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This file contains material relating to the Domestic Council Review Group on Regulatory Reform and President Ford's meetings with regulatory commissioners.
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Regulatory Reform (7)
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Regulatory Reform (7)
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This file contains material relating to the Domestic Council Review Group on Regulatory Reform and President Ford's meetings with regulatory commissioners.
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James M. Cannon Files (Ford Administration)
James Cannon's Issues Files
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Aeronautics, Commercial
Antitrust law
Government regulation
Independent regulatory commissions
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1976
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1975-06-01
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6
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1975
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The original documents are located in Box 29, folder "Regulatory Reform (7)" of the James
M. Cannon 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States of America his copyrights in all of his unpublished writings in National Archives collections.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 29 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
C
THE WHITE HOUSE
July 10, 1975
THE EAST ROOM
PRESIDENT GERALD R. FORD,
SEE
VICE PRESIDENT NELSON A. ROCKEFELLER,
PAgES
1,2,3
WITH
MEMBERS OF THE CABINET
AND
COMMISSIONERS OF THE TEN INDEPENDENT REGULATORY AGENCIES
(11:05 A.M. EDT)
THE PRESIDENT: Won't you all sit down, please.
Good morning. It is a pleasure and a privilege
to have you here, Mr. Vice President, Members of the
Cabinet and members of the various regulatory agencies.
I will make an initial relatively short statement,
to be followed by Rod Hills, being the moderator, for the
introduction of the four topics which are on the agenda,
and Paul MacAvoy will give an introductory remark or two
concerning each subject, and, then, as I think all of you
have been told, there will be one and perhaps several from
each of the -- well, from some of the regulatory agencies,
make an introductory observation and comment and then a
period will be given in each case for members of the various
regulatory agencies to make observations and comments.
I think it is quite obvious that I feel very deeply
that we must seriously consider the costs to the American
consumers of all government activities, and this, of course,
includes regulatory agencies. Regulatory reform is a theme
that arose repeatedly in the course of last fall's Economic
Summit Meeting. It is a theme that is finding, as I travel
around the country, growing public attention and support,
both in popular and economic literature, in the Executive
Branch, in the Congress, and, I am pleased to note among
the government regulators themselves.
A short time ago, I met with twenty-four Members of
Congress on this particular matter. There was unanimity on
this bipartisan group that we must examine our regulatory
practices to make sure they are meeting our present needs.
There was agreement that competition should be relied on when-
ever possible and that where regulation is unnecessary it
should be avoided.
Also there was a persistent concern expressed by
this group that some government regulation costs the country
more than it returns in benefits, and that the regulatory
process often benefits special interests at the expense of
the general public.
Finally, there was consensus that the important
public service role of the commissions must be reflected in
the attitude of the regulators, and the welfare of the
consumer must always be the first concern on their minds.
I have a strong belief that the costs which regula-
tion imposes on private citizens should be faced very squarely.
Every citizen should be aware that in some cases the costs in
some cases mean higher prices, reduced efficiency, less consumer
choice and fewer imaginative ideas.
more
(OVER)
2
In calling today's meeting, I do not suggest that
the problems reside exclusively in your agencies or commissions.
Regulations that impose costs on consumers can also be found
in Cabinet departments and in the intricate, sometimes invisible
web of laws and regulations at State and local levels.
My Administration is focusing public attention on
the need to eliminate or to minimize unnecessary controls.
We should recognize that occasionally government policies
which appear to be in the short-term public interest are in
fact detrimental to long-term consumer interests.
I am asking for your continued and intensified help
in identifying ways the commission can assist in our collec-
tive efforts to restore inventiveness and growth in the
American economy. As we look for short-term solutions, we
must also chart a course that permanently relieves the
economy of unnecessary long-term impediments.
In some instances, the circumstances which caused
government to institute regulatory schemes have changed. You
should be the leaders in identifying areas where regulation
should be eliminated or substantially revised. You have
been given, by law, extraordinary authority to regulate the
economy for the public good. With these unusual powers and
responsibilities, you must function as models of effective
and open government.
There are four major areas that deserve very careful
attention:
First, there must be a constant effort to improve
each commission's ability to identify the costs and the bene-
fits of current and proposed regulations. You should make
sure that the quality of your economic analysis matches your
high standards of legal professionalism.
In particular, the costs as well as the benefits of
restricting competition must be considered. Also, the benefits
of worthwhile social goals must be weighed against their
economic costs to the Nation as a whole.
As you know, I have ordered all departments and
agencies to prepare an inflation impact statement on each
of their major proposals. I am pleased that the House of
Representatives has changed its rules to require similar
analysis -- and I note that the Senate, in several similar
measures, is doing the same thing. I ask each of you to
give this matter the highest priority.
Second, we must make every possible step to make
sure that the backlog and the delays in regulatory proceed-
ings do not weaken the public belief in an equitable and
efficient regulatory system. If legislation is needed, you
may be certain that the Congress and the Administration
will provide such laws.
Third, the public can rightfully expect that you
will be the leaders in suggesting appropriate legislative
changes in your authorizing statutes.
Fourth, I have asked all departments and all
agencies to reexamine their present procedures for assuring
that the consumers' interests prevail. I believe that com-
petition in product quality and price is the best consumer
more
3
protection. By freeing entry, adding to rate flexibility
and promoting service competition, the consumer can be
given the choices that only the marketplace can provide.
I also urge you to insure clear communications
with consumers so they will better understand your actions.
Our joint efforts in these areas will move us a long ways
towards the efficient and useful regulatory system that we
all seek.
In addition to achieving these administrative
reforms, my Administration specifically will be seeking
further legislation that would also intend to reform our
system of regulation. It is my strong conviction that
the consumer is best able to signal his wants and needs
through the marketplace. The government should not dictate
what his economic needs should be.
Therefore, I have proposed and will continue to
support legislation to relax or eliminate the Federal con-
trols over areas where I believe the marketplace can do a
better job. I believe the government should intrude in
the free market only when well-defined social objectives
can be obtained by such intervention or when inherent monopoly
structures prevent a free, competitive market system from
operating. Government should foster rather than frustrate
competition. It should seek to insure maximum freedom for
private enterprise.
Agencies engaged in regulatory activities can
expect that the Antitrust Division of the Department of
Justice will continue to argue for competition and lower
consumer prices as a participant in your agency's proceed-
ings. Furthermore, the Attorney General will continue to
insure vigorous antitrust prosecution to remove private
sector barriers to competition.
We have, or will propose, regulatory reform
legislation in such areas as energy, transportation, financial
institutions, and communications. I have asked Congress for
its cooperation in giving these bills early consideration,
and I ask for your personal and organizational support in
achieving needed reform.
The legislation I am proposing would reduce the
government's role in the setting of prices. Also, it would
enhance innovation by making it easier for new businesses
to compete with existing firms. It would remove barriers
from existing firms to allow them to develop new services
and lower prices, as well as abandon unprofitable or
unnecessary services.
This meeting and my earlier meeting with the
congressional representatives are only the beginning -- and I
emphasize that. Today we will continue the dialogue begun at
the congressional meeting. Rod Hills and Paul MacAvoy, as I
indicated, will briefly describe our agenda for the meeting
this morning.
I will be interested in hearing more about the
steps you are taking to improve our system of regulation
as well as the problems you face in this effort. I am
particularly hopeful that we will be able to identify those
practices which are more deserving of attention and reform.
If this meeting does foster a program of action --
and I think it can -- and a new spirit of cooperation between
all of our commissions, the Congress and the White House, then,
in my judgment, we will be responsive to the public interest.
more
(OVER)
4
I thank you for being here, and at this point I
will call on Rod Hills to get the meeting started, as the
moderator.
MR. HILLS: Our purpose this morning is to foster
as wide an exchange of views as possible on the area of
government regulation. To facilitate and focus that discussion,
we have divided the session into four broad areas, the four
broad areas that the President has mentioned -- the improve-
ment of economic analysis, the improvement of the regulatory
procedures, the efforts to foster more competition in regulated
industries, and the effort to foster a reexamination of the
objectives of commissions to determine whether some form of
deregulation can be profitable and necessary.
Dr. Paul MacAvoy, of the Council of Economic Advisers,
will briefly introduce each section of our session today, and
we will call upon chairpersons present this morning to keynote
for a few moments each of the sections.
Our objective is to have as many of you as possible
express yourself, and that means, of course, that it may not
be possible to have extended discussion on some topic that
comes up. If that occurs, as it undoubtedly will, we will ask
you to defer that conversation to an early meeting here at
the White House where we will get you together with appropriate
officials to continue the discussion.
We welcome you here. We all expect this to be a
mutually beneficial session.
Paul?
MR. MacAVOY: Perhaps I might begin with a few
questions in each case. I will try to keep the questions
short, and I hope they are helpful.
In the last ten years, the caseload in the area of
price or rate setting has increased in most commissions two -
to five-fold. In this period, the complexity of the cases has
apparently increased a multiple as well. This is partly
because of changing demands, changing technological conditions,
partly also because in almost each industry with which you are
concerned, there seems to be a growing unregulated sector also
producing to meet these demands.
With a complex and larger caseload, the economic
question arises as to what the results from the more compli-
cated cases have been. Are the cases moving in the direction
of adding to gains or benefits to consumers from bringing
rates more currently in line with operating and capital costs?
Or are these activities in the caseload area moving in the
opposite direction?
The fundamental argument for regulation was that it
would do better than partially competitive or uncompetitive
markets in providing consumers with goods at prices in line
with current costs. The question that has to be asked in the
economics at this point then is, if we look at the results
from the cases, do we show economic effects of bringing prices
in line with current costs?
In some instances, it appears as if prices may be
set far above the current costs of operation; in other in-
stances, perhaps they are too low. There are cases now in
the energy and transportation sector where it is quite apparent
that costs are higher for additional service or quality than
the going rate. The question then is can be begin to carry
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5
out benefit-cost studies of caseloads in large areas of
your activities which will show that you are doing better
than the market would do in bringing prices in line with
current costs?
These same questions arise in somewhat different
form, but a benefit-cost analysis form, in the health and
safety regulation area. Many of the Commissions in this
area are relying more and more on detailed specification
of production conditions or of physical quality of the
product. These specifications have a tendency to increase
the costs of operation for corporations which get passed
on as increased prices for consumers. These costs also
have to be added to the cost of litigation, to delay in
the regulatory process; delays seem to be growing as the
complex caseload grows. Against these costs, we have to
put the benefits to the consumer of a higher quality product.
Can we begin to do benefit-cost analyses of these
health and safety regulatory activities, which clearly show
that the benefits to the consumer in increased demands and
in greater reliance on the quality of the product received
in the market, are worth the additional costs of higher
prices and delays in the institution of new technology?
Added to these questions, of course, we have to
ask whether there is available in the current techniques
of economic analysis the equipment to help you do this.
These three questions are interrelated. I hope we can
spend some time this morning on working on the answers.
THE PRESIDENT: The initial topic, "Improving
Economic Analysis in the Various Regulatory Agencies,'
to begin the discussion from the point of view of the
commissions or agencies themselves, I will call on
Lew Engman, the Chairman of the Federal Trade Commission.
Lew?
MR. ENGMAN: Thank you, Mr. President. I would
like to say, first of all, that we very much appreciate
your efforts to focus public attention and to take action
on these issues of regulatory reform. I, for one, agree
completely with the objectives which you have stated this
morning, and I must say that I have some feeling that we
could make a start on the problem if you could install a
trapdoor in the East Room and somehow make half of this
table disappear, and I won't say which half.
[Laughter]
At the FTC, we have been concerned, just as you
have, that many governmental policies, whatever and however
well intentioned they may have been in the first instance,
have outlived any economic or social justification and have
in fact become a costly burden on every American.
I have frankly regarded it, as part of my job
as Chairman of the Commission, to be outspoken on this
subject, because while the other agencies around this table
divide markets, prescribe rates or determine whether or
not new competitors can be permitted to enter a certain
market or set environmental or safety standards, our basic
responsibility, as we see it, is a much more general one,
and that is to assure that our free market economy can operate
just as freely and as openly as possible.
more
(OVER)
LIBR
6
Because, as you indicated in your opening remarks, just as
the public can pay more for goods and services as a result
of private collusion, which is what the antitrust laws are
all about, by the same token, SO do we pay more for goods and
services because of governmental intervention in the marketplace.
Now, in looking at this role of economic analysis,
I think the question really is, how can we measure the economic
costs of this kind of regulation, and how can we measure the
benefits so that we can assure ourselves that we are not paying
today's prices for solutions to yesterday's problems.
Now, at the FTC we have undertaken a self-examination
which is very much like that which the Office of Management and
Budget is now requiring in the form of inflation impact state-
ments from the Executive departments. We are trying to analyze
every single law enforcement program which we are responsible
for carrying out, analyze the costs of those programs, and to
compare those costs with the potential benefits flowing to the
public. And as a result of the cost-benefit analysis which we
have already begun to undertake, we have in fact made decisions
with respect to our programs which have reduced our activities
in certain enforcement areas and increased them in others.
Now, I have to be candid, however, and admit that
this is not a very easy thing to do. It is a case of weighing
costs, on the one hand, against benefits which are only potential,
and it is an inexact science at the present time. I think that
you know fully well, Mr. President, how hard it is to get
economists to agree with one another, and when you add onto that
the problems of data and the fact that in many instances the data
which we have available is not very good, it becomes even more
difficult.
How, for example, just to raise one kind of question,
do you quantify the benefit of the deterrent effect of a law
enforcement action -- the deterrent effect of having a cop
standing on that street corner? And to do the job right, you also
have to calculate on the benefit side of the equation, make some
assessment of where you would be without the particular regulation
or action. And beyond that, and perhaps even more important, I
think you have to try to make an assessment from an economic
cost point of view --- are there less costly ways that you can
achieve a similar benefit, assuming that there is some social
good to it?
But even with these kinds of problems, I think the fact
is that government regulation should be subjected to this kind
of cost-benefit analysis. If we really believe, if we truly
believe that a free market economy is the means to the greatest
prosperity to the greatest number of people, then I think that
we have to put the burden of proof on those who would make
that economy less free. And we found out at the Trade
Commission, with our experience with respect to cost-benefit
analysis, that although the approach is not simple -- it is
difficult -- by the same token, it was darn helpful in helping
us to address what our priorities ought to be.
And I guess I would suggest that possibly one way to
get a grip on this problem is for each agency to consider or
to start to do cost-benefit analysis itself in the light of
its own particular mission, which may differ from case to case,
and I quite frankly would be interested in the reactions of
my fellow chairmen to that point, but I think that the need
for this kind of analysis is critically important. It is long
past time that an effort was made to tell the American people
what they are getting for what they are giving up.
more
FORD
7
Thank you.
THE PRESIDENT: Thank you very much, Lew.
I guess Dick Wiley, Chairman of the Federal
Communications Commission, has some observations on the
situation in the communications industry.
MR. WILEY: Thank you, Mr. President. I happen to
agree with Chairman Engman largely in his comments.
It seems to me that the decision-making process of
the independent regulatory agencies has been in the past
dominated by consideration of legal, technical and sociologi-
cal aspects. Increasingly, our agency has come to recognize
the importance of undertaking more comprehensive inquiry into
the economic ramifications of our decisions with regards to
the costs and the benefits of those decisions to the industries
we regulate and indeed to the public.
Now, these efforts have extended to all areas of our
jurisdiction, but I might cite the example of the common carrier
industry. There, in addition to traditional rate-making con-
cepts, we are now conducting a broad-ranging economic inquiry
to analyze the costs and benefits of increased competition in
the realm of common carrier communications. Our work has in-
cluded a review of such concepts as use of sensitive pricing,
cross-subsidization, the whole question of competition vis-a-vis
monopoly. And we found that in redefining natural monopoly,
we found in many areas we have been able to dispense with that
whole idea and find areas in which competition can work in the
areas which have been traditionally considered monopolistic.
And I think in that effort WE found ways in which the public
will be ultimately saved.
MR. HILLS: Ladies and gentlemen, the discussion is
open for those of you who would like to comment. The distances
and the lights are great, so if you would not mind identifying
yourself, it would be helpful to all of us.
