THE PRESIDENT. I have an announcement to make this afternoon and then I'd like to answer a few questions, and then turn the program over to my economic advisers.
The recent improvements in all the economic indicators, the recent reduction in unemployment, the recent increase in the inflationary indicators, and the prospective impact of the new energy proposals-all have convinced me, the leaders of Congress, our economic advisers, that we do not need to proceed in the Congress with the $50 tax rebate, nor with the optional business tax credits.
Back in December, when I and the Members of the Congress met in Plains and put together the package of economic stimulus, the increase in the gross national product was down about 3.2 percent, the unemployment rate was about 8 percent or a little bit more, the economy was dormant, to say the least, and the inflationary pressures were not as great as they are now.
At that time, Senator Byrd, Speaker O'Neill, and their fellow workers in the Congress, and I all agreed on the total economic package. That's changed. Our hope then was that we would have two basic thrusts. One was toward a simplification of the income tax structure with an increased standard deduction. That will proceed. Another one was to put people to work with public works projects, public service jobs, training programs, and countercyclical aid to local governments. That will also proceed.
The other effort was to stimulate quickly, hopefully at that time in April, consumer confidence and consumer spending with a tax rebate. It's now too late to do that as early as we had anticipated. And the consumer confidence has returned; consumer spending is up. As a matter of fact, with the exception of longer trends in the stock market prices, every single indicator of the economy is up in recent weeks.
I might add one other thing: The remaining elements of the economic stimulus package will, I think, guarantee us durable growth. Not only do the economic indicators look good now but our Council of Economic Advisers believes that this will continue right on up through June. The last half of this year, of course, we'll start feeling the impact of the training programs, jobs programs, and public works projects.
Later this week, Friday, I will make a comprehensive statement on inflation and how we might reduce inflationary pressures in the future. I'm determined to hold down the deficit that will exist in our Federal Government this year, in 1978 fiscal year, 1979-80, leading toward a balanced budget in 1981.
I will resist to the utmost of my own ability excessive spending by the Congress in fiscal year 1978. And although we will reduce net spending substantially with this change, I am going to oppose strongly--and the congressional leaders with whom I've consulted agree--any substitution of this money for spending projects that might be nonvital and which might initiate permanent programs or expenditures that can't be controlled in the future.
We don't know the exact figures yet. This change will reduce the deficit substantially in 1977 fiscal year, but we still have enormous deficit prospects in fiscal year 1978. As I prepare my first budget, fiscal year '79, that will be a major factor involved in my decisionmaking process.
I might add one thing in closing: The announcement that I've made this afternoon has been supported by the Democratic leadership in the Senate, and we've also got the same expressions of approval from the House. I think this was a mutual decision. I think that there had been a slow building-up of doubt about whether or not the economic stimulus this year was necessary. And it's a joint decision. And I think that, as you well know, Senator Long and Senator Byrd and Senator Humphrey, Cranston, and others can speak for themselves.
I'd be glad to answer any questions that you might have.
REPORTER. Mr. President, were there political considerations involved in your decision as well, specifically the problems that you were running into in the Senate in trying to get the rebate passed?
THE PRESIDENT. Yes. There were political and economic decisions. The overwhelming thing, though, was economic I think that the Senate leaders to whom I referred would agree with me that we could have passed the economic stimulus package in its entirety had we decided to go ahead with it. But there is no doubt that many of the leaders, who were enthusiastic along with me back in December when economic circumstances were quite different, had lost their enthusiasm for the rebate and the business tax stimulus in light of recent unanticipated improvements in the economy.
But obviously it's a political decision as well as an economic decision, and I think it's a proper one. But it was a mutual decision to go ahead with it back in December and to terminate it now.
Q. Just to follow on.
THE PRESIDENT. Please.
Q. There are those who read this as being a political defeat for you in that you did propose the rebate, you're having trouble getting it passed, so you pulled it back.
THE PRESIDENT. Well, I've been accused of a lot of things. I don't believe anybody has ever accused me of being afraid of a political fight or of being too quick to compromise. The decision was made by me. I think among my own White House advisers, they would all confirm that I was the first one who felt that it was a mistake to go ahead with it. We have been working on the analysis for a number of weeks. Many of these data have been made public.
I did not back off because I feared a political defeat. The bill will ,be kept alive in the Senate Finance Committee; it's already passed the House with an overwhelming majority. And if the economic stimulus appears to be necessary because of changing circumstances in the next few months, then my own effort would be to go ahead and have the bill passed. But I don't believe we need it. If I could unilaterally decide to initiate these two stimuli, the $50 rebate and the business tax credits, I would not do it.
THE NATION'S ECONOMY
Q. What changed in the economic picture since you came out here last Thursday and told us that it was necessary?
THE PRESIDENT. Well, one is the present rate of inflation. Over the last 3 months now we've had an average, on an annual basis, of more than 10 percent inflation-the last month alone I think 14 percent.
The biggest overall pleasant surprise to us has been in retail sales. We did have a substantial surge in retail sales in February, compared to January. We discounted that improvement because we thought it was just a recovery from the very severe winter. But in March, in an unanticipated way, retail sales showed continued consumer confidence. I think that was a single major factor involved.
