Remarks at the Annual Meeting of the National Association of Manufacturers.

Chairman Keeler, President Gullander, Secretary Stans, Secretary Hodsson, Mr. Postmaster General, all of the distinguished guests in this very distinguished audience:

I have addressed the NAM and its Congress of Industry on several occasions, but there could be no greater honor than to address it as President of the United States on this occasion of your 75th anniversary.

And of all the many times that I have spoken in this magnificent ballroom, I can say that I have never had so many presidents behind me.

I am going to take this occasion tonight to speak to you very seriously about a subject that to many would be dull, but to you who have such an interest in America's future, not just its business future but its future in every way, will be, I am sure, extremely interesting and vital.

Because I have chosen this occasion to report to the whole Nation on this administration's economic strategy. I want to tell you tonight what we found when we took office, what we did about it, what the results of our moves were, and what we are doing now.

When we came into office 22 months ago, this was what we found:

--532,000 Americans were fighting in Vietnam, with no diplomatic or military plan to bring them home and no economic plan to provide civilian futures for them when they did get home;

--prices were rising, interest rates were rising, monetary and budget policies had produced a serious inflationary crisis.

The challenge was clear: Never before in this Nation's history had we been able to end a war without serious economic dislocation and never before in this Nation's history had we been able to curb a major inflation without a recession. We accepted that challenge.

We acted immediately on both the warfront and the home front.

Abroad, we implemented a plan that will bring home 265,000 Americans by next May. We brought casualties down to the lowest point in 4 years. We presented a fair and honest plan for peace. We reordered our national priorities: More than a million men have been released from the Armed Forces and from defense plants, and for the first time in 20 years the Federal Government spent more money last year to meet human needs than on defense.

At home, we took action which we thought was needed to combat inflation. We held down Federal spending and balanced the budget; at the same time, the monetary policy of the Federal Reserve was restrictive. By doing what we said we would do, we effectively countered much of the inflationary pressure that had been feeding on itself and endangering the dollar.

In essence, then, we found a war that was surely not ending and an inflation that was surely accelerating. We moved quickly to set a new course that would end the war and curb inflation--both at the same time.

Let me focus now on our economic plan and its results. Keep in mind its two basic elements.

First, we were determined to slow down a runaway inflation in a way that would not bring about a serious recession.

And, next, even before the results of our anti-inflationary action became fully apparent, our plan called for moving the economy up toward its full growth potential, in a way that would not bring about a new round of inflation.

That was the plan and that is the plan. It was, and is, a bold and ambitious plan--to slow down the cost of living as we end the cost of war, to hold down the pain of transition as we build strong and stable foundations for a new prosperity, with new confidence in the purchasing power of the dollar.

Now I want to speak to you and to this Nation with complete candor about the progress we have made and the problems that we still confront.

The inflation psychology when we took office in January of 1969 was more powerful than anyone knew. But the dangerously rising momentum of inflation was arrested by late 1969; the rate of inflation has been moving gradually downward in 1970.

The progress is not as fast as we would want, and we can expect some reverses along the way. But the worst of inflation is over. The lowered rise in the consumer price index, the much lower rise in the wholesale prices, and lower interest rates indicate that there will be a further decline of the rate of inflation during the year ahead.

And now the question is: Have we slowed inflation without a serious decline, as our plan called for? We have but looking at the problem, we must recognize that the Nation has paid a price for slowing down the rise in prices. The unemployment figures issued today, while they reflect in part the temporary effects of the auto strike, underscore that fact.

Unemployment now is at the level of the first half of the 1960's, before the Vietnam war buildup began. I believe we can and must do better, and that we can and must do better without war.

Businessmen and investors, large and small, have felt a profit squeeze, with corporate profits down 8 percent from 1969. And many working people and investors have been hurt. It offers little solace to know that this has been the least painful transition from war to peace, and from inflation toward stability, in our recent history.