MS. FRANKLIN: Mr. President, I have a comment and a
suggestion on this whole area. First, I am Barbara Franklin,
from the Consumer Products Safety Commission. My comment is
this -- and we are, of course, in the field of safety:
I think it is -- I am in full agreement that we need
to emphasize more than we ever have before cost-benefit analysis
in our regulatory decision-making. Given the changes we have
going on in the economy, shortages of resources that are be-
ginning to show up -- shortages of capital, and the kinds of
things that are difficult to deal with -- I think it makes it
much more incumbent upon us, as regulators, to think ahead to
what the real impacts, not only now but down the road, of what
our decisions are going to be.
We are in an area where there are some very diffi-
cult questions in terms of the costs: What does it cost to
redesign, retool? What impact are we having on technology?
On the other side, how do you value human life? How do you
value fewer injuries? They are really very tough questions.
The point is, we have really got to get a handle
on this. The law we administer requires it, but beyond that,
I think there is much more urgency than there ever was before
for us to do it. And if I may make a suggestion, I think
around the table we have got some expertise in our respective
more
(OVER)
8
agencies about this. I presume others are trying to get a
handle on this, as we are. I wish there was some mechanism --
and maybe it could come out of this meeting, which I very
much appreciate -- I have never been in the same room with
my colleagues before, and I would hope it would happen again --
I wish there were some mechanism, though, whereby we could
pool our technology or our methodology, whatever we know
about cost-benefit analysis, so each of us doesn't have to
invent the wheel, and we can move all of us further along
in the process.
MR. HILLS: The discussion is not confined to the
table. We have microphones from which anyone from the
commissions can have a commanding position, if you would
like to talk.
MR. NASSIKAS: Mr. President, John Nassikas, Chairman
of the Federal Power Commission. The Circuit Court of Appeals
for the District of Columbia said in a case a few years ago,
"Despite a continuing debate, it appears that the basic goal
of direct governmental regulation through administrative bodies
and the goal of indirect governmental regulation in the form
of antitrust law is the same, and that is to achieve the most
efficient allocation of resources possible. For instance,
whether a regulatory body is dictating the selling price or
that price is determined by a market free from unreasonable
restraints of trade, the desired result is to establish a
selling price which covers costs, plus a reasonable rate of
return on capital, thereby avoiding monopoly profits. One
more example of common purpose in both types of regulation
is that they seek to establish an atmosphere which will stimu-
late innovations for better service at a lower cost. This
analysis suggests that the two forms of economic regulation
complement each other."
I believe that the free market can undoubtedly do
a far superior job of allocating resources produced by natural
gas producers, for instance, which I can go into detail on
later on. I also believe that the antitrust laws should be
more effectively enforced.
One final word: At the Federal Power Commission,
any decision that we issue has to examine productivity and
inflationary impact. Is this the best possible price for
the consumer under the restrictive statute under which we
have to operate?
MR. HILLS: Yes, sir?
MR. SIMPSON: Thank you. Dick Simpson, Chairman of
the Consumer Product Safety Commission. Our agency is one of
the new agencies, regulatory agencies, in town and the Congress
in establishing the agency, required us, as a matter of law,
to do economic impact analysis on all of our regulations.
There is a series of findings that we must make which has to
deal with the need for the product, the degree and nature of
the risk of injury that we are trying to address, the effect
on competition, and any other method that we could have used
to achieve the same result other than the rule that we are
promulgating.
Also it goes a little further. We not only have to
make the findings but the standard itself can be overruled if
any of these economic findings are inadequate.
more
FORD
9
And I suggest that when we get to item four on the
agenda, legislative changes, one may look to the Consumer
Product Safety Act, section 9, as perhaps a model of laying
on the requirement of the economic analysis that we are
discussing here.
MR. HILLS: Very good. Are there any comments from
the back? Yes, sir?
MR. ROBINSON: Glen Robinson, from the FCC. Nobody
has commented yet on the resources and the wherewithal to do
this economic analysis. I am particularly mindful of this in
terms of probably one of the few Commissioners that has an
economist, a professional economist on my staff. But it is
inordinately difficult to get the kind of economic skills and
talent and put them, direct them to the task, and we have been
particularly hard-pressed at the FCC. We have a mammoth
undertaking, that Chairman Wiley spoke of a moment ago, to
conduct an economic analysis of the telecommunications in-
dustry, if nothing less than that, particularly the role of
competition being a traditionally natural monopoly field.
But I fear that unless we get access to more and
better economic skills than we have had in the past, the pro-
ject may fail simply because we are in a class which is a
very high-stepping class. We are up against some of the
largest corporations in the world, who have their own economic
analysts who are very competent and some of the best in the
world, as I am sure Paul MacAvoy knows. The Bell System
commands resources so far in excess of ours, there is no way,
of course, that we can match them man for man. I wouldn't
want to, if we could. And that would imply an unwieldy
governmental structure that would be counterproductive.
But we do have to focus on the talent part of this.
It is no good to just conduct economic analysis, have a bunch
of laws talk about cost-benefit analysis, if they are not
really capable of applying refined skills to the task at hand;
and it can get very complicated, as I found out sometimes, to
my discomforture, in talking to my economists.
I think we at the FCC are particularly in need of
this. I would like to see some more attention given to the
talent phase of this.
MR. HILLS: Paul, do we really need some more
economists?
MR. MacAVOY: I appreciate the demand for económists
going up as rapidly as it has in the last ten minutes.
[Laughter]
I would respond, however, to try in a way that
attempts to reduce the demand somewhat. Some years ago, the
Federal Power Commission, as a page in its annual report,
tried to lay out a benefit-cost analysis at the beginning
level. What that involved was comparing the dollars of rate
reductions that had occurred in electric power and natural
gas pipeline price controls against the cost of litigation
and other measurable costs, both of the companies and the
Commission. That had a tendency to indicate that most of
the important work of the Commission was being done in the
control of natural gas pipeline rates. That fell out of
the reports in the middle 1960's. I considered it an admirable
first cut at trying to do this kind of work.
more
(OVER)
10
You don't always measure benefits in rate
reductions. Certainly at the State level in electric power
regulation now, we measure benefits in rate increases be-
cause there are going to be shortages of capacity from State
price freezes that will make us worse off in five years.
But the idea that you have gone through this to the point
of being able to write down a page does have some benefit
to those surveying the activities of the Commission, those
who read your annual reports, because it will clearly show
that more resources put in one area might pay off in terms
of increased benefits to consumers and less in others.
This might require some kind of an economist, but certainly
would not raise honorariums or per diems of professors
appreciably.
[Laughter]
MR. HILLS: Chairman Wiley.
MR. WILEY: Yes, if I could just comment on that.
I think one thing that government needs to do is to try to
find areas in which it doesn't need to regulate and redistribute
some of those resources into areas in which we perhaps in the
short run will need more manpower in order to provide a com-
petitive mode. I think we are finding that in many areas we
need economic strength, as Commissioner Robinson mentioned,
and perhaps less lawyers regulating less aspects of the
business world.
MR. HILLS: Mr. Vice President.
THE VICE PRESIDENT: As Chairman for a couple of
years of the Commission on Water Quality, analyzing the
legislation of '72, we have been up against the same problem
that you are talking about and we have employed outside
engineering groups to make these cost analyses of the impact
of the law. And I give as an illustration: we just got a
report on the tin plate industry, the EPA's regulations for
the '73 and the '83 standards as established by the law, the
impact on that industry. And it shows, a very comprehensive
study, that 35,000 small companies would have to spend more
in capital to meet the standards of those two periods than
they have invested now that the cost -- in their present
plants -- that the cost would therefore put them out of
business, so that 35,000 companies would be put out of business,
out of 70,000. Now, this is done by a competent outside
engineering firm, and so that I think there are means of finding
that information and seeing in perspective.
You are in perhaps a more complicated field, but
the outside contractor often can be very helpful.
MR. HILLS: The Secretary of Agriculture.
SECRETARY BUTZ: I don't know how this group was
arranged here. We have got the Commission members on one
side and the Cabinet and White House on the other side --
it is something like a court room.
[Laughter]
The other day I was talking in my office about one
of these regulatory agencies I don't like too well, and I had
my finger pointing -- not toward you, Dick -- something like
this, talking to a friend of mine, and suddenly I stopped.
He said, "What is the matter, Earl?" I said, "It is just
one of those fingers pointing at him, there are three back
at me."
FORD
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[Laughter]
And I was interested in the President's comments
here that some of the Executive branches of government like-
wise are at fault here. I have got in the Department of
Agriculture 82,000 employees. I ought to make a note of that.
THE PRESIDENT: Is there more or less than you had
last year?
[Laughter]
SECRETARY BUTZ: Mr. President, I plead the Fifth.
[Laughter]
Seventy thousand of those are in the field. The
other day I asked my Assistant Secretary for Administration
how many of those exercise the police power? I was shocked
when I got back the figure of 23,000. These are people who
issue licenses, who inspect, who grade, who have the power
of life and death over a business, who are putting small
businesses out of business. And I think, Mr. President, that
you put your finger on one of the weak spots in this govern-
ment when you mentioned that some of the Executive departments
of government are doing this day after day.
I have got a poultry inspector out here, for example,
in a poultry processing plant, let's say in Mississippi. They
are running 5,000 birds an hour through that line. He has got
the power to stop the line by pushing a button. He got up
this morning. He had a headache. He came down. The plant
manager assigned him a parking place over across the lot and
it rained. He had to walk through the mud to get in there.
He is in kind of an ill humor. He looks at the condensation
on the ceiling of the men's wash room and decides it is not
right. He punches the button and he stops the line for two
hours. It costs that man $3,000 because this guy got up with
a headache this morning. Now, I have exaggerated that a little
bit, Mr. President, but not too much.
And I think that this Executive Branch is shot
through with that. Now, I am instituting in my Department --
I am doing it because I knew you were going to direct me, too,
anyway, and I am beating you at the gun here.
[Laughter]
I am instituting a self-examination top level
committee and I am bringing some industry people into it, in
my Department, to see where we can cut out some of this stuff
we are doing that I am sure raises the cost of doing business
that I am sure works against what we are trying to do, and
that is to foster a healthy atmosphere in which small business
people can survive and prosper.
MR. HILLS: Lew, you were so successful in finding
unanimity, I hesitate to call on you, but do you have a further
comment?
MR. ENGMAN: Let me interject a note maybe of some
discord just for a second, Rod. I don't mean to disagree with
my good friend Dick Wiley, but in terms of talking about
levels of resources, we all now do have resources available
to us. And it seems to me that conducting and making an effort
to conduct this kind of cost-benefit analysis is one of the
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12
most, if not the most, important thing we can be doing with
the money we now have, because through doing that we can find
out how we can more productively use the resources which we
do have.
MR. HILLS: If we may move to the second subject --
the issue of the regulatory procedures -- no subject causes
more complaint than regulatory delay. Paul, would you start
us off?
MR. MacAVOY: In reviewing the reports of the
commissions over the last few years, it appears that the
majority of the Commissions here today have experienced in-
creasing time spans between requests for rate changes or for
certificates and the final decision on the requests.
In the presence of inflation, with rapid changes in
market conditions, for other reasons, the caseload in most of
these agencies has increased remarkably since the middle
1960's. One of the general counsels of the Commissions, in
a meeting the other day, called the situation one of pancaking --
we have had layer on layer on layer of cases, some with respect
to the same company or market now in front of the Administrative
Law Judges and the Commissions themselves.
The delay that has resulted has increased costs
more than the percentage increase in the delay period. This
is primarily because the slow-downs in construction during a
period of rapid increases of construction costs have resulted
in companies experiencing higher construction cost increases
than might be expected under normal circumstances.
With a six-month to one-year delay in obtaining a
certificate, we have a 30 or 40 percent increase in the cost
of construction in some instances. On top of this, the costs
of litigation have increased sometimes by two or three times,
as the cases become strung out and become more complicated.
On top of this, as well, there has been increased duplication
of regulatory activities between State and local commissions.
It now requires more than forty licenses in order to build a
power plant in the Eastern Seabord Region, all from different
agencies.
The question is: Can we by consolidating or other-
wise changing regulatory case procedures cut into this growing
caseload so as to reduce the time lost and the litigation and
other expenses that are incurred because of the delay?
Added to this question is one that may take us in
the opposite direction. At the same time that we have ex-
perienced delays, the number and strength of complaints on
Commission non-responsiveness to individual consumers has
increased as well. IS it possible to break through the present
procedures and allow more access to individual consumers to
the commission process, again without increasing delay or
adding to the cost of regulation? What is the proper limit
on the caseload as compared to going to other administrative
practices that reduce the due process? What is the proper
limit in the sense of allowing access to all parties to a
matter that is now before the commission?
These are open-ended questions.
I
hope
that
we
can
find quick solutions. I know we can.
MR. HILLS: Chairman William Anders, the Nuclear
Regulatory Commission.
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Bill?
MR. ANDERS: I have been asked to kick off the
subject of methods of improving the regulatory procedures
and, Mr. President, with your permission, I will restrict
my comments to what I know more about, that is our own
efforts to improve our own regulatory procedures.
While our responsibilities are directed towards
safety, rather than rate setting or public convenience and
necessity, as Paul MacAvoy suggested, all regulatory agencies
share some problems which are amenable to solution through
procedural improvement.
I believe our efforts are pointing the way to
significant improvements for us and may have useful appli-
cations in other fields of regulation, and certainly we
can benefit from knowing what others are doing, as we are
learning here today.
So I believe that nuclear power can play an important
role in meeting our Nation's energy needs and it can provide
economic and environmental benefit to our citizens. But sound,
timely and credible regulation of nuclear power is essential
as to contribute full measure to the national interest, and my
colleagues and I are committed to discharging our regulatory
responsibilities in that manner.
The Nuclear Regulatory Commission is charged by the
Energy Reorganization Act of 1974 and through it the Atomic
Energy Act with the responsibility to insure safe and secure
uses of nuclear materials and facilities. The NRC is also
responsible under NEPA for weighing environmental concerns.
Now, since the great bulk of our work relates to
licensing of nuclear plants, we are targeting our main efforts
to improve our procedures in this area, improvements which we
believe will work to reduce costly delay without compromising
regulatory safety and other requirements.
Now, there are only three main facets to the licensing
improvement efforts we have under way: First, the upgrading of
management and licensing review procedures; second, involving
the public at earlier and more relevant points in the licensing
process; and, third, requesting new legislation where it is
necessary for further improvement.
As for the first, we and our predecessor, the Atomic
Energy Commission, have upgraded management and review pro-
cedures in an effort to promote stability and reduced delay
in the nuclear licensing process. This upgrading has included
encouraging the standardization of nuclear power plant designs,
license applications and our own review procedures.
Second, carrying out our safety and environmental
antitrust reviews in parallel, rather than in series, as it
was in the past. The use of a new procedure that affords an
abbreviated initial review which allows a much earlier start
of site preparation and construction.
Fourth, systemized and computerized scheduling of
staff and project tracking. Fifth, closer management review
to insure that requirements proposed by staff are worth their
cost. Sixth, incorporating more systematic consideration of
the economic cost as well as benefits of proposed regulations
and the timing of their implementation. And, seventh, im-
proved communications with industry to facilitate license
application submittals and standards development. And last
but not least, encouraging State, local and Federal licensing
action efficiency.
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As a new Commission, we are systematically reevalua-
ting all that we have inherited, while also working to maintain
the momentum of on-going licensing proceedings. Through this
reevaluation, the Commission has recognized a great advantage
of self-examination of existing and proposed regulatory
structures and policies.
To carry out this function, we have created an Office
of Policy and Evaluation, reporting directly to the Commission
itself, and independent of the Commission's operating staff.
We are also mindful that our actions have a large impact on
the public and on the industry that we regulate. Both deserve
prompt and effective licensing action.
Whenever there is a question as to whether we are
meeting that standard, we examine the facts and causes in
order to correct the specific situation and prevent its
recurrence.
The second method being used to improve licensing
has been the restructuring of regulations for more timely and
thus more effective and efficient public participation. This
is encouraged by the Atomic Energy Act and is crucial in
obtaining public understanding of nuclear power and credibility
of its regulation.
It is true that consequent public hearings which
precede licensing action carry with them the potential for
delay. But there are, we believe, constructive ways to deal
with this by applying greater procedure discipline to the
hearing process and by holding hearings at earlier dates
which are less critical for plant construction or operation.
