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Inflation
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Inflation
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Theodore C. Marrs Files (Ford Administration)
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Inflation (Finance)
Whip Inflation Now Program
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The original documents are located in Box 12, folder "Inflation" of the Theodore C. Marrs
Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 12 of the Theodore C. Marrs Files at the Gerald R. Ford Presidential Library
MEMORANDUM FOR:
TED MARRS
BILL BAROODY
FROM:
JOHN O. MARSH, JR.
Jon
Last week the President mentioned to me an idea that had been
given to him by a close personal friend from Grand Rapids who has
had extraordinary success in the business world through sales
promotions.
This friend suggested to President Ford that he should convene a
conference of one hundred persons representing a broad cross-
section of our national life including economic, cultural, social,
and age to assemble at the White House to have an idea session and
discuss how to get the country moving on all fronts in addition to
just the economic field.
The friend suggested there be invited some of the outstanding
leaders of the various fields of American life.
The President indicated he would like to see this idea developed,
and therefore, I'd appreciate very much a short memo either
individually or jointly that develops the President's suggestion.
FORD LIBRARY is GERALD
reflation tale
STATEMENT OF OBJECTIVES DRAWN FROM DISCUSSION
OF THE CITIZENS' ACTION COMMITTEE SUBCOMMITTEE
HEADED BY RALPH NADER
The working committee will recommend goals and strategies
to implement and measure achievements periodically to combat inflation,
reduce waste and thereby advance the standard of living for all Americans.
This voluntary program hopes to enlist the measurable efforts of industry,
government, workers and consumers in two major stages. Stage one in
the next sixty days will enlist the adherence of all parties to specific
goals requiring the serious commitment of the affected and contributing
groups in this national effort. Stage two will start the action phase from
go date scheduled for December
, 1974. Measurement of progress
and recognition of outstanding accomplishments will be pursued at local,
state and national levels. The success of cooperative voluntary action
will depend on a mutuality of effort, a sense of fairness and widespread
support of goals. The benefits of such action will lead to greater civic
efforts by millions of Americans and a focused awareness of what
directions public policy should take toward economic justice for all.
October 12, 1974
FOR IMMEDIATE RELEASE
OCTOBER 12, 1974
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
PRESS CONFERENCE
OF
SYLVIA PORTER
CHAIRPERSON, CITIZENS' ACTION COMMITTEE
TO FIGHT INFLATION
THE BRIEFING ROOM
4:28 P.M. EDT
MR. SPEAKES: As most of you know, the Citizens'
Action Committee to Fight Inflation, which is a distin-
guished cross-section of American citizens, is still in
the midst of a meeting in the Cabinet Room.
The President spent the better part of the
first hour with the group. He called them -- and this
is a quote -- "An excellent committee which can contribute
significantly in the fight against inflation."
The group has elected Miss Sylvia Porter as
its chairperson, and Miss Porter is here to speak briefly
with you and to take your questions. Since she is
the chairperson and the committee is still in session, we
would like to limit it to a few minutes, if we can, and
let her get back.
MISS PORTER: Ladies and gentlemen, as one of
you, I recognize that the questions might be tough.
Mine would be if you were here, but first is a statement
of principle which we have just adopted.
"The Citizens' Action Committee to Fight
Inflation is a nonpartisan, volunteer working committee.
The committee will develop public understanding and
participation in a nationwide effort to control inflation
and save energy.
This nonpartisan committee dealing with a
nonpartisan problem will mobilize the Nation through all
of its people. The committee calls on every American,
on Federal, State and local governments, organizations,
business and labor to WIN the fight against inflation."
Now, before you ask me questions, I would
like to volunteer something about myself. I am a
member of the working press. It would be intolerable for
me, in my position, to join anything with any political
tinge.
MORE
- 2 -
As I said to the President when he first
walked in the room, it would be for me committing
career suicide, and that I have no intention of doing.
I believe this is a tremendously critical moment in
the economic and, therefore, political history of our
country. I think that the consumer has been overlooked,
and my proposal at the summit conference was that we
should be called in to see what we could do, and to
help.
It is in that role that I am here, and it
is that role that I have been asked to fulfill. We
have selected and have had accepted people from every
spectrum of our society, ranging from liberal Democrats
to conservative Republicans; from big and small business-
men, to outspoken representatives of labor; we have
women, we have men; we have colors, we have creeds;
we have us all, and if we have missed by any chance a
spectrum of our society, it was because we did not have
time to enlist the people, and we will correct that
oversight.
Please believe me, ladies and gentlemen,
not one of us in that room has any political ties or
thoughts at all in this fight. And please believe me,
I believe that, or Iwould not be here.
And now, if you have something to ask me, I
will answer.
Q
Is Governor Rampton up for re-election
this year, the Governor of Utah?
MISS PORTER: Sir, I don't think I can answer
that question. I don't think I know.
Q
Miss Porter, you say you are nonpartisan,
but I wonder, is the committee supporting the 5 percent
surtax? Are you taking a position on the President's
specific proposal?
MISS PORTER: No we are not taking a position
at all on the President's anti-inflation program. We
are developing a program of our own. The program that
we are trying to develop at the committee meeting, which
I just left, is one that will have to do with the volunteers
and with people.
This would go far beyond many of the things
that the President suggested. If you will recall, he
brought this particular subject up at the very end of
his speech to the Joint Session, and it was a separate
proposal.
MORE
- 3 -
Q
What points have you agreed on as of this
moment; in other words, can you give us some kind of
a platform as to where you stand at the moment?
MISS PORTER: When I left the room, we had
certainly very well covered the field of energy conser-
vation. We were well into the field of production of
food.
Q
Can you give us any points of conclusion
or consensus?
MISS PORTER: This will be finished in about
a half-hour. I think since a lot of it is probably
going by the wayside while I am here or being developed
while I am here, I might be terribly wrong to say
anything since I don't know where it stands, even in
the last five minutes.
But we are trying to develop a program which
will involve citizens at the local, the regional,
cities, counties, and States.
Q
Miss Porter, what did the President
tell you in the hour he spent there?
MISS PORTER: He told us he was very pleased
that we had accepted. He was impressed with the broad
cross-section that we represented. He was delighted
thatwe all got here on a Saturday afternoon from a long,
long way away, and he listened with great care, and I
think he already has accepted a suggestion that came
from one of our members that he report to the American
public a couple of times a month on the progress of
the effort.
Q
Is this an ad hoc committee?
MISS PORTER: I would say SO. We plan to be
in business, however, for a long time because none of
us -- although, our membership, of course will change --
this is not going to be an easily solved problem.
Q
In the program you are working on --
the rest of them are working on right now -- has anything
been suggested that is really novel, that surprised
you as a possible viable suggestion to get voluntary
conservation?
MISS PORTER: I had been surprised at -- I
myself, and I have given this a lot of thought -- at
the originality of several of the suggestions. We
also have to look now, since it is just beginning,
at the way in which the ideas can be implemented. You
must understand we are going to break down into --
you can use your own words -- task forces, working groups.
MORE
- 4 -
I would assume there will be a small group
of us who will meet pretty frequently in New York
City, a small group that will meet pretty frequently
here. I say, for instance, Ralph Nader works out of
Washington. Mrs Foreman of Consumer Federation of
America, works out of Washington. I work out of New
York. Mr. Alioto is Mayor of San Francisco. We are
not exactly from one town. So, we will break down.
Q
Miss Porter, you met in there for quite
some time, and you said you think these are terribly
critical times and that the consumer has been overlooked.
I think there are probably millions of consumers out
there who are waiting to hear exactly what you are doing.
Can't you give us some specifics or some
of the suggestions, how the men and women, how the consumer
can conserve energy, how he can fight inflation?
MISS PORTER: This is precisely what we are
developing inside. I do not think we are going to
have anything new that has not been already pretty well
decided on energy.
During the fiasco of last winter, when we
developed a Nation of skeptics on this, pretty much
everything you could think of that could be done by
business, by schools, by homes, was thought of. The
road program of driving you know them as well as I --
and in looking over the list of hints, proposals,
recommendations of that time seems to me they cover
a very broad and extremely valuable range.
Since the energy crisis blew up in our faces ---
and you know what happened to the Nation as well as I
during the spring and summer of 1974 -- people forgot,
or let's say, they decided they had been had.
