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Mid-America Gas Dealers Association, Kansas City, MO, September 13, 1966
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Mid-America Gas Dealers Association, Kansas City, MO, September 13, 1966
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The original documents are located in Box D21, folder "Mid-America Gas Dealers
Association, Kansas City, MO, September 13, 1966" of the Ford Congressional Papers:
Press Secretary and Speech File at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. The Council donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box D21 of The Ford Congressional Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library
FOR RELEASE UPON DELIVERY AT 2 P.M., TUESDAY, SEPT. 13, 1966
ADDRESS BY HOUSE REPUBLICAN LEADER GERALD R. FORD, MID-AMERICA GAS DEALERS ASSN.
AT KANSAS CITY, MISSOURI
The President has finally dropped the other shoe. Thus far all we have heard
is a loud thump in the Administration's announced battle against inflation. We can
only guess what the results will actually be.
Mr. Johnson has proposed suspension of the 7 per cent investment tax credit
and the accelerated depreciation allowance for buildings. He promised to cut federal
spending. He is postponing the sale of certain government securities. He has asked
the Federal Reserve Board to do what it can to reduce interest rates.
These five points have been billed as an anti-inflation program. Had they
been offered last January when the Administration was faced with choosing between
rifles and ruffles, the label might have been authentic.
I have been asked by inquiring newsmen whether the President's two legislative
recommendations--suspension of the investment tax credit and the allowance for
accelerated depreciation--will be approved by the Congress. My answer was that the
Administration will have to prove to Congress that this is the proper medicine for
what ails the economy at this time. The Administration will have to prove that these
actions are preferable to other alternatives.
Please note that three of the five points in the President's so-called anti-
inflation program call for administrative action.
It is without partisanship that I simply state the obvious: The President
could have cut federal spending months ago, and he could have ordered a halt long ago
to direct sale of federal securities in the private money market by federal agencies.
In offering his five-point program, the President is saying that non-essential
federal spending helps fuel the fires of inflation. He also is saying that direct
sale of federal securities by federal agencies competes for tight money and helps
drive up interest rates.
In my view, the President is admitting that the federal government has played
a major role in touching off the inflation and high interest rate situation which
now plague the economy. I maintain that this is not a partisan observation but a
conclusion which one cannot help but draw from the points listed in the President's
anti-inflation program.
First off, I think the President's program may be of some value in reducing
interest rates, but I do not expect prices to drop or even to stabilize at present
levels as a result.
If suspension of the investment tax incentives is approved by Congress, I
would look for a slackening of demand for plant expansion funds and this should
(MORE)
-2-
produce a softening of interest rates. But how soon this would develop is a matter
for conjecture only. The best-educated guesses are that the impact will not become
readily apparent for perhaps six months.
The cost of borrowing money is, of course, one of the costs of doing business
And from that standpoint, it is a factor in pricing. But it is only one factor.
And if a reduction in this cost factor does not develop for at least six months, it
can have little immediate effect on retail prices.
Borrowing costs are a factor in what is known as cost-push inflation. An
excess of dollars floating throughout the economy figures in what is known as demand-
pull inflation.
Cuts in government spending are aimed at taking some of this excess in money
supply out of the economy.
Now, is the President talking about spending less money than was contemplated
in his $112.8 billion fiscal 1967 budget? Or is he talking only about clipping the
wings of a Democratic Congress which is exceeding his budget requests by several
billion dollars?
I believe when the President talks about freezing some federal funds during
this fiscal year he is talking about congressional appropriations over and above his
requests. I do not expect any cutback in his own contemplated level of spending.
Assuming this, I do not expect that Mr. Johnson's announced intention to
reduce government spending will take much of the foam off the economic brew that now
is turning bitter.
Republicans sought in this session of Congress to hand the President a budget-
cutting directive that would have been meaningful in terms of actually cutting
government spending. On five occasions we offered amendments which would have held
spending in a particular area to 95 per cent of the amount the President had
requested. But our best efforts failed.
The record shows that an overwhelming number of House Republicans favored
these economy moves while more than four out of five Democrats opposed them.
Now that the President himself has announced a drive to cut spending, Republi-
cans in Congress will, of course, seek to help him.
We are afraid that since the spending cuts contemplated by the President are
not truly meaningful, the Johnson Administration's next step will be an increase in
corporate and personal income taxes.
Economists who are experts in these matters tell us an increase in personal
income taxes would, of course, have immediate impact on inflation. It would cut down
on consumer demand and thus hit directly at consumer prices. But why should the
(MORE)
-3-
public be penalized for the Administration's failure to take timely anti-inflationary
action?
Corporate profits are high, and some members of Congress are urging an increase
in the corporate income tax before any other action is taken to combat inflation.
