Address Before the United States Chamber of Commerce on Its 50th Anniversary.

President Wagner, Monsignor:

I want to congratulate you on your new president, President Plumley--it's nice to have a president from Massachusetts, and we're glad to have him here. I don't know how widely that view is shared here, but I must say I am delighted to be here this morning with Governor Hodges and to welcome you, on the occasion of your fiftieth anniversary, to the Nation's Capital.

I want to take advantage of your presence in the Capital to convey my thinking about the present and future relationship of government and business, and to penetrate the dust of controversy that occasionally rises to obscure the basic issues and the basic relationships.

Almost all of the great nations of the world have their financial and political capitals located in the same city--London, Paris, Rome, Madrid and the others. Our rounding fathers chose differently, in an effort to isolate political leaders from the immediate pressures of political life and national life. But this has placed a special obligation upon all of us--to speak clearly and with precision, and to attempt to understand the obligations and responsibilities which each of us face.

The foundation of the Chamber in April of 1912 marked a turning point in the relations between government and business, and there are some who say that the events of April of 1962 have also marked a turning point in the relations between government and business. I hope that this is so, in the sense that both sides will have new emphasis upon the obligation to understand each other's problems and attitudes.

In 1960 I do not think it wholly inaccurate to say that I was the second choice of a majority of businessmen for the office of President of the United States, and when I approached the White House the cheers of members of the Chambers of Commerce around the country were not overwhelming. or deafening.

But in almost every major problem that I have encountered since assuming this responsibility, I have been impressed by the degree to which the best interests of the National Government and the country are tied to the enlightened best interests of its most important segments.

But I have also been impressed that all the segments, including the National Government, must operate responsibly in terms of each other, or the balance which sustains the general welfare will be lost.

As President my interest is in an economy which will be strong enough to absorb the potential of a rapidly expanding population, steady enough to avert the wide swings which bring grief to so many of our people, and noninflationary enough to persuade investors that this country holds a steady promise of growth and stability.

My specific interest at this time is in maintaining a competitive world position that will not further stir the gold at fort Knox.

As businessmen, your interest is profits or the maintenance of an adequate margin of return on your investments. To the extent that you want to protect your profit margins, our interests are identical, for after all we in the National Government have a large stake in your profits. To the extent that you must raise your prices to make these profits, our interests at home and abroad stand in delicate balance.

Union leaders' interests lie in the rate of return on labor for their members. To the extent that their efforts are devoted to securing equitable wages for their workers, our interests are identical, because we must have consumers to absorb our vast productive capacity, and as this year has reminded you the National Government also lives off personal income taxes. To the extent that their efforts take the form of demands which will not upset the balance which has thus far stemmed inflation in this administration, our interests are in concert. These areas where conflict exists between what I would call private interests and the general welfare must be met, it seems to me, by assumption of responsibility by all of us who care for our country.

We have many burdens in Washington-we do not want the added burden of determining individual prices for individual products. We seek instead an economic climate in which an expanding concept of business and labor responsibility, an increasing awareness of world commerce and the free forces of domestic competition will keep the price level stable and keep the Government out of price-setting.

If American business does not earn sufficient revenue to earn a fair profit, this Government cannot earn sufficient revenues to cover its outlays. If American business does not prosper and expand, this Government cannot make good its pledges of economic growth. Our foreign policies call for an increase in the sale of American goods abroad, but it is business, not Government, who must actually produce and sell these goods.

Our domestic programs call for substantial increases in employment, but it is business, not Government, who must actually perform these jobs. While Government economists can point out the necessity of increasing the rates of investment, of modernizing plant and productivity, while Washington officials may urge responsible collective bargaining and responsible wage-price decisions, we also recognize that beneath all the laws and guidelines and tax policies and stimulants we can provide, these matters all come down, quite properly in the last analysis, to private decision by private individuals.

It is easy to charge an administration is anti-business, but it is more difficult to show how an administration, composed we hope of rational men, can possibly feel they can survive without business, or how the Nation can survive unless the Government and business and all other groups in our country are exerting their best efforts in an atmosphere of understanding--and I hope cooperation.

