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Digitized from Box 6 of the White House Press Releases at the Gerald R. Ford Presidential Library
EMBARGOED FOR RELEASE
JANUARY 15, 1975
UNTIL 1:00 P.M., EST
EMBARGOED FOR WIRE TRANSMISSION
UNTIL 10:00 A.M., EST
Office of the White House Press Secretary
THE WHITE HOUSE
TO THE CONGRESS OF THE UNITED STATES:
Twenty-six years ago, a freshman Congressman, a young
fellow, with lots of idealism who was out to change the
world, stood before Speaker Sam Rayburn in the well of
this House and solemnly swore to the same oath you took
yesterday. That is an unforgettable experience, and I
congratulate you all.
Two days later, that same freshman sat in the back row
as President Truman, all charged up by his single-handed
election victory, reported as the Constitution requires
on the State of the Union.
When the bipartisan applause stopped, President Truman
said:
"I am happy to report to this Eighty-first Congress
that the State of the Union is good. Our Nation is better
able than ever before to meet the needs of the American
people and to give them their fair chance in the pursuit
of happiness. It is foremost among the nations of the
world in the search for peace.
Today, that freshman Member from Michigan stands where
Mr. Truman stood and I must say to you that the State of the
Union is not good.
Millions of Americans are out of work. Recession and
inflation are eroding the money of millions more. Prices
are too high and sales are too slow.
more
(OVER)
2
This year's Federal deficit will be about $30 billien;
next year's probably $45 billion. The national debt will
rise to over $500 billion.
Our plant capacity and productivity are not increasing
fast enough. We depend on others for essential energy.
Some people question their government's ability to make
the hard decisions and stick with them. They expect Washington
politics as usual.
Yet, what President Truman said on January 5, 1949, is
even more true in 1975.
We are better able to meet the peoples' needs.
All Americans do have a fairer chance to pursue
happiness. Not only are we still the foremost nation in
pursuit of peace, but today's prospects of attaining it
are infinitely brighter.
There were 59,000,000 Americans employed at the start
of 1949. Now there are more than 85,000,000 Americans who
have jobs. In comparable dollars, the average income of
the American family has doubled during the past 26 years.
Now, I want to speak very bluntly. I've got bad news,
and I don't expect any applause. The American people want
action and it will take both the Congress and the President
to give them what they want. Progress and solutions can be
achieved. And they will be achieved.
My message today is not intended to address all the
complex needs of America. I will send separate messages
making specific recommendations for domestic legislation,
such as General Revenue Sharing and the extension of the
Voting Rights Act.
The moment has come to move in a new direction. We
can do this by fashioning a new partnership between the
Congress, the White House and the people we both represent.
Let us mobilize the most powerful and creative
industrial nation that ever existed on this earth to put
all our people to work. The emphasis of our economic
efforts must now shift from inflation to jobs.
To bolster business and industry and to create new
jobs, I propose a one-year tax reduction of $16 billion.
Three-quarters would go to individuals and one-quarter to
promote business investment.
more
3
This cash rebate to individuals amounts to 12 percent
of 1974 tax payments -- a total cut of $12 billion, with a
maximum of $1,000 per return.
I call today on the Congress to act by April 1. If you
do, the Treasury can send the first check for half the rebate
in May and the second by September.
The other one-fourth of the cut, about $4 billion, will
go to businesses, including farms, to promote expansion and
create more jobs. The one-year reduction for businesses
would be in the form of a liberalized investment tax credit-
increasing the rate to 12 percent for all businesses.
This tax cut does not include the more fundamental
reforms needed in our tax system. But it points us in the
right direction -- allowing us as taxpayers rather than the
Government to spend our pay.
Cutting taxes, now, is essential if we are to turn the
economy around. A tax cut offers the best hope of creating
more jobs. Unfortunately, it will increase the size of the
budget deficit. Therefore, it is more important than ever
that we take steps to control the growth of Federal
expenditures.
Part of our trouble is that we have been self-indulgent.