We know that between 1960 and 1965 corporate profits before taxes climbed by
52 per cent and after taxes by 67 per cent. Dividend payments to stockholders rose
43 per cent during that period.
These big profit gains are a target for the more than two million unionized
workers whose contracts expire the rest of this year and in 1967. To the extent
that these unions win fat wage increases, more price boost pressures will be built
into the economy. It is argued that a tax increase which skimmed off some of the
corporations' heavy profits would take some of the steam out of unions' wage boost
demands and thus help to hold down prices.
Let's take a look at what's been happening to the American worker. In some
industries, wage increases in terms of real earnings are not keeping up with living
costs. Factory workers' purchasing power, measured by the Labor Department's index
(1957-59 equals 100) was 115.5 a year ago but now is down to 115.2. In short, it
has been falling.
Spendable income of the average American--with deductions for taxes and
inflation--is down, too, according to the Commerce Department. In the first quarter
of 1966, it was $2,287; in the second quarter, $2,277.
Economist Arthur F. Burns, who was chairman of the Council of Economic
Advisers under President Eisenhower, recently told a group of House Republicans:
"Despite productivity advances, real hourly wages have not improved lately."
What all this adds up to is that we can expect organized labor to make a big
push for hefty wage increases in the months ahead. It's obvious there will continue
to be new pressures contributing to cost-push inflation in 1967.
What the President has proposed to date as anti-inflationary medicine is just
the first spoonful, and it isn't going to cure the patient. If Washington's rumor
mill is accurate, the President is preparing for a general tax increase proposal
late this year or in January to step up the fight against inflation and to pay the
accelerating costs of the Vietnam War.
It has taken Mr. Johnson a long time to "get off the dime," as the saying
goes. I personally believe the country has suffered as a result.
To put it another way, I believe we wouldn't be talking about a general tax
increase if the Johnson Administration had laid down wartime priorities for govern-
ment spending last January.
(MORE)
-4-
Instead the Administration chose to keep the country on a peacetime footing.
No sacrifices were demanded of anybody except families whose sons were sent to
Vietnam. It was business as usual and everybody grab your share.
Not only did the Administration make a guns and butter choice last January,
but the White House criticized the Federal Reserve Board for increasing the bank
rediscount rate last December. The Administration said the Board's timing was bad.
Yet during the first eight months of this year the President relied almost
entirely on the Federal Reserve Board and high interest rates to try to curb an
economy that was obviously overheated and over-stimulated.
Early in 1966 it became obvious that the rate of rise in the cost of living
was becoming dangerously steep. At mid-year the six-month rise was the sharpest of
any six-month period in the past eight years. And as we approach year's end, the
indications are that 1966 will be the most inflationary period in 14 years.
Where, then, are we headed?
We are entering into a new period of deficit spending and increased taxes
after a six-year period when accumulated deficits have totalled $30 billion. The
national debt has climbed to more than $320 billion, and the interest on that debt
costs us $12.3 billion a year.
Most economists agree that deficit spending by the central government looses
the forces of inflation. In fact, Walter W. Heller, who was chairman of the Council
of Economic Advisers under the late President Kennedy and for a time under Mr. Johnson,
recently urged substantial cuts in federal spending along with a tax cut as an
antidote to inflation.
We are entering into a new period of heavy deficit spending because the
Johnson Administration refused to cut non-defense spending while fighting a multi-
billion-dollar war halfway around the world.
Rather than cut non-defense spending, the Administration has chosen to expand
it in the area of Great Society programs. To increase its Great Society outlays in
fiscal 1967, the Administration sought to make free use of the budgetary device known
as Participation Sales. The idea was to draw in $4.2 billion of private money, giving
investors certificate shares in government-held mortgages and paying them interest
considerably higher than that earned by regular government securities.
Now Mr. Johnson has called a halt to his own scheme because of tight money
and painfully high interest rates.
This stop action means the government will not aggravate the high interest
situation with sales of participation certificates. It also means the government's
deficit figure for fiscal 1967 will be written large and clear for all the public
to see.
(MORE)
-5-
Now the government--at least for a time--will have to borrow through regular
Treasury channels instead of direct sales of mortgage shares to private investors.
Now the budget will reflect this deficit borrowing.
It is no doubt significant that the President has initially ordered agency-
direct sale of federal securities suspended only until the end of the year.
If we read between the lines, this rather clearly indicates the President will
ask Congress--after the election--to increase taxes. The request may be laid before
a lame-duck Congress in November or it may not be sent to Capitol Hill until January.
But the handwriting is on the wall.
When it does come, the tax plea will be wrapped around an Administration
request for a special appropriation of perhaps $10 to $15 billion for Vietnam.
The pitch will be that the added costs of the Vietnam War have made a tax
increase necessary. Nothing will be said about the Administration's refusal early
this year to cut non-defense spending to offset the cost of the war.