Q
In view of the statement you just made,
what role do you have other than chairleader? You say
you don't think your group will come up with anything
in one of the two critical areas?
MISS PORTER: No, I think in energy the ideas
are pretty well known. What has to be done now is to
readopt them.
Q
Are you going to ask to go back to
turning the thermostats down and not driving when we
don't have to and that kind of thing? Is that what
you are saying?
MORE
- 5 -
MISS PORTER: I think the President is
going to call on the American public the way he did in
his speech to the Joint Session, to cut down their
waste of energy. I, for one, am utterly apalled at
the speed of the cars passing me on the highways that I
ride on in Westchester County. Going 55 miles an hour
is dangerous. Everybody is going to bump into you.
Q Miss Porter, in view of the fact that
this country has a vast disparate distribution of wealth,
the fact is a great many people have very little and
a few people have a very great deal -- do you think
volunteerism is the answer to these economic and energy
problems?
MISS PORTER: I think the volunteer can do a
great deal, if we believe. I have faith in that.
Q
But how do you get people to believe,
in view of what I just pointed out, that there are
people who have a great deal and there are a great many
people who have very little and with that problem it
seems to me just asking people voluntarily to cooperate
does not really solve it.
MISS PORTER: You not only ask them to
cooperate -- I am told the committee now has their
program ready. You not only ask people to cooperate,
you ask people to help themselves. All forms of fuel
right now are rather expensive. If you can cut down
and help conserve, and help us become independent, and
if at the same time you can help save your money on your
budget and make yourselves healthier, I don't call that
sacrifice.
Q
You said the President agreed to report
to the American people.
MISS PORTER: I said I thought that he approved
of the idea.
Q
What did he say that made you think
he approved it?
MISS PORTER: I liked the way he took his
notes.
Q
It seemed to me what you were saying
is this group is going to shy away from the political
controversial matters. We are all for energy conser-
vation. That is in the apple pie --
MORE
- 6 -
MISS PORTER: But going beyond energy conser-
vation, I told you.
Q
But I asked about, for example, the
surtax, and you seemed like, "We won't touch that."
MISS PORTER: Now look, that is a political
question that is up to Congress. I don't think this
particular group is going to take a stand on the
surtax because no matter what stands we take, the
Congress of the United States will have that ultimate
decision. In my own home, I cannot make a decision on
the surtax. All I know is that Iwill pay it, if it is
passed.
Q
Just to help us understand that a little
bit better then, I think we will not assume that you are
telling us facts that your committee has adopted
because we realize you came away and you don't know them,
but give us a couple of suggestions or a couple of the
ideas that were around so we will have an idea of
the kind of things you are talking about that would
be old hat.
MISS PORTER: Well, the President is making a
speech on Tuesday, as you well know, in Kansas City,
during which he will, I believe, announce some of
the ideas which are coming out of this committee this
afternoon. I think it would not be not only indiscreet
but extremely bad manners for me to scoop the President.
Q
But you do think he is taking ideas
from you today which will be in that Tuesday speech?
MISS PORTER: I believe that is his intention.
That is why we are here.
THE PRESS: Thank you, Miss Porter.
END
(AT 4:35 P.M. EDT)
The working committee will recommend
goals and strategies to implement and
measure achievements periodically to
combat inflution, reduce waste and
therefy advance the standard of lurng
for all americans. This voluntary program
hopes to enlest the messurable efforts
of intustry, government, workers and
consumers in two major stages.
Stage one in the next sixty days
will enlist the adherence of all
parties to specife goals requiring the
Servius commitment of the affected and
contributing groups in this national effort.
Stage two will -stant the action
phase from go date scheduled for
Dec.
Measurement of
natural
levels,
2/
progress and recognition of outsburnching
will be pursued at local, state and
accomplishment Sh The success y cooperative
voluntary action will depend on a
mutuality of effort, a sense of famines
and widespread support of goals. The
benefits dysuch action will lead to
greater civic efforts by millions of
americans and a focused awareness
of what durections public policy should
take toward economic justice for all
seffation F.b
A SUMMARY OF THE PRESIDENT'S ANTI-INFLATION PROGRAM
General
-- Amend the Employment Act to read
"for all those able,
willing, and seeking to work, to promote maximum employ-
ment, maximum production, and stability of the general
price level."
Food
-- Increase food production.
-- Remove remaining acreage limitations on rice, peanuts, and
cotton.
-- Review all Federal regulations to eliminate those responsible
for inflated prices.
-- Expose all restrictive practices that raise food prices.
-- Monitor food exports.
-- Provide flexibility to use food to help our foreign friends
and to provide humanitarian help for those who are hungry.
-- Help developing countries become more self sufficient in
food production.
Energy
-- Reorganize our national energy effort.
-- Reduce imports of foreign oil by one million barrels per
day by the end of 1975.
-- Require conversion of oil and gas fired electric plants to
coal or nuclear energy sources.
-- Use the Defense Production Act to allocate scarce materials
for energy development.
-- Develop with the automobile industry a program that will
increase gasoline mileage of automobiles.
-- Seek competitive pricing of natural gas supplies.
-- Make Navy petroleum reserves in California and Alaska
available.
-- Amend the Clean Air Act.
-- Pass surface mining legislation.
-- Support windfall profits tax, nuclear plant licensing, deep
waterports and ERDA.
-- Accelerate leasing of Federal lands for oil, shale, coal
and geothermal development.
-- Reimpose fuel conservation steps within government.
-- Call for commercial and consumer conservation actions.
-- Provide incentives for secondary and tertiary energy
production.
FORD
&
GERALD
LIBRARY
- 2 -
Restrictive Practices
-- Enforce the anti-trust laws, zeroing in on price fixing and
bid-rigging.
-- Increase penalties for corporate and individual anti-trust
violations.
-- Watchdog the inflationary costs of all government actions.
-- Establish a National Commission on Regulatory Reform to
re-examine independent regulatory agencies for rules
and regulations that unnecessarily increase costs to
the consumer.
-- Require an Inflation Impact Statement for all major legis-
lative proposals, regulations and rules within the
Executive Branch.
-- Ask Congress to do the same for its own legislative
initiatives.
-- Urge State and local governments to undertake similar
programs.
-- Increase productivity within government and in the private
sector, especially in the construction and health service
industries.
-- Monitor wage and price practices in the private sector.
More Capital
-- Increase the investment tax credit to ten percent.
-- Make all dividends on new preferred stock issued for
cash deductible.
-- Liberalize the capital gains tax.
Helping the Casualties
-- Provide a one year program of special unemployment insurance
benefits to those who have exhausted their regular and
extended employment insurance benefits and to those not
now covered by a regular unemployment insurance program.
-- Establish a Community Improvement Corps for one year to
provide work for the unemployed through short term useful
work projects.
-- Provide additional tax relief to low and middle income
Americans and close other tax loopholes (now in current
tax legislation).
Stimulating Housing
-- Make most home mortgages eligible for purchase by an agency
of the Federal Government.
-- Make $3 billion available immediately under the above
provision for mortgage purchases, enough to finance
about 100,000 homes.
-3-
Thrift Institutions
-- Pass the pending Financial Institutions Act to provide
thrift institutions with better tools to compete for
deposits.
International Interdependency
-- Pass the Trade Reform Act.
Federal Taxes and Spending
-- Establish a one-year temporary tax surcharge of five percent
on corporations and families with adjusted gross incomes
above $15,000.
--
Set a spending target of less than $300 billion for fiscal
year 1975.
--
Submit within 40 days a package of budget deferrals and
rescissions to the Congress to meet this goal.
--
The revenues from the new and pending proposals are
approximately equal to the outlays.
Citizen Participation
-- Ask each American to GROW MORE and WASTE LESS food.
-- Ask each American to DRIVE LESS and HEAT LESS.
--
Ask each American to SHARE WITH OTHERS.