For decades, we have been voting ever-increasing levels of
Government benefits -- and now the bill has come due. We
have been adding so many new programs that the size and
growth of the Federal budget has taken on a life of its
own.
One characteristic of these programs is that their
cost increases automatically every year because the number
of people eligible for most of these benefits increases
every year. When these programs are enacted, there is no
dollar amount set. No one knows what they will cost. All
we know is that whatever they cost last year, they will cost
more next year.
It is a question of simple arithmetic. Unless we check
the excessive growth of Federal expenditures or impose on
ourselves matching increases in taxes, we will continue to
run huge inflationary deficits in the Federal budget.
If we project the current built-in momentum of Federal
spending through the next 15 years, Federal, State, and local
government expenditures could easily comprise half of our
gross national product. This compares with less than a third
in 1975.
more
(OVER)
4
I am now in the process of preparing the budget sub-
missions for fiscal year 1976. In that budget, I will
propose legislation to restrain the growth of a number of
existing programs. I have also concluded that no new
spending programs can be initiated this year, except those
for energy. Further, I will not hesitate to veto any new
spending programs adopted by the Congress.
As an additional step toward putting the Federal
government's house in order, I recommend a five percent
limit on Federal pay increases in 1975. In all Government
programs tied to the consumer price index -- including
social security, civil service and military retirement
pay, and food stamps -- I also propose a one-year maximum
increase of 5 percent.
None of these recommended ceiling limitations, over
which the Congress has final authority, are easy to propose,
because in most cases they involve anticipated payments to
many deserving people. Nonetheless, it must be done. I
must emphasize that I am not asking you to eliminate,
reduce or freeze these payments. I am merely recommending
that we slow down the rate at which these payments increase
and these programs grow.
Only a reduction in the growth in spending can keep
Federal borrowing down and reduce the damage to the private
sector from high interest rates. Only a reduction in
spending can make it possible for the Federal Reserve
System to avoid an inflationary growth in the money supply
and thus restore balance to our economy. A major reduction
in the growth of Federal spending can help to dispel the
uncertainty that so many feel about our economy, and put
us on the way to curing our economic ills.
If we do not act to slow down the rate of increase in
Federal spending, the United States Treasury will be legally
obligated to spend more than $360 billion in Fiscal Year
1976 -- even if no new programs are enacted. These are
not matters of conjecture or prediction, but again of simple
arithmetic. The size of these numbers and their implications
for our everyday life and the health of our economic system
are shocking.
I submitted to the last Congress a list of budget
deferrals and recisions. There will be more cuts recom-
mended in the budget I will submit. Even so, the level
of outlays for fiscal year 1976 is still much too high.
Not only is it too high for this year but the decisions
we make now inevitably have a major and growing impact on
expenditure levels in future years. This is a fundamental
issue we must jointly solve.
more
5
The economic disruption we and others are experiencing
stems in part from the fact that the world price of petroleum
has quadrupled in the last year. But we cannot put all of
the blame on the oil-exporting nations. We in the
United States are not blameless. Our growing dependence
upon foreign sources has been adding to our vulnerability
for years and we did nothing to prepare ourselves for an
event such as the embargo of 1973.
During the 1960s, this country had a surplus capacity
of crude oil, which we were able to make available to our
trading partners whenever there was a disruption of supply.
This surplus capacity enabled us to influence both supplies
and prices of crude oil throughout the world. Our excess
capacity neutralized any effort at establishing an effective
cartel, and thus the rest of the world was assured of
adequate supplies of oil at reasonable prices.
In the 1960$, our surplus capacity vanished and, as a
consequence, the latent power of the oil cartel could emerge
in full force. Europe and Japan, both heavily dependent on
imported oil, now struggle to keep their economies in
balance. Even the United States, which is far more self-
sufficient than most other industrial countries, has been
put under serious pressure.
I am proposing a program which will begin to restore
our country's surplus capacity in total energy. In this
way, we will be able to assure ourselves reliable and
adequate energy and help foster a new world energy stability
for other major consuming nations.
