THE PRESIDENT. [I.] Good afternoon. I have a brief preliminary statement. I would like to say a few words about our economic outlook and program.
I think most financial experts have realized for some time that an overpriced market could not hold up once investors recognized that inflation was ending. Price-earning ratios which averaged on Dow-Jones 23 to 1 could not be justified unless there was heavy inflation in prospect. And we have been working to prevent inflation, which gives a very misleading and spurious picture of economic health. We must not permit the effects of this adjustment, however, to hamper the growth rate of our economy, with which we have, as you know, not been fully satisfied. While our recovery from last year's recession has been a good one, production, profits, and employment are at all-time highs, and the prospects for continued economic expansion remain favorable. In view of corporate and consumer cash on hand, we should take every appropriate step to make certain that recovery is stronger and longer than before and is not cut short by a new recession.
Taxation: In the first place, our tax structure as presently weighted exerts too heavy a drain on a prospering economy, compared, for example, to the net drain in competing Common Market nations. If the United States were now working at full employment and full capacity, this would produce a budget surplus at present taxation rates of about $8 billion this year. It indicates what a heavy tax structure we have, and it also indicates the effects that this heavy tax structure has on an economy moving out of a recession period.
We saw that after the '58 recession, we've seen it after the '60 recession in the last months. We have proposed, therefore, the following:
One: A $1,300 million tax credit of 8 percent on new investment in machinery and equipment, which will increase the typical rate of potential profits on modern plant expansion in this country to the same extent, for example, as a 20 point reduction in corporate income taxes, from 52 to 32 percent on the profits to be realized from a new 10-year asset. The tax bill containing this stimulus and offsetting revenue measures has been before the Congress for well over a year. And I am hopeful, particularly, that it can be passed very shortly, because one of the areas of concern in the economy has been the slowness of plant investment, and I think that if we can settle this matter of the tax credit quickly, I think it can have a most stimulating effect on new plant investment this year.
Two: Administrative revision of the Internal Revenue guidelines on the economic life of depreciable assets, to make them more realistic and flexible in terms of actual replacement practices. These revisions to be issued within the next month will also make over $ 1 billion in added cash reserves available for additional business investment and, thus, these two actions combined, which we hope will be taken in the next 30 days, constitute in effect a tax cut for American business of over $2.5 billion.
Three: A comprehensive tax reform bill which in no way overlaps the pending tax credit and loophole-closing bill offered a year ago will be offered for action by the next Congress, making effective as of January 1 of next year an across-the-board reduction in personal and corporate income tax rates which will not be wholly offset by other reforms--in other words, a net tax reduction.
Four: I have asked the Congress to provide standby tax reduction authority to make certain as recommended by the eminent Commission on Money and Credit, that this tool could be used instantly and effectively should a new recession threaten to engulf us. The House Ways and Means Committee has been busy with other important measures, but there is surely more cause now than ever before for making such authority available.
Five: I have asked the Congress to repeal the 10-percent transportation tax on train and bus travel, resulting in a tax saving of $90 million a year, and to reduce it to 5 percent on airlines. Action on this tax package will provide our economy with all the stimulus and safeguards now deemed necessary, and I hope such action will be forthcoming.
Mention should be made also of other measures already pending before the Congress which would be of immediate help to our economic expansion and our unemployed workers. A bill to help youth employment-and one out of every four of our boys and girls out of school under 20 are unemployed--a bill to help youth employment has been pending before the Rules Committee since March 29. I hope action can be taken on it.
A bill to authorize Federal, State, and local public works this year in areas of heavy unemployment and to provide standby authority for the future has already passed the Senate. Inasmuch as last year's temporary unemployment compensation program has benefited no additional unemployed since April 1, a pending bill to extend that program for 1 year should be passed by the Congress before they go home. Every week thousands of people find their unemployment compensation exhausting, must go on public assistance, and this should be a matter of great concern to all of us.
Improvements in our welfare program to help those at the bottom of the economic ladder passed the House on March 15. Other pending bills--the trade bill, the pay reform bill, and others--will all have a beneficial effect on our economy once they are enacted by the Congress. There is no need for this country to stand helplessly by and watch a recovery run out of gas. We have a program to boost it and I hope that all those who are concerned about their stocks or their profits or their jobs will help us get action on this program.