THE BROOKINGS
Bulletin
Volume 11, Number 2: Spring 1974
GERALD LIBRARY FORD
Inflation and the Budgetary Outlook
INFLATION AND NORMAL INCOME GROWTH, now and
far as they can go without jeopardizing the nation's
in the foreseeable future, will increase federal revenues
security.
much faster than federal expenditures for existing pro-
This year's defense budget and the administration's
grams and new undertakings so far proposed by the ad-
accompanying statements defining the nation's military
ministration. Over the next six years, annual federal
requirements point toward a "new look" in defense
revenues at full employment could rise by $165 billion
policy and military strategy. Some of the proposed
as against a growth in annual expenditures of $136 bil-
lion, leading to a potential full employment budget sur-
plus of almost $40 billion by 1980, unless taxes are cut
or other new programs are enacted in the interim. If
prices rise by 5 percent a year rather than by the 3 per-
cent assumed in this projection, the 1980 full employ-
ment surplus could be another $20 billion higher. In
either event, future federal budgets could accommodate
a range of new initiatives.
This prospect underlies the conclusions reached in
the fifth of the annual series of Brookings studies en-
titled Setting National Priorities. The authors of this
year's analysis of the fiscal prospects and national policy
issues reflected in the President's proposed budget are
Barry M. Blechman, a senior fellow in the Brookings
measures would reduce the cost of defense: cuts in the
Foreign Policy Studies program, and Edward M. Gram-
number of military support and auxiliary personnel and
lich and Robert W. Hartman, senior fellows in Economic
renewed emphasis on buying less expensive ships, air-
Studies. Karen Davis, a research associate in Economic
craft, and weapons are particularly important in this re-
Studies, wrote the chapter on national health insurance.
gard. Other proposals, however, would more than offset
In projecting the budgetary outlook, the authors take
these efficiency measures: enlarging the size and capa-
into account two important initiatives proposed by the
bility of general purpose forces, expanding airlift capa-
administration, the first of which is a major change in
bilities, and accelerating the modernization of aircraft,
the nation's defense posture. The administration seems
ships, and weapons. In addition, new criteria for deter-
to be taking a much stiffer view of defense require-
mining the size and composition of strategic nuclear
ments than it did in 1973. As the United States with-
forces, and a new emphasis on the readiness of general
drew from Southeast Asia, it scaled down its general
purpose forces, would affect the U.S. defense budget
purpose ("conventional") forces, sharply reducing the
over the longer term.
numbers of army divisions, ships, and aircraft from the
The administration requests a large addition to the
peaks attained in 1968. The administration believes that
Defense Department's budgetary authority to pay for
these decreases in U.S. military capability have gone as
these first steps toward a significant change in the U.S.
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
GERALD R. FORD
d obtained Vion Webber
approval to send can you
this material an a voluter
you partican offorth to
fight inflation.
of am corwinsed that
Inflation is one of the
greated Heneats to national
security which we have
foud
Summit on Inflation Presented by:
THE WHITE HOUSE
Bill Seidman
WASHINGTON
SUMMIT CONFERENCE ON INFLATION
Date: August 26, 1974
FORD & GERALD LIBRARY
Goals
The goals of the Summit Conference on Inflation are to:
1. Clarify the realities of the nation's present economic
condition.
2. Identify the causes of the present inflation.
3. Search for a consensus on the basic policies which
should be adopted to deal with the problem of in-
flation.
4. Explore new and realistic approaches to combat inflation.
5. Define areas of hardship needing immediate action.
Steering Committee
A Steering Committee of eight people has been formed from the
executive and legislative branches to provide overall direction
for the meetings. The congressional representatives are Sena-
tors Humphrey and Tower, and Congressmen McFall and Conable.
The Administration representatives on the Committee are Messrs.
Rush, Ash, Simon, and Greenspan. Mr. Seidman is the Executive
Director. Advisers to the Committee will be Arthur Burns and,
when selected, the Executive Directors of the Council on Wage
and Price Stability and the Productivity Commission.
Schedule of Summit Meetings
A series of Summit meetings involving various groups and sec-
tors of the economy will be held during September before the
final conference.
Sept. 5
Economists
The President
Sept. 11
Labor
The President
-2-
Sept. 12
State and Local Government
Secretary Lynn
Sept. 13
Agriculture and Food
Secretary Butz
Sept. 16
Transportation
Secretary Brinegar
Sept. 17
Natural Resources and Recreation
Secretary Morton
Sept. 18
Business and Manufacturing
Secretary Dent
Sept. 18
Housing and Construction
Secretary Lynn
Sept. 19
Health, Education and Welfare
Secretary Weinberger
Sept. 20
Banking and Finance
Secretary Simon
Sept. 27-28 Summit Conference
The President
Summit Meeting Procedures
Cabinet Officer-Congressional Steering Committees should de-
termine the specific arrangements for each of the preliminary
meetings under the direction of the Summit Conference Steering
Committee.
Size: Meetings should follow a general guideline of 25-50 par-
ticipants.
Location: It is hoped that several meetings will be held out-
side of Washington, D.C. prior to the final conference.
Sessions: Meetings should include two public sessions -- morn-
ing and afternoon. In accordance with the Freedom of Infor-
mation Act, a public record will be made. In addition, we re-
commend a closed dinner meeting the evening before the public
sessions.
Logistics: Logistical arrangements and expenses involved in the
meetings should be borne by the respective Departments.
Participants: In suggesting participants for the meetings, the
Cabinet Officer-Congressional Steering Committees are encour-
aged to include labor, consumer, and regulatory representatives.
where, in their opinion, such participation is appropriate. A
letter of invitation from the President will be sent on August
30. (Form attached) A list of questions to focus discussion
at the meetings will accompany the invitation. (Form attached)
Lists of suggested participants and revisions of questions in
light of each particular meeting are requested to be submitted
-3-
to Mr. Seidman's office by 5:00 p.m. August 28.
Format for Summit Meetings
A Council of Economic Advisers Report on the State of the
Economy and an OMB Report on the federal budget will form
the basis for the initial discussions in each of the meet-
ings. Each participant will be requested to come prepared
to give his views on fundamental issues and specified sub-
jects. Emphasis will vary based on the special expertise of
the group attending.
All meetings will be asked to address themselves to the fol-
lowing fundamental issues:
1. The size and composition of the federal budget and
the amount of revenue to be raised.
2. Monetary policy and interest rates.
3. International problems.
Specific problems of inflationary impact will be dealt with in
appropriate meetings as determined by the steering committees.
For example:
1. Price and wage behavior. (Labor, Housing and Construc-
tion, Transportation, etc.)
2. Capital Formation. (Banking and Finance, Housing and
Construction, Transportation, etc.)
3. Areas of high inflationary pressures. (Health, Food,
Natural Resources, etc.)
4. Tax policy and incentives. (Natural Resources, Banking
and Finance, Business and Manufacturing, etc.)
5. Priorities among existing federal programs. (State-and
Local Governments; Health, Education and Welfare, etc.)
The Summit Conference
The series of meetings between the Administration, the Congress,
and representatives of the private sector will culminate in a
two-day Summit Conference on September 27 and 28. It will be
- -4-
open to the public and presided over, in part, by the Presi-
dent.
Each preliminary meeting steering committee will select approx-
imately six participants from their meeting to attend the Sum-
mit Conference as delegates. Other participants in the pre-
liminary meetings will be invited to attend the Summit Confer-
ence as observers.
Special papers involving key areas not covered in the prelim-
inary meetings may also be included in the Summit Conference
agenda. Such papers might include: The role of science and
technology in combating inflation; the effect of inflation on
the elderly, the poor, and the young; inflation and the defense
budget.
THE WHITE HOUSE
WASHINGTON
Date
Dear Mr.
:
The Congress and I have agreed to hold a Summit Conference on
Inflation. As part of this Conference we have scheduled a series
of meetings to explore issues related to the economy and the
problem of inflation. I would appreciate your participation in a
meeting of leaders in the area of
to be held on
in
.
We are asking participants to come prepared to discuss the present
economic situation, its causes, and to submit their suggestions as
to the most appropriate policies the government can adopt. We are
also anxious to listen to your advice and counsel regarding the
problems faced by your particular sector of the economy and how
you can best contribute to controlling inflation. Attached are a
series of questions which will help focus the discussions at these
meetings.
I have asked Secretary
to chair the meeting on
and the Congress has designated
,
,
,
.
,
.
, and
to attend. Please
inform Secretary
(Phone #
)
whether you plan to attend. He will provide you with further details
regarding the meeting.
The Summit Conference on Inflation is a bipartisan national effort
to deal with our number one domestic problem. Your participation
will be a real service to your country, and I do hope you will be
able to give us the benefit of your thinking.
Kindest regards.
