONAL PETROLEUM REFINERS ASSOCIATION
TUESDAY, SEPTEMBER 19, 1967
THE MAYFLOWER HOTEL
Is the Federal Government the repository of all the wisdom in America?
It is pretty early in the morning to pose such a question but I ask you to
think about it because it is central to what has been happening in this country
in the last several years.
My own answer is that we have in Washington an Administration which professes
to have all the answers despite the fact that all of the problems are continuing.
In fact, we now have many more problems than we did seven years ago and they
are much bigger.
To put it in blunt, non-academic language, I believe there is a know-it-all
attitude on the part of the Administration which is directly responsible for
many of the ills of the Nation. It accounts for the fact that many of our
problems are going unsolved.
It is this attitude which leads Government to take a go-it-alone approach
in attacking slum conditions instead of enlisting the skills and resources of
private enterprise in the fight.
It is this attitude which prompts Government to int erfere--not assist, but
meddle--in the affairs of business and industry.
It is this attitude which leads Government to engage in unofficial price
fixing through various kinds of pressure, coercive action, downright blackmail.
This is what we have experienced in recent years. But you may have noticed
that of late the steam has gone out of the tactic. There is movement but no
action, smoke but no fire. The reason the air has gone out of the balloon is
that this Administration has so mismanaged the Nation's economy as to lack any
real muscle in its latest attempts at unofficial price-fixing.
I understand that some people in the Administration now look upon the famous
1962 confrontation between the steel industry and the White House over prices as
childish.
That's their word, not mine, so I am not being political. I suppose they
are using it to describe the then Attorney General's announcement that he had
ordered a Grand Jury investigation of the steel price increases and his action
(more)
-2-
in routing news reporters out of bed in the middle of the night for questioning
by the FBI. It could also describe the fanfare over Defense Secretary McNamara's
order that all Pentagon steel purchases be shifted to companies which had not
raised their prices.
You could also say it was childish for the White House to threaten the
dumping of aluminum stockpiles onto the market if the aluminum producers did not
roll back their announced price increases in the fall of 1965.
And, I don't know, maybe you men feel it was childish for the Interior
Department to threaten you with a flood of imports last February when some
refiners raised the price of gasoline a penny a gallon.
Some may call these Government actions childish. I say they add up to or
certainly border on blackmail.
This Administration, in effect, is saying it is smarter than the executives
who run the great industries of America. This Administration is saying you don't
know how to run your business and so they have to tell you what to do.
What has happened to the so-called free enterprise system in this country?
Who's running it? The Government or the leaders of industry? Whatever happened
to the forces of competition? Do we allow these forces to operate or do we take
this Administration's word on what the level of prices and wages should be?
In its latest price clash with the steel industry, the White House backed
off without any apparent attempts at coercion. I suspect Mr. Ackley's case was
weak or perhaps a lesson had been learned from previous ventures.
I don't think it was because this Administration had a fundamental change
of heart in its relations with business and industry. I don't think it was
because Administration officials have lost faith in themselves as fountains of
wisdom. I think it was because the Administration has made such a mess of
managing the economy that it was resigned to the facts of life.
This Administration talks about fighting inflation. Many unbiased experts
pointed out that the fight against inflation should have been launched early in
1966 with substantial cuts in domestic spending or a tax increase or both. The
Administration's present push for an income tax increase comes almost two years
late.
Am I speaking in a partisan vein? Let me remind you that the International
Monetary Fund in an annual report issued earlier this month criticized the United
States for being too slow to fight inflation in 1966 and for depending too
heavily on tight money as the answer. The IMF report went on to say that these
(more)
-3-
past mistakes probably will prevent us from increasing our surplus of exports
over imports, which we must do if we are to reduce the U.S. balance of payments
deficit.
The inflation we experienced in 1966 was demand-pull inflation--too much
money chasing too few goods. Now we are plagued with cost-push inflation--
price increases prompted by the increased cost of doing business and a growing
profit squeeze in many industries.
In late 1965 and early 1966 the economy became over-heated. The Administration
refused to cut Federal non-defense spending to cool it off. In fact, the Admin-
istration continued to stimulate the economy.
When the White House refused to act against inflation, the Federal Reserve
Board raised interest rates as a brake on the economy. Interest rates soared to
the highest level in more than four decades, but the consumer price index rang
up a 3.3 per cent rise for the year.
When the Administration finally moved against inflation it was to suspend
the 7 per cent investment tax credit. This was done against the advice of many
in the Congress and in the business community.
Last January, the Republican Leadership in the Congress urged immediate
restoration of the investment tax credit. The Administration initially ignored
our pleas despite the obvious softening of the economy in late 1966. It was only
after the damage was done that the Administration moved to have the investment
tax credit restored.
The Republican Leadership has also urged repeatedly that a system of fiscal
priorities be set up so that this Nation could work in organized fashion toward
a set of national goals in the complicated overall financial maze.