Finally, where the NRC is limited in achieving
additional licensing improvements because of existing statutes,
we have requested new legislation. For example, legislation
which is presently pending before Congress would further speed
the licensing process providing for: one, early decisions on
proposed sites, independent of the specific design of a nuclear
power plant; two, early and positive decisions on standard
plant designs; and, three, further streamlining of the hearing
phase of the licensing process.
The basic objective of this new legislation is to be
able to reduce the probability that the licensing process will
be a bottleneck in nuclear construction and to do this without
sacrificing the present high standards for review which the
public rightly expects to be maintained.
We have essentially been able to do this for using
plant operating licenses. Mr. President, we welcome the full
support that you have given this legislation.
Improvements have been made but, quite frankly, still
more needs to be done. We intend to pursue aggressively the
further streamlining of our regulatory process, not simply to
meet present problems but be prepared to meet the increasing
demands for the foreseeable future. Delays in nuclear power
plant completion as a result of our regulatory process have
become the exception rather than the rule. Slippages being
encountered now largely reflect the state of the economy and
the special problems related to refinancing. But as the
economy improves and financing problems ameliorate, nuclear
power plant construction can be expected to accelerate greatly.
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Mr. President, with your continued support and the
good working relationship with the Congress, with increasing
credibility with the public and those we regulate, the Nuclear
Regulatory Commission intends to be ready to meet the challenge
efficiently and effectively.
THE PRESIDENT: Mr. Chairman, it has often been
reported in the news media that the time -- from the beginning
to the end of a nuclear power plant in the United States --
it took roughly eight to ten years. The comparison has been
made that it took twice as long in the United States as it
did in Japan or some of the European countries.
I know you inherited that background and I am not
being necessarily critical of your predecessors, but what is
your objective in trying to reduce that from eight to ten
year period and how quickly can it be achieved?
MR. ANDERS: Mr. President, indeed, the time of
construction from beginning to actual on-time operation of a
nuclear power plant has in the past been run an eight to
ten year period, and indeed in other countries has been much
quicker.
The overhaul of the procedures and the intensity of
management pressure on the system, in the Atomic Energy
Commission and now in our Commission, is reducing that time
to where the applications that we receive now, considering
that the others in this complete link of the chain, the
constructors, the laborers and what not, the financers do
their job, as we are able to do ours, will probably bring
this time down to about seven and a half years. We would
view that, with the new legislation and with the upturn of
the economy, no labor problems, no material problems, this
could get down to a five and a half year time period.
We are seeing overseas, which in many cases had about
the same time periods that early licensing of nuclear power
plants in this country, just the reversal of that trend.
MR. HILLS: The Nuclear Regulatory Commission is, as
the Chairman says, a recent addition. By comparison, the
Interstate Commerce Commission is within twelve years of its
hundredth birthday. No Commission carries the brunt of com-
plaints about regulatory delay quite as much. Chairman
Stafford! George! What is the art of the possible?
MR STAFFORD: Oh, we think they have been doing
pretty well, Mr. Chairman. We have been taking a number of
actions pointed towards speeding up the actions there on our
cases, but, as you know, many of the, some of the Executive
Branch offices have the same problem we do, when you talk
about the Administrative Procedure Act and your own act that
you operate under. Not being a lawyer, it is easy for me to
say that the lawyers have found good ways to delay many
actions through proper procedures that are readily available
to them under the act, and we have had some experiences just
as I am sure the Justice Department has had.
So we have been working on that, but we have to
keep in mind, too, that the things we are doing are service
oriented towards making a better opportunity for the business
community of this country to better compete with all of their
neighbors, and this we are doing.
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We have taken some actions in our rate bureau,
actions to make the rate bureaus more responsive to shipper
interests, rate flexibility. Through going to the record,
we have made it possible, we are making it possible that
they can go as high as 5 percent a year without having to
come in with all their procedures and proof, which cuts
down on a lot of the time. And we continue, as we have in
the past, the policy of non-suspends for lowering their
rates. There seems to be a general feeling in some areas
that we don't permit flexibility. We have always permitted
flexibility, which permits for quick action.
I was pleased to see that the Supreme Court even
said this year and commended us for the fact that we are
continuing to encourage -- the ICC is continuing to encourage,
and they are appreciating the fact that we encourage --
competition by our licensing procedures.
Now, then, we have recently had -- in fact, in
January, I started and named some of our most knowledgeable
and able staff people to prepare what we called from our
blue ribbon panel -- everybody seems to call it blue ribbon
panel these days -- we had one in January, that has been
reporting to the Commission. And I in turn had asked our
Vice Chairman and two other of our Commissioners, one, the
latest Commissioner that the President has appointed, so
that we could be sure to get their feeling of our brand new
Commissioners in and then one of those who has been in the
business a while, and SO I would like to ask our Vice Chairman
to speak to the blue ribbon findings. They have been hold-
ing hearings at the staff level about ways to cut down on
the time.
MR. O'NEAL: Mr. President, my name is Dan O'Neal,
with the Interstate Commerce Commission. We have undertaken
to review a number of recommendations from the special staff
that the Chairman established.
The first thing that is obvious is that there is
a balancing required between due process -- the right of an
individual to defend himself before government, before an
agency, before a court -- and the interest that all of us
have in expediting decisions by government. Certainly time
is money and time wasted is money lost, so we are very
cognizant of that.
There have been a number of things accomplished,
such as reducing the number of extensions allowed and that
sort of thing. We are looking now at how we might eliminate
some of the procedural steps without sacrificing the pro-
tection of due process and we feel that we can make some
substantial reductions by requiring a better case to be
presented in the first instance by attorneys practicing
before the agency and by eliminating perhaps one review
level. And this can result in the saving of several months
in even the simplest cases.
We are well on our way, we feel. We haven't quite
made these recommendations yet; we haven't finalized them
yet for the Commission as a whole, but we feel that within
the next few days, as a matter of fact, we will. There
are a number of fronts on which regulatory lag must be
attacked and we are trying to reach all of them.
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MR. HILLS: Chairman Robson, the CAB?
MR. ROBSON: Mr. President! Rod: While I am
one of the new boys on the regulatory block, I must confess
that the complexity and delay in the regulatory decision-
making process is one that even in a short time has troubled
me greatly and, indeed, as you look over your dockets, one
gets to feel that the gestation period of a regulatory
decision is creeping near that of the pyramids.
We have undertaken a major effort on this front
and the point I wanted to make was I think what you need
to do is to make a fundamental analysis of the character
of decisions you are making, and their evidentiary base.
And to really address the fundamentals of whether to meet
standards of fairness and to render an adequate decision,
you need to subject to the process that you are now sub-
jecting it to various different kinds of information on
which you found your decisions. My suspicion is that the
central decisional facts in many cases before the regu-
latory agencies -- and perhaps I should limit my comments
to those in the economic regulatory area -- are relatively
few and that we introduce perhaps a welter of peripheral
information that we might find other ways to have at our
fingertips without making our procedures unfair.
That is really the underlying mission of the
effort that we have gone on, is to really look at our
decisions. What are they? What basis are we making them
on? And why do we require this kind of information or,
indeed, why do we even let it in?
I think that our effort will embrace both a look
at our own procedures but also our own statute and the
Administrative Procedure Act, with the idea that we want
to limit the size of the proceedings to only that that is
necessary.
I should only add one thing: There is kind of a
tension these days as to whether we are heading for more
process or less process. The one point of view which I
have just mentioned I think at least in some camps is
challenged as agencies being unresponsive and not having
sufficient process available particularly to individual
consumers or consumer interests. There is I think a tension
in this area that is indeed partly being fought out in the
Congress, but which is one that I think the individual agencies
are faced with rather persistently.
MR. HILLS: Our effort here is to find as wide a
range of views as we can. This is a subject in which the
Congressional leaders that met with the President two weeks
ago expressed great concern. I hope we could find today
some promise that something major can be done. Since that
is something to be accomplished, it is something that we hope
to get from the meeting.
Chairman Bentley, of the Federal Maritime Commission?
MS. BENTLEY: Thank you. Mr. President! Rod!
Sitting here, I wonder myself, do we really belong here, even
though we come under the umbrella of the regulatory agency?
The Federal Maritime Commission does function in a different
manner than the other transportation commissions in that we
don't license anybody. We have free entry in both the domestic
and foreign trades. We don't control rates. We think we
probably should in the domestic area, but we don't so far.
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We have made great efforts to reduce the procedures
wherever we could legally. We have combined cases wherever we
can. We find ourselves faced in a couple of instances by
Congressional action that the NEPA rules, which the courts
recently determined did apply to regulatory process, and now
of a number of cases before the Administrative Law Judges,
these are going to be dragged out from six months to a year
because of that. And the costs are going to go up, not only
the costs of the agency, the government, but also on the part
of those who are involved in the cases. Our costs alone will
be increased 6 percent just because of the NEPA rules.
In another instance, in the Executive Order 11836,
concerning cargo loss and damage reports, I have been fighting
that for four years, because I feel that this shouldn't be
another burden on the industry, but we have it. And the
industry claims that they are going to have to file from 300
to 10,000 reports each quarter, each steamship line is going to
have to do that. And I felt that this could be done on the
customs reports. These are some of the things that we
don't control, but they are being burdened on the industry
and these are just some of the points.
MR. HILLS: Let's widen the discussion for just a
moment. Yes, sir? Would you mind?
MR. SOMMER: Mr. President, my name is Al Sommer,
Securities and Exchange Commission. It is sort of difficult
to talk on this topic without being thought that you are
pointing the finger to your fellow Commissioners on the other
agencies or perhaps pointing the finger at yourself and your
fellow Commissioners on your own agency, but I would like to
point out I think there is one thing that we can do individually
that has a great deal to do with this.
Much of the delay is a procedural matter written into
statutes and rules; much of it is a requisite, I think, for the
purpose of assuring fairness to all the people who deal with
our agencies. But I think individually what we could develop
is a sensitive, a highly developed sense of impatience. I
think sometimes all of us are much too patient with delays
of our staffs, delays with the paperwork that flows across
our own desk, delays with litigants who come before us. We
are much too willing to grant extensions of time within which
to get things done. We are willing to put things aside and
suddenly they are out of memory and, the first thing you know,
a month or two months have gone by and nothing has happened
on a file where action was timely maybe two or three months
before.
I am reminded of the story of a lawyer who was
arguing a case before the Supreme Court when Justice
Frankfurter was still living. He said -- he was being
peppered with questions, as was characteristic of Justice
Frankfurter -- at one point, when his time was nearly up,
he said to the Justice -- and I think he had a Southern
accent, which I shall not try to imitate -- he said:
"Mr. Justice, time runs much faster on this side of the
bench than it does on yours. May I proceed?" And I think
we ought to remember that time runs faster perhaps on the
other side than it does on ours and I think we should bear
this in mind individually and be impatient with ourselves,
with out staffs, and with the people who appear before us.
MR. HILLS: Chairman Simpson?
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MR. SIMPSON: I would like to just comment on another
part of this agenda item, which is the efforts to include con-
sumers, that you mentioned. We have a statutory requirement
in the Consumer Product Safety Act to involve consumers in
much of our activity. And then we, by policy, have adopted
other practices which I believe meaningfully involve consumers,
and perhaps I can touch on them.
In a couple of areas, we have by policy adopted means
to directly communicate with consumers and they are very inex-
pensive. We established a toll-free number in the United States
to communicate an emergency some time ago, approximately two
years ago, and it was so successful we have continued that.
We are now receiving about 100,000 calls per year. We find
we are able to answer those in about 48 hours, mostly with
pre-automated information. About 75 percent of the calls are
requests for information from the agency -- and about 25 percent
are safety complaints, which we use as part of our data bank.
We have also taken steps to abolish secrecy in
our agency. We have no closed meetings. By policy, all
meetings of any one of our staff with any outside party
is open to the entire public to attend. It is noted in
advance on a public calendar, and consumers do come in.
Now, many times it is a little frustrating with the policy
to live with when you have a meeting in your office with a
couple of people and a hundred outsiders show up. But we
do move those to conference rooms. And that is the exception
rather than the rule. As a matter of fact, we think we have
lended some credibility to the regulatory process because we
have decreased speculation as to what goes on in these closed
meetings and, as a matter of fact, in about 95 percent of
the cases, no one shows up other than the ones who were coming
in anyhow. So when you open the door, people don't take
advantage of it.
On time, regulatory time, we have a provision of
our law where every citizen and every group is granted the
right of petition, to write a petition, to write a standard
or ban products. By law, we must respond within 120 days.
Even if the law says we must, we can't in all cases, but it
is a spur to get speedy action.
We have a recent -- we have had over 200 petitions
in the two years we have been in existence, which range any-
where from banning pet turtles to banning all aerosols
because of the flurocarbon ozone problem, so they span all
the disciplines.
Also in standards writing, which is a basic fodder
of our agency, writing mandatory standards, the Congress
requires us, on the one hand, to write a standard in virtually
90 days, but, on the other hand, they require us to do so by
allowing private parties to write that standard for us and
involve all parties in the United States, including consumers.
And, you know, it is a truism, the more people you have, the
longer it is going to take. We have, in fact, though had some
experience now where consumers, in fact consumer advocates,
are sitting down in a standards writing process with industry
people. They start out initially very skeptical, but over a
period of thirty or sixty days of working in a closed environ-
ment they find that they have a great deal of respect for each
other. So we think it is model.
MR. HILLS: Chairman Nassikas, and then, George, we
will let you close it off.
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MS. REID: Mr. President?
MR. HILLS: Oh, I'm so sorry, Go right ahead.
MS. REID: Mr. President, Mr. Vice President, I
would like to just add a bit to this consumer responsiveness
that we have done at the FCC.
We have had various regional meetings throughout
the country. We started in Atlanta, then met in Chicago,
and here in Washington, and we expect to meet in the Midwest,
farther West and then in the Far West perhaps later this year
or next year. We have met with the public, we have opened
these meetings to the public, and, believe me, they have been
a little wild, particularly in Chicago. We at the FCC do
receive complaints. But we have felt that this has been a
marvelous -- given us a marvelous rapport with the public,
with citizens groups, with the consumer, so to speak. These
meetings have also been coordinated with our Licensees'
Workshops meetings, so broadcasters have been involved.
They have come to the open meetings and we on the next day
have met with them in their workshops. So we have had that
coordination.
We feel that this has given us an insight into
the public's feelings about our Commission, about our
regulatory processes as they view them, and has been very
helpful. We have also met with various citizens groups,
Commissioners en bloc have met with the citizens groups.
And we do this frequently at the Commission. I think this
has been very helpful also.
I might add just one thing to Barbara Franklin's
comments, too. I think this is very helpful, and I would
hope, Mr. President, that this would be only the beginning
of such meetings. Thank you.
MR. HILLS: John, did you have a quick comment?
MR. NASSIKAS: Just a very brief comment. To
reduce administrative burden, Mr. President, and also to
increase competition, in 1971, we released some 4,000 small
producers from direct price regulation and handled this on
the basis of indirect price regulation. It required three
years before the Supreme Court affirmed our actions. We
also, to increase competition, placed pipeline producers on
a parity with our regulation of major producers. This also
saved considerable time. This action required two and a half
years to be affirmed.
But the real monster is the following: All major
actions of our Commission are appealed to courts. Currently,
we have over a hundred cases that are in the Federal court
system as a result of the Administrative Procedure Act and
controverted cases.
A key factor in all energy regulation, I submit,
is the lead time required from the inception of a policy to
its culmination in securing production and delivery of
incremental energy supply. This is generalized through any-
thing we do in energy.
The total time consumed in establishing area rates
for southern Louisiana, which is our most prolific gas
producing region in the country, was thirteen years, con-
cluding with the Supreme Court's opinion of June 10, 1974,
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which affirmed our decision in July 1971, increasing the
price of gas in a nutshell from 18 cents to 26 cents. This
is the equivalent of $1.50 a barrel of oil.
In contrast -- here again, trying to do what we can
under our statute -- we established a national base rate of
57 cents by rulemaking in eighteen months. I am not proud of
the eighteen months, it should be done in six months. How-
ever, we did it. This case also was on appeal in the U.S.
Court of Appeals for the Fifth Circuit. Undoubtedly, it will
reach the U.S. Supreme Court before it is finally decided.
So I will submit that an uncertain climate of
regulation, subject to judicial review, under a restrictive
statute, can't possibly induce the vast commitment necessary
to affect an improvement of gas supply of a magnitude required
to serve the needs of a growing economy.