Sincerely,
name
street
city
Suggested Questions for Discussion by Participants
at Summit Meeting of
I Fundamentals What is your view of the effect on inflation,
and what changes do you suggest with respect to:
1. Maintaining federal expenditures below 300 billion
in fiscal 1975
2. Seeking a balance federal budget or a surplus in
fiscal 1976
3. Priority preferences for existing governmental
programs within the federal budget limitations
4. Current levels of federal taxation
5. Current monetary policy and its effect on interest
rates
6. Current international economic developments and
international arrangements for financial stability
II Specific Recommendations for the
sector
What is your view of the effect on inflation, and what
suggestions have you with respect to:
1. Government regulations (Federal, State, Local)
and their effect on productivity
2. Availability of capital funds and money for
financing
3. Wage and Price controls, guidelines or private
initiatives
4. Environmental protection requirements
5. Tax incentives or deterrents
6. Areas of hardship and inequities requiring immediate
attention
III Other Suggestions What other suggestions do you have for
controlling inflation?
INTER-OFFICE MEMORANDUM
serfection fele
THE ADVERTISING COUNCIL, INC.
Council Staff
To:
Date:
October 11, 1974
From:
Robert P. Keim
Subject:
Inflation Campaign
Here are ten copy points I gleaned from the proceedings of
the Conference on Inflation that could, in my view, have
public applicability in any campaign on inflation.
They are not set forth in any order of priority. Some received
more general acceptance than others. In many cases they were
couched originally in technical economic terms. I have re-
directed them as they might apply to the average middle class
audience. Obviously, groups such as the lower middle, poor,
disadvantaged, retired, etc. do not have these options avail-
able to them and some sort of disclaimer would be necessary
where they are concerned.
10 WAYS TO FIGHT INFLATION
FORD EYE
Balance your budget (and expect your
government officials to do the same).
Postpone unnecessary borrowing (wait
for interest rates to come down - as
they will.
Save as much as you can (take advantage
of high savings interest rates; watch your
money grow).
Conserve energy (you'll save on fuel and
utility bills and take the pressure off
scarce supplies).
Don't raise your prices more than your
costs or services absolutely require -
or demand more pay than your work warrants.
Insist on productivity improvements from
your boss, your fellow workers, and yourself.
- 2 -
Shop wisely; look for bargains; go for the
lower item and talk up the fact that you're
doing it. Make economy fashionable.
Work with others to eliminate outmoded regulations
that keep costs of goods and services high.
Do it yourself. Plant Victory Gardens for
yourself or within your community. Do your
own repair and maintenance work.
Assist in recycling programs and the re-use of
scrap materials.
RPK/jo
Tom Wallace
Ralk Naden
RichardS. Ohendalski
Keim
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THE WHITE HOUSE
WASHINGTON
October 14, 1974
FORD LIMITED
Dear Ted:
Thank you very much for your help at the meeting
of the Citizens' Action Committee to Fight Inflation
with President Ford last Saturday. I appreciate it.
Sincerely,
Russ
Russell Freeburg
Dr. Theodore Marrs
Room 103 - Old Executive Office Building
Washington, D. C. 20510
THE WHITE HOUSE
OUTS
300
/
Dr. Theodore Marrs
Room 103 - Old Executive Office Building
Washington, D. C. 20510
GERALD R. FORD
October 18, 1974
Dear Friend:
The President has welcomed the formation of a Citizens
Action Committee to Fight Inflation and all Americans should
now join together to combat this enemy.
The Committee is a non-partisan group dealing with a
problem which Americans of all political persuasions want
to solve. The Committee's goal is to mobilize action
throughout America to Whip Inflation Now (WIN). It is our
earnest hope that all Americans will enthusiastically join
in this effort. By working together as we have done his-
torically when faced by great challenges, we can restore
the vitality of our economy.
Enclosed are the texts of the Presidents October 8th
economic address to the Congress and his remarks to the
Future Farmers of America in Kansas City on October 15th.
The first of these speeches outlines the President's pro-
gram of anti-inflationary responsibilities to be undertaken
by the federal government. The Kansas City address details
some valuable suggestions for voluntary action on the part
of the public which were recommended by the Citizens Action
Committee to Fight Inflation.
We would appreciate your telling us how you plan to use
your organizations' resources - publications, letters, resolu-
tions, displays, billboards, broadcasts, TV spots or the like -
to WIN the fight against inflation.
October 18, 1974
FORD LIBRARY & GERALD
Dear Friend:
The President has welcomed the formation of a Citizens
Action Committee to Fight Inflation and all Americans should
now join together to combat this enemy.
The Committee is a non-partisan group dealing with a
problem which Americans of all political persuasions want
to solve. The Committee's goal is to mobilize action
throughout America to Whip Inflation Now (WIN). It is our
earnest hope that all Americans will enthusiastically join
in this effort. By working together as we have done his-
torically when faced by great challenges, we can restore
the vitality of our economy.
Enclosed are the texts of the Presidents October 8th
economic address to the Congress and his remarks to the
Future Farmers of America in Kansas City on October 15th.
The first of these speeches outlines the President's pro-
gram of anti-inflationary responsibilities to be undertaken
by the federal government. The Kansas City address details
some valuable suggestions for voluntary action on the part
of the public which were recommended by the Citizens Action
Committee to Fight Inflation.
We would appreciate your telling us how you plan to use
your organizations' resources - publications, letters, resolu-
tions, displays, billboards, broadcasts, TV spots or the like -
to WIN the fight against inflation.
Inflation File
THE WHITE HOUSE
WASHINGTON
October 21, 1974
FORD & DERALD LIBRARY
Dear Friend:
The President has welcomed the formation of a Citizens
Action Committee to Fight Inflation and has encouraged
all Americans to join together to combat this common
enemy.
The Committee is a non-partisan group dealing with a
problem which Americans of all political persuasions
want to solve. The Committee's goal is to mobilize
action throughout America to WIN the fight against
inflation and to save energy. It is our earnest hope
that all Americans will enthusiastically join in this
effort. By working together as we have done histori-
cally when faced by great challenges, we can restore
the vitality of our economy.
Enclosed are the texts of the President's October 8th
economic address to the Congress and his remarks to
the Future Farmers of America in Kansas City on October
15th. The first of these speeches outlines the
President's program of anti-inflationary responsibilities
to be undertaken by the federal government. The Kansas
City address details some valuable suggestions for vol-
untary action on the part of the public which were
recommended by the Citizens Action Committee to Fight
Inflation.
The President would welcome hearing about your plans to
use your organization's resources - publications, letters,
resolutions, displays, billboards, broadcasts, TV spots
or the like - to WIN the fight against inflation and
save energy. You can communicate directly with the
President, with me or with Mr. Russell Freeburg, White
House Coordinator for the WIN program.
With best wishes,
Sincerely,
OBE
William J. Baroody, Jr.
Assistant to the President
Enclosures
Date: October 18, 1974
REQUEST FOR MAILING
Subject: The Economy
Enclosures:
President's Address to Joint Session of Congress
(in order)
Remarks of the President to the Future Farmers of America
Cover Letter By: William J. Baroody, Jr.
Assistant to the President
DISTRIBUTION
Name of List
Code Quan. Cover by
Chairmen of the Board of Colleges
Baroody
Presidents of Colleges
11
Retired Officers Association
11
AFL-CIO Leaders
"
Military, Patriotic and Veterans Leaders
11
11
Leaders of Major Industries and Industrial
Associations
11
VFW State Leaders
11
Business / Community Leaders "Movers and
"
Shakers"
11
Small Town Opinion Molders Names by
"
County Chairman
11
Big City Opinion Molders Names by
11
11
County Chairman
"
Disabled Veterans Commanders
American Legion, National Officers and
"
Post Commanders
Total Mailing: approximately 60,000
Extra Copies:
Comments:
Initiated By:
Authorized By: upon
Date: October 18, 1974
REQUEST FOR MAILING
Subject: The Economy
Enclosures President's Address to Joint Session of Congress
(in order)
Remarks of the President to the Future Farmers of America
Cover Letter By: William J. Baroody, Jr.
Assistant to the President
DISTRIBUTION
Name of List
Code Quan. Cover by
American Veterans
Baroody
Civil and Service Organizations
11
Executives, State Chambers of Commerce
"
Metropolitan Chambers of Commerce
11
Professional Associations and Firms,
"
Legal and Medical, etc.