I have full confidence in the basic strength and economic potential of this country and the free world. We in the United States, business, labor, and the government, all of us working together, rather than at cross purposes, must rise to our responsibilities to maintain the forward thrust of our economy. The economic productivity and potential of the United States is the heart of our strength. Unemployment last month declined. Consumer income has been rising rapidly. New homes are being built at a remarkable rate. And this administration intends to do its full share of the task required to realize our full economic potential.
Q. Mr. President, I take it from your statement that you have no intention of recommending a tax cut to take effect before next year. Would you confirm that? And also tell us if you can envision any circumstances which would require tax reduction before next year?
THE PRESIDENT. I think my statement goes into the various tax proposals that we make in some detail. Of course, this is our best judgment at this time. Of course, if new circumstances brought a new situation, then we would have to make other judgments. But this is our judgment and we believe that this is the most responsible and effective line to take. And I think that if we get action in all the areas which I have described--and they are all very possible--that we can provide a good sustaining lift to the economy.
Q. Mr. President, in the same subject, can you discuss any thinking on rates or how far the reduction will go that you intend to propose in January? And second, sir, if you don't get some of these provisions or proposals which you regard as quite vital, are you thinking in terms of asking Congress to return in the fall if they don't pass them, say, by mid-September?
THE PRESIDENT. Well, I think the tax--the proposed tax bill you are talking about for next January, the work on it should be completed later in the summer. So at that time I think we could discuss it in more detail.
On the other matter, I would--already it has passed the House. The depreciation we can do by administrative action, and we are going to do that, and, as I say, that amounts to over $1 billion. That will be completed in the next 30 days. It has already been done in the textile industry. But the whole job will be completed in the next 30 days.
The other bill, the tax credit, has passed the House. It is now in the Senate finance Committee. It can be of most valuable assistance in the area where our economy has had the most difficulty, and that is on the question of plant investment. So that if you could put these two together, as I said, it amounts to $2,500 million, and I think would be of great assistance to the economy. So I am very hopeful that the Senate will act on this legislation. If they do not, of course we will have to take a look at the situation. But this bill was proposed last year, and a year now has gone by, and now we are going through other months. I think the very fact that some companies are uncertain as to whether they are going to get the tax credit does have a depressing effect upon their investment plans.
[2.] Q. Mr. President, there is a report, unofficial report, from Paris this afternoon that a meeting between you and General de Gaulle is in the process of being arranged. Is this correct?
THE PRESIDENT. No, I haven't heard that. No.
[3.] Q. Mr. President, why do you think the Senate voted so sharply yesterday to tie your hands on sending aid to Communist countries, especially in defiance of pleas from the White House on the point? And do you think anything can be done to rectify the situation beyond the amendment put in today on food?
THE PRESIDENT. Well, the amendment that was put in today on food will be very helpful, because the primary assistance that we have been giving, for example, to Poland, has been through food. In addition, it permits the private organizations to continue to function.
In Yugoslavia we have been giving aid in food; there was some limited development assistance which would not be possible under the Senate amendment. There has been a good deal, of course, of frustration about these programs. They have been under attack for many years and we've carried this aid program since the Marshall plan days, and I suppose people do get tired. But our adversaries are not tired. The desire of people to remain independent--the Polish people want to be independent, they are not Communist by choice but by hard circumstances forced upon them, and I think that we should continue to hold out some hope for them. We are not prepared to take military action to free them, quite obviously, and we did not undertake anything like that during the Hungary revolt, but I do think that we should not slam the door in their face. So that I am glad that the Senate went as far as it went today.
Yugoslavia has been more complicated, and I know that the programs of assistance have been under attack, but the primary assistance now is foodstuffs and it has been quite limited. But Yugoslavia is not a member of the Warsaw bloc. The break between Yugoslavia and the Soviet Union in the late forties probably did more to maintain the independence of Greece, when that border was closed, than any other single action. And those who were associated with that effort know how close it was in Greece, and I think there is an advantage in encouraging national independence. We may not approve of the government of Yugoslavia, or they may not approve of our government, but at least they have maintained an independent status in regard to joining the Warsaw bloc, or in regard to their dependence upon Moscow. Now, that might change. In that case, of course, our policy could change. But I do think that flexibility is necessary. No one has any idea what the circumstances will be in the next 12 months. We might find it necessary or desirable to give some assistance to a country which was following an independent policy; we might find the language of yesterday denying us that flexibility. I am glad the Senate went back as far as it did. I do think that they should give us the right to give assistance when we deem it in the national interest. I remember this fight was made under President Eisenhower and I supported his efforts at that time to maintain this flexibility--on two occasions--and I am glad at least we have had given some flexibility by the action of the Senate today.
