Statement by the President in Response to President Truman's Statement on the Effect of Rising Interest Rates.
PRESIDENT TRUMAN, in his usual forthright manner, has spoken out against the rapid escalation in interest rates. As I said in December, and have repeated several times since, I, too, am concerned about the interest rate rise and what it means to many Americans. However, I cannot agree with President Truman that our economy is in danger of recession or depression.
The tightness of money mainly reflects the extreme buoyancy of our economy and the resulting very sharp rise in the demand for credit. These are symptoms of strength, not weakness. But we need to find better ways to restrain inflationary pressures than by resorting merely to the high interest rates we have been witnessing.
Note: The statement was read by George Christian, an assistant press secretary, at his news conference at 11:35 a.m. on Monday, August 29, 1966, at San Antonio, Texas. It was not made public in the form of a White House press release.
President Truman's statement, distributed to the press on August 28, at the Muehlebach Hotel in Kansas City, Mo., reads as follows:
In response to the many kind and warm messages, expressing concern about my recent illness, I am glad to report that I am making satisfactory progress and expect that in the coming weeks I shall be able to resume my daily office routine.
In the meantime, I have tried to keep up with the news of the world, as best I could. There was little comfort for me in what I read.
There is a matter about which I am so deeply concerned that I feel it has become necessary for me to speak out.
A drastic increase in interest rates has been imposed on the American economy. A warning is current that higher rates are yet to come. We are told that this action was necessary in order to forestall inflation.
Of course, no one wants runaway inflation. But, I think it is fair to say that that kind of inflation is no longer possible in the United States.
What is more likely to happen is that we will bring on a precipitous deflation, if we persist in high interest practices. The result could be a serious depression.
These higher interest rates were in fact an added burden on all governments--Federal, State and local. The added interest costs end up as a further tax on the consumer.
We know from long experience that a drastic rise in interest rates works a hardship on the consuming public. It only benefits the privileged few.
We have had problems with the Nation's money management through many critical periods in our history. Measures had to be taken by the Government to correct recurring abuses.
The Nation's monetary structure was reorganized to be administered in the public interest through the Federal Reserve System. I am led to ask: "Is it being so administered now? Is it in the true sense a Federal system?"
During my administration, we faced a similar threat of an arbitrary raise in the rates of interest. This was at the time of the Korean conflict.
I received notice of an impending move to confront the Government with a demand for higher interest rates of Treasury Bond issues, as well as certain other restrictive conditions, to be imposed by the Federal Reserve on the Treasury.
This would have meant an imposition of an additional nonproductive tax burden on the public-and we rejected it. The Government prevailed.
I rarely, these days, take up my pen to make comment on matters which I am confident are receiving the concern and attention of the administration. But, I thought that this was a matter which had reached a point where it became necessary for me to speak. There is yet time to remedy the situation. (Congressional Record, Aug. 29, 1966, p. 20072)
Lyndon B. Johnson, Statement by the President in Response to President Truman's Statement on the Effect of Rising Interest Rates. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/238885