11
Banking Associations
"
Commercial Bank Chairmen of Boards
<
"
Officers of Securities & Brokerage Firms
11
Teamsters
11
Supporters for a Conservative Platform
11
Manufacturing Organizations
"
Miscellaneous Manufacturing & Farming
11
Associations
11
100 Top Industrial Firms - -- #2 Man
"
Heads of Top Public Utilities Companies
11
Total Mailing: approximately 60,000
Extra Copies:
Comments: Initiated By:
Authorized By: wf2p
Date: October 18, 1974
REQUEST FOR MAILING
Subject: The Economy
Enclosures: President's Address to Joint Session of Congress
(in order) Remarks of the President to the Future Farmers of America
Cover Letter By: William J. Baroody, Jr.
Assistant to the President
DISTRIBUTION
Name of List
Code Quan. Cover by
Heads of Leading Transportation Companies
Baroody
Leading Retail Companies -- #2 Man
"
Jewish War Veterans Post Commanders
"
National Jewish Organizations
"
Chairmen of the Board of Leading Insurance
"
Companies
Presidents of Major Health Professional
11
Organizations
Presidents of Senior Citizens Clubs
"
National Volunteer Organizations Servicing
"
Senior Citizens
Negro General Mailing List
"
Black Leaders
"
Nationalities Organizations
"
Key National Leaders
11
Republican National Committee Members
"
Total Mailing: approximately 60,000
Extra Copies:
Comments:
Initiated By:
Authorized By: W/B
Date: October 18, 1974
REQUEST FOR MAILING
Subject: The Economy
Enclosures: President's Address to Joint Session of Congress
(in order)
Remarks of the President to the Future Farmers of America
Cover Letter By: William J. Baroody, Jr.
Assistant to the President
DISTRIBUTION
Name of List
Code Quan. Cover by
County Chairmen - GOP -- -- include if not
Baroody
covered by group entitled "Big City" and
"Small Town Opinion Molders"
"
List of Conservation Groups
Officers of Non-Partisan Women's Groups
"
Business and Professional Women
11
Campus Newspapers
"
National Association of Student Councils
11
Youth Organizations
"
Total Mailing: approximately 60,000
Extra Copies:
Comments: Initiated By:
Authorized By: WIB/m
October 21, 1974
Dear Friend:
The President has welcomed the formation of a Citizens
Action Committee to Fight Inflation and has encouraged
all Americans to join together to combat this common
enemy.
The Committee is a non-partisan group dealing with a
problem which Americans of all political persuasions
want to solve. The Committee's goal is to mobilise
action throughout America to WIN the fight against
inflation and to save energy. It is our earnest hope
that all Americans will enthusiastically join in this
effort. By working together as we have done histori-
cally when faced by great challenges, we can restore
the vitality of our economy.
Enclosed are the texts of the President's October 8th
economic address to the Congress and his remarks to
the Future Farmers of America in Kansas City on October
15th. The first of these speeches outlines the
President's program of anti-inflationary responsibilities
to be undertaken by the federal government. The Kansas
City address details some valuable suggestions for vol-
untary action on the part of the public which were
recommended by the Citizens Action Committee to Fight
Inflation.
The President would welcome hearing about your plans to
use your organization's resources - publications, letters,
resolutions, displays, billboards, broadcasts, TV spots
or the like - to WIN the fight against inflation and
save energy. You can communicate directly with the
President, with me or with Mr. Russell Freeburg, White
House Coordinator for the WIN program.
With best wishes,
Sincerely,
William J. Baroody, Jr.
Assistant to the President
Enclosures
October 21, 1974
Dear Friend:
The President has welcomed the formation of a Citizens
Action Committee to Fight Inflation and has encouraged
all Americans to join together to combat this common
enemy.
The Committee is a non-partisan group dealing with a
problem which Americans of all political persuasions
want to solve. The Committee's goal is to mobilise
action throughout America to WIN the fight against
inflation and to save energy. It is our earnest hope
that all Americans will enthusiastically join in this
effort. By working together as we have done histori-
cally when faced by great challenges, we can restore
the vitality of our economy.
Enclosed are the texts of the President's October 8th
economic address to the Congress and his remarks to
the Future Farmers of America in Kansas City on October
15th. The first of these speeches outlines the
President's program of anti-inflationary responsibilities
to be undertaken by the federal government. The Kansas
City address details some valuable suggestions for vol-
untary action on the part of the public which were
recommended by the Citizens Action Committee to Fight
Inflation.
The President would welcome hearing about your plans to
use your organization's resources - publications, letters,
resolutions, displays, billboards, broadcasts, TV spots
or the like - to WIN the fight against inflation and
save energy. You can communicate directly with the
President, with me or with Mr. Russell Freeburg, White
House Coordinator for the WIN program.
With best wishes,
Sincerely,
William J. Baroody, Jr.
Assistant to the President
Enclosures
October 21, 1974
Dear Friend:
The President has welcomed the formation of a Citizens
Action Committee to Fight Inflation and has encouraged
all Americans to join together to combat this common
enemy.
The Committee is a non-partisan group dealing with a
problem which Americans of all political persuasions
want to solve. The Committee's goal is to mobilise
action throughout America to WIN the fight against
inflation and to save energy. It is our earnest hope
that all Americans will enthusiastically join in this
effort. By working together as we have done histori-
cally when faced by great challenges, we can restore
the vitality of our economy.
Enclosed are the texts of the President's October 8th
economic address to the Congress and his remarks to
the Future Farmers of America in Kansas City on October
15th. The first of these speeches outlines the
President's program of anti-inflationary responsibilities
to be undertaken by the federal government. The Kansas
City address details some valuable suggestions for vol-
untary action on the part of the public which were
recommended by the Citizens Action Committee to Fight
Inflation.
The President would welcome hearing about your plans to
use your organization's resources - publications, letters,
resolutions, displays, billboards, broadcasts, TV spots
or the like - to WIN the fight against inflation and
save energy. You can communicate directly with the
President, with me or with Mr. Russell Freeburg, White
House Coordinator for the WIN program.
With best wishes,
Sincerely,
William J. Baroody, Jr.
Assistant to the President
Enclosures
THE WHITE HOUSE
WASHINGTON
tile
Date Dec 27, 1974
TO:
BILL BAROODY, JR.
FROM: DR. THEODORE C. MARRS
For your signature
For your coordination
For your information
X
Per our conversation
Other:
FORD & LIBRARY GERALD
"WIB Figs seen"
THE WHITE HOUSE
WASHINGTON
December 24, 1974
GERALD R. FORD LIBRARYA
Dear Mr. Carus:
On behalf of the President I am replying to your letter
of December 6. Although President Ford would like to
personally respond to each letter he receives, I am
sure you understand that the demands on his time do not
permit this.
Yoù may be assured that Governor Reagan's views are
highly respected here. I have insured that your letter
and the attachments have had appropriate circulation and
emphasis.
Thank you for your consideration and your thoughtfulness.
Sincerely,
Theodore C. Marrs
Special Assistant to the President
Mr. M. Blouke Carus
Carus Corporation
1500 8th Street
La Salle, Illinois 61301
RECEPTION HOUSE & SECURITY
DEC10'7
CARUS CORPORATION
M. B. Carus
Processed DEC 19. by. 1974
1500 8th Street # La Salle, Illinois 61301
Mr. Theodore C. Marrs
Special Assistant to the President
The White House
Washington, D. C. 20515
CARUS CORPORATION
M. BLOUKE CARUS
Pres dent and Chief Executive Officer
6 December 1974
Gerald R. Ford
The President
The White House
Washington, D. C. 20515
Dear President Ford:
As you know, most Americans are deeply concerned about the American
economy. Your nomination and election in 1976 may well depend upon
how well you solve this extremely complex problem. I think your summit
conference to discuss what to do about our extremely dangerous situation
C
was a good idea, especially from a publicity point of view, but I hope you
will bear in mind the pitfalls of such a conference: almost everyone in the
American economy has vested interests of some sort, and so the proposals
will be mutually exclusive. No one will publicly propose what really needs
to be done: genuine willingness to cut government expenditures about
20-30% and reduce the expansion of the money supply. I think the enclosed
P
article is quite good and needs to be taken seriously by your staff. Governor
Reagan is a proven expert in this field.