We have worked to establish the responsible view that we take of our role in the economy, and I do not think the record of our decisions, taken in totality, has been one to suggest that we are not responsive to the problems of business. I will point to our efforts in the field of inflation, to the balance of payments, to the transportation policy, for example, recently enunciated, as tenders of this concern. I expect to be able to point soon to more realistic income tax guidelines on the depreciable lives of business assets, and to the 8-percent tax credit for investment in equipment and machinery, which has been proposed and is now being considered by the Senate.

I do not regard the vigorous enforcement of the antitrust laws, for example, to be anti-business. These statutes, most of which have a long historic past antedating the life of the Chamber of Commerce, are based on the basic premise that a private enterprise system must be truly competitive if it is to realize its full potential. And it is natural in these important basic industries in which one or two companies may control over 50 percent of the total national production, that the Government should be concerned that the realities of competition exist, as well as their appearance. But this is in the interest of business, and you know quite well that nearly every action taken by this Government and previous administrations, in the field of antitrust actions, or actions by the Federal Trade Commission have been based upon complaints brought by businessmen themselves. This is in the interest, therefore, of business, as well as of the general public.

When I talk of the public interest in these matters, I am not using a rhetorical phrase. It costs the United States $3 billion a year to maintain our troops and our defense establishment and security commitments abroad. If the balance of trade is not sufficiently in our favor to finance this burden, we have two alternatives--one, to lose gold, as we have been doing; and two, to begin to withdraw our security commitments.

This is the heart of the issue which has occupied the attention of so many of us in recent months, of our efforts to persuade the steel union to accept a noninflationary wage agreement--and to persuade the steel companies to make every effort to maintain price stability.

In the competitive contest for world markets, upon which the balance of payments depends, our record since the end of the Korean War has not been wholly satisfactory, I am sure, to any of us. From the end of the Korean War, our export prices rose about 11 percent, while average export prices in the Common Market held steady. There were significant wage raises during this period, as we know. Indeed our wage levels in the large manufacturing industries rose 30 percent in the United States but they rose 58 percent in the same period in France and Germany. But their output per man-hour increased so fast that they were able to maintain a stable price level. During this period, our gold stocks declined by $5 1/2 billion, and the short-term dollar claims of foreigners, a potential call on our gold stock, rose by an equal amount, $11 billion in the past few years.

I do not mean to say that we have priced ourselves out of world markets. Our merchandise exports of over $20 billion testify that we have not. And our comparative price performance has improved in the last 2 or 3 years. But if we are to stem the gold outflow, which we must by one means or another, eliminate the deficit in our balance of payments, and continue as I believe we must to discharge our far-flung international obligations, we must avoid inflation, modernize American industry, and improve our relative position in the world markets.

Never in the 50-year history of the Chamber of Commerce has its dedication to a vigorous economy been more in the national and international interest than it is today. This administration, I assure you, shares your concern about the cost-profit squeeze on American business. We want prosperity and in a free enterprise system there can be no prosperity without profit. We want a growing economy, and there can be no growth without the investment that is inspired and financed by profit.

We want to maintain our national security and other essential programs and we will have little revenue to finance them unless there is profit. We want to improve our balance of payments without reducing our commitments abroad, and we cannot increase our export surplus, which we must, without modernizing our plants through profit. We can help through new trade policies that increase the businessman's access to foreign markets, particularly to the expanding markets of nearly 200 million people which we will have in Western Europe.

And I want to salute the United States Chamber of Commerce for its historic endorsement of the new Trade Expansion Bill. We can help by making more realistic the income tax guideline on the depreciable lives of business assets, a move long called for and needed, and now being carried through. I recognize that many of you would like, as I would, to have far more rapid depreciation schedules. I can assure you that we are limited only by the fact, which you must recognize, that these depreciation changes will, in their early years, mean a loss of governmental revenues. If we wish to bring our budget as closely as possible to balance as far as the economy permits, we do not feel able to relinquish at this time these sources of revenue in total. But we should look ahead to the maximum extent possible, as we have already done in textiles, and as we are now examining in steel, and we are quite conscious of the competitive advantages which rapid depreciation gives to the Western European manufacturers. We are looking ahead now to make these depreciation schedules more realistic.