I think it is important, even apart from gas deregulation,
which I advocate, that the Administrative Procedure Act be amended
so as to make certain that all regulatory agencies can prescribe
rates by rulemaking. We believe we are right in our interpre-
tation of the law that we can prescribe national rates for all
producers by rulemaking, but to avoid judicial lag, the Congress
should pass a statute on that point.
MR. HILLS: Ms. Hanford, did you have a brief
comment?
MS. HANFORD: Yes.
MR. STAFFORD: Much briefer than John's "yes."
MS. HANFORD: Just very quickly. Elizabeth Hanford,
Federal Trade Commission: I just wanted to reiterate again
the importance of consumer input in the regulatory process --
the opportunity for the individual consumer to have a part in
the decision-making process of his government.
I think there are ways that these opportunities can
be enhanced and, as we try to enhance them, we must keep in
mind also that the consumer must be provided with information
and education as to what his rights are under the laws that
we enforce and the regulations that we promulgate.
And I think that the efforts recently to try to
provide information to those beyond the antitrust bar about
the antitrust laws is an example of moving in the right
direction there to inform the individual citizen about the
laws in the antitrust area. And we can do more, I think,
to move in that direction in, for example, just providing
an analysis of a complicated consent order in layman's
language so that those who do have an interest can respond
and can provide input. I think we should also move in that
direction.
Thank you.
MR. HILLS: George!
MR. STAFFORD: My remarks go back to a few words
that Helen were saying a few moments ago, and fit pretty much
into what the President's position has been, and ours, on the
slowdown that NEPA has created in all of our actions, and the
fact that we had to solve the NEPA problem on our major cases
before we could ever get to the point at hand, the question
that was before the Commission.
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So if you haven't read the case that the Supreme
Court -- we are all loving the Supreme Court these days --
if you haven't read their decision handed down in our scrap
case, on the NEPA matter prior to getting into the case
itself, that they just became one more party in the case to
be settled at the final case time, but they added an addenda
and said, in effect, this covers all your other cases where
you have got problems, all of our abandonment cases, railroad
abandonments were help up for over a year because we couldn't
get our NEPA problem solved in order to get to the case of
abandoning the railroads. And so the Supreme Court, with one
quick brush, the other day, just wiped all that slow-down out
for us. We still have to consider it, but only as a party in
the case at the time we are making the final decision.
MR. HILLS: The third topic is the issue of whether
competition can indeed be encouraged in regulated industries.
Paul?
MR. MAC AVOY: In attempting to familiarize our-
selves with your activities, we had the remarkable and
interesting opportunity to go back to read the Senate and
House committee reports and the actual bills that were passed
setting up your agencies. In almost every case, we found
some reference to the ultimate justification for regulation
in that industry, was that it was not competitive enough to
provide the quality and price for the consumer that could be
gotten from controls. The justification for regulation, in
other words, was that competition failed to exist in the
industry to a sufficient extent to allow the market to
operate in an unregulated fashion.
As we go through the history of the Commissions in
the last ten years, there seem to be a number of cases that
are paradoxical to the original intent of the law. Rather
than regulation being a substitute for poor competition,
regulation has prevented what competition there is from
working. There have been significant impediments to the
entry of new competitors from the use of the certificate
proceedings. There have been significant controls over rate
changes which would have occurred in even partially com-
petitive markets as a result of cost and demand changes.
The question then is, what can be done to allow
the amount of competition there is to work as fully as it
can. The question might be put in more direct terms: Why
can't we free up entry into these industries by essentially
eliminating the certificate of necessity and convenience?
The only justification given in the record establishing the
Commissions is that in some cases there are economies of
scale which prevent the full operation of competition. There
is only room for one or two firms.
Well, in that case, then, the question becomes: Why
can't we free up entry except where there is significant
evidence of economies of scale? Why should there be any other
reason for limiting entry of potentially effective competitors?
The same sorts of questions arise in rate flexibility and
response to cost and demand changes. Why can't we increase
the amount of competition among companies by allowing more
flexibility in rates?
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MR. HILLS: The Securities and Exchange Commission
has indeed required competition in rates recently. Chairman
Garrett! Ray! What are your comments on the subject?
MR. GARRETT: Mr. President, Rod, the methods by
which a regulatory agency may properly encourage beneficial
competition among the companies subject to its jurisdiction
must depend both upon the practical economic circumstances
of the affected industry and upon the agency's legislative
mandate.
Some regulatory agencies were created on the premise
that in certain industries competition would do more harm than
good, particularly where industries were new and thought to
require special protection; others because they were accepted
as natural monopolies. Airlines are an obvious example of
the former; electric utilities the latter. But the situation
is further complicated by increasing instances of inter-industry
competition.
To the extent, however, that economic conditions and
statutory discretion permit, the primary method of promise for
the regulatory encouragement of competition is the objective
reevaluation of accepted patterns and practices under present
conditions and attitudes. It would, in my opinion, be wrong
in principle and, at any rate, impossible under existing
statutes for regulatory agencies abruptly to assume that all
legal restraints are undesirable, insofar as they might in
some respect be regarded as discouraging the virtues of un-
fettered competition.
The myriad ways in which the Federal Government
intrudes upon the economic activity of our citizens is far
more pervasive and the whole matter far too complex to be
resolved simply by decreeing that there should be more com-
petition everywhere all the time. Much regulation was born
of perceived inadequacies of uncontrolled competition in
selected areas. In many instances, there does not appear
to be any compelling reason to believe that the inadequacies
of free competition that these agencies were created to re-
dress would not arise again if the agencies were abolished or
their authority sharply altered, although in other instances
circumstances may have changed so fundamentally as to make
traditional regulation now unnecessary and harmful.
The road to progress, in my opinion, lies not so
much in radical surgery as in thoughtful, objective analysis
and programs carefully implemented. The Securities and
Exchange Commission has limited involvement in the direct
regulation of prices. The one area in which we have been in-
volved has been that of minimum commission rates for brokerage
services charged by members of the national securities and
exchanges, especially the New York Stock Exchange. By rule,
we caused the abolition of such minimum rate schedules
effective May 1, 1975. This action has been applauded by
everyone except most of the brokers and dealers who naturally
were the persons most affected.
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The full consequences of the unfixing of commission
rates are not yet known but, in any event, in view of the
special characteristics of the securities markets, there is a
question whether it provides a useful example for other areas
of regulatory activity. Certainly, it will not mean that
equally beneficial results will necessarily flow from removing
all legal compulsion or protection from rates and prices in
other areas, but it does mean that the possibility should be
examined.
In many areas, added competitive regulatory shields
have become so subtle an accepted part of life that reexamina-
tion of their justification requires a major intellectual
effort. Yet it should be done and done again from time to time
because economic conditions can drastically change the appropriate
thrust of regulation.
We have seen this dramatically illustrated in recent
years. Much regulation was initially imposed to prevent over-
charging by companies and industries where duplication of
facilities seemed practically impossible or wasteful. The so-
called natural monopolies being monopolies or nearly so were
thus affected with the public interest and could and should be
subject to legal controls.
The changing technology and other facts can alter
the appropriate regulatory response. Examples abound: Not
long ago, it was accepted doctrine that competition between
electric and gas utilities should be encouraged, thus
stimulating maximum production and consumption and lower
costs for consumers of each product. Within the electric
field, proposed combinations of systems were resisted on the
ground that competition for greater use of electricity and
thus lower unit costs would be discouraged by the combination.
Almost overnight this attitude has been a quaint anachronism,
totally inconsistent with current interests and conservation
of energy in the face of growing shortages and concern for the
environment. Similar changes have occurred in other regulated
areas.
Mr. President, the desirability and feasibility of
stimulating beneficial competition on presently regulated in-
dustries is much too complex a subject to permit precise
recommendations in such brief remarks as these, even if it
were seemly for me to presume to advise other commissions on
the exercise of their responsibilities. But I do strongly
urge, as the critical reexamination of the accepted patterns,
in the light of present circumstances and the willingness to
experiment. If all areas where regulators now determine prices
or protect against competitors are required to justify themselves
anew for the present and foreseeable future, we may find many
instances in which the heavy hand of regulation can be lifted
with good effect.
This reexamination process will, no doubt, uncover
instances of agency inflexibility, but it should be borne in
mind that such problems may also be the product of statutory
mandates which either foreclose administrative flexibility or
fail to encourage it. If the reevaluation process is ultimately
to prove most effective, administrative agencies must be given
the flexibility to respond to new conditions as they discover
them.
Thank you.
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MR. HILLS: The Civil Aeronautics Board has recently
announced an experiment in deregulation for greater competition.
John, is it a deep enough and broad enough experiment, in your
judgment? And do you think you are going to be moving in that
direction?
MR. ROBSON: Well, the depth and breadth, Rod, of
the experiment which we have proposed in essentially outline
form is something upon which we have asked for comment and
expect to get thoughtful comment upon. What we have tried to
do is, as Ray has suggested, reevaluate the concepts of regula-
tion to try to, in a laboratory which we hope will provide a
useful output, introduce some of the concepts of flexible
pricing, freer entry and exit, and see what we can add to the
knowledge base and gain some insight as to what the application
of those kinds of concepts might have on a system-wide basis.
I am hard pressed to answer your question with a yes
or no, because one of the parts of the development of the ex-
periment is really to get thoughtful comment upon an outline
for experiment. We have suggested, indeed, part of our question
is if this isn't a good one, have you got a better one? -- So in
terms of willingness to reexamine, we think that is important.
We think it is important that those whom we regulate
reexamine their own futures and the regulatory regime that
might best fit their needs in the long term, because they
obviously are the ones who are most immediately affected.
And -- to the extent that we stimulate thought on that, we
think that is important.
MR. HILLS: Mr. Springer, Federal Power Commission?
MR. SPRINGER: Mr. President, recently I went back
to look at the Congressional Record -- and it is always good
to do that once in a while -- and I find that you and I voted
twice for deregulation of natural gas. There must have been
a reason for this, at least in our own minds, as to why those
votes were made as they were.
It was my understanding that we did that in order to
stimulate the production of natural gas so that there would be
a greater supply. Now, what happened? Well, I have just been
down there two years, and each one of those years the supply of
gas has gone down. The rationing of gas has gone up. This
year we expect it to be in the neighborhood of 40 or 45 percent
less consumption than there was last winter, and that is in
addition to roughly 35 to 40 percent less than the year before.
So this gives you some idea of why we voted for deregulation.
Now we are finding, twenty years, that it took twenty years
to prove that our votes were right.
(Laughter)
I don't know how much longer we could go on waiting.
Now, what is the situation? And my predecessor, Pinky Walker,
who now is back as head of the School of Commerce at the
University of Missouri, and his last parting words to me said,
"Bill, there is nothing economics will determine." What did
he mean by that? Simply this: You have three really forms of
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26
energy today in this country, 90 percent of it -- coal, oil
and gas. Well, out of those three, as any of you know, gas is
the Cadillac of fuels. I would say that oil is the Oldsmobile
or the Mercury, and coal is the Ford. But what --
(Laughter)
I hope I didn't offend any car makers here. But let's
look at these three fuels. If we were to take them in the form
of that, the Cadillac of it is selling for a third of the price
of the Oldsmobile, and half the price of the Mercury. It is
ridiculous that the Cadillac is selling for one-third the price
of the Oldsmobile and one-half the price of the Ford. This
seems to me so demonstrative in the economic field that you
simply cannot keep on inevitably selling the most desirable
product that is on the market in the form of heat or fuel per
BTU unit for a third or a half of what the competition is selling
for.
Now, what does this do? And I can only emphasize this
this way: If you were investing money, and if you were the
chairman of the board of a company and you were sitting down at
Christmas time, you certainly wouldn't send your money out to
find some gas fields. You would sent it out to find some coal
or some oil, and that is exactly what the companies have done
in the last four or five years. They have put their money
where the economics is, where the money that can be made
from it. This is the American system at work. And so they sent
their money out to the Near East to produce cheap oil and finally
you get an embargo and it goes up three times what it was.
Now, these are things that happen when you try to
restrain the economic system from working on the kind of a
system that we have.
Now, to show you further from where we went back
twenty years ago, when the President and I -- the last
twenty-one years ago, 1954 -- the last time we voted on it.
Our reserves this last year increased by 7.9 trillion cubic
feet. That is all the reserves in proof. But what did we
use last year? We used 23 trillion cubic feet of gas last
year. In other words, in short, we are using it at three times
the rate that we are increasing the reserves in the gas field.
Now, these figures alone to me indicate that competi-
tion is the thing that is going to get you a greater supply,
and the only way you are going to compete is to allow them by
some means to be able to charge something in the vicinity of
what their competition is getting. Otherwise all of your
money and your economics are going into other forms of energy.
We didn't ask for deregulation of gas wholly. We
asked for deregulation of gas, new gas. Now, why did we ask
for deregulation of new gas and not deregulation of gas as the
President and I voted twenty-one years ago? For the simple
reason: There were a great many critics on Capitol Hill who
said, "Oh, you do that and the price of gas immediately will
shoot way up and skyrocket and people won't be able to afford
it." By deregulating new gas, not old gas but new gas, it
meant that old gas when its contracts expired, would take a
new gas price, naturally. New gas, however, would be decontrolled
and at the rate of the expiration of contracts each year, it
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27
is about 7 percent, which meant in essence that it would take
approximately fifteen years to decontrol all the gas in the
country. The result of it would be that you would get a
gradual impact of an increase in price, which would put you
then in competition with your other fuel, which made sense.
We didn't attempt, nor did we ask the Congress to
decontrol all gas and to allow it to shoot to a skyrocket. And,
in addition to that, the Chairman and I testified before the
Stevenson committee that we would be willing, if they would
give us this kind of a deregulation of new gas, that we would
assume some responsibility and would allow it to be written
into law, that if it got out of control, that we would assert
ourselves. Isn't that right, Mr. Chairman?
So I can't see but where we have attempted -- and
these are the recommendations, I understand, you have made,
Mr. Chairman, the same as ours -- why this is not a fair and
equitable way in which to promote. I am talking about competi-
tion of money, now the competition of economics, which is just
as important as the competition, say, between two companies.
But I think, overall, that if we could have this kind of
deregulation -- and I think that is something we have to have
from the Congress -- we cannot utilize this ourselves, we are
strictly bound by the law -- the Natural Gas Act which is, as
I say, somewhat antiquated. Before the Stennis committee the
other day, I used something like "antiquated like the horse and
buggy," but I don't think it is quite that bad, but it certainly
could bear a great deal of improvement, which would give us an
opportunity I think to promote a situation where we could get
an adequate supply of gas.
THE PRESIDENT: Mr. Chairman, let me make an observa-
tion, or two of them, I should say. Bill, I am glad that we
had such foresight twenty-one years ago that is being validated
by the unfortunate circumstances we see today.
The second -- and you indicated by inference -- the
lack of adequate natural gas, which is being caused by the
artificially low price, will mean substantially less jobs this
winter. It inevitably, as you and the Chairman of the Federal
Power Commission know, will mean that interruptible service will
be precluded in factories in New Jersey, in Illinois, in Michigan,
in Ohio, and many other States. And the lack of affirmative
action to raise or to eliminate the regulation in this area
will substantially cut jobs this winter and could, if we don't
get some action, interfere with our economic recovery in the
months ahead. And the Congress has an absolute requirement
to move on this legislation, and every day they delay means
a greater possibility of fewer jobs and a roadblock in our
economic recovery.
MR. HILLS: George first, and then Lew, please.
MR. O'NEAL: Dan O'Neal, Interstate Commerce Commission.
MR. HILLS: Very good.
MR. O'NEAL: I would just like to make one observation
insofar as this subject relates to the regulation of transporta-
tion. The purpose of transportation regulation in the United
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28
States has been to provide a private common carrier system to
place all businesses in the country in a position so that they
can compete no matter what their size, where they happen to be
located in the United States.
I think probably there may be room for adjustment
in the entry requirements, but I think it is important to keep
in mind at the present time entry requirements carry with them
service obligations. The carriers are required to provide
service. If that obligation is gone, then the question is who
will suffer, and I think there is a substantial question or a
substantial indication that those who suffer will likely be
the smaller businessman, who will not have the capacity to fill
up a truck, say, every time he makes a shipment. And this has
been verified recently by a study of deregulation in Great
Britain, where those commodities that can be shipped in a full
truck were shipped at a somewhat lower price than previously.