Y
I enjoyed being your host 11 April 1970 when you visited La Salle County
with Charlotte Reid. I have followed your meteoric rise with fascination,
and I want to congratulate you on all you have done so far. But leadership
is not thrust upon you--it must be earned by facing difficult decisions,
sometimes unpopular. I have hopes that you will become one of our greatest
presidents.
Best wishes.
Sincerely,
MBlanbe Carus
M. Blouke Carus
MBC: dw
Enc: IMPRIMIS, November, 1974
"Inflation: Its Cause and Cure," by W. Philip Gramm
cc: White House Staff; Cabinet Members
1500 8th Street
La Salle, Illinois 61301
815/223-1500
Cable: CARCHEMCO
LIBRANA GERALD B. FORD
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simprimis Hillsdale College Hillsdale, Michigan 49242 Vol. 3 No. 11
November 1974
INFLATION: ITS CAUSE AND CURE
by
W. Philip Gramm
Philip Gramm is a professor of economics at Texas A & M.
He received his B.A. and Ph.D. in economics from the
University of Georgia. Dr. Gramm delivered this presentation
as part of the most recent Center for Constructive Alternatives
seminar, which was titled "Energy or Exhaustion: The Planet
as Provider.'
We are today experiencing the most prolonged
to fight the Revolutionary War. The paper currency
period of rapid inflation in the history of the United
units were called Continental Dollars. You have all
States. While we have had short periods where
heard the saying "not worth a Continental," a
inflation rates have been more intense, a decade of
statement derived from the fact that when Continental
5 percent plus average inflation is without precedent
Dollars were redeemed at the end of the Revolution-
in the history of the Republic. As an index of how
ary War, they were redeemed at 2 cents on the
severe price increases have been for the last decade,
dollar in gold and silver. The paper currency de-
the consumer price index, which measures the price
preciated very rapidly because of the tremendous
of the market basket of goods and services purchased
quantity which was issued. In essence, the Continental
by the American consumer, is up 57 percent and
Congress was coming on the American market and
the wholesale price index, which measures the price
competing against private citizens for goods and
of raw materials used in the production processes,
services with newly issued Continental currency,
is up 65 percent from a decade ago. Not only have
buying goods at a more rapid rate than the economy
we experienced a decade of high inflation rates, but
was producing them. Prices, therefore, were driven up.
in the last year the rate of price increase has
quickened. The consumer price index is up 12 percent
It is important to note, however, in reviewing
from a year ago and the wholesale price index is up
our first inflationary experience as a nation that
20 percent. These harsh economic facts suggest two
at the end of the Revolutionary War the Congress
questions: (1) how did we get in such a mess, and
established the First Bank of the United States,
(2) how do we get out?
which systematically withdrew Continental Notes
from circulation. Prices then leveled off and fell
The first question is easy to answer. We have
back toward their original level.
data on inflation which goes back to the 15th
century, when gold was discovered in America,
The next major inflation in American history was
transported to Spain, and permeated the European
the War of 1812 inflation, which was basically a
market. Since that time there has never been a
carbon copy of the Revolutionary War inflation. The
prolonged general price inflation in recorded history
principal method of deriving federal revenue was
that was not preceded by and directly related to a
imposing import taxes or tariffs. But we were at
growth in the money supply. In our economy a
war with our major trading partner, England, and
growth in the money supply occurs principally when
tariffs had fallen off drastically. In order to fight
the government spends more than it taxes and
the war we therefore issued tremendous quantities
prints money to make up part of the difference.
of paper currency and produced a rise in general
price level. Again, however, to the credit of our
We have incurred five major inflations in the
forebears, when the war was over the Congress
history of the United States: the Revolutionary War
established a Second Bank of the United States
inflation, the War of 1812 inflation, the Civil War
that redeemed paper currency at par. Prices leveled
inflation, the World War II inflation, and the Vietnam
off and declined back to their original level as the
War inflation. All five of these inflations have had
paper currency was withdrawn from circulation.
the same cause: a rapid increase in the money
supply. Under the Articles of Confederation the
The next major inflation in American history
Continental Congress did not have the power to
occurred during the American Civil War. The federal
tax. It was therefore forced to issue paper currency
government ran a billion dollar deficit, which was
IMPRIMIS is the journal from The Center for Constructive
impriemis (im-pri mis) adv. In the first place. Middle English,
Alternatives. As an exposition of ideas and first principles, it
from Latin in primis, among the first (things)
offers alternative solutions to the problems of our time. A
subscription is free on request.
without precedence in history. It financed a large
money stock, the growth in the economy, and
part of this deficit by issuing Greenback Notes.
changes in prices. Remember what money is used
These Greenback Notes expanded the money supply
for - it is used to buy and sell goods and services
by over 150 percent, and prices roughly doubled from
and consummate exchange. We have found in eco-
1860 to 1865. At the end of the war taxes were
nomics that as the level of economic activity grows
left at their war-time level and government spending
with the growth in income and commerce, the
was cut back drastically. The government surplus
demand for money grows by a corresponding amount.
drew Greenbacks out of circulation and the treasurer
So if the economy grows at about 3 percent a year,
of the United States burned them. As the money
which has been the historic growth rate on average
supply declined prices fell off, and by 1879 we went
throughout the entire history of the United States,
back on the gold standard at exactly the same par
then the economy will absorb a 3 percent growth
value that existed in 1860 because prices had been
in the money supply with no change in prices. For
driven back down to their previous level.
example, from 1947 to 1962 the federal govern-
The next major inflation in American history
ment ran small deficits and the money stock grew
occurred in World War II. The federal government
ran a large deficit and the money stock grew
140 percent as the Federal Reserve Bank monetized
a part of the debt. As the government entered the
market armed with newly printed money, it drove
up prices, increasing overall prices by over 60 percent
during the Second World War. By 1946 we had
balanced the budget, and by 1947 price increases
had ceased. We established a period from 1947 to
1962 which proved to be one of the most prolonged
periods of stable prices and stable economic growth
in the Twentieth Century.
The next major inflation in American history
occurred with the initiation of massive government
expenditures on the Vietnam War. We are today in
the fifth major inflation in American history -
and its source is identical to the four inflations that
preceded it. The current inflation differs only by
the fact that it has been carried over into a peace-
time period; this is the only peace-time inflation
in the entire history of our country. Our present
inflation has been caused by the fact that the
federal government since 1965 has run a $100
billion deficit and has financed 40 percent of that
deficit by simply printing money.
It is fundamentally important to note the difference
in the impact on the economy caused by federal
finance in taxing and borrowing, as opposed to
printing money. When the government taxes and
spends the receipts of those taxes, the ability of the
private consumer to purchase goods and services is
diminished by the amount of the tax. Therefore,
at about 3 percent per year as the Federal Reserve
the increase in total spending as a result of the
Bank purchased government securities in the open
increase in government spending is quite small. If
market to keep interest rates low. The economy
the government goes onto the bond market and
grew at about 3 percent a year so that the increase
sells bonds, competing with private firms and private
in money supply was simply absorbed in the con-
individuals for loanable funds, the competition simply
summation of exchange, and prices remained virtually
drives up interest rates as government diverts funds
stable for the entire period. One exception was the
away from private investment projects. In this case,
year 1950, when the economic impact of the Korean
private spending falls by the amount that public
Conflict was felt. The money supply grew by 10
spending increases. In the case of selling government
percent, the economy grew by about 3 percent,
bonds to the Federal Reserve Bank, which in turn
and prices increased about 8 percent.
gives the treasurer the capacity to write checks
drawn on the Federal Reserve Bank, there is no
Beginning in 1964 we had large increases in
corresponding decrease in private spending. So the
federal spending to finance unprecedented domestic
increase in government spending represents a net
expenditures on the War on Poverty and on Great
increase in total demand for goods and services.