Instead we have had business as usual and butter along with guns while
fighting a war that is draining this country of men and wealth. It's time the
Administration recognized that the war in Vietnam is this country's No. 1
priority, that we must end it quickly and honorably before we can tend in proper
measure to the rest of the Nation's business.
After a period of damaging demand-pull inflation and a softening in the
economy, Congress now is being asked to impose a 10 per cent surtax on individual
and corporate income. This tax on a tax looms at a time of lingering uncertainty
in the economy--a time when a majority of the economic indicators are pointing
downward.
(more)
-4-
The Administration cites national employment figures as an argument for
the 10 per cent surtax. They say little about the fact that businesses again
have scaled down their capital spending for this year and that it will be a
tiny fraction compared with the 16.7 per cent rise in 1966.
The proposed tax increase is supposed to be a weapon against inflation.
But the facts are that the kind of inflation we now are experiencing is
primarily the cost-push type--increases in the cost of doing business being
passed along to the consumer. The increased tax on corporate income would,
of course, be an added cost of doing business. Yet the Administration is actively
engaged in obtaining business endorsements for the proposed tax increase and the
method of seeking such endorsements should raise questions.
I said at the outset that this Administration operates on the premise that
it is the repository of all wisdom. If you are inclined to accept this philosophy,
look again. As a famous Democrat, Alfred E. Smith, was fond of saying, "Let's
look at the record."
The Administration calls the proposed 10 per cent tax surcharge a war tax.
What are the facts?
It was in fiscal 1966 that Vietnam spending began to spurt tremendously.
But if we lay aside the spending attributable to Vietnam, we still find a $29
billion increase in federal spending between fiscal 1965 and fiscal 1968--or an
annual increase of about $10 billion.
The record shows that this is two-and-a-half times as large as the annual
rate of increase in total Federal spending during the three preceding fiscal
years--from fiscal 1962 to fiscal 1965.
That's the record, gentlemen. Neither the Vietnam War nor even total
defense expenditures explains the tremendous surge in Federal spending that began
in 1965.
Federal spending is now growing in every direction, and yet the President
is asking his friends in the United States Senate to restore all of the cuts
the House has made in his spending requests for fiscal 1968.
The record shows that since 1960 our population has grown by 10 per cent.
In that same period, the Federal Government's civilian bureaucracy has swelled
by 25 per cent; the cost of government payrolls, including the military, has
grown by 75 per cent; the total of all government spending has risen 83 per cent;
Federal non-defense spending is up 97 per cent.
(more)
-5-
In 1965 the Administration was pushing its Great Society programs.
Officials knew that Vietnam costs would run $10 billion higher than the official
estimate but they denied this in testimony before committees of the Congress.
Had they owned up to it, there would have been a public outcry for non-defense
spending restraints and demands for a hold-down on Great Society programming.
Now we are facing an estimated fiscal 1968 deficit of $25 to $30 billion.
We were told about this red ink deluge only recently by Administration officials--
long after the Republican National Coordinating Committee had predicted a deficit
of exactly those proportions.
In pursuing its request for a 10 per cent surtax, the Administration offers
a vague promise to cut roughly $2 billion in non-defense spending--after Congress
has completed work on the appropriation bills. At the same time, the President
is pressuring the Congress to give him every dime he asked for last January. And
at the same time, the Administration tells us there is no escape from a tax
increase.
I submit that if the Administration would cooperate fully with the Congress,
Federal spending not connected with the Vietnam War could be reduced or
deferred sufficiently to avoid a tax increase.
At this time--with softness in the economy and the disruption caused by
the auto strike--I cannot support a tax increase.
In view of this Administration's record on spending, I do not think the
tax increase would be temporary. It would be a vehicle for a continued surge in
Federal non-defense spending--a trend that must be brought under control.
We have reviewed the record of this Administration which seeks to substitute
its economics for that of private business.
Everyone agrees that price stability should be one of our top objectives.
But relative price stability will come only through sound economic growth--
growth which is fostered by the proper mix of fiscal and monetary policy in
Washington and courage at the top to take the actions needed at the time they are
needed.
Obviously there still are individuals in this country who haven't learned
that lasting assurance of price stability can only come from the discipline of
a free market and from responsible actions by business and labor leaders.
I might add that sound and impartial government generates the kind of
atmosphere which helps business and labor leaders to act responsibly.
(more)
-6-
It is sound and impartial government which is the key to price stability,
not Big Daddy government which substitutes its wisdom for that of the private
sector.
America grew and prospered because of its belief in our basically free
economic system. Let's not lose future progress by abandoning this allegiance
and substituting for it a politically-motivated effort to manage the economy.
###
FOR RELEASE IN AM's OF TUESDAY, SEPTEMBER 19, 1967
A SPEECH BY REP. GERALD R. FORD, R-MICH.