Let me get her. Then I will get you.
Q. Mr. President, about 2 days ago Secretary Marshall said that we were focusing too much on business confidence and not enough on consumer confidence, and that if the $50 rebate were killed, and there would be nothing in it for the working people, as he put it, the backbone of the United States. What are you going to say to all of those people in anticipation of the rebate who have already, in essence, spent it?
THE PRESIDENT. Well, I think it's accurate to say--I can't speak for all the people in the country; I don't profess to do that. We consulted with the labor leaders on this change in our policy. I think it's accurate to say, for instance, that Mr. Meany thought it was a very good move that we terminate the $50 rebate package. We still have intact more than a $20 billion economic stimulus package with most of the emphasis on direct job opportunities in public service jobs, public works projects, CETA and other training programs, and in the anticyclical allotment of funds to local governments to help themselves.
The only exception to the direct job opportunities in the remaining stimulus package, which was quite large, is the simplification of the tax structure with the standard deduction. I intend to go ahead with that. But the overwhelming part of more than a $20 billion stimulus package is directly oriented to jobs.
Q. Mr. President, what concern do you have that this is the start, perhaps, of a week of several pieces of bitter medicine you're going to have to give us--today, and then tomorrow, on anti-inflation measures and then a week later on conserving energy? It's going to be kind of a grim week.
THE PRESIDENT. Well, I can't deny that description. It's not an easy thing to do. I think that as the President I have to face facts as they are. My own experience in politics is that if people believe that they are making a sacrifice, but if it's equitable and fair and necessary, there is very little political consequence to be derived for the one who makes the announcement.
With the anti-inflation package there will be constraints on people. There will be special interests, some quite benevolent in nature, who will be disappointed. And with the energy messages that I'll deliver next week there will be another presentation that's quite severe.
But I think that in general I can live through the next week, and I believe that when the period is over, I hope and I do believe that the American people will think it's not only fair and equitable but also necessary. So, I don't think the political consequences are as severe as you might have thought.
Q. Mr. President, Treasury Secretary Blumenthal said only yesterday afternoon that this rebate was still needed because unemployment was over 7 million and industrial capacity was only operating at 80 percent. What happened to change from then until last night when you turned around on this?
THE PRESIDENT. I'll let him speak for himself in just a moment. But let me point this out: In the last 2 months, we've had an increase in jobs in the country of almost a million. The unemployment rate, when we made this decision, was about 8 percent--I think 8.05, 8.1. It's now dropped down to 7.3. This is still much too high. And it's just a matter of judgment; there is not any sure thing about what's going to happen in the future.
If the present economic indicators continue to improve and if the present inflationary pressures continue to rise, I don't think there is any doubt in my mind that this is the right decision to make. Obviously, we can't anticipate with any degree of certainty what's going to happen in the future. But I'll let Mr. Blumenthal speak for himself on the question you raised.
Q. Do you still think our unemployment rate can go down below 7 percent without this stimulus?
THE PRESIDENT. I believe that it can indeed go down below 7 percent without the stimulus, yes.
Q. This year?
THE PRESIDENT. The stimulus that we're talking about, the $50 tax rebate, was not designed specifically for job opportunities. It was designed to improve consumer confidence and to stimulate the economy over the long run. We just have found that we don't need it. When we thought back in December that we could get the $50 checks in the mail in April-and that was our hope and expectation-there was a real apparent need for it. Now, even if there was a need, apparently May or June is the earliest that we could possibly get the checks in the mail if everybody was for it. We don't think there is a need any more. So, the circumstances have simply changed.
Q. Mr. President, many Americans were looking forward to the tax rebate. Where exactly will the $10 billion go? Can you explain definitively?
THE PRESIDENT. My commitment and my hope is that the amount of money that was going to be spent on the tax rebate will be used to reduce the 1977 deficit. I'll take one more question.
Q. Mr. President, now that you won't have this probably bruising battle over getting the rebate passed by the Senate, do you expect you will fare better in the upcoming battle over the energy package?
THE PRESIDENT. I'm sure there are going to be plenty of bruising battles to go around.
Q. Was this a factor in your decision?
THE PRESIDENT. No, it wasn't a factor, as far as a bruising battle was concerned. It was a factor in that very dedicated and, I think, self-described liberal Senators like Senator Humphrey told me last night that when he got down to Florida a couple of days ago that this preyed on his mind, and he felt that it was very, very wrong. He had already decided, he said, to come back up here early Sunday to get Senator Long and to get Majority Leader Byrd and come to me and ask me to withdraw the tax rebate, not because we couldn't get the votes but simply because it's not needed.
There is no way to separate economics from politics, of course, because politicians quite often make the economic decisions and analyze the economic data. But the essence of it is that I think we could have forced it through the Senate with perhaps a brutal battle, as you described. Everybody that I've talked to agrees with that. I just don't think it's necessary, and it's a joint decision between me and the Congress.
Let me close by turning over the program to Mike Blumenthal, the Secretary of the Treasury, to Charlie Schultze, the Chairman of my Economics Advisers, and to Bert Lance, who is Director of the Office of Management and Budget.
Thank you very much.