Society programs. With the escalation of the war in
Vietnam we saw the government deficit rise from
There is a simple rule of thumb to follow in
a fairly low level in 1964 to $25 billion a year in
gauging the relation between the growth in the
1968. The so-called anti-inflationary surcharge im-
2
*posed in 1968 had no real impact on inflation rates
were imposed in the fifth dynasty of ancient Egypt.
because government expenditures grew more rapidly
Pericles imposed price controls in ancient Athens,
than tax receipts. As a result, in 1968 we ran a
and Diocletian imposed wage and price controls
record peace-time deficit and the money supply
in ancient Rome. And from the fifth dynasty of
grew by almost 8 percent.
ancient Egypt to President Nixon's Phase IV price
controls, all of these experiences have one thing
In 1969, when President Nixon took office, we
in common - not one in history has ever worked.
made the only real attempt in the whole inflationary
And they do not work for a very simple reason:
period to stop the inflation. Beginning in January,
they freeze prices at a point where the quantity
President Nixon brought the budget into balance,
demanded exceeds the quantity supplied. They simply
and the rate of growth in the money stock from
turn price increases into shortages and stifle the
January to June was zero percent. This policy worked
incentive to produce, therefore causing output to
because the rate of pricing increase, which was
fall.
almost 7 percent on an annual basis in December
and January, had fallen to a 2.7 percent rate of
We have in fact produced a minor miracle in the
price increase by June. But in April, May and June
United States in the 1970's, in that we have produced
the unemployment rate jumped a significant amount.
a grain and a meat shortage through government
policy in a country that has the most fertile land,
Unemployment rose principally because in the
the highest level of capital equipment and techno-
wage negotiations which occurred in the fall of
logy in agriculture, and the best educated farmer in
1968, wage contracts were made on the assumption
the world. We have produced shortages of critical
of a continuation of 5-7 percent inflation rates.
inputs into the productions process, sending the
This expectation was realistic, given our previous
country into a recession where output fell by
five years experience. So an employer who expected
7 percent in the first quarter of 1974 and 1-1/2
the productivity of his workers to rise by 2 percent
percent in the second quarter of 1974. We are today
was willing to negotiate a 7-9 percent wage increase
recovering from a recession that was caused by
if he expected the price of his product to rise by
wage and price controls.
5-7 percent. Laborers, being aware of the same set
of circumstances, were unwilling to accept any
If one looks at what the federal government says
smaller pay increase. If the federal government had
it is doing in its "anti-inflation" policy, and then
continued its expansionary monetary and fiscal policy,
looks at the growth in the money supply to see
such wage negotiations would have caused no changes
what it is actually doing, there is only one conclusion
in the unemployment rate. But when the federal
that can be drawn. That conclusion is that federal
government reversed its monetary policy in attempt-
anti-inflation policy since June of 1969 has been
ing to stabilize prices, and the rate of price increase
a "fraud." Over the last 12 months the monetary
fell below 3 percent by June, the wages that had
base has grown at almost an 8 percent annual rate.
been negotiated in the fall of 1968 were too
Never in history has such a rate of monetary ex-
high for full employment, and workers were laid off.
pansion failed to produce rapid inflation.
The federal government at this point faced a crucial
decision between two options. (1) It could reverse
When the federal government, in June 1969,
its monetary policy, reinflate, and therefore seek
stopped trying to do anything about inflation it
to drive up prices, which would produce a fall in
turned its activities toward developing scapegoats
real wages to the point necessary to produce full
in order to get Americans to blame their neighbor
employment. Or (2), it could maintain its monetary
for their problems. Had the scapegoat strategy not
been so effective, it would be humorous. How does
policy, and allow the new contracts written in the
the system work? Well, you have all heard it. It
fall of 1969 to be based on a 2.7 percent inflation
works basically as follows. A bureaucrat goes to a
rate and a higher unemployment rate.
businessman and says, "Why are you increasing your
In 1969 and 1970 the federal government reversed
prices?" And the businessman says, "Because our
its policy and began to inflate at an increasing rate
costs are rising." And then the bureaucrat says.
in the last six months of 1969 and 1970. By January
"What is your major cost?" And the businessman
of 1971 the inflation rate was back up to a 6 percent
savs, "labor." And then the bureaucrat says, "Well,
annual rise and the unemployment rate was beginning
labor unions cause inflation." And then the same
to slide. Since June of 1969, when we abandoned
bureaucrat goes to union leaders and says, "Why
our only real attempt to stop the inflation, we have
are you demanding such high wage increases?"
made no significant attempt to stop inflation in this
And union leaders note that the consumer price
country. We have sought to find easier solutions to
index is up 12 percent since last year, and that
our economic dilemma. At first we tried a voluntary
real wages of hourly workers are 4 percent lower
basis, in the second half of 1969 and 1970. With
than they were a year ago in real purchasing power
mandatory wage and price controls in 1971 we
dollars. And the bureaucrat says, "Well, who sets
attempted to freeze prices and wages in the United
prices anyway?" And the labor leaders say, "business-
States by government edict.
men." And the bureaucrat says, "Well, through
price collusion and administered prices, businessmen
While we in economics have a lot of data on
create inflation."
inflation, we have even more data on wage and price
controls. In fact, our first history of wage and price
Then, of course, another popular version of scape-
controls occurred 5,000 years ago when price controls
goatism was employed by John Connally when he
3
became head of the price commission. He said, "We
that government economists marvel at record demand
are all causing inflation through our greed. We are
in the short term credit market in the face of record
all SO greedy in competing against each other for
high interest rates, but if one can borrow at 12-1/2
goods and services that we are, through this com-
percent on prime commercial paper and the inflation
petition, driving up prices. We have all just got to
rate is 12 percent, he is paying back, in real terms,
stand back and quit being so greedy. I guess the
only 1/2 percent interest. It is indeed no marvel
low point in scapegoatism was reached when Herbert
that the demand for capital on the short term credit
Stein pronounced, just before his retirement from
market is at a record high, because real interest
the Council of Economic Advisors, that the American
rates are at a record low. Indeed, if the Federal
people were responsible for inflation.
Reserve Bank were not today following an easy money
Picking up the scapegoat theme, Jack Anderson,
policy through open market purchases of govern-
ment securities, interest rates on short-term credit
about eight months ago, wrote an article in which
he said high interest rates are the result of banker
would probably be 15 percent.
collusion in an attempt to drive up the interest
While high nominal interest rates have not dis-
rate to make fat profits at the public's expense.
rupted the short-term credit market, they have had
This statement, I think, showed that Jack Anderson
a disastrous effect on the long-term credit market,
knows nothing about banking and finance and nothing
and the reason is very simple to understand. His-
about economic history, because never in the historv
torically, in the United States we have been blessed
of the United States have we had high inflation
with fiscally responsible government. Indeed, if you
rates when we have not also had high interest rates.
throw out all the war years in American history,
prices on the average have remained constant or
fallen slightly throughout the entire history of the
United States. As a result, we have had historically
low nominal interest rates. Therefore, borrowers
are loathe to commit themselves over 25 - 30 years
to a nominal interest rate that, although it may be
2 percent or negative (in real terms) at current
inflation rates, might later turn out to be an extremely
disadvantageous rate if the current inflation should
end. Secondly, at high inflation rates, funds have
been diverted from their traditional channels, where-
by savings flowed into commercial banks and savings
and loans institutions, and were in turn loaned out
to businesses to build new factories, to generate
jobs, and to build new homes. As a result of high
inflation rates, funds have been diverted into land,
commodity speculation, and large government bond
issues.
We are all aware of the impact inflation has on
income redistribution, particularly on those with
fixed salaries, the old, and the poor. There is no
question that this is a major cost of inflation. But
an additional, more important cost is the impact
caused by diverting funds from traditional channels
and disrupting the link between the saver and the
investor. In this way, we are today planting seeds
which will yield lower economic growth rates for
a decade. The diversion of funds into land and
commodity speculation, while it is an effective
inflation hedge, does not promote the economic
growth of the country or growth in employment
and wages.