These are not small problems, and people are not statistics. The man looking for a job, the businessman suffering from disappointing sales, the investor who has seen his savings and investments erode-all are Americans with very important human concerns, concerns that particularly affect the President of the United States who has responsibility for this Nation.

The pain of transition from war to peace, from inflation to stability, is real, and it is the business of government, of business, and of labor to help ease that pain as we move ahead.

Having paid the cost of slowing the rise in prices, the workingman and the businessman in this country have earned a new right--the right to reasonable stability and a new steadiness of growth in our economic life.

Let me turn now to the prospects for the next phase of our economic plan. Our objective is to help move our economy up to its full potential of growth and employment while continuing to reduce inflation.

The basic questions are these: What have we been doing to restimulate the economy? What do we intend to do to step up the pace of growth? And what are we all prepared to do to hold down the cost of living as we quicken our economic pulse?

First, this is what has already been done to help the economy resume its growth:

Early in 1970, budget policy turned in a more expansionist direction. It was an orderly and well-timed change. Some of the present deficit is government's way of picking up the check for a slowdown of inflation; much of it is a force working toward orderly stimulation and expansion of the economy at the time that such expansion is needed.

Second, monetary policy has changed over the period of this year. From mid-1969 to February of this year, the money supply grew by only 1 percent a year; since February, the Federal Reserve has permitted the supply of money to grow at an annual rate of 6 percent.

And then, third, as a result of easier credit policies and curbing of inflationary psychology, interest rates are coming down substantially. This sets the stage for new expansion of housing, of State and local government construction, of private capital formation needed for productivity.

The effects of these basic changes in economic policy can already be seen in the strong upsurge in housing starts, the rapid expansion of State and local bond financing, and the strong market for corporate debt financing. Along with unusually large spending potential by consumers, these signs all point to expansion ahead.

But government has a responsibility to do more than this. This is what we are doing to help the economy along the path that will get us back to full employment as rapidly as possible, while continuing to make progress against inflation.

First, we plan our budget on the basis that it would be balanced if we were at full employment and the economy were producing full tax revenues, not when the economy is below that point. And, consequently, our budget policy will be responsible in holding down inflation, but it will also be responsive in encouraging expansion.

Second, as the economy rises toward full employment, more money will be required to do the Nation's business. The amount of business to be done will rise steadily, and we shall need a rate of expansion of the supply of money and credit to do the job properly. I have been assured by Dr. Arthur Bums that the independent Federal Reserve System will provide fully for the increasing monetary needs of the economy. I am confident that this commitment will be kept.

Third, we look to a continuation of the strong revival of housing construction to be a leading force in the upward movement of the economy. Housing starts have been rising strongly this year. They surged ahead almost 20 percent in the last quarter. The programs of government, which profoundly affect the rate of housing construction, will continue to be directed to assure that the pent-up demand for housing in America is met.

As we take these actions to produce a vigorous and orderly expansion, let's turn to the other side of the coin.

Here is what we are doing to strengthen resistance to inflation at the very same time.

We have arranged for a series of Inflation Alerts and established the National Commission on Productivity to enable labor, business, and the public to cooperate in improving efficiency and cutting costs.

We have also set up procedures to change some government regulations that contribute to higher prices. These are not moves toward controls; on the contrary, these are moves away from the kind of government controls that cause artificial market shortages.

Let me give two examples. The first, the recent increase of 25 cents per barrel in the price of crude oil, was accompanied by increases in prices of gasoline and, later, of jet fuel.

Up to now, State restrictions on production on Federal offshore leases have held down the supply of crude oil.

I have been informed by the Director of the Office of Emergency Preparedness that these State restrictions are not necessary for national security; moreover, they actually interfere with the freedom of our domestic market system.

Consequently, I have today directed the Interior Department to assume complete regulating responsibility for conservation and production of oil and gas on all Federal offshore lands. This means that more oil will be produced on those lands, while maintaining strict environmental standards.

I have also directed that companies importing Canadian oil be permitted to use their overseas allocation for the purchase of more crude oil from Canada.