[4.] Q. Mr. President, in your introductory statement, you didn't mention two items which are in this year's tax bill, the withholding on dividends and interest, and the payments on earnings of American firms overseas before those earnings are repatriated. Are you prepared to relinquish this request now or to postpone it until next year?
THE PRESIDENT. No, the major one of course, which is the withholding, is not a new tax. That tax is on the books today and has been for many years. All we are now talking about is a more effective way of collecting a tax. So that is not a new tax.
Now, the other tax of course is the tax on so-called tax havens, and on dividend--and on money, which would put those companies on a basis comparable to American companies. This has been tied to making it less attractive to American capital to leave this country. That is the purpose of that amendment and I am hopeful that it will pass, in as close a form as it is possible to what it was when we introduced it, because the gold flow concerns us all.
But those taxes, in my opinion, represent responsible actions. But what I was talking about is the stimulus that will be given by the total tax package--putting all this together to the American business, plus the depreciation, of course, which represents, as I say, a clear gain for business.
[5.] Q. Mr. President, in connection with the aid fight in the Senate yesterday, there continue to be reports that you are dissatisfied with the reorganization of the aid program administratively. Could you discuss that?
THE PRESIDENT. Well, no, that is not correct. I am concerned about the progress we are making in the Alliance for Progress. I think the aid agency has made important gains. I think the long-range authorization which was given to us by the Congress last year has been most helpful, and I think we benefited from it in our programs. It permitted us to associate in consortiums which I think have produced much better economic planning. The matter, of course, of primary concern to me is the Alliance for Progress. We are engaged in a tremendous new joint venture. All these countries are faced with very difficult economic problems--balance of payments problems, great dependence on one or two commodities, raw materials which suffer in price fluctuations, and all such internal difficulties as we've seen in the case of two or three countries in the last month. So that we are not dealing with a situation even as stable as it was in Europe at the end of World War II when we began the Marshall plan. So that this matter continues to be of concern to me, that the Alliance move forward.
But I would say that generally I think that the aid agency is improved over what the situation was before the Congress gave us the additional tools.
[6.] Q. Mr. President, last Friday, John Bailey, the Democratic National Chairman, made a speech in which he accused Governor Rockefeller of racial prejudice toward Negroes. I wonder if you felt even in an election year this was a justified statement.
THE PRESIDENT. No, I don't think--I haven't seen any evidence that Mr. Rockefeller is prejudiced in any way towards any racial group. I am glad to make that statement, and I am sure that some of the statements the Congressman--the Chairman of the Republican Committee--has made about me will be, I am sure, similarly repudiated by leading Republicans. [Laughter] I have been waiting for it for about a year and a half!
[7.] Q. Mr. President, you have given Congress an awful lot to chew in this session and some of them are getting a little impatient, this being a campaign year. Do you think that the Congress ought to stick around, at least until Labor Day or later, nonetheless, to get through the bulk of this program, or do you propose to give them some top priority list and say, that is it?
THE PRESIDENT. Well, I'm sure we'll probably have to come to a priority, as you say. Time is coming on, it is election year, and the Congress wants to get home. These programs are important, however. Going down the list: medical care for the aged, youth employment, aid for higher education, the trade bill, the tax bill, there's a good many of very great importance so that the normal authorizations and appropriations the legislation which I named here--it's hard to pick a list. But obviously, we're going to have to, because we've only got a limited time left.
[8.] Q. Mr. President, can you give us your first impression on the Inter-American Center proposal which was presented to you today?
THE PRESIDENT. Well, I listened to the presentation. I'm going to have a meeting with the Department of Commerce to listen to it in more detail and then, with the Senators and Congressmen who are involved, see if we can come to some decision about it.
[9.] Q. Mr. President, there have been persistent reports that either the American Government or Britain intends to offer nuclear information or equipment to France in order to get better terms for Britain to enter the Common Market or to improve relations with General de Gaulle. I think the latest version is that General Gavin is to come to Washington with an alleged recommendation that American nuclear equipment be provided. What do you think of this concept?