But those smaller shipments that could not fill up a truck, the
cost of those rose substantially. So I think this is an area
that certainly deserves review, but I think we have to move
with some care as well.
Thank you.
MR. HILLS: Lew?
MR. ENGMAN: Mr. President, what I was going to say
was that Paul MacAvoy raised some questions as to why entry had
to be limited and all of the comments that I have heard thus
far have been in the direction of encouraging competition.
Dan has made some defense of why we have to limit entry, and
I guess the only question I would raise is, that may be fine,
perhaps we do want that service, that added service, but let's
find out what the cost of that is to our economy, SO that we
can measure off and trade off the benefits of the cost with that
so-called improved service, so we can make a rational judgment,
SO the Congress can make a rational judgment as to whether it
is really worth it.
MR. ROBSON: Mr. President, may I just add one point
to that, since we seem to be pretty much involved in entry
control. There have been two countries, Canada and Australia,
who have now tried the deregulation route. Both of them have
had teams over in my agency taking a look at how we do it.
They are going back -- and you have probably been
reading lately that Australia is very close to going back
to full regulation. Canada is not that far along with it.
But they have been down talking to me, talking to the people
in my commission about how do we do this. I would just like
to make that note.
MR. HILLS: Helen, did you have a comment?
MS. BENTLY: Yes. I would like to point out that
the Federal Maritime Commission was established back in
1916 as a result of the fact that it was felt that com-
petition created more harm than good at that time. The
foreign steamship lines serving the North Atlantic and the
United States were engaged in a very serious rate war and
they came to the Congress and asked them to do something
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29
about it. So with that the Shipping Act of 1916 was passed
and under that -- under section 15 -- the Federal Maritime
Commission is empowered to grant any trust immunity to
steamship conferences, which our friends in the Department
of Justice are unhappy about at times. But we do have open
steamship conferences in this country and now our American
flag lines feel it is very important that they have to have
the Federal Maritime Commission behind them to survive.
However, here again, we are faced with an uncon-
trollable factor, and that is that the United Nations
(UNCTAD) recently passed the Code of Conduct for Liner
Practices, in which it is calling for closed steamship
conferences internationally. Although we haven't approved
that, if this does become international law, this country
is going to be in a real dilemma.
MR. HILLS: Glen Robinson?
MR. ROBINSON: Dan O'Neal's comment gave me the
first opportunity I have had to disagree with anybody.
The image conjured up here that regulation is something
that is predominantly oriented to helping the small consumers
is one of the prevalent myths I think in our American folk-
lore. From my experience, both as a teacher in regulated
industries for a number of years, and as a recent regulator,
is that that plays a very, very small role, and I see nothing,
since I came to the FCC, to disabuse me of the notion that
predominantly the regulation has the effect of protecting
businessmen who have an understandable allergy to competition,
but one which we should resist I think. And the traditional
response by saying, well, we do this, of course, to protect
the public's right to good service -- the fact is, however,
most of the agencies -- and I think the FCC has been histori-
cally as guilty, I suppose, as any -- have not protected good
service. Service has been deteriorating.
So I think we have to ask ourselves whether there
isn't time to at least take another hard look at this problem
and find out whether the alternative competition wouldn't
actually provide better service. And I must say, the idea
right now, sort of looking abroad to find out how Great
Britain is going about it, seems to me to be somewhat odd,
in view of Great Britain's problems. I think that would
probably be the last place we would want to look right now.
MR. HILLS: I think we have largely covered both
topic three and, thanks to Commissioner Springer, we have
indeed discussed the question of whether or not agencies
ought to reexamine their reason for existence in certain
regulatory activities.
John, do you have anything to add to Commissioner
Springer's comments on topic four?
MR. NASSIKAS: I will try to cut this very short.
I have some prepared remarks.
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30
MR. HILLS: And since our time is already short.
MR. NASSIKAS: I know. Actually, there is a
consensus today I think to critically analyze the economic
regulatory structure of government, as the President has
said, and to make necessary changes to achieve national
policy goals, without the imposition of unwarranted and
costly federal intervention.
I want to emphasize though that our continuing
inability to agree on a national energy policy is a dramatic
illustration of the problem of finding solutions before we
know what the consensus is on our objectives. Until an
energy policy has been agreed upon between the Administration
and the Congress, there is really very little to be gained
from debating the pros and cons of agency reorganization and
administration reform insofar as the energy agencies are
concerned.
I want to get back to natural gas now. The
pervasive and deepening depletion of natural gas supply is
an illustration of the consequences of governmental failure
to agree on national policy goals. The Natural Gas Act of
'38 is not suited to the realities of '75. As you pointed
out, Mr. President, unquestionably, because of the shackles
of the Natural Gas Act, there may be unemployment this
winter. In the event that unemployment is averted, it will
be at higher costs to the consumers. We have recommended
the exemption from price ceilings for 180 days in a bill that
is pending before OMB and there is a companion bill that has
been introduced in the Congress. Even if the Congress does
not succeed in deregulating natural gas, as we have recom-
mended, that at least there ought to be emergency powers
granted to the Federal Power Commission to exempt dedications
of natural gas to curtail pipelines to supply needed energy
to industries which affect employment in this country. So I
just want to raise that point.
One illustration of the extent to which curtailments
have reached: We estimate that about three trillion cubic
feet through March 1976 less than the amount needed will be
available to supply the interstate market. This equates to
one and a half million barrels of oil a day, or more than
20 percent of U.S. imports of oil and oil products of 1974
levels. And at $12 a barrel, this oil equals over $6 billion
or double the revenues of all producers selling to interstate
pipelines. So that the tradeoff here is consumers theoreti-
cally will pay twice as much for imported oil than they pay
to all producers in the United States as a result of the
unfulfilled and deferred demand.
I just say one more point on deregulation. In the
belief that a workably competitive market -- and this follows
Paul MacAvoy's thesis -- in a free enterprise system is a
better regulator than centrally enforced economic controls.
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I have recommended since early 1973 that prices for new
supplies of natural gas be deregulated, with protective
covenants for the public interest, including a windfall
profits tax, with appropriate credits for investment and
exploration and development of natural gas resources and
monitoring of prices by the Federal Power Commission, as
well as what you indicated, Mr. President, the strict
antitrust enforcement by the Justice Department and the
Federal Trade Commission.
Legislation has yet to result, as you well know.
I say that natural gas producer deregulation is an energy
policy imperative. I have said this for many years. The
electric utility industry -- another point that has to be
addressed, I think, is what we are going to do about the
electric utility industry and the natural gas industry
insofar as their financial requirements are concerned.
Both industries are in bad shape. The electric utility
industry has improved, but I certainly endorse most all
of the regulatory reforms, the tax credits, the investment
tax credit, and some of the other fast writeoff provisions
that you recently recommended, and I have so spoken before
various committees of Congress.
I think that we also need congressional reform of
the congressional committee structure. There should be a
joint committee on energy established, I believe similar
somewhat to the Joint Committee on Atomic Energy. I have
testified personally, and it is a real privilege to testify
before the Congress, 96 times before twenty congressional
committees since I have been Chairman of this commission.
Number 97 will come up on Monday, and the topic of that will
undoubtedly be why we should not deregulate; I intend to
say why we should deregulate.
That is all I have to say at this time. Thank you.
MR. HILLS: We have just one minute left. Chairman
Bagley is Chairman of the newest commission created, the
Commodities Futures Trading Commission. In that time, Bill,
can you tell us whether you are going to narrow the scope
of regulation, before it is too late?
MR. BAGLEY: Give me five minutes and I could.
Rod! Mr. President! With ten weeks' tenure in town, I
would be presumptuous, but I am going to try anyway. I
am going to try to throw out a couple of broader ideas
which might help all of us, if the ideas catch hold.
First of all, with that brief tenure, we don't
suffer yet from hardening of the categories. We are not
afflicted. But, instead, in response to your specific
question, the Commodities Futures Trading Commission was
created out of a demonstrable situation where there was a
lack of confidence in the markets. So if we -- and this
is probably the origin, the genesis, of most of the com-
missions -- at least initially, if we can do what I like to
call "regularizing" rather than regulating the markets and
restore and build up public confidence, you are going to get
a broader market and therefore more competition. So initially
it looks good.
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32
But I get to thinking, our fellow commissioners
are getting to thinking now, what are we going to do with
this beautiful new opportunity to not allow ourselves to
fall into the regulatory malaise. I have two ideas.
What we need are mechanisms that will keep all of
us going when none of us are here. One I espouse is to ask
Congress to have an automatic review, a ten-year review, if
you will, not just budget but authorization review for
everybody in this room -- not including you, sir -- for
all of the commissions.
(Laughter)
For all of the commissions, simply so that a person
will have to -- a chairman and the commissioners will have
to justify their existence or not continue in existence. I
would hope that Congress would do that for us.
Number two -- and this can cause some controversy --
I am just out of the legislative arena and the author of
every open meeting act in California -- I would like to say,
by congressional action, even by Executive Order, if it is
possible, a creation of an aura of openness. You don't have
to answer all of the detailed problems. Of course, there are
some exceptions. I have run into them all in my legislative
experience, and beat them all down also.
The point is that, with openness, you would get
consumer access, you would create more confidence in the
regulatory process. Automatically you would create an aura
or atmosphere that government is responsive and also that
openness would provide a constituency that I don't think
commissions have. The natural political constituency is
not existent, therefore perhaps we do get or are subject to
the risk of becoming captured by a smaller constituency.
With openness, you are going to have some responsiveness.
I hope those ideas will be thought about.
Thank you.
MR. HILLS: Thank you.
Mr. President.
THE PRESIDENT: At the outset, in the closing remarks,
let me thank each and every one of you for your participation.
You have a great responsibility individually and collectively.
Some are old in origin, some are relatively new, but each of
you have a very definite mission, and you have some monumental
problems to face.
As I said at the outset, this is the first meeting
of this kind and I do get a sense that perhaps subsequent
meetings would be in order. I do feel that the Congress will
be responsive to the effort that is being made by you and by
us and I am certain that your relations in this area with the
Congress will be improved, particularly if you respond to what
they are suggesting and what we are approving.
Naturally, there are five follow-up actions that I
would like to emphasize. Each Chairman, I hope, will give
further attention to the cost-to-benefit analysis of the
commissions under their chairmanship. I think it is absolutely
more
33
essential that we fully understand the economic costs of
your activities in order to take concrete steps to achieve
these reforms. And to facilitate this understanding, I
would hope that you would actually issue the cost-benefit
analyses on your major programs. This would parallel the
inflation impact statements that are required of the various
Federal departments and agencies in the Executive Branch of
the government and they would coincide with the requirement
now in the House of Representatives for an inflation impact
statement on every major legislative proposal that is submitted
to the House as a whole.
Secondly, I would ask that you undertake a com-
prehensive and specific review of all areas where regulatory
delays presently occur, in order to eliminate any of the
impediments to a speedy and an effective process.
I think it makes sense to set a goal of six months
to see if you can't in a demonstrative way show a reduction
in any of the regulatory delays that you know better than I
and better than others take place.
And, third, I would ask that you study and revise
the procedures as they are appropriate to insure that you are
responsive to the legitimate consumer interests, and that
your actions are more clearly understood by the American people.
And, fourth, that you should consider the most
fundamental changes that would move us toward deregulation
in areas where the regulatory process no longer makes sense.
And I think Chairman Nassikas has made a very valid point in
the case of deregulation of natural gas. In some areas, it
is increasingly clear that more competition is a better
regulator than the government itself.
I know some of the agencies are moving in this
same direction with respect to deregulation of certain
aspects such as in the case of the CAB. This experiment
in one or more agencies borne of more recent vintage, I
think can produce substantial results and I would strongly
urge every commission to undertake an analysis to see if
you can't do something in this area.
It is my judgment that in every case you have to
ask yourself, individually as commissioners and as a com-
mission, is regulation better in each case than an unregulated
market?
And, finally, I will continue to meet with the 24
designated Members of the House and Senate, both Democratic
as well as Republican, to review with them the progress and
the areas where we think action can be taken, must be taken.
And I am asking the members of my Administration to work
closely with each of you and each of your commissions as well,
as to respond for the Executive Branch in their areas of
jurisdiction.
It is my judgment that with the cooperation of the
Congress, and I am sure it will be there, the cooperation of
each of you and your respective agencies, and with the full
more
(OVER)
34
participation of the Executive Branch, we can make some very
substantial headway and we will all be applauded, in my
judgment, by the American people and we will have a healthier
and a far more efficient economy.
I thank you very, very much.
(Applause)
(end)
FORD
REQUESTED
THE WHITE HOUSE
INFORMATION
WASHINGTON
October 30, 1975
MEMORANDUM FOR:
JIM CANNON
File
FROM:
PAUL LEACH
SUBJECT:
Regulatory Reform
The attached materials will provide you with a
clear and concise picture of the objectives of
the regulatory reform program. In particular, Tab A
provides several quotations from Presidential
speeches (p. 1) and then provides a statement of
objectives (pp. 2-3) and a list of Administration
actions and initiatives to date (pp. 3-5).
The four principal speeches by the President which
discuss the subject of regulatory reform are:
Hardware Convention Tab B
Meeting with
Tab C
Commissioners
Chamber of Commerce Tab D
Address to Congress Tab E
In addition to legislation already submitted and
supported by the President, our major current targets
of economic regulation reform opportunity are
trucking regulation reform (1st priority), cable
TV and other communications, insurance and Robinson-
Patman Act reform. Furthermore, the Review Group
is encouraging and monitoring the reform efforts
of the Independent Agencies and Executive Departments
and Agencies. On a tentative basis, we have also
been exploring other areas (e.g., maritime) where
reform might be appropriate (once the initial priority
efforts are well along).
Attachments (5)
SERALD
FORD is LIBRAR
A
ISSUE: Regulatory Reform
Administration Position
In the past year, President Ford has outlined his regulatory reform
program in more than twenty speeches, messages, and conferences. The
President has said:
"We must reassess, as I see it, the archaic, and often times very
rigid, regulations which hamper the economy of the United States
and directly affect the American consumer.
Meaningful reform of
our present regulatory system must be part of the current effort to
respond to the consumer."
White House Conference on
Domestic and Economic Affairs
in Concord, New Hampshire
April 18, 1975
"Let me emphasize, however, that we do not seek to eliminate all
regulations, Many are costly, but they are essential to preserve
public health and public safety. But, we must know their cost and
measure those costs against the good that the regulations seek to
accomplish."
Chamber of Commerce Annual Meeting
in Washington, D.C. April 28, 1975
"We will establish as national policy this basic fact of economic life,
that Government regulation is not an effective substitute for vigorous
American competition in the marketplace."
American Hardware Manufacturer's
Association Meeting in Chicago
August 25, 1975
"Agencies engaged in regulatory activities can expect that the Antitrust
Division of the Department of Justice will continue to argue for
competition and lower consumer prices as a participant in your agency's
proceedings. Furthermore, the Attorney General will continue to insure
vigorous antitrust prosecution to remove private sector barriers to
competition".
White House Meeting with the
Independent Regulatory Commissioner
July 10, 1975
2
FACT SHEET
REGULATORY REFORM
"We will establish as a national policy
this basic fact of economic life, that
Government regulation is not an effec-
tive substitute for vigorous American
competition in the market place."
President Gerald R. Ford
August 25, 1975
President Ford has adopted as a principal goal of his
Administration the reform of Government regulation. He
has ordered a critical review of all Federal regulatory
activities. The purpose of the review is to eliminate
regulations that have become obsolete and inefficient
in today's economic environment--ones that are contri-
buting to higher prices, reduced efficiency, less
consumer choice, and fewer imaginative ideas. The goal
of the program is the development of a rational and
efficient regulatory system serving today's needs.
The need for reform has been recognized by Presidents
Truman, Eisenhower, Kennedy, Johnson and Ford. However,
changing economic conditions have increased public aware-
ness of the need for reform. The opportunity for change
is greater than ever before. Therefore, the Administration
has initiated a comprehensive program of legislative and
administrative action.
PRINCIPAL OBJECTIVES OF THE PROGRAM
1. To benefit consumers by encouraging increased competition.
Competition fosters innovation, encourages new business,
creates new jobs, ensures a variety of goods and services
and helps to keep prices at reasonable levels. By
eliminating arbitrary barriers to entry and increasing
pricing flexibility, the Administration hopes to
gradually restore competition in the regulated sectors
of the economy.
