Remarks to the Members of the Business Council.

ONE HUNDRED years ago, at the midpoint of the decade of the 1860's, this Nation emerged from a paralyzing period of division, bitterness, and strife.

A spirit of new unity and confidence appeared. As a result, America entered the most expansive decades of the last century. Our Nation grew. Our economy grew. The hopes and horizons of our people began to grow--as never before.

From Maine to California, the foundation was put in place for the great thrust forward which has brought us the system and society we know today.

I believe there is a parallel with our own times now.

In this year of 1964, the people have expressed their will that the division, bitterness, and contention of our times be laid aside.

A fresh spirit of unity and confidence is strong--in all sections and among all segments. As a result, we are approaching the midpoint of this decade of the 1960's ready--as never before for America's greatest expansion, growth, and success.

We of this generation have the opportunity-and we have the obligation--to put in place the foundation for the America of the 21st century.

This challenge is our chief concern in Washington.

I know it is your chief concern in your businesses, also.

That is why I would like to speak to the Business Council tonight about the contributions both Government and business have to make in the years immediately ahead.

Over the past 12 months I have said many times that it is my hope--and purpose--that Government and business should operate in partnership, not as antagonists.

That will always be my goal.

Government cannot maintain a healthy, prosperous economy by its own efforts. But neither is it fair nor possible to demand that business solve our economic problems alone.

We must work together--and we shall.

Times are good--we hope and expect them to continue.

But if we made a list of the foremost economic problems confronting us today, that list would include these four:

1. Maintaining and, if possible, accelerating our rate of economic expansion to continue whittling away at unemployment and unused capacity.

2. Maintaining our excellent record of price stability.

3. Continuing to strengthen our balance of payments.

4. Finding ways to reduce the tragically high rate of unemployment among teenagers, and assuring adequate economic opportunities for all our people not now in the mainstream of American prosperity.

In each of these four areas, Government has an important role--and so does business. I want to spell out my views in this regard-and assure you that your views are welcome by this administration whether in agreement or disagreement.

First, there is the problem of sustaining prosperity.

I believe the Federal Government's role is to create a climate conducive to prosperity. To do this, there are six primary obligations.

1. A tax system that does not overburden businessmen or consumers--and maintains the incentives for productive effort.

2. Expenditure programs that promote development of human and natural resources and make the social investments needed to support private activity.

3. Keeping a clear field for private initiative in the wide range of activities where competitive enterprise is the most efficient way of getting things done.

4. An overall budget policy that promotes balance between purchasing power and productive capacity.

5. Monetary and credit policies that provide funds to nourish an expanding economy without overfeeding it.

6. Finally, there must be an alertness and a willingness to act promptly and decisively when the Nation is threatened by either recession or inflation.

These are obligations this administration has been willing to assume. And we have met them through such measures as last year's tax cut, our frugal but forward-looking budgets, and the policies of the Federal Reserve and the Treasury.

But if prosperity is to be realized, obligations must be met by business and labor and consumers, too. We look to business to contribute through these means:

1. The production of high-quality goods and new and improved items that merit the consumer's dollar.

2. Initiative in cost reduction.

3. Selling efforts that realize the full potential of domestic and international markets.

4. Employment policies that offer job security and incentives to able workers.

5. Investment policies that contribute to smooth expansion.

6. Careful, efficient management to avoid the inventory problems which have so often been a source of economic instability in the past.

I believe it is especially important for business to recognize prudently that we live in a growing economy--and an increasingly stable economy. Demand is growing 50 percent in a decade. To share in that growth, firms must expand both capacity-and employment.

The task of sustaining our domestic prosperity in the year ahead faces a new handicap not of our own making.

Events overseas have compelled the Federal Reserve to raise our discount rate. At the same time, the Federal Reserve and the FDIC have lifted the ceiling on the interest rates banks may pay on certain types of deposits--with primary emphasis on short-term deposits. Increases in these short-term rates were necessary at this time to guard against the possibility of an outflow of funds from this country.

We had to do this to protect the dollar abroad. And we will keep short-term rates at these levels as long as the international monetary situation requires it.