Our high interest rates today, which have disrupted
the long-term capital market, have been caused by
How do we stop the inflation? Inflation has one
irresponsible government. I think that it is important
cause and it has but one cure. And that one cure
that we not allow bankers and businessmen to be
is to slow the rate of growth in the money supply.
used as scapegoats for government failure. In fact,
This can occur only by closing the government
if one looks at nominal interest rates and the current
deficit. Our inflation has resulted from the prevalence
inflation rates and attempts to draw any parallel
of a bankrupt (and bankrupting) idea within govern-
between current interest rates, in terms of real
ment that money solves problems. If one looks at
resources borrowed, relative to real resources paid
the historic growth pattern of government spending
back, interest rates today are not at historic highs,
over the history of the United States, it is very
as we are told in the newspaper and on the news.
easy to discern that within the last 15 years there
They are at historic lows. We hear from Washington
has been a fundamental change within our govern-
4
ment. From the birth of the United States it took
make money. It would be so productive that we
over 180 years for the federal budget to grow from
could tax its output and finance government programs
roughly zero to $100 billion. It took only ten years
on the basis of its productivity. I told him that I
to grow from $100 billion to $200 billion, and it
envisioned a system whereby we would allow people
has taken only four years for it to grow from $200
to own property, and we would allow them to
billion to $300 billion. Despite the fact that federal
combine this property with their God-given talents
tax collections have grown by 110 percent over
to produce output. We would allow them to sell
a decade, over three times the rate of economic
output in a free market so that each individual, in
growth, the federal government has failed to live
attempting to maximize his own welfare, would
within its budget. The federal government is deficit
operate at maximum efficiency. And each consumer,
financing at such a rate that today it is absorbing
in attempting to maximize his own individual welfare,
60 percent of all the funds raised in U.S. capital
would economize on the things that were scarce and
markets.
therefore expensive, and substitute for them things
that were abundant and therefore cheap. In such a
In January I had the pleasure of working in
system, by rewarding production and innovation,
Washington for my Congressman, Olin Teague, on
we could assure a maximum level of economic
the Energy Emergency Act. While I was there,
growth. I told him that I was basically a modest
Congressman Teague asked me if I would read some
of the bills that he had to vote on during the period
person and that I wanted him to know this was
I was working for him. I noticed that despite the
not totally my idea; that in fact if he would like
fact that I make my living reading and writing, I was
a written reference, he might look at Adam Smith's
unable to read the bills as fast as they came in, SO
Wealth of Nations, written in 1776. And I hung up.
the stack on my desk kept getting higher and higher.
Well, I assumed that I would never hear from the
Finally I realized that it was physically impossible
White House again, but indeed they went to a great
for any Congressman to read the bills he had to vote
deal of trouble to get in touch with me. And
on. I assert here today that no member of the
that's how, as I expressed it, for about a four-
United States Congress read the $25 billion education
month period, while I didn't invent free enterprise,
act that has just become law. The sheer bulk of
I had the sole Washington distributorship on it.
paperwork is so great that no effective research is
Probably the best statement of the money-solves-
being done in the Congress by those who are actually
problems philosophy that I have ever heard was John
engaged in the process of making decisions in the
Lindsay's statement shortly after he became mayor
public interest. We are experiencing an attempt by
of New York. The gist of John Lindsay's message
the Congress to substitute money for ideas.
was as follows: people think New York City has
The best personal example that I have witnessed
a lot of problems, but New York City has only one
of the bankruptcy of government with regard to
problem - private affluence and public poverty.
new and viable ideas was a call I received back in
If my budget were simply twice what it is today
January. I was working in my office at Texas
I could solve every problem in New York City.
A & M and my secretary, who gets excited with
The day John Lindsay left office his budget was
very little provocation, came into my office and
2.2 times what it was the day he took office, and by
said, "Dr. Gramm, you're not going to believe this,
every index from garbage collection to crime in the
but the President of the United States is on the
streets, New York City was a worse place to live
telephone." And I said, "You're right, I don't
the day he left than the day he came. And the reason
believe it." But, anyway, I picked up the phone
is that money does not solve problems, ideas solve
and this very stern sounding lady said, "Is this
problems. And government has not had a viable
Dr. W. Philip Gramm of Texas A & M University?"
idea in 40 years.
I said, "Yes, Ma'm." She said, "Dr. Gramm, this
is the White House calling."
If we are to ever put an end to spiralling prices,
So I sat on the edge of my chair awaiting some
shortages, high interest rates and economic stagna-
message - some mission from my President - and
tion, we must stop the growth of government and
this guy came on the phone from the White House
put our monetary and fiscal house in order. To re-
staff. He said, "Dr. Gramm, your name has been
verse the trend of fiscal irresponsibility we need
given to us by some very, very important people.
strong leadership, which is a scarce commodity in
We think you might be the kind of guy that can
Washington today. We must resist the siren song of
help us develop a new and viable energy program,
more and more government spending and more and
a system of government control and subsidies, a
more government controls, and stand up for the
system of government and industry mutual research
free enterprise system which has made us prosperous
and free.
and project participation. And as an index of our
commitment to this project we are willing to commit
$20 billion." He went on and used every 25-cent
The hour is late. It has become quite fashionable
word in the English language. When he got through,
to proclaim the inevitability of the demise of our
being an Aggie, I said simply, "It is a happy coinci-
system. Such a philosophy is a convenient escape.
dence that out of 211 million Americans you have
For if there is not hope we are not obligated to do
called the right man, because I know exactly what
anything. In fact, there is no real reason for pessimism.
to do." I told him that I envisioned a system which
We have human talents on our side. We have money
was not going to cost a penny, but in fact would
and economic power on our side, and most important,
5
we have history on our side. We have in the American
about the future of America, and I am optimistic about
Tree enterprise system, the most successful economic
the future of the American free enterprise system.
system in the world. It has elevated us from a
If we have learned anything in the 1970's, it is that
powerless nation, 90 percent of whose citizens were
big government cannot solve problems, and that
in poverty - by any measure - at the time of the
spending more of the taxpayers' money cannot turn
Revolution, into the greatest agricultural and in-
a bad idea into a good one. Everywhere I go in our
dustrial power on earth. So successful is our system
state and in our nation I find the American people
and so high are the aspirations of the American
feel a sense of helplessness. They know big govern-
people that we define poverty at an income level
ment is not working, they know something is out
that is higher than the average income level of the
of kilter, but they don't know what to do about it.
world's second most powerful nation. Yet, para-
What we need today, more than at any time in the
doxically, this great system is under attack at all
history of the United States, is a new wave of
levels of government, and is being replaced by a
leadership to turn this country around. We need
system which has never worked in history and which
this leadership to fulfill the ideals and aspirations
is working effectively no where in the world today.
of a revolution which occurred almost two hundred
The greatest product in history is not selling for the
years ago. In the coming struggle for the survival
simple reason that it has no salesman. Those within
and the success of the American experiment, I call
our government who supposedly represent our views
upon you as our business and civic leaders not to
are defending our system with an ineptitude un-
be merely passive observers, but to be active parti-
paralleled in the history of the Republic. To reverse
cipants. While I cannot speak for the actions of
this trend we need but a unit of will.
others, in my own case I mean not only to participate,
I wish to tell you today that I am optimistic
I mean in that participation to lead.
Hillsdale College is marked by its strong independence
and its emphasis on academic excellence. It holds that the
traditional values of Western civilization, especially including
the free society of responsible individuals, are worthy of
defense. In maintaining these values, the college has remained
independent throughout its 130 years, neither soliciting nor
accepting government funding of any sort.
enter for constructive alternatives
Frank Carlucci
Robert Sasseen
Under-Secretary of Health,
Dean of Faculty
Education and Welfare
University of California
Robert Baker
San Jose
Attorney at Law
Phyllis Schlafly
CCA-II "GALLOPING GOALS: MINORITY QUO-
Author and columnist
TAS VIA AFFIRMATIVE ACTION"
Norman Hill, Associate Director
A. Philip Randolf Institute
Opponent of Equal Rights
Amendment
A federal program which was intended to suppress
George Roche III
Sue Leeson
President of Hillsdale College
discrimination regarding race and sex has now,
Professor of Political Science
under the auspices of Affirmative Action, succeeded
Virginia Davis Nordin
Willamette University
Professor of Education
in achieving exactly the opposite effect. The next
Thomas Sowell
University of Wisconsin
Professor of Economics
seminar of the Center for Constructive Alternatives
Madison
U.C.L.A.
will examine the various aspects of Affirmative
Paul Seabury
Miro Todorovich
Action from November 10 - 15, 1974, with parti-
Professor of Political Science
Director of Committee on
cipants including:
University of California
Academic Non-Discrimination
Berkeley
and Integrity
The opinions expressed in IMPRIMIS may be, but are not necessarily, the views of the Center for Constructive Alternatives or Hillsdale College.
Copyright (c)1974 by Hillsdale College Permission to reprint in whole or in part is hereby granted, provided customary credit is given.