It is a sad commentary on political courage when a government cannot record
a surplus even during boomtime.
Fiscal tranquilizers now are the order of the day. It is time the American
people shook off the sedatives and woke up to fiscal reality.
###
FOR RELEASE UPON DELIVERY AT 2 P.M., TUESDAY, SEPT. 13, 1966
ADDRESS BY HOUSE REPUBLICAN LEADER GERALD R. FORD, MID-AMERICA GAS DEALERS ASSN.
AT KANSAS CITY, MISSOURI
The President has finally dropped the other shoe. Thus far all we have heard
is a loud thump in the Administration's announced battle against inflation. We can
only guess what the results will actually be.
Mr. Johnson has proposed suspension of the 7 per cent investment tax credit
and the accelerated depreciation allowance for buildings. He promised to cut federal
spending. He is postponing the sale of certain government securities. He has asked
the Federal Reserve Board to do what it can to reduce interest rates.
These five points have been billed as an anti-inflation program. Had they
been offered last January when the Administration was faced with choosing between
rifles and ruffles, the label might have been authentic.
I have been asked by inquiring newsmen whether the President's two legislative
recommendations--suspension of the investment tax credit and the allowance for
accelerated depreciation-willl be approved by the Congress. My answer was that the
Administration will have to prove to Congress that this is the proper medicine for
what ails the economy at this time. The Administration will have to prove that these
actions are preferable to other alternatives.
Please note that three of the five points in the President's so-called anti-
inflation program call for administrative action.
It is without partisanship that I simply state the obvious: The President
could have cut federal spending months ago, and he could have ordered a halt long ago
to direct sale of federal securities in the private money market by federal agencies.
In offering his five-point program, the President is saying that non-essential
federal spending helps fuel the fires of inflation. He also is saying that direct
sale of federal securities by federal agencies competes for tight money and helps
drive up interest rates.
In my view, the President is admitting that the federal government has played
a major role in touching off the inflation and high interest rate situation which
now plague the economy. I maintain that this is not a partisan observation but a
conclusion which one cannot help but draw from the points listed in the President's
anti-inflation program.
First off, I think the President's program may be of some value in reducing
interest rates, but I do not expect prices to drop or even to stabilize at present
levels as a result.
If suepension of the investment tax incentives is approved by Congress, I
would look for a slackening of demand for plant expansion funds and this should
(MORE)
-2-
produce a softening of interest rates. But how soon this would develop is a matter
for conjecture only. The best-educated guesses are that the impact will not become
readily apparent for perhaps six months.
The cost of borrowing money is, of course, one of the costs of doing business
And from that standpoint, it is a factor in pricing. But it is only one factor.
And if a reduction in this cost factor does not develop for at least six months, it
can have little immediate effect on retail prices.
Borrowing costs are a factor in what is known as cost-push inflation. An
excess of dollars floating throughout the economy figures in what is known as demand-
pull inflation.
Cuts in government spending are aimed at taking some of this excess in money
supply out of the economy.
Now, is the President talking about spending less money than was contemplated
in his $112.8 billion fiscal 1967 budget? Or is he talking only about clipping the
wings of a Democratic Congress which is exceeding his budget requests by several
billion dollars?
I believe when the President talks about freezing some federal funds during
this fiscal year he is talking about congressional appropriations over and above his
requests. I do not expect any cutback in his own contemplated level of spending.
Assuming this, I do not expect that Mr. Johnson's announced intention to
reduce government spending will take much of the foam off the economic brew that now
is turning bitter.
Republicans sought in this session of Congress to hand the President a budget-
cutting directive that would have been meaningful in terms of actually cutting
government spending. On five occasions we offered amendments which would have held
spending in a particular area to 95 per cent of the amount the President had
requested. But our best efforts failed.
The record shows that an overwhelming number of House Republicans favored
these economy moves while more than four out of five Democrats opposed them.
Now that the President himself has announced a drive to cut spending, Republi-
cans in Congress will, of course, seek to help him.
We are afraid that since the spending cuts contemplated by the President are
not truly meaningful, the Johnson Administration's next step will be an increase in
corporate and personal income taxes.
Economists who are experts in these matters tell us an increase in personal
income taxes would, of course, have immediate impact on inflation. It would cut down
on consumer demand and thus hit directly at consumer prices. But why should the
(MORE)
-3-
public be penalized for the Administration's failure to take timely anti-inflationary
action?
Corporate profits are high, and some members of Congress are urging an increase
in the corporate income tax before any other action is taken to combat inflation.
We know that between 1960 and 1965 corporate profits before taxes climbed by
52 per cent and after taxes by 67 per cent. Dividend payments to stockholders rose
43 per cent during that period.