THE PRESIDENT. I think these matters are not related. Secondly, General Gavin, I think, has already issued a statement in regard to his position. He had not planned to come to Washington. I think he was going to address a commencement audience in New England next week, and that was the purpose for which he was coming back. But I don't think the matters are related, and--either in the minds of the French or in the minds of the United States.
[10.] Q. Mr. President, this is a question about American and British aid to Egypt. In Cairo in March I was told that you and President Nasser had engaged in a rather extensive correspondence, not all of which has been made public. And I wondered if he told you anything in that, that you can tell us, about his Middle East activities or gave any assurances that would make him more eligible for aid now than he used to be?
THE PRESIDENT. No, I don't know about that. We haven't had any extensive correspondence, and as you know, most of the assistance we have been giving Egypt has been in foodstuffs. We continue to attempt to have good relations with the U.A.R., but I have received no information or assurances from President Nasser in regard to any future policy decisions which he might make.
[11.] Q. Mr. President, did you meet with some Spanish Republicans in Caracas in December of 1961? And did you tell them that you would work to overthrow the Franco Government in Spain?
THE PRESIDENT. The answer to both questions is no.
[12.] Q. Mr. President, do you believe that the economy will reach the 4 percent unemployment target that you have set for mid-1963, with a balanced budget in the fiscal year?
THE PRESIDENT. Obviously we are going to have to wait and make a judgment as to whether we are going to reach 4 percent. We are down to substantially lower, of course, than it has been--unemployment, but still not satisfactory. And I think it would be impossible to make a precise judgment today about whether we are going to reach that figure.
[13.] Q. Mr. President, could you clarify the situation on medical care legislation? The opponents of the administration measure, the Anderson-King bill, which is tied to social security, say that the passage of that law or that measure would cause the repeal of the Kerr-Mills law, which now affects protection for certain needy. Are these the facts?
THE PRESIDENT. No, the fact--in fact, the argument against passing the Anderson-King--one of the arguments has been that there are some people who were not involved and covered by Social Security. But they would still be covered by present law. They'd still be covered by the Kerr-Mills bill. It doesn't seem to me that that is a substantial argument against covering nearly 14 million other people who are entitled and-who are covered by Social Security. In addition, it may be possible to take other measures, to provide additional assistance for those who were not covered by Social Security. Many States, as you know, of course, have not passed the Kerr-Mills, I don't think that the State that the A.M.A. spokesman comes from--Dr. Annis--has passed the Kerr-Mills bill, enabling legislation on the State level. I think that we ought to pass the King Anderson bill, medical care for the aged under Social Security. And I think the argument that we shouldn't do it because we're not going to be able to include everybody under it seems to me to be wholly misleading. We can include 14 million people, and we can continue the legislation we have on the books for the others, and in addition we can take additional special steps for them, which I would support.
[14.] Q. Mr. President, yesterday, the Mexican Ambassador to the Organization of American States made some statements which could be regarded as offensive to some of your appointees, to this country and to its residents. Normally, when an official spokesman for a country makes such a comment it could be construed as a deliberate way of withdrawing an invitation for a visit, which has been extended to you. Could you comment?
THE PRESIDENT, No, I have seen--no, as far as I know, and I am sure I know, the invitation by the Mexican Government stands, and I am sure that this is a matter which the Mexican Government themselves can deal with more effectively than I could. The OAS is an international body, and that speech--statements are made in debate, and I think this is really a matter between the representative and his own government rather than between this government and the Ambassador.
[15.] Q. Mr. President, Republicans in Congress put out a statement of policy today, which among other things, says this: a stable dollar is not likely to result if control of the Federal Reserve System rests in the White House. This is taken to be an attack on your proposal that the President have authority to appoint his own Federal Reserve Chairman. How important is this to you?
THE PRESIDENT. First, the point of the matter is that what we have proposed is with the strong support of the Chairman of the Federal Reserve, that the term of the Chairman be the same as with the President, which was the original intention of the legislation when it was first passed. But it has no effect upon me, if that is what they are thinking of, which I presume they are, because the matter of the Chairman's position comes up in 1963. So that I have no--if I were anxious to get control of the Federal Reserve, the matter comes up in 1963. What we are talking about is for other Presidents in other days. And it is a reform which the Chairman of the Federal Reserve, the Commission on Money and Credit, and many others have thought would be very helpful in the liaison between the President and the Federal Reserve.