3
2. To increase understanding of the costs of regulation.
Often the real costs of regulatory activities are
more hidden from public view. Inefficient and out-
dated regulations cost consumers billions of dollars
every year in unnecessarily high prices. The
Administration believes that these costs should be
subject to the same critical attention devoted to
Federal expenditures.
3. To improve methods of achieving the objectives of
regulation. In many instances, regulation is necessary.
However, such regulation, particularly in the health
and safety areas, can impose a considerable cost burden on
the consuming public and on business. The Administration
is concerned that public protection be achieved in the
most efficient manner.
4. To substitute increased antitrust enforcement for
administrative regulation. In the past, regulation
has often been a substitute for competition. The
Administration is seeking to reverse this pattern and
believes that antitrust enforcement has an important
role in driving costs and prices down to their minimum.
THE ADMINISTRATION'S PROGRAM
Steps are being taken both administratively and through
legislation to bring about needed change in our regulatory
system. Last October, the President asked Congress to
jointly sponsor a National Commission on Regulatory Reform
to study the problems of Government regulation; so far, no
action has been taken by Congress. Accordingly, the Adminis-
tration is pursuing specific reform initiatives:
- Inflation Impact Analysis. Departments and Agencies
are now required to analyze the inflationary impact
of major legislative proposals, rules and regulations.
This requirement is designed to measure the economic
cost of Government regulations.
- Council on Wage and Price Stability. One of President
Ford's first official actions was the creation of the
Council to monitor the economy and to evaluate the
economic impact of Government policies and regulations.
Now, in its second year, the Council is placing increased
emphasis on the identification of regulatory practices
which create unnecessary cost burdens for consumers.
4
- Expanded Antitrust Activity. In addition to providing
for increased antitrust enforcement resources, the
Administration is questioning antitrust immunity now
granted to numerous industries. Many of the Adminis-
tration's legislative proposals will eliminate anti-
trust exemptions which are unnecessary and restrain
competition.
- Independent Regulatory Commissions. The President has
met with the Commissioners of the 10 Independent
Regulatory Agencies to emphasize the importance of
regulatory reform. He asked the Commissioners to:
analyze the economic costs and benefits of their
actions; reduce regulatory delays; better represent
consumer interests; and eliminate outdated regulation.
- Commission on Federal Paperwork. The Commission was
established to study the impact of government reporting
requirements on businesses and individuals. To assure
action in the short-run, the Administration is working
now to eliminate unnecessary paperwork requirements
over which it has control.
- Transportation Regulatory Reform. The Administration has
developed a specific legislative agenda to reform
transportation economic regulation.
The Railroad Revitalization Act submitted in
May seeks to rebuild a healthy, progressive
rail system by eliminating outdated regulatory
restrictions thus enabling the railroads to
better compete with other forms of transporta-
tion.
The Aviation Act of 1975 was introduced in
October and will improve the regulatory
environment of the airlines by fostering
price competition and by allowing existing
airlines to serve new markets and new
carriers to enter the industry.
Reform of trucking regulation will soon be proposed.
- Fair Trade Laws. The Administration strongly supports
the repeal of Federal legislation which permits States
to have fair trade laws. These laws, which allow
manufacturers to dictate the retail price for their
products, have been estimated to cost consumers
$2 billion per year.
5
- Financial Institutions Act. The Administration
submitted in March the Financial Institutions Act
which will enable small savers to earn higher
interest on their savings accounts and provide more
diversified financial services to all customers.
- Securities. President Ford signed the Securities
Act Amendments of 1975 in June to promote competition
among stockbrokers and to establish a national stock
market system.
- Energy. To help assure adequate supplies of energy, the
Administration has proposed legislation to deregulate the
price of new natural gas and old oil.
B
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
B
(Chicago, Illinois)
THE WHITE HOUSE
SEE
REMARKS OF THE PRESIDENT
TO THE
PAgES 4,5,6
AMERICAN HARDWARE
MANUFACTURER'S ASSOCIATION
McCORMICK PLACE
9:37 A.M. CDT
Cardinal Cody, Mr. Spencer, distinguished
guests, ladies and gentlemen:
It is a very special pleasure and privilege for
me to be here this morning and to pay tribute to the American
hardware industry and to kick off Hardware Week in the
City of Chicago.
Yours is an industry that has taken American
ingenuity and coupled it with some of the most effective
merchandising techniques known to mortal man.
That may seem like some exaggeration, but a hard-
ware store is the only business I know of where you can
go to buy a 10 cent carriage bolt and come out with a can
of paint, a new, improved screwdriver, 50 pounds of charcoal
brickets, a bicycle repair kit, ten minutes of free
advice, 12 picture hooks, six fuses and a lawnmower, and
then have to go back because you forgot the 10 cent
carriage bolt you went to buy there in the first place.
(Laughter)
I have been a typical homeowner most of my
life, and my wife Betty knows it. She says that sending
me to a hardware store is the nearest thing she knows to
playing chicken with our life savings. (Laughter)
Nevertheless, on behalf of all of us "do-it-
yourselfers," let me thank all of you here for making
possible the wonder of wonders -- the neighborhood hard-
ware imporium, more affectionately known as the world's
only candy store for grown-ups. (Laughter)
MORE
FORD
GERALD
Page 2
2
In your business, you constantly seek out those
new ideas that are so important to a great country, and so do
we in this country. In fact, no nation or society in history
has done more to encourage invention, innovation and
initiative.
The explosion of American ideas began 200
year ago with our Declaration of Independence. A century
ago a tide of industrial progress started to sweep over
America, sewing machines revolutionized the clothing
industry. Electricity made life brighter and more prosperous.
Automobileassembly lines put us on wheels. The telegraph
and telephone -- later movies, radio and television -- linked
the people of this vast Nation closer and closer together.
In our generation, America has split the atom and
conquered space. Americans never shirked from challenge.
Courage, originality, opportunity and optimism are national
traits.
This has been the spirit of America for the past
two centuries -- a spirit of ideas and individuality. It
was and is the spirit of private enterprise -- churning
ahead in a free, competitive system fueled by private savings
and investment. We need to recall these basic facts about
America, about ourselves as a people and about our way of
life.
No nation has invested more than we have in
humanity and science. No nation has taken greater risks or
experimented as much for progress. As a result, no nation
has earned such rewards as the United States.
Today America is again called upon to invest,
to risk, to experiment in the name of progress. But
unfortunately, we have reached a watershed. A decision
must be made. The question, put simply, is precisely
this: how do we finance both the investment needed for
economic growth and essential programs needed to solve our
human problems?
Today we are faced with a problem of creating
new jobs in numbers greater than ever before in America.
Although unemployment is far too high, nevertheless we
should not forget that 85 millions in this great country
are at work and that is about 1.2 million more than just
last March.
By 1980, we must create another 14 million jobs
to meet the needs of our expanding population. This is our
objective, and it will require substantial economic progress.
As always, economic progress depends on our ability
as a Nation to foster capital investment and increase
the productivity of our workers. The share of our
gross national product committed to the private sector
investment must increase significantly over the next few years
if we are to reach our economic potential. Some, for
example, estimate that total investment requirements could
reach as high as $4 trillion.
However, as our need for capital grows, the
abilities of industry to generate necessary funds is
declining. This is essentially because inflation has
eroded corporate balance sheets and because our national
tax laws fail to stimulate such investment.
In short, our financial ability to increase
production is declining. This decline is curtailing
needed growth in jobs and income and undermining our
ability to compete internationally.
I am very confident once this becomes clear to
the American people they will understand America's need
for tax policies that will help to channel sufficient
resources into the expansion of productive capacity.
At today's level of economic activity, no shortage
of industrial facilities exist, but our Nation's economic
machine is not now running at top speed. In the
future, we have every reason to expect it will, but we
must now not permit bottlenecks and shortages to reappear
as the economy gains momentum.
We must not condemn our fellow citizens to
unemployment because the modern tools needed to compete
in world markets are lacking.
Capital, as all of you know, is vital to all
segments of our economy to expand agricultural production,
to develop domestic resources of energy and raw material,
reducing our dependence on oil imports and to preserve and
to improve our economy.
This Administration has proposed reforms to the
Congress to stimulate through what some call capital forma-
tion through tax incentives, but I prefer to use the term
"job creation" because that is what the proposals would do
as a practical matter.
If adopted, they would provide the funds to
expand America's industry capability to create jobs, for
one thing, by reducing the double taxation on dividends.
As expected, these proposals have raised an
outcry from some Members of Congress who oppose them and,
as a person who was in the Congress for a number of years,
I understand these voices.
The Congress, in this case, as in others, has
come up with no alternatives. We have got to push them
to action here, as well as elsewhere. America cannot put
its faith in wishing wells. We must do something about
expanding our sources of capital to create jobs, and we
must do it right now.
MORE
I ask the Congress to join with me in this
4.
commitment to our Nation's future, to increase jobs,
income and full economic recovery.
Let us expand the size of our economic pie
rather than simply redistributing the pieces of a much
smaller piece of pie.
By itself, however, additional capital cannot
revitalize the American economy and our free market
system. We must also take steps to help restore the
vitality of the marketplace and effective competition is
the way to do it.
Too often in the past our Government has
stifled that competition in the name of economic regula-
tion to the detriment of the consumer. For that reason,
my Administration -- with strong support of the Congress
in this instance -- is seeking fundamental reform of economic
regulation in the United States.
The problem is simply this: In many industries,
transportation, energy, communication, as well as others,
Federal regulatory commissions have actually, thwarted
competition. The bureaucratic monopolies have tackled
business and conflicting policies and red tape far, far
too long.
The record is clear. They have burdened the
consumer with the cost of misdirected regulation.
Although I am greatly encouraged by widespread
backing for regulatory reform, I also recognize we still
have a long, long way to go to achieve it. With the
continued support, which is very evident, with the support
of you, as well as your industry, we will reverse the
trend of the last few decades.
We will establish as national policy this basic
fact of economic life, that Government regulation is not
an effective substitute for vigorous American competition
in the marketplace.
Having said this, let me add that some -- and
let me qualify it by saying some -- regulations are
necessary and appropriate; for instance, involving health,
safety and the environment.
But the reforms that we seek would eliminate
the impractical, the unnecessary and the obsolete.
As part of this effort to insure that we have a strong
economic system, we must maintain an anti-trust policy
which validates our commitment to competitive markets.
MORE
If we reduce Government regulation of business,
5
we must make certain and positive that our anti-trust
laws are vigorously enforced.
Competition, when freed of Government regulation
and supported by anti-trust laws, is the driving force of
our economy. It will drive costs down to their minimum
and assure prices based on these legitimate costs.
Yet, such steps cover only a part of the over-
all problem. It is much more difficult to deal with areas
that anti-trust laws do not touch, these other regulated
and legal monopolies and the Government sanctioned cartels.
For instance, various industry rate bureaus
and self-regulatory agencies -- transportation rate
bureaus, shipping conferences, stock exchanges and
professional associations -- now seem to operate in a
congenial cost-plus environment.
This is simply because Government once decided
they need not, or cannot, compete.
They are allowed to fix prices and divide
markets under the regulatory cloak, free from anti-trust
enforcement.
An essential element of regulatory reform legis-
lation I have already sent or will send to Congress will
eliminate most of these anticompetitive practices. The
remainder of these practices, now immunized from anti-
trust laws, are undergoing intense review in the Executive
Branch of the Government.
In short, this Administration will look at the
whole range of Government sanctioned monopoly -- from the
small franchises protected by Federal regulations, which
rule out competition, all the way to Government-endorsed
cartels involving entire industries.
We must recognize this: Over the years Govern-
ment has done as much to create and perpetuate monopoly
as it has done to control or eliminate it. As a result,
this Nation has become accustomed to certain forms of
monopoly. Some are regarded as beneficial, some not.
If an industry combines to raise prices, it
violates our anti-trust laws, but no laws are violated
if an industry can get the Federal Government to build
trade barriers, to increase support prices for the goods
or services that it produces, or to police against potential
competitors or pricecutters.
MORE
Page 6
It is sad but true -- too often the Government
walks with the industry along the road to monopoly.
The end result of such special treatment
provides special benefits for a few, but powerful, groups
in the economy at the expense of the taxpayer and the
consumer.
Let me emphasize this is not -- and never will
be -- and Administration of special interests. This is
an Administration of public interest, and always will be
just that.
Therefore, we will not permit the continuation of
monopoly privilege, which is not in the public interest.
It is my job and your job to open the American marketplace
to all comers.
Ultimately, the vital reforms will be viewed --
as they should be -- as a pocketbook issue. Government
regulation and restrictions now cost consumers billions
and billions of dollars each year. We must be concerned
about the cost of monopoly however it is imposed and
for what reasons.
We must be sure that regulatory reform and anti-
trust actions go hand in hand with incentives to spark
capital investment to create new jobs and new competition.
This is what I firmly believe is needed to revive the
American economic dream.
Before I close, let me share one thought with
you. It concerns a subject that affects the lives and
the pocketbooks of every American -- the runaway growth
of the Federal Government itself.
One of the goals I have set for myself as
President is to cut big Government down to size -- and we
can do it this way -- to make it more manageable, more
responsive, more efficient and less costly. I want to put
an end to the mountain of paperwork and the quicksand of
regulation which big Government makes every businessman
cope with.
Do you have any idea how many different Federal
forms Washington sends out and asks you to fill out?
Would you believe it is over 5,000 -- 5,000 Federal forms
to keep Washington at work and businessmen from their work.
Believe me -- and obviously you agree -- this is
not the way this great Nation was built over a 200-year
span. I can vividly recall how my father started a small
family factory back in, of all years, 1929. In those dire
economic circumstances, everybody pitched in.
My speciality -- and it didn't require much skill
was mixing the paint and labeling cans. But, my father was
always out there selling the merchandise and doing what makes
sense for the business, not what makes sense for the
bureaucrats.
The Ford Paint and Varnish Company survived the
depression. And I have wondered if it would have if my
father had had to fill out all of today's forms and
applications and those thousands and thousands of questionaires,
and at the same time, cope with a patchwork of rules and
regulations which face today's businessmen.
My objective is to get the Federal Government
as far out of your business, out of your lives, out of
your pocketbooks and out of your hair as I possibly can.
To this end, within three weeks after I came into
the Office of the Presidency last August, I directed the
heads of all Federal Government, departments and agencies
to reduce the personnel for whom they had requested funds
for the remainder of the fiscal year by 40,000.
Actually, I can report to you today that their
performance exceeded my directive. We ended fiscal year
1975 on June 30 of this year with a reduction or a cutback
of 52,000 Federal employees under the planned levels of
a year ago.
As far as those 5,000 Government forms, I can
tell you this: several months ago I directed Jim Lynn,
the Director of the Office of Management and Budget, to
examine, to analyze, to evaluate and then throw out as many
of these timewasters as he possibly can. And I am going to
personally monitor it.
To put it very simply, I want to see the American
businessman pushing merchandise, not pencils.
You don't need a lot of bureaucrats looking over
your shoulder and telling you how to run your life or how
to run your business. We are a people who declared our
independence 200 years ago, and we are not about to lose it
now to paper shufflers and computers.
Let's take the shackles off American businessmen.
That is the only kind of hardware I don't approve of.
Thank you very much.
END
(AT 10:02 A.M. CDT)
FORD
D
FOR IMMEDIATE RELEASE
APRIL 28, 1975
D
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
SEE
THE WHITE HOUSE
PAGES
REMARKS OF THE PRESIDENT
TO THE
63RD ANNUAL MEETING OF THE
4-10
CHAMBER OF COMMERCE OF THE UNITED STATES
CONSTITUTION HALL
10:25 A.M. EDT
Chairman Smith, President Booth, members and
guests of the United States Chamber of Commerce:
It is like a spring tonic to appear before
a meeting of the Chamber of Commerce, and I thank you
most generously for your warm welcome. Individually,
as well as collectively, you have always presented such
an upbeat, positive approach to America that it really
feels good to be with you this morning.
Believe me, we need that kind of vitality,
that zest for problem solving, and that absence of
cynicism that so typifies your membership. Let me also
congratulate you on the relevance of your theme for this
meeting: America's Future -- Our Critical Choices.
As leaders of business, industry, Government,
we join together to explore the future, so that we may
seize the opportunities and be better able to cope with
the problems that we face in common. The mutuality of
our problems was never more clearly stated than when I
was introduced at a business conference quite recently.