These actions demonstrate once again that we will do whatever is required to safeguard the strength of our dollar.

But Chairman Martin--both by his words and by the actions of the Federal Reserve-has shown his determination to assure the continued ample availability of reserves to banks and therefore of credit to business. He does not believe--nor do I--that the discount rate action will either lead to any appreciable rise in market yields on long-term bonds--or justify any general increase in the rates which banks charge their customers.

What troubles me is the risk that a general upward movement of bank lending rates might slow down our economic advance.

The first casualty of such a slowdown will be the support I need for my determined effort to control Government expenditures in order to get back to the balanced budget we must have--a balanced budget in a prosperous economy.

If our Federal revenues slip off because the economy is running slower, the Federal deficit will surely grow. But pressure will also converge on the Congress and the President to keep Federal expenditures up in every section of the country.

I am confident that American bankers will consider the long-term interest of the Nation in sustaining a healthy and vigorous rate of economic growth. I am sure they know that their own long-term interest is inseparable from the prosperity of the Nation.

The second concern facing us on both sides of the desk is whether we can achieve rapid economic growth without sacrificing reasonable price stability. We can if both Government and business make the contributions they should.

For its part, Government must avoid overheating the economy, encourage cost-reducing investment in the private sector, support steady and sustained growth of markets, and plan now for future public and private needs to help lessen bottlenecks to expansion in the future.

I believe, also, that through wage-price guideposts Government can offer leadership on the kind of voluntary private wage and price policies that are consistent with achieving sustained prosperity, full employment, and price stability.

Business--for its part--can contribute to price stability by supporting and practicing active competition in free markets and by looking beyond short-term economic conditions. It is imperative that business policies provide a steady flow of new low-cost capacity to meet our growing demands, assure the training of the kinds of workers our economy will need before bottlenecks arise, seek profits from market expansion rather than exploitation of short-run opportunities, and pass on high-productivity gains through lower prices.

The third concern is with our balance of payments.

On this, Government's responsibility is major--and we take this responsibility most seriously. That is the reason for our strong commitment to cost and price stability, and to reducing the flow of short-term funds abroad.

Government payments abroad have been cut back--from more than $3.8 billion in 1960 to $2.7 billion this year, a cut of nearly one-third. Further cuts in overseas costs are due next year--without cutting our effectiveness.

We are trying in every way to help American exporters find and develop profitable markets abroad. We are seeking continually to remove foreign barriers to American goods--and the trade negotiations now starting in Geneva will be conducted on a truly reciprocal basis.

I remind you, Government cannot sell American goods abroad. Business itself must do that--and I urge every American businessman to make sure no profitable export possibilities are being neglected.

Fourth--and finally--we face the problems of teenage unemployment and economic opportunities for our minorities.

Overall, our unemployment rate is 5 percent. That is too high. But the teenage unemployment rate is almost three times higher--at 14.5 percent. And among the nonwhite teenagers in our labor force, the rate is an almost unbelievable 30 percent.

I have said before--and I say again: we cannot solve the social .problems of our society at the end of a billy club. If we are to assure ourselves of law and order, if we are to reduce crime and delinquency, if we are to enjoy together the life of one nation and one people, we must make sure that opportunity is equal for all our people--of all ages, all races, all religions, all regions.

Discrimination in all its forms--including the lack of comparable education opportunities--is costing us nearly $20 billion a year. That is more than 3 percent of our GNP. It is a cost the public and private sectors together must labor constantly to reduce and remove.

As a Nation we have made great headway on these problems this year--in national legislation, in local community programs, in attitudes of employers and workers.

We must not allow that progress to be slowed now.

Our young people must be better trained for productive roles in our economy--and there must be assurance of jobs for them once they are trained, regardless of their race.

For all the challenges before us, the answer cannot come from Government alone-nor from the man who occupies the Presidency alone. The quality of America's future depends upon the quality of America's leadership--at every level.

I welcome and am grateful for the effective role of the Business Council. I hope that through your example a closer partnership may come between business and Government. On that partnership--and partnership with all segments--we can build more wisely and successfully for America's greatest years. For that is our opportunity and obligation now at this turning-point time in the decade of the 1960's.