BEFORE THE BOARD OF DIRECTORS OF
THE NATIONAL PETROLEUM REFINERS ASSOCIATION
TUESDAY, SEPTEMBER 19, 1967
THE MAYFLOWER HOTEL
Is the Federal Government the repository of all the wisdom in America?
It is pretty early in the morning to pose such a question but I ask you to
think about it because it is central to what has been happening in this country
in the last several years.
My own answer is that we have in Washington an Administration which professes
to have all the answers despite the fact that all of the problems are continuing.
In fact, we now have many more problems than we did seven years ago and they
are much bigger.
To put it in blunt, non-academic language, I believe there is a know-it-all
attitude on the part of the Administration which is directly responsible for
many of the ills of the Nation. It accounts for the fact that many of our
problems are going unsolved.
It is this attitude which leads Government to take a go-it-alone approach
in attacking slum conditions instead of enlisting the skills and resources of
private enterprise in the fight.
It is this attitude which prompts Government to interfere--not assist, but
meddle--in the affairs of business and industry.
It is this attitude which leads Government to engage in unofficial price
fixing through various kinds of pressure, coercive action, downright blackmail.
This is what we have experienced in recent years. But you may have noticed
that of late the steam has gone out of the tactic. There is movement but no
action, smoke but no fire. The reason the air has gone out of the balloon is
that this Administration has so mismanaged the Nation's economy as to lack any
real muscle in its latest attempts at unofficial price-fixing.
I understand that some people in the Administration now look upon the famous
1962 confrontation between the steel industry and the White House over prices as
childish.
That's their word, not mine, so I am not being political. I suppose they
are using it to describe the then Attorney General's announcement that he had
ordered a Grand Jury investigation of the steel price increases and his action
(more)
-2-
in routing news reporters out of bed in the middle of the night for questioning
by the FBI. It could also describe the fanfare over Defense Secretary McNamara's
order that all Pentagon steel purchases be shifted to companies which had not
raised their prices.
You could also say it was childish for the White House to threaten the
dumping of aluminum stockpiles onto the market if the aluminum producers did not
roll back their announced price increases in the fall of 1965.
And, I don't know, maybe you men feel it was childish for the Interior
Department to threaten you with a flood of imports last February when some
refiners raised the price of gasoline a penny a gallon.
Some may call these Government actions childish. I say they add up to or
certainly border on blackmail.
This Administration, in effect, is saying it is smarter than the executives
who run the great industries of America. This Administration is saying you don't
know how to run your business and so they have to tell you what to do.
What has happened to the so-called free enterprise system in this country?
Who's running it? The Government or the leaders of industry? Whatever happened
to the forces of competition? Do we allow these forces to operate or do we take
this Administration's word on what the level of prices and wages should be?
In its latest price clash with the steel industry, the White House backed
off without any apparent attempts at coercion. I suspect Mr. Ackley's case was
weak or perhaps a lesson had been learned from previous ventures.
I don't think it was because this Administration had a fundamental change
of heart in its relations with business and industry. I don't think it was
because Administration officials have lost faith in themselves as fountains of
wisdom. I think it was because the Administration has made such a mess of
managing the economy that it was resigned to the facts of life.
This Administration talks about fighting inflation. Many unbiased experts
pointed out that the fight against inflation should have been launched early in
1966 with substantial cuts in domestic spending or a tax increase or both. The
Administration's present push for an income tax increase comes almost two years
late.
Am I speaking in a partisan vein? Let me remind you that the International
Monetary Fund in an annual report issued earlier this month criticized the United
States for being too slow to fight inflation in 1966 and for depending too
heavily on tight money as the answer. The IMF report went on to say that these
(more)
-3-
past mistakes probably will prevent us from increasing our surplus of exports
over imports, which we must do if we are to reduce the U.S. balance of payments
deficit.
The inflation we experienced in 1966 was demand-pull inflation--too much
money chasing too few goods. Now we are plagued with cost-push inflation--
price increases prompted by the increased cost of doing business and a growing
profit squeeze in many industries.
In late 1965 and early 1966 the economy became over-heated. The Administration
refused to cut Federal non-defense spending to cool it off. In fact, the Admin-
istration continued to stimulate the economy.
When the White House refused to act against inflation, the Federal Reserve
Board raised interest rates as a brake on the economy. Interest rates soared to
the highest level in more than four decades, but the consumer price index rang
up a 3.3 per cent rise for the year.
When the Administration finally moved against inflation it was to suspend
the 7 per cent investment tax credit. This was done against the advice of many
in the Congress and in the business community.
Last January, the Republican Leadership in the Congress urged immediate
restoration of the investment tax credit. The Administration initially ignored
our pleas despite the obvious softening of the economy in late 1966. It was only
after the damage was done that the Administration moved to have the investment
tax credit restored.