We, after all, are very closely associated in our responsibilities, though the Federal Reserve is independent and reports to the Congress. So that it has no application to me, and it is like a good many other things that are said. They are not wholly based on fact, but they sound rather good when those speeches are made.
[16.] Q. Mr. President, do your economic counselors still believe that the gross national product will reach $570 billion this year and do they also believe that you can balance the Federal budget in the fiscal year?
THE PRESIDENT. They are--I would think they are not as convinced as they were that we will be up to $570 billion. But we will, I think, have a good chance, if we carry out the steps I recommended, of being close to $570 billion.
As I say, we had the best month, almost, in our history in autos; houses are up, personal savings are up, actually consumer goods are moving very fast. The one area which is causing concern in the economy has been plant investment, which has not been as high as they originally hoped it would be in January.
Now, if we can, by the various tax measures I have discussed, and by other steps which may become useful as time goes on, give sufficient demand so that business can go into new plant investment, or be persuaded to, encouraged to, then we can make this a very good year. It's going to be, we hope, a good year anyway, but I don't think we can get to $570 billion unless plant vestment steps up beyond the projected 8 percent. And quite obviously, the sharp decline in the market is not--certainly is bound to make it somewhat more difficult, though it is--I believe there is very strong-there is very good vitality in the economy and I think it can be substantially boosted by the steps I've recommended.
[17.] Q. Mr. President, in connection with your January tax proposal, for next January, without going into rates can you give us any idea of the range of the net tax cut that you are thinking of, in total amount?
THE PRESIDENT. No, I think it would be better to wait until the program is completed.
[i8.] Q. Mr. President, can you comment on the Public Health Service announcement of a special panel of experts to study whether there is a link between cigarette smoking and certain killer diseases? And can you tell us whether the study will be a matter of months or years, or just what the--
THE PRESIDENT. Well, I think the statement that the Surgeon General issued this morning, I think, gives the position of the Surgeon General, which I have supported, and is in direct response to the question which you asked 2 weeks ago, and now that the survey will take some months--it will go into 1963, but I think that that announcement is in response to your question. You've been answered.
[19.] Q. Mr. President, the National Advisory Committee on Radiation has reported that there are serious gaps in our fallout detection and surveillance and monitoring system. And they have recommended a very substantial increase in spending over the next 7 years that will amount to almost half a billion dollars. Can you give us your reaction to this, and whether or not it is being seriously considered, or whether you feel that we should increase our funds by that much?
THE PRESIDENT. I couldn't make a judgment on that yet. I think that we ought to do more than we're doing but we have not determined on our program as yet.
[20.] Q. Mr. President, could you tell us how you size up Mr. Nixon's showing in California, and give us any inkling of your own political plans this fall?
THE PRESIDENT. No, the primaries are difficult--[laughter]--and I think that he emerged from a tough one, which I congratulate him for. Now, as far as my plans, I will be active in the fall, but we haven't fixed a definite schedule.
[21.] Q. Mr. President, that Republican statement you mentioned earlier, called the "Declaration of Party Principles," charges, among lots of other things, bankruptcy in leadership in foreign affairs and incompetence of the New frontier destroying confidence. Would you care to comment upon that, sir?
THE PRESIDENT. It isn't true, but--no.
[22.] Q. Mr. President, the three princes of Laos are getting together at last in the formation of a coalition government. Assuming that such a government should be agreed upon, to what extent would the United States go in backing it up economically, and to what extent would we expect them to preserve a neutral policy?
THE PRESIDENT. Well, the first talks were encouraging. If it worked out and we had a neutral and independent Laos, we would of course support it with every proper means, and we would hope it would be able to maintain its position of being neutral and independent.
Reporter: Thank you, Mr. President.
THE PRESIDENT. I have one more. [Laughter]
[23.] Q. Mr. President, there seems to be a serious disagreement between you and Mayor Wagner of New York about the reelection of Congressman Buckley. Do you feel this is a serious split and are you doing anything to heal this split either between you and the mayor, or the split in the New York party?
THE PRESIDENT. Mr. Smith was right, as usual! [Laughter]
No, we have a different opinion about it, and we've made our views known, and I am continuing to hold mine and I am sure he does. I am for Congressman Buckley and he's for someone else, and that's the way it's going to be, I guess.