Taken together, these actions will increase the supply of oil and can be expected to help restrain the increase of oil and gasoline prices.

Let us look at the other side of the coin--at the wage side--to see where government leadership can help hold down costs and prices.

The problem in the construction industry, for example, illustrates the need for that kind of leadership. When you have an industry in which one out of three negotiations has led to a strike; when major construction wage settlements are more than double the national average for all manufacturing, at a time when many construction workers are out of work, then something is basically wrong with that industry's bargaining process.

What can be done about it?

For one thing, the structure of bargaining must be changed. As it is now, the craft-by-craft, city-by-city pattern only guarantees instability in the construction industry. What is called for is a more consolidated bargaining, on an area or regional scope. What is needed is a bargaining process that will preserve the integrity of each bargaining unit while it provides a new base for stability and fairness.

Consequently, I have directed the Construction Industry Collective Bargaining Commission to take the initiative in working out these changes with leaders of management and labor. And if the Commission determines that legislation is required to work the problem out, that legislation will be proposed and supported.

In today's economy, about the only thing greater than the problem of the construction industry is the potential of the construction industry. The men who are building this Nation in that industry work in a field with a great future, and one in which the Federal Government--with its expanded housing programs, its highway programs--will be a driving force for growth.

The time is now for the construction trades and the construction industry on the management side to face up to reality--a reality where strikes and costs are limiting its own future. The Federal stake in the construction industry is enormous. Unless the industry wants government to intervene in wage negotiations on Federal projects to protect the public interest, the moment is here for labor and management to make their own reforms in that industry.

If business and labor expect public policy to help stimulate real expansion, then business and labor should be prepared to offer the public some real help in curbing inflation.

In discussing this problem, however, let us recognize that no one industry and no one side of the bargaining table can be made the scapegoat for rising prices. There is blame enough to go around, and the past policies of government bear their full share of the blame for inflation. Recriminations, buck-passing aren't going to help; what is needed now is the firm acceptance of the fact that fighting inflation is everybody's business.

The decisions of business and labor about prices and wages must be formed by the economic facts of life. The most basic of these facts is that we cannot receive more real income than we turn out in real goods and services. When profits and wages are rising faster than productivity, prices will also be rising.

Wage increases which are eaten up by price increases don't help the workingman, and they hurt everyone else. Because of our campaign against inflation, we now have an opportunity to break the vicious circle of wage-price escalation. As you know, productivity is once again on the rise. As a result, production costs are rising less rapidly.

Government has done its part in our budget and monetary policy to hold the line. Now this is the moment for business and labor to make a special effort to exercise restraint in price and wage decisions.

This is the moment for labor and management to stop freezing into wage settlements and price actions any expectation that inflation will continue in the future at its peak rate of the past. Any wage or price decision that makes the flat and irreversible assumption of a high rate of inflation ahead is against the public interest and against the real interest of the workingman.

This is also the moment, with productivity newly on .the rise, for business to take a hard new look at its pricing policies, and to pass along to the consumer its savings in production costs.

Let us look beyond our immediate concerns to the deeper strengths, the longer range goals of the American economy.

Many people see full employment and a stable cost of living as a kind of tradeoff; they say we can have one or the other, but never both at the same time. The best we can hope for, they say, is a "balance of error"--not too much in unemployment at a time when there is not too much inflation.

That may be a stage on the way to our goal, but it is not our goal.

The American people have a right to expect more than that, and I believe that we can do better than that.

Our goal is to achieve a combination of full employment and reasonable price stability. And I am confident that we can and will achieve that goal.

I want to tell you why I am confident.

I have an abiding faith in the power and genius of the American economic system. No businessman can intelligently plan ahead without figuring in the capacity of that economic system to meet the demands made upon it by the American people.

Taking the record of American free enterprise as a guide, the most realistic, businesslike view of the future is this: Our system can deliver full employment, a stable dollar, and truly equal opportunity-and it can do it all at the same time.