The Republican Leadership has also urged repeatedly that a system of fiscal
priorities be set up so that this Nation could work in organized fashion toward
a set of national goals in the complicated overall financial maze.
Instead we have had business as usual and butter along with guns while
fighting a war that is draining this country of men and wealth. It's time the
Administration recognized that the war in Vietnam is this country's No. 1
priority, that we must end it quickly and honorably before we can tend in proper
measure to the rest of the Nation's business.
After a period of damaging demand-pull inflation and a softening in the
economy, Congress now is being asked to impose a 10 per cent surtax on individual
and corporate income. This tax on a tax looms at a time of lingering uncertainty
in the economy--a time when a majority of the economic indicators are pointing
downward.
(more)
-4-
The Administration cites national employment figures as an argument for
the 10 per cent surtax. They say little about the fact that businesses again
have scaled down their capital spending for this year and that it will be a
tiny fraction compared with the 16.7 per cent rise in 1966.
The proposed tax increase is supposed to be a weapon against inflation.
But the facts are that the kind of inflation we now are experiencing is
primarily the cost-push type--increases in the cost of doing business being
passed along to the consumer. The increased tax on corporate income would,
of course, be an added cost of doing business. Yet the Administration is actively
engaged in obtaining business endorsements for the proposed tax increase and the
method of seeking such endorsements should raise questions.
I said at the outset that this Administration operates on the premise that
it is the repository of all wisdom. If you are inclined to accept this philosophy,
look again. As a famous Democrat, Alfred E. Smith, was fond of saying, "Let's
look at the record."
The Administration calls the proposed 10 per cent tax surcharge a war tax.
What are the facts?
It was in fiscal 1966 that Vietnam spending began to spurt tremendously.
But if we lay aside the spending attributable to Vietnam, we still find a $29
billion increase in federal spending between fiscal 1965 and fiscal 1968--or an
annual increase of about $10 billion.
The record shows that this is two-and-a-half times as large as the annual
rate of increase in total Federal spending during the three preceding fiscal
years from fiscal 1962 to fiscal 1965.
That's the record, gentlemen. Neither the Vietnam War nor even total
defense expenditures explains the tremendous surge in Federal spending that began
in 1965.
Federal spending is now growing in every direction, and yet the President
is asking his friends in the United States Senate to restore all of the cuts
the House has made in his spending requests for fiscal 1968.
The record shows that since 1960 our population has grown by 10 per cent.
In that same period, the Federal Government's civilian bureaucracy has swelled
by 25 per cent; the cost of government payrolls, including the military, has
grown by 75 per cent; the total of all government spending has risen 83 per cent;
Federal non-defense spending is up 97 per cent.
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In 1965 the Administration was pushing its Great Society programs.
Officials knew that Vietnam costs would run $10 billion higher than the official
estimate but they denied this in testimony before committees of the Congress.
Had they owned up to it, there would have been a public outcry for non-defense
spending restraints and demands for a hold-down on Great Society programming.
Now we are facing an estimated fiscal 1968 deficit of $25 to $30 billion.
We were told about this red ink deluge only recently by Administration officials--
long after the Republican National Coordinating Committee had predicted a deficit
of exactly those proportions.
In pursuing its request for a 10 per cent surtax, the Administration offers
a vague promise to cut roughly $2 billion in non-defense spending--after Congress
has completed work on the appropriation bills. At the same time, the President
is pressuring the Congress to give him every dime he asked for last January. And
at the same time, the Administration tells us there is no escape from a tax
increase.
I submit that if the Administration would cooperate fully with the Congress,
Federal spending not connected with the Vietnam War could be reduced or
deferred sufficiently to avoid a tax increase.
At this time--with softness in the economy and the disruption caused by
the auto strike--I cannot support a tax increase.
In view of this Administration's record on spending, I do not think the
tax increase would be temporary. It would be a vehicle for a continued surge in
Federal non-defense spending--a trend that must be brought under control.
We have reviewed the record of this Administration which seeks to substitute
its economics for that of private business.
Everyone agrees that price stability should be one of our top objectives.
But relative price stability will come only through sound economic growth--
growth which is fostered by the proper mix of fiscal and monetary policy in
Washington and courage at the top to take the actions needed at the time they are
needed.
Obviously there still are individuals in this country who haven't learned
that lasting assurance of price stability can only come from the discipline of
a free market and from responsible actions by business and labor leaders.
I might add that sound and impartial government generates the kind of
atmosphere which helps business and labor leaders to act responsibly.
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It is sound and impartial government which is the key to price stability,
not Big Daddy government which substitutes its wisdom for that of the private
sector.
America grew and prospered because of its belief in our basically free
economic system. Let's not lose future progress by abandoning this allegiance
and substituting for it a politically-motivated effort to manage the economy.
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