The moderator said, "The greatness of America
is that anyone çan grow up to be president of an auto
company, president of an airline, president of a utility,
or President of the United States." Then he took a long
pause and added, "That is just one of the chances you
have to take.' (Laughter)
Speaking of Presidents, I would like you to
join with me in a salute to someone we are all fond of
and proud of, someone who has been a driving force in the
Chamber. Arch Booth is leaving as Chamber President to
begin some new adventures.
MORE
(OVER)
FORD & LIBRARY 074839
Page 2
In his 32 years with the Chamber, he has
helped to build this organization into a dynamic
force for good in America, a force that is adaptable,
responsive and innovative.
As long as I have been in Washington ------ which
is more than a generation --- Arch, you have been a force
for progress in the White House and on Capitol Hill.
We will miss you, and all of us wish you the very, very
best.
MORE
LIBRARY GERALD R. FORD
Page 3
It is appropriate at this 63rd meeting that
my appearance here this morning follows a slide show
sketching the critical choices of the future of our
country. That presentation hits many of the points
that I have been discussing around the country for
the past few months.
These critical choices must be made, and they
must be made just as quickly as the Congress and this
Administration can work out effective solutions.
One of the most serious problems facing us,
of course, is the runaway spending of the Federal
Government. It poses a genuine threat to our way
of life. I have called upon the Congress to hold the
deficit line this year at what I consider the alarming
figure of some $60 billion.
I am pleased that both Houses of the Congress
appear ready to use their newly instituted budget reform
procedures to impose ceilings on total spending for the
next fiscal year.
Even though I strongly feel the ceilings proposed
by the Congressional Budget Committees are too high, I am
glad that some in the Congress are demonstrating more
concern about overall spending than has been the case in
the past.
While the spending problems we face are enormous
and very, very serious, I agree with the Chamber that
there is far more right with America than what is wrong
with our great country.
I most certainly agree with your President that
we have taken for granted the things that are right with
America so long that we must remind ourselves as to what
is right with America. An outstanding example is the fact
that under our free enterprise system we consistently
produce higher quality, safer and more reliable goods
than any economy which operates under rigid government
controls.
Planned economies simply do not achieve the
quality or the low price of goods which are the fruits
of an open and competitive system. Buyers overwhelmingly
prefer products of the free enterprise system. Where
business competes for the buyer's dollar, the result is
better products.
We tend to overlook, also, that the survival of
the American business is directly dependent on its
ability to provide the largest number of consumers with
goods of high quality, utility, and safety at attractive
prices.
R.
MORE
FORD
GERALD
TIBRARY
The self-interest of Amer ican business demands
that it please customers while there is no such automatic
mechanism of consumer protection in controlled economies.
We are a dynamic society with a dynamic economy.
But this requires that we, as people, insure that our
Governmental institutions are responsive to changing
conditions. Let me discuss with you, on this occasion,
one function performed by government -- yes, even ours --
which requires our attention and is in need of reform,
and that is regulation.
In discussing regulation, let me say we should
be prepared to listen carefully to the case of those who
might be injured by de-regulation, or changes in regulation.
But we must make our decision in terms of what benefits
all of us.
I have confidence that our system can make the
changes that are required to meet the challenges of our
dynamic society.
It may be useful at this point to distinguish
between the two broad kinds of Government regulation.
First, there are regulations designed to deal with the
competitive performance of such industries as railroads,
trucking, arlines, utilities, and banking. This
type of regulation controls rates, the right to serve
specific markets, and competitive practices.
One of the most impressive outcomes of the September
Summit Conference on Inflation was the nearly unanimous agree-
ment among all participants of all persuasions that there
are tremendous efficiency losses, reductions in productivity
and unnecessary costs to the economy from some aspects
of this kind of regulation.
Almost without exception, the conferees recommended
reform or elimination of obsolete and unnecessary regulations.
It is important to recognize that these obsolete and
unnecessary regulations are not the result of perversity
on the part of some regulatory body or Government official.
Rather, they result from the fact that the regulatory process
is inherently static.
Regulations do not automatically expire when
they have outlived their usefulness. There is no systematic
pattern of review and even when .it is acknowledged that
changes are warranted, procedural delays often result
in obsolete rules remaining in force for years.
In short, while the intention of regulation is
to protect consumers, it sometimes does just the opposite.
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R.
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In many cases, the reduction or elimination
of existing regulations would result in lower prices
for the consumer and open new opportunitites for business.
In other industries, where there is inadequate
competition, regulation should continue, but it is the
job of Government to insure that such necessary regulation
is administered efficiently and fairly.
A second type of regulation is concern with social
issues such as occupational safety, consumer product safety,
and of course, the environment. This kind of regulation
is generally of more recent origin but it is becoming
more critical every day.
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LISTARY GERALD R. FORD
Page 6
The central issue here is the need for a
proper assessment, or evaulation, of costs and benefits.
The question is not whether we want to do something
about noise or safety, but whether in making changes in our
regulations they would make more sense in terms of costs
added and benefits gained.
When I talk about costs, I am not just talking
about cold figures in a bookkeeping ledger. I am
talking about what you pay in the marketplace, in the
supermarket, in the clothing store, in the ladies
boutique. Ultimately, all such costs are paid by you,
the producers, and your wives, the consumers.
All too often the Federal Government promulgates
new rules and regulations which raise costs and consumer
prices at the same time. To achieve small, or somewhat
limited social benefits, in these cases we must either
revise proposed rules and regulations to lower their
cost, or we must not adopt them in the first place.
Moreover, we must examine the whole ranges of
existing rules and regulations to determine whether
modifications could lower costs without significantly
sacrificing their objectives.
Let me emphasize, however, that we do not seek
to eliminate all regulations. Many are costly, but they
are essential to preserve public health and public
safety. But, we must know their cost and measure
those costs against the good that the regulations seek
to accomplish.
A major problem is that these costs are often
hidden from the public generally. While we are all
accustomed to an open debate on the Government's budget,
far too little attention has been focused on the ways
in which Government regulations levy a hidden tax on
the American people.
In the nearly 90 years since we created the
first Federal regulatory commission, we have built a
system of regulations which abound with contradictions
and excesses, all to the detriment of the public.
There are sound estimates that Government
regulations have added billions of unnecessary dollars
to business and consumer costs every year. To reverse
this trend of growing regulation, my Administration is
working hard to identify and to eliminate those regula-
tions which now cost the American people more than they
provide in benefits.
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I feel strongly, just as the Chamber does,
that we must keep and improve those regulations which
work, but we have an obligation to discard those that
do not.
Let me review with you for a moment some of
the steps we are taking to make sure that we concentrate
not on rhetoric, but on results.
First, I have asked all offices within the
Executive Branch to evaluate the inflationary impact
of significant legislation, rules and regulations which
we propose.
Let me say that I am delighted that the House
of Representatives has also adopted changes in its rules
to require the measurement of the cost of legislation
before it is adopted.
Most people would agree that some regulation
is needed, but only when we know the cost of proposed
Government actions can we rationally determine how much
regulation we are willing to pay for.
For example, is it worth as much as $30 billion
a year of the consumer dollar to reduce the level of
occupational noise exposure by approximately five decibels?
Have air bags been proven sufficiently cost-effective
for us to require their installation in all cars at
between $100 and $300 each?
Earlier this year, I sent to the Congress a
comprehensive program to seek energy sufficiency for our
Nation. Among the highest priorities of this effort is
my proposal to remove, as quickly as possible, the
Federal price controls on new natural gas sold in
interstate markets.
At present, the artificially low price of
natural gas marketed interstate has curtailed explora-
tion and development and forced users shut out by present
shortages toward either curtailment of their operations
or greater dependence on oil.
Inevitably, inaction this year by the Congress
will result in plant shutdowns and job layoffs. We
cannot afford that bad result.
We have already submitted a Financial Institutions
Act, which should phase out some of the most anti-
competitive Federal regulations governing banks and
thrift institutions. The American people will benefit if
all financial institutions are able to offer a wider
variety of lending services and pay more competitive
interest rates to savers.
R.
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In the coming weeks, I will send to the
Congress a comprehensive transportation program designed
to achieve maximum reform of Federal regulations
governing our railroads, airlines and trucking firms.
The first of these bills will permit rail-
roads to begin to adjust their rates within specified
limits without Icc interference. The legislation will
improve procedures for mergers and for abandonments.
The increased competition brought about by
this legislation will lower costs for consumers and
save approximately 70,000 barrels of oil each day.
Legislation proposing corresponding reform measures
for trucking and airline regulation will follow
shortly.
Another element of our program is pending
legislation in the Congress, which would end the so-
called fair trade law. Federal law today now permits
States to allow manufacturers to dictate the price of
their product and drives up the cost on such items
as books, cosmetics, shoes and hardware.
These depression-era laws, which cost consumers
an estimated $2 billion a year, should be laid to rest,
along with the NRA Blue Eagle of the same period.
In addition, I will propose changes in other
laws which restrain competition and deny buyers
substantial savings. The Robinson-Patman Act is a
leading example of such laws. It discourages both
large and small firms from cutting prices, and it also
makes it harder for them to expand into new markets
and to pass on to customers the cost savings on
large orders.
Finally, there are a larger number of related
actions, which will improve our understanding of
Government regulations and facilitate future changes.
The problem of Government-imposed reporting requirements
has become so acute that your Government has had to
create a Commission on Federal Paperwork.
Yes, that is right. There is a committee, a
board, an agency or a commission in Washington for
just about everything, including trying to cut down
the onerous filling out of Federal forms, which last
June numbered exactly 5,146 separate types That's many,
too many.
The commission will represent the Administra-
tion, the Congress, and the public, and I intend to see
that its very wide powers are used effectively to cut
R.
down the unnecessary burden on our American free
FORD
enterprise system.
GERALD
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I will be convening very shortly an unpre-
cedented meeting of all of the Commissioners of the
ten major independent regulatory agencies. Joining
them will be key Members of the Congress and the
Administration.
Together, we will discuss the imperative
need to foster greater competition in the public
interest and the equal imperative need to consider the
inflationary effects of all proposed new regulations.
Let me reaffirm to you today my deep personal
conviction that the best way to begin in our efforts
is to improve the Government we have, not to enlarge
it.
I do not believe a bigger Government is
necessarily a better Government.
May I add this: Please never forget, a
Government big enough to give us everything we want is
a Government big enough to take from us everything we
have.
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I have ordered action by the Executive depart-
ments and agencies to make major improvements in the
quality of service to the consumer, and I have asked the
Congress to postpone action on legislation which would
create a new Federal agency for consumer advocacy.
I do not believe that we need yet another Federal
bureaucracy in Washington with its attendant cost of about
$60 million over the next three years, and
hundreds of additional Federal employees.
At a time when we are trying to cut down both the
size and the cost of Government, it would be unsound to
add still another layer of bureaucracy. Instead, the
program I have outlined represents the first steps toward
improving Government's ability to serve all of its citizens.
Let me add I need your help in so many ways. I
need your views, your ideas, and yes, your suggestions;
for in that wäy, we can bring the full weight of the
business community to bear on solving the mutual problems
that we face.
I urge you to bring to my attention those
Government practices which you feel unnecessarily add
to cost and interfere with the effective working of our
free enterprise system.
You will be doing your country and your fellow
businessmen a service as well as yourself.
We have a unique opportunity right now to make
some long overdue changes in a system of regulation
which has not kept pace with the times. The critical choices
remain to be made. But I am confident that America has the
capability and the desire to respond to thhose challenges.
These fundamental reforms are vital to our economic
recovery and our long-range stability.
I commend the Chamber for the advertisements
entitled, "What's Right With America. "
Of the 12 items listed in the ad, I particularly
like number six, which says, "We have a willingness to
experiment with different forms of social, economic and
political organization -- keeping what works and discarding
what doesn "
That sums up very well what I have said to you
here today. So, let us work together in this effort which
will benefit all Americans.
Thank you very much.
&
FORD
END
(10:55 A.M. EDT)
GERALD
LIBRARY
E
FOR IMMEDIATE RELEASE
OCTOBER 8, 1974
E
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
SEE
ADDRESS OF THE PRESIDENT
TO THE
PAGES
5-7
JOINT SESSION OF CONGRESS
10
THE HOUSE CHAMBER
4:02 P.M. EDT
Mr. Speaker, Mr. President, distinguished
guests, my very dear friends:
In his first inaugural address, President
Franklin Roosevelt said, and I quote: "The people of
the United States have not failed They want direct,
vigorous action, and they have asked for discipline and
direction under our leadership.'
Today, though our economic difficulties
do not approach the emergency of 1933, the message from
the American people is exactly the same. I trust that
you are getting the very same message that I am
receiving: Our constituents want leadership, our
constituents want action.
All of us have heard much talk on this very
floor about Congress recovering its rightful share of
national leadership. I now intend to offer you that
chance.
The 73rd Congress responded to FDR's appeal
in five days. I am deeply grateful for the cooperation
of the 93rd Congress and the Conference on Inflation,
which ended ten days ago.
Mr. Speaker, many -- but not all -- of your
recommendations on behalf of your party's Caucus are
reflected in some of my proposals here today. The
distinguished Majority Leader of the Senate offered a
nine-point program.
I seriously studied all of them and adopted some of
his suggestions.
I might add, I have also listened very hard
to many of our former colleagues in both bodies and of
both the majority and the minority, and have been both
persuaded and dissuaded. But in the end I had to make
the decision, I had to decide, as each of you do, when
the rollcall is called.
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I. will not take your time today with the dis-
cussion of the origins of inflation and its bad effect
on the United States, but I do know where we want to be
in 1976 on the 200th birthday of a United States of
America that has not lost its way, nor its will, nor
its sense of national purpose.
During the meetings on inflation, I listened
carefully to many valuable suggestions. Since the
summit, I have evaluated literally hundreds of ideas,
day and night.
My conclusions are very simply stated. There
is only one point on which all advisers have agreed:
We must whip inflation right now.
None of the remedies proposed, great or small,
compulsory or voluntary, stands a chance unless they
are combined in a considered package, in a concerted
effort, in a grand design.
I have reviewed the past and the present efforts
of our Federal Government to help the economy. They
are simply not good enough, nor sufficiently broad, nor
do they pack the punch that will turn America's economy
on.
A stable American economy cannot be sustained
if the world's economy is in chaos. International
cooperation is absolutely essential and vital, but while
we seek agreements with other nations, let us put our
own economic house in order.
Today, I have identified ten areas for our
joint action, the Executive and the Legislative Branches
of our Government.
Number One: Food.
America is the world's champion producer of
food. Food prices and petroleum prices in the United
States are primary inflationary factors.
America today partially depends on foreign
sources for petroleum, but we can grow more than
enough food for ourselves.
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To halt higher food prices, we must produce
more food, and I call upon every farmer to produce the
full capacity. And I say to you and to the farmers,
they have done a magnificent job in the past, and
we should be eternally grateful.
This Government, however, will do all in
its power to assure him, that farmer, he can sell
his entire yield at reasonable prices. Accordingly,
I ask the Congress to remove all remaining acreage
limitations on rice, peanuts, and cotton.
I also assure America's farmer here and now
that I will allocate all the fuel and ask authority to
allocate all the fertilizer they need to do this
essential job.
Agricultural marketing orders and other
Federal regulations are being reviewed to eliminate
or modify those responsible for inflated prices.
I have directed our new Council on Wage and
Price Stability to find and to expose all restrictive
practices, public or private, which raise food prices.
The Administration will also monitor food production,
margins, pricing, and exports.
We can and we shall have an adequate supply
at home, and through cooperation, meet the needs of our
trading partners abroad.
Over this past weekend we initiated a
voluntary program to monitor grain exports. The
Economic Policy Board will be responsible for
determining the policy under this program.
In addition, in order to better allocate our
supplies for export, I ask that a provision be added
to Public Law 480 under which we ship food to the needy
and friendly countries. The President needs authority
to waive certain of the restrictions on shipments
based on national interest or humanitarian grounds
Number Two: Energy.
America's future depends heavily on oil,
gas, coal, electricity, and other resources called
energy. Make no mistake, we do have a real energy
problem.
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Page 4
One-third of our oil -- 17 percent of
America's total energy -- now comes from foreign
sources that we cannot control, at high cartel prices
costing you and me $16 billion --- $16 billion more than
just a year ago.