But this Nation and, in fact, the world must face the
prospect of energy difficulties between now and 1985. This
program will impose burdens on all of us with the aim of
reducing our consumption of energy and increasing pro-
duction. Great attention has been paid to considerations
of fairness and I can assure you that the burdens will not
fall more harshly on those less able to bear them.
I am recommending a plan to make us invulnerable to
cut-offs of foreign oil. It will require sacrifices.
But it will work.
I have set the following national energy goals to
assure that our future is as secure and productive as
our past:
-- First, we must reduce oil imports by 1 million
barrels per day by the end of this year and by
2 million barrels per day by the end of 1977.
more
(OVER)
6
Second, we must end vulnerability to economic
disruption by foreign suppliers by 1985.
-- Third, we must develop our energy technology
and resources so that the United States has
the ability to supply a significant share of
the energy needs of the Free World by the end
of this century.
To attain these objectives, we need immediate action
to cut imports. Unfortunately, in the short-term there
are only a limited number of actions which can increase
domestic supply. I will press for all of them.
I urge quick action on legislation to allow commercial
production at the Elk Hills, California, Naval Petroleum
Reserve. In order that we make greater use of domestic coal
resources, I am submitting amendments to the Energy Supply
and Environmental Coordination Act which will greatly
increase the number of power plants that can be promptly
converted to coal.
Voluntary conservation continues to be essential, but
tougher programs are also needed -- and needed now. There-
fore, I am using Presidential powers to raise the fee on
all imported crude oil and petroleum products. Crude oil
fee levels will be increased $1 per barrel on February 1,
by $2 per barrel on March 1 and by $3 per barrel on April 1.
I will take action to reduce undue hardship on any geo-
graphical region. The foregoing are interim administrative
actions. They will be rescinded when the necessary
legislation is enacted.
To that end, I am requesting the Congress to act within
90 days on a more comprehensive energy tax program. It
includes:
-- Excise taxes and import fees totalling $2 per
barrel on product imports and on all crude oil.
-- Deregulation of new natural gas and enactment of
a natural gas excise tax.
-- Enactment of a windfall profits tax by April 1
to ensure that oil producers do not profit
unduly. At the same time I plan to take
Presidential initiative to decontrol the price
of domestic crude oil on April 1.
more
7
The sooner Congress acts, the more effective the oil
conservation program will be and the quicker the Federal
revenues can be returned to our people.
I am prepared to use Presidential authority to limit
imports, as necessary, to assure the success of this program.
I want you to know that before deciding on my energy
conservation program, I considered rationing and higher
gasoline taxes as alternatives. Neither would achieve
the desired results and both would produce unacceptable
inequities.
A massive program must be initiated to increase energy
supply, cut demand and provide new standby emergency
programs to achieve the independence we want by 1985.
The largest part of increased oil production must come
from new frontier areas on the Outer Continental Shelf
and from the Naval Petroleum Reserve No. 4 in Alaska. It
is the intention of this Administration to nove ahead with
exploration, leasing and production on those frontier
areas of the Outer Continental Shelf where the environ-
mental risks are acceptable.
Use of our most abundant domestic resource -- coal --
is severely limited. We must strike a reasonable compromise
on environmental concerns with coal. I am submitting Clean
Air Act amendments which will allow greater coal use with-
out sacrificing our clean air goals.
I vetoed the strip mining legislation passed by the last
Congress. With appropriate changes, I will sign a revised
version into law.
I am proposing a number of actions to energize our
nuclear power program. I will submit legislation to
expedite nuclear licensing and the rapid selection of sites.
In recent months, utilities have cancelled or postponed
over 60 percent of planned nuclear expansion and 30 percent
of planned additions to non-nuclear capacity. Financing
problems for that industry are growing worse. I am there-
fore recommending that the one year investment tax credit
of 12 percent be extended an additional two years to
specifically speed the construction of power plants that
do not use natural gas or oil. I am also submitting
proposals for selective changes in State utility commission
regulations.
more
(OVER)
8
To provide the critical stability for our domestic
energy production in the face of world price uncertainty,
I will request legislation to authorize and require tariffs,
import quotas or price floors to protect our energy prices
at levels which will achieve energy independence.