We can help, if Congress will pass the pending bill, by granting an 8 percent tax credit for investment in equipment and machinery, and those of you who do not feel that that is sufficient--and it may well not be--must recognize that this particular provision, limited as you may feel it is, will cost the Government in the next fiscal year $1,800 million in tax revenues if it is accepted by the Senate. And I believe, in the form that it is in, it will result in far more stimulus to business for every dollar of tax revenue foregone than the more familiar alternatives that many of you might have preferred.

I recognize that some of you are opposed to some of the revenue measures which we have recommended to balance revenue losses which we incur from the tax credit. But we cannot responsibly forego such a large amount of our budget unless we consider alternate means of recouping that loss. We take these steps only for budgetary reasons, and in the case of tax havens abroad in order to make less advantageous the flow of American capital into other countries and to place enterprises there on a fair competitive basis with American companies here which must pay the taxes which they do not.

We can also help by creating a climate of collective bargaining in which increased wages are held within the appropriate limits of rising productivity, a rising productivity that will also provide for investments in modernization, for profits, and even, we hope, lower prices to stimulate increased purchasing.

And may I add at this point that when an administration has not hesitated to seek Taft-Hartley injunctions for national emergencies, has successfully urged moderation on the steel workers and other unions, has expressed a firm and continuing opposition to the 25-hour week, or anything less than the 40-hour week, and has gone on record against featherbedding and racketeering and road blocks to automation, it surely does not need to be asked whether it will invoke the national interest wherever it believes it to be threatened.

In addition, this administration can help alleviate the businessman's cost-price squeeze through new transportation policies aimed at providing increased freedom of competition at lower cost to the shipper, through fiscal and monetary policies aimed at making more capital available at less cost, and through a whole host of other policies on patents, productivity, and procurement.

But perhaps most important of all are our efforts which are aimed at creating conditions of high employment, and what is most important I know to all of you, high capacity utilization. For when the economy is expanding, profits generally are expanding, and not at the cost of the consumer. But when the economy is slack, we not only have unemployment but profits are inevitably slack. Just as there can be no prosperity without profits, so are profits hinged to prosperity. With the high fixed costs of modern production and business organizations, few American business firms can earn an adequate profit on an inadequate volume. Profits have been under pressure since early 1957 because the economy has been operating below capacity since 1957. To restore profits to an adequate level, to maintain an adequate level of employment, we must restore the economy to full activity.

In short, our primary challenge is not how to divide the economic pie, but how to enlarge it. To fight now over larger slices of the existing pie, by seeking higher margins on lower volume, or higher wages ahead of productivity, can only weaken our effort to expand the economy of the United States.

The recovery of the past year has already raised our total output rate by $50 billion, corporate profits by $13 billion, personal income by $32 billion, employment by 1 million 200 thousand, and industrial production by 13 percent. And this upswing is continuing. Housing starts rebounded vigorously last month. Retail sales are rising. Consumer intentions are encouraging. Business plans an 11 percent increase in its investment in new plant and equipment. And construction awards are at an all-time high. I am convinced that our economy in 1962 will break all records in production, employment, and profits. But we must, of course, always do better.

For had we achieved these goals of full employment and high capacity, I am confident that none of the events which made this last month so memorable would have taken place at all. And if we can now join in achieving these goals, I am confident that they may never need to take place again.

I realize that we shall not reach these goals overnight, nor shall we achieve them without inconvenience, some disagreement, and some adjustments on every side--among labor, business, and the Government.

But the Bible tells us that "there is a time for every purpose under the heaven . . . a time to cast away stones and a time to gather stones together." And ladies and gentlemen, I believe it is time for us all to gather stones together to build this country as it must be built in the coming years.

Thank you.