I know that many businessmen are concerned when young people--including probably some of your own children-come to you and say, "Business is not for me. I don't want to get in that rat race; I want to help other people."

The paradox is this: Nothing has done more to help people in this country and people in the world than the American private economic system. Not organized charity, not the most active voluntary organizations, not government itself can begin to compare with the benefits to people that flow from that unique combination of management, capital, and labor in America.

Here is a system that has reduced the percentage of poor in this Nation by almost half in the last 10 years; a system in which even those on welfare in the United States receive more real income than 75 percent of the people in this world will see in their lifetime.

Here is a system that provides the workingman with more opportunity, more real income, more leisure time, more personal freedom than any system in the history of man--and provides all of them at the same time.

Here is a system that has made it possible for the United States to distribute $140 billion in aid to the rest of the world since the end of World War II--a system that makes it possible for us to respond generously to human needs created by an earthquake in Peru, a flood in Romania, a cyclone and tidal wave in Pakistan.¹

¹ An announcement and the transcripts of three news briefings on disaster relief efforts in East Pakistan were released by the White House on November 20, 23, 26, and 27, 1970.

And here is a system that makes possible massive aid to education, vital new programs to improve the health of our people, a wide range of efforts to protect and restore our environment. A strong economy makes us strong enough to better our lives; a strong economy makes us strong enough to defend our freedom.

Our system produces wealth. Now, I realize that "wealth" is a word that is scorned by a lot of people today.

But how could we afford our massive educational system without the wealth produced by the people who make our economy move? Where would we get the resources to care for the poor, to look after the sick, to clean up our air and water, if it were not for the wealth generated by a free economy?

Too many people make the mistake of thinking that because government is the distributor of so much wealth, that government must be the source of the wealth. Nothing could be further from the truth.

You cannot pass a law raising a nation's standard of living. You cannot legislate into being the resources to solve our problems.

On the contrary, the only place you can turn to for the ability to help other people is that place that is so often denounced as the citadel of self-interest--the private enterprise system of America.

The next time you hear somebody running that system down, the next time you hear the product of that system derided as "material" or unworthy of man's highest ideals, remember these things:

A nation with the greatest social goals, with the most perfect political system, but without a strong and free economy, is like a magnificent automobile without an engine.

We in America have the engine; it is something to be proud of, not ashamed of; it gives power to our purpose.

Surely there are many ways for that engine, that system, to be improved. But let us never forget that what is right about our American system enables us to correct what is wrong. The wealth produced by labor, management, and capital gives all of us the power to ennoble our aims, to enrich our own lives, and the lives of our fellow men.

We are not the only people in the world to dream of opportunity with security, growth with stability, freedom with justice. That "American dream," as it is called, is not limited to Americans.

But we in America stand first in the world on the road to achieving that dream, because we have created the system that can take us there.

Without a strong economy, dreams will always remain impossible dreams; but with the wealth that workingmen and businessmen produce, we in America are turning our dreams into reality.

To the young person thinking of entering business tomorrow, as well as to those already managing and working, as so many of you are, in our free economic system today, may I point out that a credo for a new prosperity is emerging.

I believe the American economy is strong and growing stronger, capable of more than doubling the real income of each succeeding generation of Americans.

I believe American business will respond to the social as well as the economic demands of the consumer, adding to the dignity and security of work as well as the quality of life.

I believe the greatness of America's economic system will be judged by future generations, not by how big it got but how good it is; not only in the increased value of its investments but in its increased investment in human values.

I believe we will build a new prosperity that will last; not a period of good times between periods of hard times, but a steady prosperity that people can count on and plan for.

I believe that the new prosperity can never be gained at the expense of one group or another, but must be newly shared at every level of our society and among all our people.

And this above all: I believe that only if our economic system remains free can we achieve that combination of full employment and price stability that will be the foundation of something Americans have never had in this century--a new prosperity in a full generation of peace.