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Michigan Institute of Banking, November 2, 1972
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4526467
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Michigan Institute of Banking, November 2, 1972
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Gerald R. Ford Congressional Papers
Speeches
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Economics
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1972
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1972-11-01
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The original documents are located in Box D34, folder "Michigan Institute of Banking,
November 2, 1972" 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States of America his copyrights in all of his unpublished writings in National Archives collections.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 D34 of the Ford Congressional Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library
CONGRESSMAN
NEWS
GERALD R. FORD
HOUSE REPUBLICAN LEADER
RELEASE
Excerpts from a speech by R.p. Gerald R. Ford before the Michigan Institute of Banking,
Thursday evening, Nov. 2, 1972.
Two economic myths are being circulated these days. One takes the form that "wages
are frozen while prices are not." Well, of course, neither wages nor prices are frozen
but both are controlled. The other is the contention that we would all be better off
if wage and price controls were abolished in favor of guidelines and the President simply
empowered to roll back prices whenever he so chooses. The answer there is that we tried
wage-price guidelines in the Sixties and they failed when the crunch came.
As you know, the objective of the wage-price controls program was to reduce
inflation to 2 to 3 per cent by the end of 1972 by restricting price increases to an
average of 2.5 per cent per year andi holding wage increases to an average annual increase
rate of 5.5 per cent. How has this worked out in practice?
Since controls went into effect, the average increase granted by the Price Commission
has been 3.25 per cent on items for which increases were requested and 1.65 per cent on
total sales of requesting firms.
At the same time, the combined weighted average pay increase granted by the Pay
Board has been 5 per cent, affecting more than 15.2 million workers.
the New Economic Policy has worked. Prices have been held down. During
12 months of indexes since the beginning of the New Economic Policy, the Consumer Price
Index has increased at an annual rate of 2.9 per cent, compared with rates of 5 to 6 per
cent during 1969-70. For the President's critics to
blame the present Administration
for inflation is like the architect who built the
Leaning Tower of Pisa claiming
the world was tilted.
While the rate of inflation has been held in check, economic expansion has continued
and a boom has been developing.
Gross national product in "real" terms grew at an annual rate of 9.4 per cent in
the second quarter, the highest rate since the fourth quarter of 1965. The third quarter
growth rate was a slower 5.9 per cent but over the last three quarters the overall growth
rate has been 7 per cent.
So the economy has
grown at 7 per in "real"terms centinuring the first three
quarters of this year while
inflation has advanced at a curtailed rate of 3 per cent.
The Administration thus appears to have a good chance of bettering the estimate of
a 6 per cent
growth rate its economists made last January, and inflation has been
-2-
held to the maximum the Administ ration set as its goal for price increases during 1972.
Muantime we are adding new jobs at the highest rate of job creation since 1955--more
than 2.5 million new jobs in the last 12 months. Employment has reached the all-time
high of 82m million. In this area, unemployment has dropped 1.3 per cent to a low
of
5.8 per cent. nationwide
Unemoboyment is still too high but this is because of an abnormally large growth
in the labor force due to
reduction of our military
fordes from 3.5 million in 1968 to 2.3 million in fiscal 1973 and a
cutback in
defense spending that eliminated 1.3 million jobs.
to the
We come now
real test of
our economic health--and the
results are excellent. Since the New Economic Policy was introduced in August 1971,
real
earnings have risen at an annual rate of 4.1 per cent. Between 1965 and 1970,
taking huge bites
when infla tion was
out of workers' payche@ks, real spendable earnings
for the average production worker did not increase at all.
It is clear that substantial gains in economic activity are being achieved this year.
We can expect a rise of at least $100 billion in gross national product--10 per cent
before adjustment for inflation and approximately 7 per cent after inflationary adjustment.
Only six of the 27 years since World War II have seen larger increases in total output.
The business expansion appears to have the momentum to sustain an uptrend through
the rest of this year and into 1973.
Consumer spending remains vigorous and the latest University of Michigan survey
of consumer sentiment shows an increase in consumer confidence and inclination to buy.
Activity in all major sectors of the e conomy is either stable or rising.
However, cost-push inflation is till present and this is a problem. Demand pressures
are building on a broad front. A testing period lies ahead.
My own personal view is that wage and price controls must continue
There is no question
that controls have worked to hold down
But
the inflationary spiral.
there is also no question in my mind that continuing
pressures demand a continuation of controls.
I do not believe we should remove wage and price controls until it is cle arly
demonstrated that controls are no longer needed. That time is not now, and I do not
see it in the months immediately ahead. At the same time, I feel
sure we will
point where we
arrive in the
fairly near future
can move into
a Phase III
type of restrain
predict
Meantime I
the economy will continue on a
strong
growth path and
unemployment will steadily decline. In short, we can look to the future with much
confidence.