A primary solution has to be at home. If you
have forgotten the shortages of last winter, most
Americans have not.
I have ordered today the reorganization of
our national energy effort in the creation of a
National Energy Board. It will be chaired with
developing, or I should say charged with developing
a single national energy policy and program. And I
think most of you will be glad to know that our former
colleague, Rog Morton, our Secretary of Interior, will
be the overall boss of our national energy program.
Rog Morton's marching orders are to reduce
imports of foreign oil by one million barrels per day
by the end of 1975, whether by savings here at home,
or by increasing our own sources.
Secretary Morton, along with his other
responsibility, is also charged with increasing our
domestic energy supply by promptly utilizing our coal
resources and expanding recovery of domestic oil still
in the grounds in old wells.
New legislation will be sought after your
recess to require use of cleaner coal processes and
nuclear fuel in new electric plants and the quick
conversion of existing oil plants.
I propose that we, together, set a target date
of 1980 for eliminating oil-fired plants from the
Nation's base-loaded electrical capacity.
I will use the Defense Production Act to
allocate scarce materials for energy development, and
I will ask you, the House and Senate, for whatever
amendments prove necessary.
I will meet with top management of the automobile
industry to assure, either by agreement or by law, a firm
program aimed at achieving a 40 percent increase in
gasoline mileage within a four-year development deadline.
MORE
Priority legislation -- action, I should say --
to increase energy supply here at home requires the
following:
One, long-sought deregulation of natural
gas supplies.
Number two, responsible use of our Naval
petroleum reserves in California and Alaska.
Number three, amendments to the Clean Air Act, and
Four, passage of surface mining legislation
to insure an adequate supply with common-sense environmental
protection.
Now, if all of these steps fail to meet our
current energy saving goals, I will not hestitate to ask
for tougher measures. For the long range, we must work
harder on coal gasification. We must push with renewed
vigor and talent research in the use of nonfossil
fuels. The power of the atom, the heat of the sun
and the steam stored deep in the earth, the force of
the winds and water, must be main sources of energy
for our grandchildren, and we can do it.
Number Three: Restrictive Practices.
To increase productivity and contain prices,
we must end restrictive and costly practices, whether
instituted by Government, industry, labor or others.
And I am determined to return to the vigorous enforcement
of antitrust laws.
The Administration will zero in on more
effective enforcement of laws against price fixing and
bid rigging. For instance, non-competitive professional
fee schedules and real estate settlement fees must be
eliminated. Such violations will be prosecuted by the
Department of Justice to the full extent of the law.
Now I ask Congress for prompt authority to
increase maximum penalties for antitrust violations
from $50,000 to $1 million for corporations, and
from $50,000 to $100,000 for individual violators.
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At the Conference on Inflation, we found, I
would say, very broad agreement that the Federal
Government imposes too many hidden and too many
inflationary costs on our economy. As a result, I
propose a four-point program aimed at a substantial
purging process.
Number one, I have ordered the Council on
Wage and Price Stability to be the watchdog over
inflationary costs of all Governmental actions.
Two, I ask the Congress to establish a National
Commission on Regulatory Reform to undertake a long
overdue total re-examination of the independent regulatory
agencies. It will be a joint effort by the Congress,
the Executive Branch and the private sector to identify
and eliminate existing Federal rules and regulations that
increase costs to the consumer without any good reason
in today's economic climate.
Three, hereafter, I will require that all major
legislative pro osals, regulations and rules emanating
from the Executive Branch of the Government will include
an Inflation Impact Statement that certifies we have
carefully weighed the effect on the Nation. I respect-
fully request that the Congress require a similar advance
Inflation Impact Statement for its own legislative
initiatives.
Finally, I urge State and local units of
government to undertake similar programs to reduce
inflationary effects of their regulatory activities.
At this point I thank the Congress for
recently revitalizing the National Commission on
Productivity and Work Quality. It will initially concen-
trate on problems of productivity in Government --
Federal, State and local.
Outside of Government, it will develop
meaningful blueprints for labor-management cooperation
at the plant level. It should look particularly at the
construction and the health service industries.
The Council on Wage and Price Stability will,
of course, monitor wage and price increases in the
private sector. Monitoring will include public hearings
to justify either price or wage increases. I emphasize,
in fact re-emphasize, that this is not a compulsory
wage and price control agency.
Now, I know many Americans see Federal controls
as the answer, but I believe from past experience
controls show us that they never really stop inflation,
not the last time, not even during and immediately after
World War II, when, as I recall, prices rose despite
severe andenforceable wartime rationing.
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Now, beacetime controls actually, we know from
recent experience, create shortages, hamper production,
stifle growth and limit jobs. I do not ask for such
powers, however politically tempting, as such a program
could cause the fixer and the black marketeer to flourish,
while decent citizens face empty shelves and stand in long
waiting lines.
Number Four: We Need More Capital.
We cannot "eat up our seed corn. " Our free
enterprise system depends on orderly capital markets
through which the savings of our people become productively
used. Today, our capital markets are in total disarray.
We must restore their vitality. Prudent monetary
restraint is essential.
You and the American people should know, however,
I have personally been assured by the Chairman of
the Independent Federal Reserve Board, that the supply
of money and credit will expand sufficiently to meet the
needs of our economy and that in no event will a credit
crunch occur.
The prime lending rate is going down. To
help industry to buy more machines and create more jobs,
I am recommending a liberalized 10 percent investment
tax credit. This credit should be especially helpful to
capital-intensive industries, such as primary metals,
public utilities, where capacity shortages have developed.
I am asking Congress to enact tax legislation
to provide that all dividends on preferred stocks issued
for cash be fully deductible by the issuing company.
This should bring in more capital, especially for energy-
producing utilities. It will also help other industries
shift from debt to equity, providing a sounder capital
structure.
Capital gains tax legislation must be liberalized
as proposed by the tax reform bill currently before the
Committee on Ways and Means. I endorse this approach
and hope that it will pass promptly.
Number Five: Helping The Casualties.
And this is a very important part of the
overall speech. The Conference on Inflation made
everybody even more aware of who is suffering most from
inflation. Foremost are those who are jobless through
no fault of their own.
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Page 8
Three weeks ago, I released funds which, with
earlier actions, provide public service employment
for some 170,000 who need work. I now propose to the
Congress a two-step program to augment this action.
First, 13 weeks of special unemployment insurance
benefits would be provided to those who have exhausted
their regular and extended unemployment insurance
benefits, and 26 weeks of special unemployment insurance
benefits to those who qualify but are not now covered
by regular unemployment insurance programs.
Funding in this case would come from the
general treasury, not from taxes on employers, as is
the case with the established unemployment program.
Second, I ask the Congress to create a brand
new Community Improvement Corps to provide work
for the unemployed through short-term useful work projects
to improve, beautify and enhance the environment of our
cities, our towns and our countryside.
This standby program would come alive whenever
unemployment exceeds 6 percent nationally. It would
be stopped when unemployment drops below 6 percent.
Local labor markets would each qualify for grants when-
ever their unemployment rate exceeds 6.5 percent.
State and local government contractors would
supervise these projects and could hire only those who
had exhausted their unemployment insurance benefits. The
goal of this new program is to provide more constructive
work for all Americans, young or old, who cannot find a
job.
The purpose really follows this formula.
Short-term problems require short-term remedies. I
therefore request that these programs be for a one-year
period.
Now, I know that low-and middle-income Americans
have been hardest hit by inflation. Their budgets are
most vulnerable because a larger part of their income
goes for the highly inflated costs of food, fuel and
medical care.
The tax reform bill now in the House Committee
on Ways and Means, which I favor, already provides
approximately $1.6 billion of tax relief to these groups.
Compensating new revenues are provided in this prospective
legislation by a windfall tax, profits tax on oil producers
and by closing other loopholes.
If enacted, this will be a major contribution
by the Congress in our common effort to make our tax system
fairer to all.
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Page 9
Number Six: Stimulating Housing.
Without question, credit is the lifeblood of
housing. The United States, unfortunately, is suffering
the longest and the most severe housing recession
since the end of World War II. Unemployment in the
construction trades is twice the national average.
One of my first acts as President was to
sign the Housing and Community Development Act of
1974. I have since concluded that still more help is
needed, help that can be delivered very quickly and with
minimum inflationary impact.
I urge the Congress to enact before recess
additional legislation to make most home mortgages
eligible for purchase by an agency of the Federal
Government. As the law stands now, only FHA or VA home
mortgages, one fifth of the total, are covered.
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Page 10
I am very glad that the Senate, thanks to
the leadership of Senator Brooke and Senator Cranston,
has already made substantial progress on this legislation.
As soon as it comes to me, I will make at least $3 billion
immediately available for mortgage purchases, enough to
finance about 100,000 more American homes.
Number Seven: Thrift Institutions.
Savings and loan and similar institutions are
hard hit by inflation and high interest rates. They
no longer attract, unfortunately, adequate deposits.
The Executive Branch, in my judgment, must join with
the Congress in giving critically-needed attention to
the structure and the operation of our thrift institutions
which now find themselves for the third time in eight
years in another period of serious mortgage credit
scarcity.
Passage of the pending financial institution
bill will help, but no single measure has yet appeared,
as I see it, to solve feast or famine in mortgage credit.
However, I promise to work with you individually and
collectively to develop additional specific programs
in this area in the future.
Number Eight: International Interdependency.
The United States has a responsibility not only
to maintain a healthy economy at home, but also to seek
policies which compliment rather than disrupt the
constructive efforts of others.
Essential to U.S. initiatives is the early
passage of an acceptable trade reform bill. My special
representative for trade negotiations departed earlier
this afternoon to Canada, Europe, Japan, to brief
foreign friends on my proposal.
We live in an interdependent world and therefore
must work together to resolve common economic problems.
Number Nine: Federal Taxes and Spending.
To support programs, to increase production
and share inflation-produced hardships, we need additional
tax revenues. I am aware that any proposal for new
taxes just four weeks before a national election is, to
put it mildly, considered politically unwise. And I am
frank to say that I have been earnestly advised to wait
and talk about taxes anytime after November 5.
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Page 11
But I do say in sincerity that I will not
play politics with America's future.
Our present inflation, to a considerable
degree, comes from many years of enacting expensive
programs without raising enough revenues to pay for
them.
The truth is that 19 out of the 25 years I
had the honor and the privilege to serve in this
Chamber, the Federal Government ended up with Federal
deficits. That is not a very good batting average.
By now, almost everybody -- almost everybody
else, I should say -- has stated my position on Federal
gasoline taxes. This time I will do it myself. I am
not -- emphasizing not -- asking you for any increase
in gas taxes.
I am -- I am asking you to approve a one-year
temporary tax surcharge of 5 percent on corporate
and upper-level individual incomes.
This would generally exclude from the surcharge
those families with gross incomes below $15,000 a year.
The estimated $5 billion in extra revenue to be raised
by this inflation-fighting tax should pay for the new
programs I have recommended in this message.
I think, and I suspect each of you know, this
is the acid test of our joint determination to whip
inflation in America. I would not ask this if major
loopholes were not now being closed by the Committee on
Ways and Means' tax reform bill.
I urge you to join me before your recess, in
addition to what I have said before, to join me by
voting to set a target spending limit -- let me emphasize
it -- a target spending limit of $300 billion for the
Federal fiscal budget of 1975.
When Congress agrees to this spending target,
I will submit a package of budget deferrals and recissions
to meet this goal. I will do the tough job of designating
for Congressional action on your return those areas which
I believe can and must be reduced.
These will be hard choices and everyone of you
in this Chamber know it as well as I.
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Page 12
They will be hard choices, but no Federal
agency, including the Defense Department, will be
untouchable.
It is my judgment that fiscal discipline is
a necessary weapon in any fight against inflation.
While this spending target is a small step, it is a
step in the right direction, and we need to get on
that course without any further delay.
I do not think that any of us in this Chamber
today can ask the American people to tighten their belts
if Uncle Sam is unwilling to tighten his belt first.
Now, if I might, I would like to say a few
words directly to your constituents and, incidentally,
mine.
My fellow Americans, ten days ago I asked
you to get things started by making a list of ten ways
to fight inflation and save energy, to exchange your
list with your neighbors, and to send me a copy.
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Page 13
I have personally read scores of the
thousands of letters received at the White House, and
incidentially, I have made my economic experts read
some of them, too. We all benefitted, at least I did, and
I thank each and every one of you for this cooperation.
Some of the good ideas from your home to mine
have been cranked into the recommendations I have just
made to the Congress and the steps I am taking as
President to whip inflation right now. There were also
firm warnings on what Government must not do, and I
appreciated those, too.
Your best suggestions for voluntary
restraint and self-discipline showed me that a great
degree of patriotic determination and unanimity already
exist in this great land.
I have asked Congress for urgent specific
actions it alone can take. I advised Congress of the
initial steps that I am taking as President Here is
what only you can do: Unless every able American
pitches in, Congress and I cannot do the job.
Winning our fight against inflation and waste
involves total mobilization of America's greatest
resources, the brains, the skills and the will power
of the American people.
Here is what we must do, what each and every one
of you can do. To help increase food and lower prices,
grow more and waste less. To help save scarce fuel
in the energy crisis, drive less, heat less. Every
housewife knows almost exactly how much she spent for
food last week. If you cannot spare a penny from your
food budget -- and I know there are many -- surely you
can cut the food that you waste by 5 percent.
Every American motorist knows exactly how
many miles he or she drives to work or to school every
day and about how much mileage she or he runs up each
year. If we all drive at least 5 percent fewer miles,
we can save almost unbelievably 250,000 barrels of foreign
oil per day by the end of 1975.
Most of us can do better than 5 percent by
car pooling, taking the bus, riding bikes or just plain
walking. We can save enough gas by self-discipline to
meet our one million barrels per day goal.
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Page 14
I think there is one final thing that all
Americans can do, rich or poor, and that is share with
others. We can share burdens as we can share blessings.
Sharing is not easy, not easy to measure like mileage
and family budgets, but I am sure that 5 percent more
is not nearly enough to ask, so I ask you to share every-
thing you can and a little bit more. And it will
strengthen our spirits as well as our economy.
Today I will not take more of the time of
this busy Congress, for I vividly remember the rush
before every recess, and the clock is already running
on my specific and urgent request for legislative
action. I also remember how much Congress can get done
when it puts its shoulder to the wheel.
One week from tonight I have a longstanding
invitation in Kansas City to address the Future Farmers
of America, a fine organization of wonderful young
people whose help, with millions of others, is vital
in this battle. I will elaborate then how volunteer
inflation fighters and energy savers can further mobilize
their total efforts.
Since asking Miss Sylvia Porter, the well-known
financial writer, to help me organize an all-out, nation-
wide volunteer mobilization, I have named a White House
coordinator and have enlisted the enthusiastic support
and services of some 17 other distinguished Americans
to help plan for citizen and private group participation.
There will be no big Federal bureaucracy set
up for this crash program. Through the courtesy of such
volunteers from the communication and media fields, a
very simple enlistment form will appear in many of
tomorrow's newspapers, along with a symbol of this new
mobilization, which I am wearing on my lapel.
It bears the single word WIN. I think that
tells it all. I will call upon every American to join
in this massive mobilization and stick with it
until we do win as a Nation and as a people.
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Page 15
Mr. Speaker and Mr. President, I stand
on a spot hallowed by history. Many Presidents have
come here many times to solicit, to scold, to flatter,
to exhort the Congress to support them in their leadership.
Once in a great while Presidents have stood
here and truly inspired the most skeptical and the most
sophisticated audience of their co-equal partners in
Government.
Perhaps once or twice in a generation is there
such a Joint Session. I don't expect this one to be.
Only two of my predecessors have come in person to call
upon Congress for a declaration of war, and I shall not
do that.
But I say to you, with all sincerity, that
our inflation, our public enemy number one, will, unless
whipped, destroy our country, our homes, our liberties,
our property, and finally our national pride, as surely
as any well-armed wartime enemy.
I concede there will be no sudden Pearl Harbor
to shock us into unity and into sacrifice, but I think
we have had enough early warnings. The time to intercept
is right now. The time to intercept is almost gone.
My friends and former colleagues, will you
enlist now? My friends and fellow Americans, will you
enlist now? Together with discipline and determination,
we will win.
I thank you very much.
END (AT 4:47 P.M. EDT)
GERALD