These big profit gains are a target for the more than two million unionized
workers whose contracts expire the rest of this year and in 1967. To the extent
that these unions win fat wage increases, more price boost pressures will be built
into the economy. It is argued that a tax increase which skimmed off some of the
corporations' heavy profits would take some of the steam out of unions' wage boost
demands and thus help to hold down prices.
Let's take a look at what's been happening to the American worker. In some
industries, wage increases in terms of real earnings are not keeping up with living
costs. Factory workers' purchasing power, measured by the Labor Department's index
(1957-59 equals 100) was 115.5 a year ago but now is down to 115.2. In short, it
has been falling.
Spendable income of the average American--with deductions for taxes and
inflation--is down, too, according to the Commerce Department. In the first quarter
of 1966, it was $2,287; in the second quarter, $2,277.
Economist Arthur F. Burns, who was chairman of the Council of Economic
Advisers under President Eisenhower, recently told a group of House Republicans:
"Despite productivity advances, real hourly wages have not improved lately."
What all this adds up to is that we can expect organized labor to make a big
push for hefty wage increases in the months ahead. It's obvious there will continue
to be new pressures contributing to cost-push inflation in 1967.
What the President has proposed to date as anti-inflationary medicine is just
the first spoonful, and it isn't going to cure the patient. If Washington's rumor
mill is accurate, the President is preparing for a general tax increase proposal
late this year or in January to step up the fight against inflation and to pay the
accelerating costs of the Vietnam War.
It has taken Mr. Johnson a long time to "get off the dime," as the saying
goes. I personally believe the country has suffered as a result.
To put it another way, I believe we wouldn't be talking about a general tax
increase if the Johnson Administration had laid down wartime priorities for govern-
ment spending last January.
(MORE)
-4-
Instead the Administration chose to keep the country on a peacetime footing.
No sacrifices were demanded of anybody except families whose sons were sent to
Vietnam. It was business as usual and everybody grab your share.
Not only did the Administration make a guns and butter choice last January,
but the White House criticized the Federal Reserve Board for increasing the bank
rediscount rate last December. The Administration said the Board's timing was bad.
Yet during the first eight months of this year the President relied almost
entirely on the Federal Reserve Board and high interest rates to try to curb an
economy that was obviously overheated and over-stimulated.
Early in 1966 it became obvious that the rate of rise in the cost of living
was becoming dangerously steep. At mid-year the six-month rise was the sharpest of
any six-month period in the past eight years. And as we approach year's end, the
indications are that 1966 will be the most inflationary period in 14 years.
Where, then, are we headed?
We are entering into a new period of deficit spending and increased taxes
after a six-year period when accumulated deficits have totalled $30 billion. The
national debt has climbed to more than $320 billion, and the interest on that debt
costs us $12.3 billion a year.
Most economists agree that deficit spending by the central_government looses
the forces of inflation. In fact, Walter W. Heller, who was chairman of the Council
cf Economic Advisers under the late President Kennedy and for a time under Mr. Johnson,
recently urged substantial cuts in federal spending along with a tax cut as an
antidote to inflation.
We are entering into a new period of heavy deficit spending because the
Johnson Administration refused to cut non-defense spending while fighting a multi-
billion-dollar war halfway around the world.
Rather than cut non-defense spending, the Administration has chosen to expand
it in the area of Great Society programs. To increase its Great Society outlays in
fiscal 1967, the Administration sought to make free use of the budgetary device known
as Participation Sales. The idea was to draw in $4.2 billion of private money, giving
investors certificate shares in government-held mortgages and paying them interest
considerably higher than that earned by regular government securities.
Now Mr. Johnson has called a halt to his own scheme because of tight money
and painfully high interest rates.
This stop action means the government will not aggravate the high interest
situation with sales of participation certificates. It also means the government's
deficit figure for fiscal 1967 will be written large and clear for all the public
to see.
(MORE)
-5-
Now the government--at least for a time--will have to borrow through regular
Treasury channels instead of direct sales of mortgage shares to private investors.
Now the budget will reflect this deficit borrowing.
It is no doubt significant that the President has initially ordered agency-
direct sale of federal securities suspended only until the end of the year.
If we read between the lines, this rather clearly indicates the President will
ask Congress--after the election--to increase taxes. The request may be laid before
a lame-duck Congress in November or it may not be sent to Capitol Hill until January.
But the handwriting is on the wall.
When it does come, the tax plea will be wrapped around an Administration
request for a special appropriation of perhaps $10 to $15 billion for Vietnam.
The pitch will be that the added costs of the Vietnam War have made a tax
increase necessary. Nothing will be said about the Administration's refusal early
this year to cut non-defense spending to offset the cost of the war.
It is a sad commentary on political courage when a government cannot record
a surplus even during boomtime.
Fiscal tranquilizers now are the order of the day. It is time the American
people shook off the sedatives and woke up to fiscal reality.
###