TWO WEEKS ago I signed into law the Revenue Act of 1971--providing tax cuts of some $15 billion over the next 3 years to stimulate the economy and provide hundreds of thousands of new jobs. Last weekend, at the meeting of finance ministers in Washington, new ground rules were completed for the international economic order--a step which will also do much to strengthen our domestic economy. Today, I have taken the third major step this month to put our economy on a sound footing by signing into law the Economic Stabilization Act Amendments of 1971.
I am grateful for the timely response of the Congress to the request I made for this legislation just 2 months ago. This prompt action means that our battle against inflation--which has been making significant progress in recent months-can be continued and completed in the coming year.
The legislation I have signed today extends and amends the Economic Stabilization Act of 1970 under which both the first and second phases of our anti-inflation program were launched. It provides authority for continuing these efforts through April 30, 1973. I hope and expect, however, that before that date we will see the end of the inflationary psychology that developed in the 1960's, achieve lasting price stability, end controls, and return to reliance on free market forces.
The enactment of the Economic Stabilization Act Amendments means that the Cost of Living Council, the Price Commission, the Pay Board, the Committee on Interest and Dividends, and the advisory committees on rent,1 on State and local governments, and on the health services industry, can continue to play very important roles in stabilizing the cost of living for all Americans. Already their work has produced heartening results. The Consumer Price Index was increasing at an annual rate of a little more than 4 percent during the 6 months prior to August, but since August it has been cut dramatically to an annual rate of less than 2 percent. Industrial commodity prices, which were climbing at an annual rate of 5 1/2 percent during the 6 months prior to August, have since August actually decreased at an annual rate of more than 1 percent.
1 On November 22, 1971, the President signed Executive Order 11632 establishing the Rent Advisory Board. White House announcements of the appointment of the members of the Board were released on November 23 and December 23 and are printed in the Weekly Compilation of Presidential Documents (vol. 7, PP. 1557 and 1708).
Interest rates have also generally declined since August, increasing the attractiveness of job-creating investment.
Much work still remains to be done. That is why this legislation is so important. Our objective of reducing price increases to 2 to 3 percent during 1972 is within reach. Most importantly, this program continues to have wide support from labor, business, and from the general public.
Because voluntary public cooperation remains the keystone of success of these efforts, we continue to be most heartened by the determination so widely evident among the American people to make this program work. The strong bipartisan support which the Congress has given to the Economic Stabilization Act is further evidence of the cooperative and unified spirit in which this country is facing its economic challenges.
In a number of ways, the Congress has gone beyond my recommendations and included provisions in this legislation which could complicate its operations in the future. One such section provides for pay increases for Federal employees, effective for calendar year 1972. I am today signing two Executive orders implementing this section and I am also issuing a separate statement describing my position on this matter.
The major elements of our new economic program are now in place. The program of personal and business tax cuts which I called for in August and which I signed into law on December 10 promises to expand purchasing power, increase sales, and provide hundreds of thousands of new jobs. The Emergency Employment Act which I signed on July 12 will provide many jobs in the public sector; nearly 125,000 jobs in areas such as education, environmental protection, law enforcement, public works, and transportation have already been funded. The budget that I will present to Congress in January will also be designed to stimulate the economy and create additional jobs.
On the international scene, our major trading partners have agreed to adjust the dollar prices of their currencies upward and to negotiate for adjustments in trade barriers, while we in turn will eliminate our import surtax and, with Congressional approval, will lower the price of the dollar in relation to gold. The result of these efforts will be more markets for American goods abroad and thus more jobs and higher incomes for the American people.
Already, the stimulative effect of our new economic policies has been evident. It now appears that the gross national product will rise at an annual rate of more than 6 percent in the fourth quarter of 1971, compared to 4 percent in the third quarter and 5 percent in the second quarter. Since July, employment has grown by over 1 million, and more jobs are being created each month. Industrial production is rising and businesses are now planning to increase investment by some 6½ percent during the next 6 months because of the favorable economic environment.
All of these efforts are designed to create a new prosperity in peacetime for America. The extension of the Economic Stabilization Act assures that we will not see our prosperity neutralized--as so often in the past--by the forces of inflation.
We can now confidently say that 1971 is ending on a most encouraging economic note and that 1972 will begin as a year of great economic promise.