Increasing energy supplies is not enough. We must also
take additional steps to cut long-term consumption. I
therefore propose:
-- Legislation to make thermal efficiency standards
mandatory for all new buildings in the United States.
These standards would be set after appropriate
consultation with architects, builders and labor.
-- A new tax credit of up to $150 for those home
owners who install insulation equipment.
-- The establishment of an energy conservation
program to help low income families purchase
insulation supplies.
-- Legislation to modify and defer automotive
pollution standards for 5 years to enable us
to improve new automobile gas mileage 40 percent
by 1980.
These proposals and actions, cumulatively, can reduce
our dependence on foreign energy supplies to 3-5 million
barrels per day by 1985. To make the United States
invulnerable to foreign disruption, I propose standby
emergency legislation and a strategic storage program of
1 billion barrels of oil for domestic needs and 300 million
barrels for defense purposes.
I will ask for the funds needed for energy research
and development activities. I have established a goal of
1 million barrels of synthetic fuels and shale oil production
per day by 1985 together with an incentive program to achieve
it.
I believe in America's capabilities. Within the next
ten years, my program envisions:
-- 200 major nuclear power plants,
-- 250 major new coal mines,
-- 150 major coal-fired power plants,
-- 30 major new oil refineries,
more
9
-- 20 major new synthetic fuel plants,
-- the drilling of many thousands of new oil wells,
-- the insulation of 18 million homes,
-- and construction of millions of new automobiles,
trucks and buses that use much less fuel.
We can do it. In another crisis -- the one in 1942 --
President Franklin D. Roosevelt said this country would
build 60,000 aircraft. By 1943, production had reached
125,000 airplanes annually.
If the Congress and the American people will work with
me to attain these targets, they will be achieved and
surpassed.
From adversity, let us seize opportunity. Revenues of
some $30 billion from higher energy taxes designed to
encourage conservation must be refunded to the American
people in a manner which corrects distortions in our tax
system wrought by inflation.
People have been pushed into higher tax brackets by
inflation with a consequent reduction in their actual
spending power. Business taxes are similarly distorted
because inflation exaggerates reported profits resulting
in excessive taxes.
Accordingly, I propose that future individual income
taxes be reduced by $16.5 billion. This will be done by
raising the low income allowance and reducing tax rates.
This continuing tax cut will primarily benefit lower and
middle income taxpayers.
For example, a typical family of four with a gross
income of $5,600 now pays $185 in Federal income taxes.
Under this tax cut plan, they would pay nothing. A family
of four with a gross income of $12,500 now pays $1,260 in
Federal taxes. My plan reduces that by $300. Families
grossing $20,000 would receive a reduction of $210.
Those with the very lowest incomes, who can least
afford higher costs, must also be compensated. I propose
a payment of $80 to every person 18 years of age and
older in that category.
State and local governments will receive $2 billion
in additional revenue sharing to offset their increased
energy costs.
more
(OVER)
10
To offset inflationary distortions and to generate
more economic activity, the corporate tax rate will be
reduced from 48 percent to 42 percent.
Now, let me turn to the international dimension of the
present crisis. At no time in our peacetime history has
the state of the Nation depended more heavily on the state
of the world. And seldom if ever has the state of the
world depended more heavily on the state of our Nation.
The economic distress is global. We will not solve
it at home unless we help to remedy the profound economic
dislocation abroad. World trade and monentary structure
provides markets, energy, food and vital raw materials --
for all nations. This international system is now in
jeopardy.
This Nation can be proud of significant achievements
in recent years in solving problems and crises. The Berlin
Agreement, the SALT agreements, our new relationship with
China, the unprecedented efforts in the Middle East -- are
immensely encouraging. But the world is not free from
crisis. In a world of 150 nations, where nuclear technology
is proliferating and regional conflicts continue, inter-
national security cannot be taken for granted.
So let there be no mistake about it: international
cooperation is a vital fact of our lives today. This is
not a moment for the American people to turn inward.
More than ever before, our own well-being dépends on
America's determination and leadership in the world.
We are a great Nation -- spiritually, politically,
militarily, diplomatically and economically. America's
commitment to international security has sustained the
safety of allies and friends in many areas --- in the
Middle East, in Europe, in Asia. Our turning away would
unleash new instabilities and dangers around the globe
which would, in turn, threaten our own security.
At the end of World War II, we turned a similar
challenge into an historic achievement. An old order was
in disarray; political and economic institutions were
shattered. In that period, this Nation and its partners
built new institutions, new mechanisms of mutual support
and cooperation. Today, as then, we face an historic
opportunity. If we act, imaginatively and boldly, as we
acted then, this period will in retrospect be seen as one
of the great creative moments of our history.
The whole world is watching to see how we respond.
more
11
A resurgent American economy would do more to restore
the confidence of the world in its own future than anything
else we can do. The program that this Congress will pass
can demonstrate to the world that we have started to put
our own house in order. It can show that this Nation is
able and willing to help other nations meet the common
challenge. It can demonstrate that the United States
will fulfill its responsibility as a leader among nations.
At stake is the future of the industrialized democracies,
which have perceived their destiny in common and sustained
it in common for 30 years.
The developing nations are also at a turning point.
The poorest nations see their hopes of feeding their hungry
and developing their societies shattered by the economic
crisis. The long-term economic future for the producers
of raw materials also depends on cooperative solutions.
Our relations with the Communist countries are a basic
factor of the world environment. We must seek to build a
long-term basis for coexistence. We will stand by our
principles and our interests; we will act firmly when
challenged. The kind of world we want depends on a broad
policy of creating mutual incentives for restraint and
for cooperation.
As we move forward to meet our global challenges and
opportunities, we must have the tools to do the job.
Our military forces are strong and ready. This
military strength deters aggression against our allies,
stabilizes our relations with former adversaries and
protects our homeland. Fully adequate conventional and
strategic forces cost many billions, but these dollars
are sound insurance for our safety and a more peaceful
world.
Military strength alone is not sufficient. Effective
diplomacy is also essential in preventing conflict and
building world understanding. The Vladivostok negotiations
with the Soviet Union represent a major step in moderating
strategic arms competition. My recent discussions with
leaders of the Atlantic Community, Japan and South Korea
have contributed to our meeting the common challenge.
But we have serious problems before us that require
cooperation between the President and the Congress. By
the Constitution and tradition, the execution of foreign
policy is the responsibility of the President.
more
(OVER)
12
In recent years, under the stress of the Vietnam War,
legislative restrictions on the President's capability to
execute foreign and military decisions have proliferated.
As a member of the Congress, I opposed some and approved
others. As President, I welcome the advice and cooperation
of the House and Senate.
But, if our foreign policy is to be successful we
cannot rigidly restrict in legislation the ability of the
President to act. The conduct of negotiations is 111
suited to such limitations. For my part, I pledge this
Administration will act in the closest consultations with
the Congress as we face delicate situations and troubled
times throughout the globe.
When I became President only five months ago, I promised
the last Congress a policy of communication, conciliation,
compromise and cooperation. I renew that pledge to the new
members of this Congress.
To sum up:
America needs a new direction which I have sought to
chart here today -- a change of course which will:
-- put the unemployed back to work;
-- increase real income and production;
-- restrain the growth of government spending;
---- achieve energy independence; and
- advance the cause of world understanding.
We have the ability. We have the know-how. In part-
nership with the American people, we will achieve these
objectives.
As our 200th anniversary approaches, we owe it to
ourselves, and to posterity, to rebuild our political and
economic strength. Let us make America, once again, and
for centuries more to come, what it has so long been -- a
stronghold and beacon-light of liberty for the world.
GERALD R. FORD
THE WHITE HOUSE,
January 15, 1975.
# # # #